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China, and Two More Ethical Challenges to Oil Sands

ENERGY & EQUITY: Last in a list of ways Canada is turning a blessing into a curse.

Andrew Nikiforuk 3 Nov

Andrew Nikiforuk, whose column Energy & Equity runs regularly on The Tyee, is the author of the national best seller, Tar Sands: Dirty Oil and the Future of the Continent. His award-winning book called for a national debate on the pace and scale of bitumen production and its impact on Canada's politics three years ago.

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Bad business: Linking Canada's fate to Chinese political repression and environmental disregard.

In two previous articles, I detailed seven of 10 ethical challenges Canada faces given the way it is exploiting the oil sands. Find those here and here. I wrap up here with the final three.

Ethical Challenge Eight: The Enbridge/Chinese Gamble

With Chinese money and corporate backing, Enbridge wants to build a $5-billion pipeline from Alberta to the port of Kitimat, British Columbia. The project, which aims to bring bitumen to Asian markets, would consist of two pipelines: one to import condensate (light oil) from the Middle East and one to move bitumen diluted with condensate to more than 300 supertankers on the coast.

The proposal may well spark one of the greatest political and economic battles in Canadian history for three ethical reasons. In fact more than 4,000 Canadians have already signed up to say "no" in public hearings organized by Canada's National Energy Board. The unprecedented number of opponents suggests that the battle over the Enbridge Gateway project could make the uproar over TransCanada's Keystone XL pipeline look like a tea party.

For starters the pipeline and supertanker project clearly puts at risk the culture and livelihood of several important coastal First Nations including the Haisla; the Git'gat; the Haida and the Heiltsuk. Just one oil supertanker accident would all but destroy these ancient marine cultures still energized by salmon. An oil spill would also irrevocably damage one of the world's most beautiful and biologically diverse coast lines.

By asking First Nations to assume all the risk for supertanker accidents (the company bluntly told elders that it wasn't responsible for the oil after it left its pipeline), Enbridge has antagonized coastal residents. In response a new and powerful aboriginal leadership has already declared that their culture and the welfare of future generations can't be bought by oil.

Second, the pipeline project and associated tanker traffic (more than 300 ships a year) places at risk some of Canada's most charismatic wildlife. Any nation that would even think about sacrificing white spirit bears, wolves, humpback whales and five glorious salmon species (and other wonders) for a few Chinese yuan has clearly lost its moral authority. Nicholas Nassim Taleb, the famous business critic, put it best: "We become civilized only by knowing what to refrain from doing."

Last but not least the character and scale of the China's investments in Canada's oil patch and the pipeline proposal undermines the nation's sovereignty. China, a bizarrely authoritarian shopping mart, has an atrocious environmental and human rights record. Few places have destroyed as much wildlife, groundwater and soil fertility as resolutely as China's industrial revolution. Even the government's own environmental report card characterizes the destruction of biological life support systems as "very grave."

Moreover Chinese Communists have no more regard for First Nations than they do for dissident artists, Buddhist Tibetans or Moslem Uighers.

Before China became the world's second largest oil importer, it set up three state-owned oil companies in the 1980s: the Chinese National Petroleum Corporation (CNPC), the Chinese National Offshore Oil Corporation (CNOOC) and Sinopec. To keep its economy fueled with oil, these copy-cats of U.S. multinationals have made strategic investments in Africa, the Middle East and Latin America. Ricardo Soares de Oliveira, an oil analyst at Cambridge University, argues that these petroleum forays are not by their nature malignant but that the Chinese have merely inserted themselves "in a much older political economy that is already illiberal, destructive and hyper-exploitative."

In the last five years the Chinese have also discovered Alberta's bitumen. Sinopec and the CNPC, among the world's largest firms by revenue, have poured more than $11-billion into the oil sands. While Sinopec supports the Gateway pipeline, CNOOC, which seems to specialize in oil spills, has bought a 35 per cent share of Opti-Nexen's troubled oil sands steam plant operation for $2-billion.

These acquisitions, combined with the Chinese support for Enbridge's pipeline, not only clearly threaten the B.C. coast and First Nations territory; they also represent a real danger to national sovereignty. "The wrinkle is that the more Canadian resources are controlled by China, the less say Canadians will have over how they are developed, where they are sold and for how much, putting China in the driver's seat," accurately observed pro-business columnist Claudia Catteno in the National Post. Sinopec, now a minority holder of Syncrude, Canada's largest bitumen producer, can already veto whether that the company adds value to the product at home or ships more raw bitumen abroad.

Not surprisingly Big Oil, the Canadian government and bitumen boosters have supported the Chinese oil sands invasion as well as the Enbridge pipeline. Much like Africa's dysfunctional elites, Canada's bitumen fueled government regards illiberal Communist investors as a welcome relief from the climate change progressives slowly emerging in the U.S. oil market.

In addition Big Oil already owns major shares in China’s petroleum empire. Explains oil analyst Soares de Oliviera: "Most people don't know that western oil majors are strategic investors in the internationally listed subsidiaries of the three Chinese companies; they cooperate extensively in China and elsewhere, particularly but not only in the refinery sector; and will soon (once WTO criteria is implemented) be fully competitive within China itself."

Just like Big Oil the ethical record of both Sinopec and CNPC are appalling by any Canadian business standard. The former chairman of Sinopec (now Enbridge's big partner) was convicted in 2009 of taking $28-million worth of bribes in order to help "illegal interests."

REPRISK, a Swiss firm that provides data on corporate performance, rates CNPC as one of the world's 10 worst companies because of its African human rights abuses and environmental pollution. (CNPC is almost as accident prone as BP.) Not surprisingly, four other oil sands investors keep CNPC company on the REPRISK's worst performing list: Shell, Total, ExxonMobil and Chevron.

In sum the Enbridge/Chinese gamble poses but one basic question for the country: should Canada risk destroying the coastal Great Bear Rainforest as well as First Nations dependent on the energy of salmon in order to fuel an abusive Communist regime hell bent on putting more cars on the road in Shanghai?

Ethical Challenge Nine: The Carbon Bomb

Although Alberta's politicians like to call bitumen "the jewel of hydrocarbons," the unconventional resource remains a junk asphalt-like crude. Rich in impurities and poor in hydrogen, coal-like bitumen requires energy intensive upgrading as well as complex refining. Just cleaning up the heavy hydrocarbon produces mountains of petroleum coke (more than 5 million tonnes) a year in northern Alberta. As a consequence Environment Canada estimates that the project now accounts for six percent of Canada's total GHG emissions.

The best scientific evidence (Adam Brandt at Stanford University) calculates that the carbon footprint for bitumen ranges from 10 to 30 per cent higher than that of conventional light oil refined in Europe. Based on Brandt's study, the European Commission argues that bitumen has, on average, a carbon footprint 23 per cent higher than that of conventional oil and is a threat to global climate security.

That finding puts bitumen in the upper range of highly polluting oils, which includes Iranian, Russian and Nigerian feedstock. These crudes are carbon rich due to flaring and venting (pure waste) of natural gas in the field. (Bitumen processing requires similar volumes of natural gas in order to transform a low quality crude into something refinable.) Brandt's findings were also peer reviewed.

However industry and government sponsored studies including two reports by IHS CERA, a prominent energy study group, claim that bitumen has only a six per cent higher footprint (a range of five to 15 per cent) than conventional oil refined in the U.S. (The oil consumed in the U.S. is on average much heavier and dirtier than European feedstocks.) But CERA's controversial calculation is based on flawed accounting as well as computer models that don't use real bitumen production data. The firm's low figures, which were not peer reviewed, do not include the loss of peat land carbon sinks (an estimated 8 million tonnes a year); the footprint of natural and unconventional gas development to enrich bitumen (the equivalent of Nigeria's flaring); methane emissions from huge lakes of mining waste or even the fact that it takes 1.2 barrels of bitumen to make a barrel of synthetic crude.

IHS CERA admits that an overall lack of public transparency on the carbon footprint of individual oil sands projects remains a critical issue for scientists, government and industry alike.

Environment Canada estimates that total carbon emissions from the oil sands will likely grow from 49 million tonnes today to 92 million tonnes by 2020. At that point the dirty industry will surpass the emissions of Canada's buildings, agriculture or entire passenger car fleet. It will also exceed the carbon emission of more than half of 50 U.S. states south of the border.

To date the oil sands most significant impact on atmospheric pollution has been its ruinous impact on public policy for climate change and energy conservation. Given the rapid development of bitumen and Canada's new role as a reactive petro state, the federal government has abandoned every public goal to reduce emissions that acidify the oceans and destabilize the climate. As a consequence Canada's investments in community-based renewables, conservation or energy innovation have been minimal.

Last month Scott Vaughn, Canada's Commissioner of the Environment and Sustainable Environment once again detailed the unseemly scale of Canada's policy failure on polluting carbon emissions. (His successors have documented the same trend for more than a decade.) Vaughn concluded that Canada's climate action plans are not in compliance with the law and are missing vital information. Moreover a right-wing government that is as openly skeptical of climate change science as Saudi's oil sheiks, has reduced GHG reduction goals downward by 90 per cent between 2007 and 2010.

Added Vaughn: "Despite allocations of more than $9 billion, the government has yet to establish the management systems and tools needed to achieve, measure, and report on greenhouse gas emission reductions. Key elements missing include consistent quality assurance and verification systems to report actual GHG emission reductions and clear and consistent financial reporting systems for the measures in the plans."

To date Alberta (and the federal government) has proposed to reduce oil sands emissions with a small carbon tax combined with the world's most expensive Carbon Capture and Storage (CCS) projects. Yet experimental ventures to bury carbon under the ground are being abandoned around the world due to irrational cost, unworkable scales, public opposition and uncertain technologies. (Most scientists regard Alberta's stated goals of burying 70 per cent of its emissions as an impossible and fraudulent objective.)

The province's carbon tax is also inadequate. At pennies per barrel of bitumen production, it is 100 times too small to drive innovation. Given that taxpayers now subsidize fuel costs for bitumen production, the tax is also a cruel joke. "Either make the carbon tax significant, or get rid of it, because it exemplifies cynical PR," say most industry insiders.

An effective national carbon/energy plan would cap bitumen production at two to three million barrels a day.

It would report emissions from the oil sands on a project-by-project basis with transparent peer reviews.

It would actively seek reductions where they are easiest to achieve such as fugitive emissions in the oil patch and public transportation.

It would support decentralized energy production created by small businesses.

It would focus on energy savings and not just carbon savings. It would also include a national carbon tax to reduce demand for fossil fuels as well as higher royalties for high carbon emitting oil sands projects.

As Peter Silverstone, an Edmonton author, has argued, "Such a change will give very significant financial incentives to companies to reduce their greenhouse gas emissions."

In addition revenue from a national carbon tax should fund an innovative and carefully audited program to reduce eastern Canada's dangerous dependence on foreign oil. The primary goal of a national energy/carbon plan is simple: take two kilograms of carbon emissions off the national economic table for every kilogram produced in the oil sands while encouraging more energy resilience and innovation at home.

Instead of pursuing such a conservative program, the federal government, now heavily dependent on bitumen revenues, has linked arms with Big Oil to pursue a high-risk game of denial and bullying. As a consequence it has actively lobbied against low carbon fuel standards and climate change programs in the United States and Europe. Since 2009 Canada's Department of Foreign Affairs in alliance with major oil companies (the Pan-European Oil Sands Advocacy Plan) has engaged in more than 110 lobby actions to derail Europe's Fuel Quality Directive.

As one member of the European Parliament put it: "The government of Canada has been lobbying us in a manner that is not acceptable." Instead of working to protect the world's oceans and atmosphere from more carbon pollution, the Canadian government has clearly opted to align its interests with ExxonMobil. The whole country could pay a profound price for its destructive and un-Canadian hubris.

Ethical Challenge 10: The Dysfunctional Petro State

Countries that rely on black gold for revenue generally come to represent the interests of petroleum production and then lie like hell. And Canada is no exception. In fact its foreign diplomats now spend more time pimping for Big Oil than they do representing the interests of ordinary Canadians.

While former premiers (Gordon Campbell and Gary Doer) actively promote bitumen production as "clean energy," Natural Resource Minister Joe Oliver openly lies about the project's social and health impacts on the Cree, Dene and Metis. Incredibly, Oliver told one European crowd that bitumen mining takes place in a land "uninhabitable... uh... by human beings. So, you know, no community is being disrupted."

Political scientists have diagnosed this pathological condition and call it the petro state. Drawing on the seminal work of Canadian economic historian Harold Innis, Stanford political scientist Terry Lynn Karl has documented how state reliance on revenue from a single staple such as bitumen or natural gas, can weaken institutions, dumb down policy, concentrate power, cripple the economy and hinder democracy.

"Petro states are not like other states," concluded Karl in her trailblazing 1998 book The Paradox of Plenty: Oil Booms and Petro States.

Oil revenue primarily serves as the corrosive catalyst for political dysfunction, notes Karl: "Because these states live from oil rents rather than from direct taxation, they are likely to tax their populations lightly or not at all. Thus, they are unusually detached from and unaccountable to the general population, and their populations, in turn, are less likely to demand accountability from and representation in government. In effect, the vital link between taxation and representation is broken."

For decades now oil has left a telltale crude imprint on nations as diverse as Algeria, the United Kingdom, Mexico, Ecuador, Russia, Alaska and Texas. Oil booms not only engendered spending manias in these states but left a legacy of poor statecraft, pathetic tax regimes, political extremism, environmental degradation and long periods of often authoritarian or extended rule. Oil-exporting nations ultimately "rely on an unsustainable development trajectory fuelled by an exhaustible resource -- and the very rents produced this resource form an implacable barrier to change," adds Karl.

Karl's research has been confirmed by a legion of scholars. Researchers as varied as Michael Ross at the University of Southern California and the Nobel prize-winning economist Joseph Stiglitz have commented on the peculiar and often destructive character of petro states whether left or right wing, Moslem or Christian.

In an essay on Russia's petro rulers, Peter Rutland, a U.S. scholar, recently noted that resource wealth in general poses a hefty moral hazard: "The society (and its leaders) start to think that it is richer than it really is, and fritters away the energy rents in excessive consumption or infrastructure investment. Social inequality and political instability tends to increase."

Petro politics explains why Health Canada and members of Alberta Health falsely accused two physicians (Dr. John O'Connor and Dr. Michel Sauvé) of causing undue alarm by advocating for better aboriginal and worker's health care in the oil sands region. Both doctors responsibly raised concerns about the project's social impacts (a syphilis epidemic and road fatalities) as well as higher than average cancer rates among First Nations downstream of the world's largest energy project. Due to complaints lodged by government bureaucrats both physicians were unjustly harassed and investigated by the Alberta College of Physicians and Surgeons.

Even Alberta's Health Quality Council has now acknowledged the systematic persecution and abuse of physicians in the petro state. A 2011 Council report found that "a number of physicians have described disturbing life- and career-changing outcomes that they attribute to their advocacy efforts. These include having hospital privileges affected, feeling ostracized by peers, and having contracts for services being altered or cancelled, which in some cases, limited their options for remaining in the province. Some have elected to leave the province to seek work elsewhere."

Petro politics also explain Alberta and Canada's poor environmental record and the systematic gutting of environmental science and enforcement. Public liabilities for mining waste clean-up in the oil sands, for example, have been allowed to exceed $20 billion while the government holds but $1 billion in security deposits. The character of the petro state also explains the slow and ponderous move to properly install a federal water and pollution monitoring program on the Athabasca River. It took nearly six independent studies over a two-year period to prompt concrete action. To date the region's groundwater remains poorly quantified and monitored. And on it goes.

The almost total capitulation of federal political interests to bitumen exports and the defense of Big Oil has grossly undermined Canada's character and reputation. "Oil revenues are the catalyst for a chronic tendency of the state to become overextended, over-centralized, and captured by special interests," warns Karl. In Canada this dangerous transformation has become a moral hazard of the highest order.  [Tyee]

Read more: Energy, Politics, Environment

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