The US' private energy source
CANADA is an energy superpower. That is what Stephen Harper, the country's prime minister said in 2007 and it remains true despite the downturn in global energy prices in the past year. The country is awash in natural gas and holds the world's second-biggest deposit of oil, in the bitumen-rich oil sands of northern Alberta.
For generations, Canadians have felt both blessed and cursed by their natural resources. The blessing is the country's abundance of lumber, water, hydrocarbons and other minerals. And by an accident of geography, Canada sits on the doorstep of the world's most rapacious consumer of these products.
The curse? Many Canadians have long resented their role as the hewer of wood and drawer of water for their North American cousins. Canada's resources have always underpinned US' economic hegemony. But Canadians feel the US often forgets this. Their soldiers die alongside US and other Nato troops in Afghanistan, but Canadians often feel there is little appreciation or recognition for their contribution among the general US populace. Even Hollywood has relied on the Canucks. But who, south of the border, remembers that Michael J Fox, John Candy, Pamela Anderson, Dan Aykroyd, Donald Sutherland, Eugene Levy, Jim Carrey, Keanu Reeves, Mike Myers, Neve Campbell, William Shatner, Christopher Plummer and dozens of others (the list is long) hail from the frozen north?
In the realm of energy, at least, the relationship between the two countries is becoming more balanced. Canadian energy exports are big news in the US, partly because of US paranoia about imports of oil from the Middle East and Venezuela, and its politicians' frequently stated desire for "energy independence". That "independence" usually presumes a steady rise in imports of Canadian crude – already at about 1.8m barrels a day.
The other reason Americans are suddenly aware of Canadian energy relates to the environment. The movement to stop the oil sands because of their environmental impact has had a significant effect in the US and other countries. For every trade mission the Alberta provincial government sends to Washington to promote its bitumen, the environmentalists make twice as much noise. Even President Barack Obama has chided Canada for the "heavy carbon footprint" left by the oil sands.
There is no doubt that the oil sands are ugly. The images of the developments are sufficient on their own to convince people that something is going terribly awry in the Canadian wilderness. When National Geographic ran a story on the oil sands earlier this year it caused outrage among some Canadian politicians. The Canadian Association of Petroleum Producers, an industry body, published a long point-by-point refutation.
But beautiful pictures of ugly industry are powerful. Indeed, talk to executives and government officials in Alberta – as Petroleum Economist did last month as part of a special report on the Canadian energy sector (see p4) – and you get the impression that the province's government thinks the oil-sands problem is simply a failure of public relations. If only we delivered our message as effectively as the environmentalists, runs their argument, people would see the truth for themselves.
Not quite. If, as some in the media business maintain, the first rule of PR is to tell the truth, it's difficult to see what the oil-sands developers can do. On his Twitter service last month, the Alberta energy spokesman, Jerry Bellikka, wrote that he was "tired of so-called journalists telling me they can see the oil sands tailing ponds from orbit". When were they last in space? he asked. Good point. But anyone can do as Petroleum Economist did last month, and drive down a highway north of Fort McMurray and see tailings ponds on either side of the road. Whether you can see it all from space or not, it isn't pretty. Even the best PR machine in the world would struggle to claim otherwise.
Yet moderate environmentalists are beginning to feel that the rhetoric is getting out of hand. The claim that the oil sands use too much water or may damage the rivers of northern Alberta, for example, is weak, says David Keith, a climate-change expert in the geosciences department of the University of Calgary. So too, it turns out, is the notion that the oil sands create significantly more emissions than other conventional crude supplies: a recent study by the Canadian Energy Research Institute – whose members include governments and oil-sands developers, but whose authority, with small reservations, is accepted by most environmentalists – indicates that on a well-to-wheel basis, emissions from Canadian syncrude are similar to those from Nigerian or even some Californian crudes. That study, hope oil-sands developers, will stop legislation in some US states aimed at halting imports of "dirty oil" from Canada. "We just want a fact-based discussion," says Don Thompson, head of the Oil Sands Developers Group.
Here are a couple of facts. No authority in the world expects oil demand to shrink in the coming decades. And reserves of conventional crude are depleting. So the oil sands are not going away. About 20% of the foreign oil in US drivers' tanks comes from Canada (and over half of this is from the oil sands). China wants to import bitumen. Other Asian consumers hope to source oil from Canada too.
The biggest energy project in the world
So an environmental strategy that tries to stop the oil sands is doomed. A more realistic approach would be to push the Alberta government towards more stringent regulation of the developments, deeper environmental assessments of each project's impact and a more open approval process. Lawyers on both sides say the regulations are already tough. And Alberta claims its rules could stand up to those of any other oil-producing jurisdiction. Yet the oil sands aren't any other development: they're the biggest energy project in the world and if something goes wrong – a tailings pond spill into the Athabasca river, for example – the consequences could be catastrophic.
Ironically, the environmentalists may find some support from companies. Privately, some executives say they would like more regulation – and blame Alberta's laissez faire government for its lax attitude to the oil sands. Voluntary pollution and environmental targets don't work, say the companies, because not all firms adopt them.
Meanwhile, there are other pressing causes for the environmentalists. Alberta is still building coal-fired power stations and coal is by far the biggest emitter in the province. The US and Europe are doing the same. That isn't to absolve Alberta. It is the beating heart of Harper's export-oriented economy. And Canada's stance in Copenhagen later this year is likely to reflect the prime minister's close relationship with his adopted province and its energy industry (his father was an Imperial Oil accountant). Canada, however, will probably do as much as the US does. A new cap-and-trade system there will be followed by one north of the border.
Canada is an energy superpower, but it is the US' private energy superpower. It's not politicians in Alberta, but consumers in the Midwest who will decide how much Canadian syncrude the US consumes. If sausage eaters have a problem with how their bangers are made, they can stop eating them. The same goes for oil.