Oil Scorecard

We have some energy issues up here in Canada that we’re trying to sort out and get to the point of actually making decisions.  It’s difficult to understand the ramifications of all the potential decisions, so we’ve devised a rudimentary scorecard to help you get your head around it.

There are several issues.  One, our Oil Sands (or tar sands) contain the largest potential reserves of crude oil outside of Saudi Arabia.  Except the crude is mixed with mud, clay and sand in a bituminous mess that looks like, well, tar and sand.  We have managed to figure out reasonably effective ways of getting the oil out of the sand and making the crude usable for refining. 

There is an environmental cost, yes and it’s a steep one, but we also cannot uninvent petroleum products from our planet.  Too much of everyone’s life depends on oil, regardless of what the off-the-grid folks say.  That ASA tablet you took last night for your headache came from the petrochemical industry, so let’s agree that we need oil and will for the next several dozen generations.  The less we use, the better, is also agreed. 

Having oil, which Canada does, means we have two decisions to make.  First, who gets to turn the crude into things?  The KeystoneXL pipeline wants to move Canadian crude to Houston to refine it into things we need, essentially selling our stuff back to us at a monstrous profit.  There is significant blowback in the US about where the route will go. 

Line 9 is an older pipeline owned by Enbridge that runs more or less from Western Canada, eventually winding up in New Brunswick at a refinery there.  Enbridge wants to reverse the nearly 40 year old pipeline to work from the west to the east, instead of the other way round.  The line was engineered to do this and actually has been reversed once before, with no issues.  But Line 9 is nearly 40 years old and there is a risk of things going badly wrong.

Meanwhile a CN freight near Edmonton has derailed and thirteen oil and Liquefied Natural Gas (LNG) cars are now burning themselves out:  The fire department can’t safely get close enough to put the wet stuff on the red stuff.  We’ve been down that road earlier this year with the Lac Megantic derailment that destroyed the heart of the town and put the focus of safety on moving flammable goods by rail.

To simplify:  Moving crude by rail is not as safe as moving crude by pipeline.  Yes, Enbridge did have a pipeline break earlier this year in Kalamazoo that dumped a crapload of crude into the Kalamazoo River, which is also not good.  However, pipeline breaks tend not to explode and kill 47 people like Lac Megantic. 

The scorecard so far:  Move crude by pipeline is better than moving it by rail.  Both have an environmental cost, to be sure, but the first measure is safety for the majority of us.  Pipeline wins.

Now, where to move it to?  We’re very much in favour of not sending our raw materials out to be sold back to us.  Canada has been doing that for nearly 200 years and it has never worked to our advantage.

In a magic wand kind of way, we would punch two pipelines across Canada one going that way and the other going that way that Canada could use for their own interests.  This would lead to a handful of brand new Canadian refineries with the most modern technology and the smallest environmental footprint possible. 

Unfortunately, this is not going to happen.  Refineries have a seven to ten year lead time to engineer and build.  Pipelines, about a three to five year lead time, so we have to work with the infrastructure we have, which means Line 9 and a refinery in New Brunswick.  Not great, but not horrible either.

Getting our crude to a refinery in Canada means we make the gas, diesel, chemicals and goods out of it and sell it to the rest of the world at a significant profit.  We earn that profit by taking the risk of transporting it, refining it, selling it and taking the environmental hits that come from extracting the crude, using older pipelines and doing the grunt work to get the crude to the refinery with the infrastructure we have now. 

So here’s the scorecard now:

Still need oil

Pipeline safer than Rail

Line 9 better than KeystoneXL.

From the environmental perspective, only Line 9 can generate profits that can be used to improve and ensure the smallest possible environmental impact on the planet, including the extraction of the crude in the first place. 

Now, here’s the kicker:  Only government can put the conditions necessary in place to force the hand of private industry.  Private industry is not interested in funds being taken off the top to fund a clean-up of the oil sands. Private industry is not interested in building a new pair of pipelines with the most modern safety and environmental standards, to brand new refineries with the smallest environmental footprint.  Private industry is not interested in merely making offensive amounts of profit; they want grotesque, obscene amounts of profit.  And environmentalists hung from lamp posts.

Which is why government should step in..  Legislate the snot out of Line 9, as it is the most beneficial to the country as a whole, but also take 10% vig right off the top to fund the environmental clean-up of the oil sands and to ensure that the technology used in the next five to ten years is as safe and comprehensively monitored as possible.  Then take another 10% off the bottom to fund our own, new, safe, environmentally sane infrastructure to use Canadian resources for Canadian benefit. 

What this strategy means is we get the benefit of our oil and we dramatically increase the funding to fixing the environmental impact of the oil sands.  Both sides win.

Which is why it will never happen.


2 responses to “Oil Scorecard

  1. In mining, the government already takes a large chunk of money up front to return the land to its “original state” before any mining can begin. This money must be held in trust. This is why mining is so expensive, but it also ensures complete clean up when the mine closes. If it can be done for mining, why not petroleum products?

  2. Houston, we have a problem

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