Oil - Black is the New Green
by Fritz Kropfreiter
We Albertans are selling our children’s and grandchildren’s birthright at rock bottom prices, then giving grants to the oil giants to cover up the mess they leave behind. It boggles the mind that everyone with two “little grey cells” to rub together doesn’t see what is happening under their very noses. Our “Alberta Advantage”, the oil and bitumen beneath our feet, is being drained away as surely as is the aquifer in Arizona - and hardly anyone seems to care. Worse than that, our government regularly forgoes royalties that are already among the lowest anywhere, while telling Albertan to lower their expectations vis a vis education, health, and other social programs.
The great lie that oil companies have foisted on the Alberta public (abetted by their cronies in government) is that higher royalties will cause the wholesale flight of oil and drilling companies to greener pastures. A populace that has been conditioned to react with irrational fear to the threat of abandonment and poverty, can be played like a tumor laden fish right to the net, and will parrot the doom and gloom that is their constant fare from government and media. My nephew, Tom, who is an oil company executive is convinced that the oil superstructure in Alberta will collapse if there is any change to the current royalty structure; if he has been so totally duped, being closer to where the oil based rubber meets the asphalt covered road, what chance do everyday Albertans have to take a rational stand.
The fact is, these companies will not be disappearing before the sullied pastures of Alberta cease to yield a profit. Business, like nature, abhors a vacuum. If there is an opportunity for return on a dollar, someone will be there to squeeze whatever they can out of a situation with as little risk and as little of their own money as possible. Oil companies are no different. If there is oil in the ground and if, after selling it, there is money left over after all the expenses and overhead are paid, the undertaking is a no-brainer.
Furthermore, where are the oil companies going to flee to? It’s not like there are massive fields of untapped bitumen or crude that are lying fallow for lack of oil company interest. During the last review of royalties that threatened the massive profits of the petro-giants in 2008-2009, drilling was scaled back in the province and the amount of oil pumped was reduced. But there was also a major economic slump as a result of the real estate bust in the US and the fall in confidence intensified by a volatile stock market. Couple this with a dip in the price per barrel of Alberta crude from $130 in May of 2008 to $60 one year later and it is obvious that the oil companies had no desire to pump their oil out of the ground at such a marginal price because they knew the price would recover. That the timing coincided with a rise in royalty rates (that has since been adjusted by government), must have appeared to the oil giants as a gift from heaven. They could point to decreased activity in the oil patch as proof positive that higher royalties would jeopardize the future of the industry in Alberta.
The federal and provincial governments have recently announced almost 1 billion dollars in subsidies to help Shell Oil work on Carbon Capture and Storage (CCS), with Alberta contributing about 85% of the money. This is part of a 2 billion dollar commitment by the Alberta government to implement a technology that has been abandoned in many parts of the world because it is too expensive; besides, it is much easier to just let the CO2 keep on flowing. Sequestration (another name for CCS) has an impact on households that is not often mentioned – it causes the price of energy (be it gasoline or electricity) to skyrocket. CO2 is fairly economical to store - it is the capture part that is so expensive because the gas must be liquefied in order to pump it into the ground. Adding carbon capture technology to a coal burning power plant, for example, sucks up 40 percent of the power it can produce.
Looking over the petro-business in Alberta, a few things become apparent:
1) With insignificant royalties, Alberta is the Garden of Eden for the oil patch.
2) Oil companies reap enormous profits and expose themselves to very little risk.
3) As oil prices continue to rise, Albertans are losing billions of dollars in foregone royalties, subsidies, and grants to industry.
4) To paraphrase the Molson’s beer ads, “Oil is made from Alberta” – unfortunately that oil doesn’t grow back.
5) When the oil is gone – and nobody can argue that it will last for even 50 years – Alberta will be left with nothing but a provincial tailings pond, toxic rivers and lakes, and a ticking time bomb in the form of sequestered CO2.
6) The government’s lack of vision, coupled with their indecent relationship with international oil, will ensure that even the meager monies derived from selling our oil will have been squandered and what is left won’t even cover the clean up costs.
7) Alberta, which has made no efforts to build any secondary or tertiary industry of note, will be left as Idaho north – peddling whatever resources it has left like a 50 year old syphilitic whore.