Ottawa’s policy vacuum undermines its oil sands rhetoric

OIL: it’s an imposing and multi-faceted topic, into whose orbit come geopolitical intrigue, war and empire building. Oil fuels our modern industrial comforts and conveniences, as well as our controversies. In many parts of the petroleum-rich world — Iraq, Saudi Arabia, Sudan, Nigeria —  it has engendered violence and state corruption. A blessing of mixed character, oil production and its inevitable politics have arrived on a massive scale to Canada, most of it in the form of bitumen. Civil war and autocracy are unlikely in this democratic, rule-of-law nation, but don’t expect a smooth journey. There are battles ahead, and the evidence suggests Canada is ill-prepared both for its scope and scale.

Canada’s extraction industry long predates the automobile, its roots extending into the nation’s agricultural era. The conventional beginning is 1858, at Black Creek, near present-day London. In a time of drought, the petroleum refiner and entrepreneur James Miller Williams dug for water near his asphalt well, discovering instead North America’s first commercial oil deposit. The chance find attracted others, and soon the town was renamed Oil Springs and an industry was well underway.

For decades since, Canada has produced a variety of energy products, from coal and crude to liquid natural gas and nuclear power. Industry-produced maps reveal a continent thickly decorated with wells, mines, pipelines, waterways and railroads, from which issue the country’s massive supply of natural resources. A literal turning-point arrived in March of 2006, when the Calgary-based pipeline-and-storage company Enbridge reversed the flow of its Spearhead pipeline, bringing Alberta’s oil sands product south to Oklahoma in place of the Gulf of Mexico oil which had been coming north. Those who were then paying attention did not fail to see the significance: Canada was now a major international presence in the petroleum industry.

Less than two years earlier, Canada’s daily oil sands crude production — which today is 2.8 million barrels — surpassed one million. Behind only Saudi Arabia and Venezuela in the volume of its oil reserves, Canada was long hindered by the high cost of accessing and extracting the thick bitumen which constitutes ninety-seven percent of its known energy reserves. As the technology of oil sands extraction improved, and as the costs of conventional crude rose, the economics of the oil sands went from liability to asset. Canada is now the world’s largest exporter of crude oil to the United States, and the sixth largest oil producer. With global demand expected to double in the next two decades, and with the country’s productive capacity expanding year by year, Canada’s energy’s prospects are bright.

The dark spot in this prospect is the apparent lack of foresight among the country’s political leaders. The current Prime Minister, Stephen Harper, has been an eager promoter of the oil sands and of the petroleum industry in general, bringing industry representatives to China and hosting the many Chinese delegations keen to do business in Canada’s energy sector. In the meanwhile, issues of domestic concern languish, and the federal government appears overly confident in its ability to heavy-hand its way through the process. Recent Chinese bids to acquire oil sands assets have exposed the federal government’s lack of a clear and public position on foreign ownership. The Harper government, most notably the Minister of Natural Resources, Joe Oliver, speaks often of the national interest in promoting the oil sands, but in unspecified terms which only underscore the policy vacuum. In an irony missed by few, Oliver dismissed critics of foreign ownership as being themselves the agents of American special interests. Lost in the exchange has been a nation-building discussion of the real-world policy challenges and opportunities this blessing of potential riches presents.

Meanwhile Enbridge has had a difficult month. The President Al Monaco has had to address a scathing report on the Kalamazoo river spill by the U.S. Pipeline and Hazardous Materials Safety Administration. Enbridge’s shares and finances have recently done well, so much so that at the end of July the company announced its highest earnings since June of 1983. Despite this, or even because of it, the company has a tough public relations challenge ahead. Oil companies are an easy and popular target. The tone of an August 3 Enbridge statement suggests the careful mood of the company, which these days is walking a PR tight rope: “Enbridge operates the largest and most complex liquids pipeline system in the world. We’re proud of what we do – helping to provide reliable energy to many millions of people across North America every single day. Over the last decade we’ve transported almost 12 billion barrels of crude oil with a safe delivery record better than 99.999 per cent. That’s good, but for us, it’s not good enough. We will never stop striving for 100 per cent.” Nor should they, given that this .0001 percent represents international headline news and additional speaking points for opponents. An oil spill is like an airline crash: citations of statistics do precious little to soften the human and ecological tragedy, both of which are real — as Enbridge well knows. “One spill is too many” may be the only point on which all are agreed.

“It is the moment in Aboriginal law,” says Merle Alexander. He is an Aboriginal Law specialist with the Vancouver firm Bull Housser, a member of the Kitasoo Xai’xais First Nation, and a keen observer of the developing storm. “This will be unprecedented: Aboriginal rights and title, under Section 35 of the Constitution Act, will compete with what has been politically deemed the national interest. It’s a battle we’ve never seen, and it will unite all Aboriginal peoples.” Mention of the constitution is certain to provoke Canadians, but Alexander’s observation does not end with a dispute between First Nations and the Crown. “With British Columbia’s objections, you don’t just have Section 35 behind the opposition — you also have Section 92. Two of the constitutional partners are resisting the third, pushing back on the idea of federal paramouncy. This is going to be quite a battle.”

The questions arise: if observers like Merle Alexander are correct, will the public be informed about, and prepared for, what approaches? Will legal and political institutions yield workable resolutions, or will the system break down to the detriment of society and the economy? With billions of dollars of economic activity and with Aboriginal land and title rights depending upon the outcome, the oil sands dispute is a matter of high stakes for all involved. The mainstream media often cast the battle as a conflict between commerce and environmentalism — between the advocates of growth and capitalism, on the one hand, and the advocates of sustainability and a lighter carbon footprint on the other. This however misses a critical portion of reality.

“People say that we British Columbians are a bunch of enviros,” notes Art Sterritt. A Gitxsan, he’s the Executive Director of the Coastal First Nations, the person mandated to speak on behalf of the coastal communities affected by the Northern Gateway Proposal. He explains that the opposition to the pipeline and increased tanker traffic is rooted in economic realities. “One of the things people don’t understand is we’re a have province. We don’t need revenue from oil. It’s not like we don’t have an economy that is sustainable. There are over 30,000 jobs on the coast that depend on a healthy environment. It doesn’t make sense for British Columbians to jeopardize that in order to change our culture to one that depends on oil. First Nations are not anti-development either. There’s major stuff going on here, like the LNG [liquid natural gas] projects that are being embraced by almost all First Nations. Sure, there are impacts — but they’re not catastrophic. They can be managed.”

First Nations are not only managing: increasingly they are managers, as well as Presidents and CEOs. While Canadians debate topics ranging from global warming to the threat of foreign ownership, Aboriginal business leaders are busy making resource deals around the world. BC coastal nations sell raw hemlock to the Chinese, and one of them – Coast Tsimshian Resources – now has a Beijing office. The Assembly of First Nations undertakes periodical overseas trade missions, promoting partnerships and leasing deals directly with international oil and mineral investors. Earlier this year, the Six Nations based tobacco company Grand River Enterprises agreed to sell $30 million worth of tobacco leaf to China. They have plans to expand into Pakistan. First Nation Grain Management is in the export business, expecting to ship fifty thousand tons of grain to China later this year. These business deals have become so commonplace that the Canadian Security Intelligence Service monitors their development carefully.

They are not the only ones watching. Politicians south of the US-Canada border are also concerned about China’s appetite for North American resources, especially in the Canadian oil sands. While much of the expressed fear in the United States and elsewhere is doubtless a case of political posturing, uncertainty over Chinese objectives (beyond the obvious one, fueling of their industrial expansion) and a lack of clear domestic energy policies make the way clear for nervous speculation. Eighty percent of the world’s oil reserves are government controlled, in many instances by closed and authoritarian regimes. Of the remaining twenty percent, Canada has over one-half — in the oil sands. It’s worth investigating the risks should this precious resource pass into the control of the oligarchs who populate the People’s Republic of China. On this question the federal government of Canada has been silent, but critics note that its actions suggest indifference to the concern. “Stephen Harper has a dream,” speculates Merle Alexander. “It’s likely to make Canada one of the economic super powers.” But at what cost?

Anticipating the obstacles to its energy ambitions, the federal government pushed forward with a broad reconstitution of Canada’s environmental laws. Introduced in June as an omnibus budget bill, C-38 introduced, amended or repealed seventy federal laws, among them the Canadian Environmental Assessment Act. C-38 provided the federal cabinet authority to override decisions of the National Energy Board and to reject or amend the rulings of the Joint Review Panel which is currently hearing evidence on the Enbridge Northern Gateway proposal from First Nations. The bill reduces protection for fish and fish habitats and tellingly exempts pipelines from the Navigable Waters Act, thereby reducing protection for species at risk. “The legal battle will most definitely include attacking C-38,” asserts lawyer Merle Alexander.

That there will be a battle in this country no one appears to doubt. There is far too much money to be made, and far too much breakdown of trust among the respective parties. The only uncertainties are the character of the fight — whether matters will be sorted out in the courts or on the ground, by means of law and negotiation or raw power politics. “Enbridge ignores the opposition,” says Art Sterritt. “And we understand now why they do: the Prime Minister has told them he’s going to deliver this. This gives them the confidence to keep going.” Likewise, the opposition of British Columbians, which polls suggest is well above fifty percent, gives First Nations the confidence to contemplate not only lawsuits but blockades. The province, which is a steward of the world’s longest coastline and its largest temperate rainforest, is not likely to yield without a fight. The battle lines having been drawn, a sleepy summertime nation lumbers toward the inevitable.

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