Under construction Updated January 2013

Recent controversies surrounding the construction of inter-provincial and international pipelines to transport bitumen from the oil sands have raised questions about the reasons Canada does not develop an even more integrated value-added oil industry. Now that profits have soared, there has been a pulling back of taxation easing and a decrease in enthusiasm for what many perceive as subsidies for the oil industry. In the report entitled “Public Services for Ontarians: a Path to Sustainability and Excellence” by the Commission on the Reform of Ontario’s Public Services, committee chair, economist Don Drummond, lamented the lack of federal support for Ontario’s green energy initiatives, while the oil and gas sectors received $1.4 billion in annual subsidies. However, there is at the same time, an aggressive push towards relaxing environmental concerns to allow for expansion of the already impressive network of pipelines to expand markets for bitumen with a focus on Asia.

The Northern Gateway Project Joint Review Panel Hearings, examining “the environmental viability of the proposed $6-billion twin pipeline project” continue through January and February 2013 in Victoria and Vancouver, BC. Protests continue and the review has been labelled as undemocratic and alienating as observers watch the proceedings on screen in “dark and dreary rooms” separated from presenters in an effort to maintain order and respect. While the thousands of interveners protesting are successful in capturing media attention, there is a sense that pipeline expansion is inevitable as the oil industry and federal and Alberta governments align in their focus on increasing bitumen production and access to markets (west, east, south and even north). Faced with a boom in North American oil production, a shale and oil sands revolution and lack of pipeline capacity the very low price of WCS at $57 US a barrel suffers a 36% differential against WTI. With current North American crude oil markets, Mark Corey argued that once crude reaches tidewater, this waterborne crude will have higher value than landlocked crude. Getting tidewater access pricing point depends on increased pipeline access.

John Carruthers, President, Enbridge Northern Gateway Pipelines and Enbridge’s panel of well known energy economists including Calgarian Bob Mansell and Muse Consultants were cross-examined by Alberta Federation of Labour president Gil McGowan. McGowan argued that there would be increased job loss if 585,000 barrels of bitumen a day were exported to China rather than upgraded and refined in Canada.  Mansell argued Alberta does not have strong, major consumer markets for refined products and there is therefore no market incentive for large-scale refining. The NDP leader is promoting pipelines to eastern Canadian refineries.  A report Muse Consulting claims that as crude prices rise Canadian crude producers revenue increases but so does the cost of feedstock to Canadian refiners using western crude wherever they might be reducing the benefit of Canadian crude to Canadian refineries by about 25 per cent.  (Pratt, Sheila. 2012-09-05. “Enbridge pipeline hearing focuses on economic benefits.” Edmonton Journal.)

At the February, 2012 parliamentary session on “Current and Future State of Oil and Gas Pipelines and Refining Capacity in Canada” Michael Ervin of Kent Group argues against the expansion of oil refineries claiming there is a trend towards decreasing the use of gasoline in North America, the US has made massive cuts in refineries, the BRIC countries will continue to building massive oil refineries and Albertan/Canadian refineries will be unable to compete at a global level.

“I sometimes hear speculation that the building of more Canadian refineries would lower the price of wholesale and retail fuels for Canadian consumers. It is important to understand, however, that Canadian refineries are really just part of a North American capacity pool, and lower wholesale prices in Canada brought about by more capacity would quickly attract U.S. wholesale buyers, thus negating any hopes of sustained lower prices in Canada (Ervin 2012-02).”

“According to Michael Ervin, while the Keystone XL and Northern Gateway proposals are important to ensure continued growth in Canada’s upstream industry, particularly the oil sands, they would reduce the competitiveness of Canadian refineries that currently process crude oil from Western Canada.63 Furthermore, Joseph Gargiso, Administrative Vice-President of Communications at the Energy and Paperworkers Union of Canada, told the Committee (with reference to estimates by economist Michael McCracken) that “for every 400,000 barrels of raw bitumen exported out of the country for upgrading and refining, 18,000 [well-paid] jobs in Canada will be lost [...],” not including jobs related to downstream activities, such as manufacturing.64″

Standing Senate Committee on Energy, the Environment and Natural Resources tabled their report entitled “Now or Never”  in which they recommended shipping crude oil from the west to the east of Canada:

<blockquote> “The committee also looks favourably upon the prospect of shipping western Canadian crude to the East for refining and marketing in Ontario,
Quebec, Atlantic Canada and international markets. This idea has long been touted as an obvious way to boost Eastern Canadian energy security and advance nation-building, but it has repeatedly been delayed because of inadequate market conditions. However, the economics for piping oil to the East have improved considerably, particularly because higher prices can be achieved for oil in Eastern Canada than in the American Midwest.” (Standing Senate Committee on Energy, the Environment and Natural Resources. July 2012. Now or Never: Canada Must Act Urgently to Seize its Place in the New Energy World Order. </blockquote>

For most of us it is confusing to attempt to follow the flow of crude oil through complicated networks of pipelines from north to south (or west to east) then back again as much more expensive, products refined in the United States? Or will be purchasing refined products from the eastern United States from refineries that process crude oil imported from Saudi Arabia, Africa and Venezuela? As China buys more of the oil sands and China and India complete their super refineries, will the gasoline in Canadian pumps will be coming from there, an even cheaper source than the United States? Does that mean bitumen from northern Alberta will traverse British Columbia/Alberta borders, then cross the ocean twice to return to us as refined products that cost less to the Canadian consumer and the environment? What are the guarantees that we will have access to oil and its byproducts in future markets when 40% of the oil sands industry is already foreign-owned and managed?


“According to the Canadian Energy Research Institute, as oil sands production grows, employment in Canada as a result of new oil sands investments in production and processing is expected to grow from 75,000 jobs in 2010 to 905,000 jobs in 2035, with 126,000 jobs being sourced in provinces other than Alberta. New oil sands development is expected to contribute more than $2.1 trillion (2010 dollars) to the Canadian economy over the next 25 years – about $84 billion per year. The oil sands industry will pay an estimated $766 billion in provincial and federal taxes and royalties in the same period, which contributes to quality of life and services across Canada (CAPP. 2011-09-22. “Oil sands a Canadian job creator; domestic and U.S. processing needed.” )”
CAPP

Integrated firms, such as Calgary-based Husky (controlled by Hong Kong billionaire Li Ka-shing) with its crude storage system in Hardisty, pipelines, upgrader and refineries, use the cheaper oil sands crude oil as refinery and upgrader feedstock. The mitigation potential of integrated firms is substantial. Husky’s net earnings increased by 22% since April 2011 in spite of the volatility of price of crude. The Calgary-based American integrated company, Imperial Oil, with its refineries posted a 30% increase in earnings in the first quarter of 2012 (Calgary Herald 2012-04).

In North America, the benchmark crude oil price is West Texas Intermediate (“WTI”), a high-quality, light-weight, low-sulphur, sweet crude; WTI is the underlying commodity of the (NYME) New York Mercantile Exchange’s oil futures contracts. These properties make it excellent for making gasoline, which is why it is the major benchmark of crude oil in the Americas. WTI is generally priced at about a $5-6 per barrel premium to the OPEC Basket Price and about $1-2 per-barrel premium to Brent (Amadeo February 13, 2012).” Western Canadian Select (WCS) are priced/discounted against the the price of West Texas Intermediate (WTI) crude oil (http://www.baytex.ab.ca/operations/marketing/benchmark-heavy-oil-prices.cfm). According to reuters, in February 2013 WTI was at $93; WCS at $57 (a 36% discount) and Brent was $111 per barrel. In October 2012 WTI was at US$96.21 a barrel and WCS was at US$74.21 a $22.00 discount or differential which is 22.8%. (http://www.baytex.ab.ca/files/pdf/Operations/Historical%20WCS%20Pricing_October%202012.pdf) In December 18, 2012 WCS was $55 US per barrel with $33 US discount relative to WTI grade at $88 US. The world price for light sweet Brent Crude was just shy of $109 per barrel. (Kleiss, Karen. 2012-12-19. “Plunging oil price a long-term concern for Alberta.Edmonton Journal). Lower prices, which are also related to seasonal events, are consistently tied to over supply and inadequate transportation infrastructure to suitable refineries.

As one question appears to be answered another is raised as issues concerning the oil industry cannot be disentangled from questions and concerns about complex financial instruments that have changed basic concepts of economics globally. Public policy regarding energy strategies needs to balance concerns about the economy in general, employment, transportation and the environment.

“[T]he government’s focus began to really sharpen in the mid-1990s in the wake of several significant accidents and the industry’s response [...] of a broad commitment to risk management. The ebb and flow of legislative and regulatory mandates is directly tied to accidents, with the regulatory tide becoming ever higher when the accidents come in groups, as they did in 1994 and 1995, 2000 and 2001, and most recently, [in 2010].” Tenley, George. 2011-04-04/07. Opening Address. Managing Pipeline Integrity. 11th Workshop. Banff, AB.

How long will it take for greener energies to be developed gradually replacing our thirst for oil? How green will they really be? How deep are the changes you are willing to make? In the interim, how can we manage risks inherent in the energy industries?

What if there is an oil shortage or crisis?

“Can Canada replace the oil it imports with resources from its own territory if our suppliers become unreliable, or if an oil crisis becomes a reality? The answer is a resounding NO! Under NAFTA, we must keep sending the same proportion of our oil to the United States no matter what happens on the world stage. Article 605 of NAFTA only allows us to reduce exports to the U.S. if we cut our domestic supplies by the same proportion. Furthermore, we can’t charge the U.S. a higher price than the one
in Canada and we can’t disrupt or restrict the normal channels of supply. What are those normal channels? A huge network of 16,000 km of pipelines sends Canadian oil south, mainly to the American mid-west. At the moment, no pipeline takes Alberta’s oil to eastern Canada (Council of Canadians).”

According to most North American economists and the business community the the responsibility of the CEO’s of incorporated companies such as the oil sands giants, which include super major oil companies (who represent more than 80% of the oil sands production in Canada: BP Canada Energy Company (British multinational oil and gas company headquartered in London, United Kingdom), Canadian Natural Resources Limited, Cenovus Energy Inc., ConocoPhillips Canada Resources Corp. (American multinational energy), Devon Canada Corporation(largest U.S.-based independent natural gas and oil producer), Imperial Oil (controlled by US based ExxonMobil, which owns 69.6% of its stock), Nexen Inc., Shell Canada Energy(Canada-based subsidiary of Royal Dutch Shell, one of the largest multinational oil companies in the world), Statoil Canada Ltd., Suncor Energy Inc.(Canadian), Teck Resources Limited (Canadian), Total E&P Canada Ltd.)(French multinational oil and gas company, one of the six “Supermajor” oil companies in the world), the major players in the oil refining industry (Imperial Oil, Husky (controlled by Hong Kong billionaire Li Ka-shing) Harvest (controlled by state-owned Korea National Oil Corporation (KNOC), Chevron (American multinational energy corporation, one of six super majors), Suncor (Canadian), Shell (Canada-based subsidiary of Royal Dutch Shell, one of the largest multinational oil companies in the world), NOVA Chemicals, Ultramar (Canadian), Irving Oil (private Canadian) and the oil pipeline industry (TransCanada (Canadian), Enbridge (Canadian), Seaway), is to increase the market value of stocks owned by shareholders.

The Canadian Council of Chief Executives (CCCE) an influential public policy advocate association composed of the CEOs of 150 leading Canadian companies, CEOs, who “collectively administer C$4.5 trillion in assets, have annual revenues in excess of C$850 billion, and are responsible for the vast majority of Canada’s exports, investment, research and development, and training.” In 2012 they hosted a series entitled “Canada in the Pacific Century: Ensuring Canada’s Success in a Rebalanced Global Economy.” In the session in Calgary December, 2012 there was much celebratory congratulations on the federal decision to approve $15B Chinese takeover of Nexen. Alberta’s Energy Minister repeats again his call to get bitumen to tidewater or saltwater ports so Alberta can get “world price” instead of suffering increasing price differentials against WTI. Because Alberta is landlocked, not at tidewater, the oil industry loses $15 – $20 billion in revenues annually. He claims the lost oil revenue is reflected in lost provincial royalties although Alberta receives Bitumen Royalty-in-Kind (BRIK) by which the government has the option to take its royalty share either in cash or in kind. “Currently, the government takes its share of conventional crude oil production in kind and collects its royalty share for other resources in cash. The decision to exercise the in-kind option for bitumen was identified in October 2007 as a way for the Crown to use its share of bitumen strategically to supply potential upgraders and refineries in Alberta, and to optimize its royalty share by marketing those volumes (Government of Alberta. Energy. BRIK. FAQ).”.

Pipelines and/or refineries? What are the environmental costs for both?

Corrosion, poor planning and response

“The evolution of safety regulation in North America has moved to a new focus; namely, the total corporate responsibility for every facet of the operation, including the integrity management plan and the actions taken under it. This strong focus on the “management” side of “integrity management” has occurred over a relatively short timeframe, and has been made operational in the wake of serious industry sins of omission at the highest levels of corporate leadership.” Tenley, George. 2011-04-04/07. Opening Address. Managing Pipeline Integrity. 11th Workshop. Banff, AB.

Pipelines are aging. Newer pipelines can have monitoring devices built in but these new smart technologies are difficult to adapt to pipelines built 50 years ago. In its 2010 field surveillance report, the Energy Resources Conservation Board (ERCB), an independent agency of the Government of Alberta, recorded “687 pipeline failures across the province” (ERCB. 2011-11. ST57-2011 “Field Surveillance and Operations Branch Provincial Summary 2010” p. 16 http://www.ercb.ca/docs/products/STs/ST57-2011.pdf).” (626 were leaks/hits, 18 were ruptures, and 43 were hits with no release (ERCB 2010).

There is an intense race to add new lines, reverse flows and repair old pipelines as oil sands’ projects increase production. There are three major pipeline projects proposed in British Columbia: Enbridge’s Northern Gateway Pipeline, the expansion of Kinder Morgan’s Trans Mountain Pipeline, and the Pacific Trails Pipeline by Apache, Encana and EOG Resources. There is currently an over production of light and heavy Canadian crude varieties and a pipeline bottleneck in the American Midwest. Refineries are closed for maintenance or expediency and Canadian crude is steeply discounted against WTI (Calgary Herald 2012-04). There is also a heightened competition between Alberta’s oil sands and North Dakota’s Bakken formation “tight” oil for pipeline priorities. Oil refineries are costly to build and/or refurbish and the market is considered to be “mature.” International agreements appear to limit the ability of nation-states to make logical, reasonable decisions.

“One of the key barriers identified was the risk-averse nature of the [oil] industry. Unless industry is given a compelling reason to do so, such as fiscal or regulatory pressure from the government, companies are unlikely to invest in new refining capacity in the mature North American market. Rather, they will invest capital wherever in the world that returns are highest. According to industry, government will have to play an instrumental role if the vision is to be achieved (Laureshen, Clark and Du Plessis 2005:15).

Alberta alone has 400,000 km of provincially regulated pipelines. (CBC. 2012-07-20. “Alberta pledges pipeline safety review: 3-pronged review to be carried out by independent party, energy minister says.”) see map image here mapping Alberta’s pipelines. This Financial Post map is interactive.

“In order to transport bitumen to refineries equipped to process it, bitumen must be blended with a diluent, traditionally condensate, to meet pipeline specifications for density and viscosity (NEB).” Dilbit: Growth in non-upgraded bitumen supply will increase the demand for diluent required to facilitate pipeline transportation to market. The Board’s outlook for traditional diluent (i.e., condensate) projects little growth in supply through to 2015, while demand under current operational conditions would be
expected to rise by approximately 50 000 m3 /d (315 mb/d). Additional supply could be made available by directing condensate used for other purposes to diluent usage, but the majority of the gap must be filled through the use of substitutes. Several opportunities exist for substitutes including refinery naphtha and conventional light oil; however, the most suitable solution, due to its availability, is synthetic crude oil (SCO) ( (NEB 2004:12).”

Pipelines: Internal Corrosion

“A chief concern about the transport of Canadian crude through the proposed Keystone XL pipeline is a claim that dilbit poses more release risks than other types of crude. In particular, the committee will examine whether there is evidence that dilbit has corrosive or erosive characteristics that elevate its potential for release from transmission pipelines when compared with other crude oils. Should the committee conclude there is no evidence of an increased potential for release, it will report this finding to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) by spring 2013 (Institute for Corrosion Ohio University).”

“Pipeline integrity is an increasing challenge to the energy industry as the infrastructure is aging, and new field developments are introduced in both deep and remote areas of the world (source).”

Although the industry claims that diluted bitumen (dilbit) is no more corrosive than conventional crude, older pipelines are at higher risk because water that separates from dilbit tends to collect and start corroding (Linda Daugherty, US Pipeline and Hazardous Materials Safety Administration (PHMSA)’s deputy associate administrator for policy and programs).

“As a starting point, the committee might want to reference similar types of crudes,” suggested Linda Daugherty, US Pipeline and Hazardous Materials Safety Administration (PHMSA)’s deputy associate administrator for policy and programs. “Age also is a definite factor. Many pipelines were installed 40 years ago and have sharp turns where water which has separated from dilbit would tend to collect and start corrosion (Snow, Nick. 2012-07-24. “Diluted bitumen, heavy crudes are similar, NAS panel told.” Oil and Gas Journal. OGJ Washington Editor.).”

“Internal corrosion is a leading cause of pipeline failure — and one of the most difficult to detect.” Monitoring internal corrosion of pipelines is both “challenging and expensive” costing “several billion dollars annually in the U.S. alone.” Internal corrosion of pipelines can occur when moisture mixes with impurities (salts, like chlorine, and sulphur compounds). (source Bill Shaw, engineering professor at the University of Calgary and director of the Pipeline Engineering Centre, which studies corrosion and monitoring).

“Problems mainly arise when water that has not been removed from a crude before it goes into a pipeline begins to separate and collects at points along the bottom of the pipe’s interior, he explained. Dissolved gases—primarily carbon dioxide—and oil extracts such as organic acids also can influence corrosion rates, Moghissi said. Running a pig through the pipeline probably is the most effective corrosion inhibiter, although chemicals also can help, he told the panel.”

Tank Truck transport versus Pipeline Transport?

Canadian Energy Pipeline Association President Brenda Kenny argues that it “would need five and a half million trucks a year to replace the oil pipeline network in Canada  (O’Neil, Peter. 2012-08-09. “Beleaguered pipeline industry vows to rally around PR campaign.” Postmedia News).”

“Until the early 1980s, bitumen was trucked to asphalt refiners in Alberta and Saskatchewan. Growing volumes through the early 1980s supported the development of pipelines from producing areas to Edmonton, from where the bitumen could access high-conversion refineries and broader asphalt markets. Between 1982 and 1985 Alberta Energy Company (AEC) built a pipeline system designed to move bitumen blend from Cold Lake to Edmonton and to ship diluent to Cold Lake from Edmonton (Walker, Ian C. 1998. “Marketing Challenges for Canadian Bitumen.” Imperial Oil, Calgary, Alberta, Canada).”

Truck transport is more expensive to the oil industry than pipelines. (McKibben,M. J.; Gillies, R. G. 2000. “Predicting pressure gradients in heavy oil—water pipelines.” “Because truck transport is expensive, pipeline transport of heavy crude oil is of interest.”

By 2003 there was concern that the transportation of crude bitumen would face huge obstacles. “Road conditions, weather problems, and fuel prices are some of the other issues that hauling companies have to deal with routinely. Although the preferred mode of transporting crude bitumen is pipelining wherever possible, the Alberta Utilities and Energy Board estimates that unless there is a dramatic technological breakthrough, or a substantial increase in the price of crude bitumen, pipelining of this product will not be technically or economically feasible within the foreseeable future (Laverty, K. 2003-04-07. “Super trucks: Loads grow so fast that the oil industry’s ‘transport architects’ stopped keeping score on size records.” Oilweek Magazine. Vol. 54. No. 14. page(s) 42-46).

Alberta Provincial Highway No. 63 built in 1970 is a 240-kilometre-long, two-lane north–south highway road connecting Fort McMurray and the Oil Sands bitumen mine sites to southern Alberta. According to Syncrude Canada, Highway 63 probably ferries the highest tonnage per mile of any road in Canada and is “inadequate for the traffic that uses it.” Plans are underway (2012) to expand it into a four-lane divided highway to accommodate the heavy traffic of logging trucks, SUVs, semi-trailers, buses and tanker trucks including convoys of extra-wide loads carrying tires, turbines and cokers (source). There are numerous fatal accidents on the highway as tankers and logging trucks slow traffic to a crawl while oil workers race to get in and out of the site. The expansion would cost c. one-billion-dollar and the province is considering using toll booths to place the cost of the oil sands’ driven needs on the shoulders of the users: the oil sands industry. This would increase the cost of trucking oil by tankers and intensify the push for more pipeline capacity.

Among the list of complaints received by the Energy Resources Conservation Board (ERCB) regarding the oil and gas industries, complaints about truck transport are high on the list (Energy Resources Conservation Board (ERCB). 2011-11. ST57-2011 “Field Surveillance and Operations Branch Provincial Summary 2010” p. 16 http://www.ercb.ca/docs/products/STs/ST57-2011.pdf).”

In his paper on bio-oil (not heavy oil) Pootakham claimed there was less of an environmental footprint if pipelines not trucks were used as transportation (Epub. Pootakham T, Kumar A. 2010-01. “A comparison of pipeline versus truck transport of bio-oil.” 101(1):414-21.
Pootakham T, Kumar A. 2009-08-21. “A comparison of pipeline versus truck transport of bio-oil.“).
Epub. Pootakham T, Kumar A. 2010-01. “A comparison of pipeline versus truck transport of bio-oil.” 101(1):414-21.

There has been a call for an oil industry-financed railway from Fort McMurray to Edmonton since at least 2005. Since 2009 Calgary-based Canadian Pacific Railway Ltd. carry North Dakota Bakken to refineries to compensate for pipeline bottlenecks. “With each tank car containing 650 barrels of oil, that’s 126,000 barrels a day — a significant pipeline on rail (Cattaneo, Claudia. 2012-03-02. “As pipelines stall, railways keep oil flowing.” Financial Post).”

In the same Financial Post article (2012-03-02),

“CN, in response to customer demand, is moving crude (i.e., heavy crude, light crude, pure bitumen) from areas in Western Canada to various markets,” it said in an emailed statement. “CN has also been providing truck-to-rail transportation solutions for crude oil, where CN is loading directly from truck to rail.”

Oil industry: not subsidies but federal and provincial incentives

The oil industry has received various forms of federal and provincial incentives in the years prior to the boom. For example, the governments provide funds for research on improved technologies and methodologies for extraction, land recovery, etc. Companies who receive this multi-million dollar funding are not obligated to use the technologies they develop if the profit-margins would be negatively affected by their implementation. How many millions of public funds have been quietly assigned to this research?

From where does Canada import its oil?

“Most Canadians are under the impression that we do not need to worry about our energy security. We see ourselves as a country rich in oil, and we assume that our own resources are available to us for consumption. That assumption is incorrect. Canadians do need to ask where their oil comes from because it doesn’t necessarily come from Canada! Canada imports more than half of the crude oil it needs. We purchase around 55 per cent of our oil from countries such as Algeria, Saudi Arabia and Venezuela. We are also turning increasingly toward new sources including Russian and African producers. Canadians should question whether we can count on those suppliers for a steady supply of oil (Council of Canadians).”

This debate unfolds at a time when Canadians consume about 1.8 million barrels of oil a day according to Peter Boag, president of the Canadian Petroleum Products Institute (Lindell, 2012-01-31). While Boag also claims that Canada’s 19 refineries produce two million barrels of day, and are only operating at 80% capacity, he neglects to mention that many Canadian refineries are older, smaller, inefficient and not designed for bitumen. The product Canadians produce is exported and Canada relies on U. S. refineries to supply gasoline and airline fuel for example. Eastern refineries rely on oil imported from Saudi Arabia, Africa and Venezuela, which are much more volatile than WTI prices for geopolitical reasons. In March 2012 the Brent-WTI differential continued to negatively impact the price of bitumen from the oil sands. Western Canada Select was priced at a $35.50 U. S. discount to West Texas Intermediate (WTI) (37% below the U.S. crude), which itself trades at a substantial discount to the Brent crude oil prices. Brent crude oil prices rose (2012-03-21) to a record high of near $125 per barrel (Hussain, Yadullah. 2012-03-21. “Oil industry may lose $18B a year in crude price discounts: CIBC.Financial Post).

The market value of Western Canada Select

The inadequacy of the current pipeline national and Canada-U.S. networks also decrease the market value of Western Canada Select. Until TransCanada’s Keystone XL portion is operational, there is a bottle neck which limits the movement of bitumen to U.S. refineries capable of upgrading the heavy oil. Some predict that this pipeline extension will not be in place until late 2013 and until then the Brent-WTI differential will remain.

There is a request under review for a west-east reversal and expansion of the Seaway pipelines which would also positively impact the Alberta’s oil (Hussain, Yadullah. 2012-03-21. “Oil industry may lose $18B a year in crude price discounts: CIBC.Financial Post.) “Ontario’s oil comes from Western Canada, but it is sent first to the United States to be refined before being delivered to the province.”

“The heightened pressure on lawmakers to get more revenue for Alberta’s bitumen follows recent calls to address a predicted decline in synthetic oil produced in the province, as a percentage of total bitumen output. The Energy Resources Conservation Board predicts 47% of bitumen produced in the province in 2020 will be upgraded to light oil, down from 58% in 2010. In 2008, the province had set a goal of 66%. The regulator’s summer forecast had some eyeing jobs and tax revenue attached to additional upgraders crying out for government actionPenty 2011-11-25.

Synthetic Crude Oil Production: “In 2010, all crude bitumen produced from mining, as well as a small portion of in situ production (about 11 per cent), was upgraded in Alberta, yielding 46.1 million m3 (290 million barrels) of SCO. About 58 per cent of total crude bitumen produced in Alberta was upgraded in the province in 2010. By 2020, SCO production is forecast to almost double to 81.5 million m3 (513 million barrels). While this is a significant increase compared to 2010, it is expected that only 47 per cent of total crude bitumen produced in Alberta will be upgraded in the province by the end of the forecast period because of an expected narrow price differential of bitumen relative to light crude oil. Over the next 10 years, mined bitumen is projected to continue to be the primary source of the bitumen upgraded to SCO in Alberta. However, it is projected that bitumen from in situ production will be increasingly upgraded to SCO in the province. The portion of in situ production upgraded in the province will increase from 11 per cent in 2010 to 13 per cent by the end of the forecast period.” ERCB. 2011-06. “ST98-2011 Alberta’s Energy Reserves 2010 and Supply/Demand Outlook 2011-2020.” p. 6.

There is a call for keeping more employment in Canada and for expanded use of eastern oil refineries.

“A poll conducted by ThinkHQ Public Affairs showed 81% support in Alberta for the government taking steps to increase the amount of oilsands upgrading and refining done in the province, with the support cutting across partisan lines. The survey showed 73% support for the idea of putting higher royalties on the export of raw bitumen and 56% support for tax incentives for private investment. Support dropped under 50% for a Crown corporation to build and operate upgraders, operating subsidies to private sector upgraders and investing tax dollars to help build private sector projects (Wood 2012-01-26).”

Questions and concerns about the race to sell bitumen using today’s water-hungry and natural-gas hungry technologies, are being raised.  There is a call to slow down the process. However, the price of natural gas has fallen dramatically and “natural gas is a key raw material for refineries, which use it predominantly as a source of fuel to operate. Hydraulic fracturing methods have significantly increased the supply of natural gas in the U.S.” “Natural gas is a market that has been turned upside down in the last few years with the development of technology for extracting gas from shale beds with hydraulic fracturing. The new resources made available through fracking have caused the price to drop from $8 for a million BTUs to between $4 and $5 per MBTU. The U.S. has been in the lead when it comes to exploiting shale gas (Kanellos 2011-06-09).

“In Natural Gas, U.S. Will Move From Abundance to Imports.” Canada is the only OECD nation that does not have a national energy plan which complicates the environmental and economic issues related to energy. Ever since Prime Minister Trudeau’s Energy Plan almost divided the country along the east-west axis, no Prime Minister has dared to touch the topic. In the Canadian system, provinces control energy while the federal government controls pipelines. Canadian cannot look to the risk-averse, profit-motivated oil industry to consider long-term resource development, investment of profits towards infrastructure beyond extraction, transportation and minor upgrading. It is only through federal-provincial and in some cases regional pressure that the oil industry could be pressured/encouraged to build oil refineries in Canada to develop an even more integrated oil industry. The federal government needs to take the lead. In March 2012 Alberta Premier Alison Redford began to discuss openly the possibility of a Canadian energy strategy as opposed to a national energy plan. Phase 4 of TransCanada’s Keystone pipeline project met major hurdles at the U. S. federal level in late 2011. Alberta Premier Alison Redford says her government will take a hands-off approach to the increased upgrading of bitumen in the province as Alberta’s oilsands production continues to ramp up (Wood 2012-01-26).”

“With the energy spotlight focused recently on the proposed Keystone XL and Northern Gateway pipelines that would ship raw bitumen to the United States and Pacific Coast, respectively, there have been growing calls for increasing the capacity in Alberta to upgrade and refine oilsands into products like synthetic crude, gasoline and diesel.” “Redford said it is up to the market and energy industry to determine opportunities for more processing (if it makes economic sense) — not the government. “If we have wheat, we’re not going to say to people you can only export bread.” “Redford remains committed to the planned North West upgrader, but there are no other projects in line for provincial involvement.”(Wood 2012-01-26).”

Even though “we would get far more value for our resources if we were to ship refined product,” Canada only refines about 50% of oil and the rest goes to refineries in the United States. Increases in oil refinery facility size and improvements in efficiencies have offset much of the lost physical capacity of the industry.

Concerns about state-capitalism and oil sands takeover by state-owned companies (SOE)

See also Canada in the Pacific Century

Mintz, Jack. 2012-07-24. “We should welcome investment, but state-owned firms like China National Offshore Oil Corp (CNOOC) — now targeting Nexen — are a different matter.” Financial Post.

“The acquisition of Canadian companies by state-owned companies or sovereign wealth funds (whether from China, Russia or elsewhere), is a less clear-cut matter. Should Canada permit the nationalization of its business sector through foreign state ownership? … Yet, there are potential downfalls, particularly related to China National Offshore Oil Corp (CNOOC) being state-owned rather than a privatized business. Unless a government wishes its state-owned enterprises to operate strictly according to commercial criteria, a takeover of a private company by a State Owned Enterprise (SOE) could result in the target performing less efficiently since other criteria besides value maximization undermine profitability and productivity… recent papers published on both Canadian and international experiences conclude that state-owned enterprises perform less efficiently than privatized companies. .. The CNOOC takeover of Nexen will not be the last of similar potential acquisitions of Canadian businesses by foreign state-owned entities. Ottawa will need a clear policy to determine the suitability of these takeovers and to apply it readily.”

While it is widely acknowledged that Canada needs to diversify and depend less on the United States as its major market, there are concerns about basing the Asian market on state-owned corporations. The Economist revealed some disturbing trends in this emerging form of capitalism: state capitalism. Sixteen of the largest twenty global oil companies are state owned, and together control over 80 % of oil reserves. Their bottom line is profit and have no concern for Canada’s long-term economic health, employment, environmental impact, etc.

“Investments by China’s big energy State Owned Enterprises (SEOs) – China National Offshore Oil Corp (CNOOC), Sinopec and CNPC – in Canada’s oilsands and unconventional gas sectors since 2010 have totalled at least $25 billion… [C]oncerns about SOEs range from unlawful technology transfers to preferred access to bank capital and below-market interest rates that suggest the companies don’t play by the same economic rules as their competitors (Ewan. 2012-08. “Canada Riding Historic Wave Chinese Investment.” Calgary Herald 2012).

CNOOK “is an $89 billion company with oil and gas assets in Indonesia, Iraq, Australia, Africa, North and South America, as well as China… The $15 billion bid by China National Offshore Oil Corp (CNOOC) to buy Canada’s Nexen, Inc will help the Chinese state giant gain the expertise to drill in deep, disputed waters of the South China Sea without relying on risk-averse foreign firms (Eckert, Paul. 2012-08-04. CNOOC-Nexen deal seen helping China’s South China Sea thrust. Reuters).” By 2018-2023 China would probably have the experience, knowledge and technologies like those Nexen already has to “set up and maintain stable rigs in 5,000-10,000 feet of ocean water” and “drill 10,000-18,000 feet deep in sediment (Eckert 2012-08-04)”. How might China’s access to an expanded South China Sea deep drilling, affect the future of oil sands bitumen market and the Northern Gateway pipeline in five or ten years?

Why does Canada not have a cohesive national energy strategy?

“Without a Canadian Energy Strategy – a strategy that will give Canadians security of their energy supplies, guaranteed access to energy reserves in times of need, and strong policies that protect our environment and focus on fi nding alternative, less harmful energy solutions – our country will continue to be a victim of an energy gold rush. Politicians cannot let corporations and the market set the agenda, focusing on big business needs, and privatizing public services, while ignoring the energy security needs of Canadians (Council of Canadians).”

We need a strong government position yet we do not have a cohesive energy strategy. The oil industry is a risk-averse industry and at this time there is an unwillingness to develop infrastructure beyond extraction and minimal upgrading. In the United States refineries are being closed. The proposed $6 billion Shell refinery was cancelled in 2009 because of  “the current project execution environment, market conditions and the current inflationary pressures across the oil and gas industry.” Although greener technologies are being developed, it is estimated that we will continue to be dependent on fossil fuels until c. 2040. Why not stretch out our use of these invaluable resources? There are opportunities for job creation through the development and implementation of  innovative marketable technologies that will make the extraction process more efficient, environmentally friendly and financially feasible? Federal funds have supported much research in the field that never sees the light of day because the oil industry, like the ocean liner, can’t adapt quickly to change. Enbridge is in the process of applying to the National Energy Board to reverse the flow in 35-year-old Line 9 Sarnia/Montreal pipeline to the original direction for which it was designed in 1975 to take western Canadian crude to Montreal refineries. “It would give Quebec and Atlantic Canada – which currently get 80 per cent of their crude from Europe, Africa and the Middle East – a reliable source of domestic oil. As Joseph Gargiso of the Communications, Energy and Paperworker’s Union said in support of the line reversal: “A country that is blessed with petroleum resources like Canada should first and foremost assure that the country as a whole has access to a guaranteed supply.” The pipeline reversal would also allow the Alberta oil industry to get a better price for its product (Calgary Herald 2012).”

Where does Canada’s oil come from?

“Canadians need a national energy strategy – one that puts citizens’ interests ahead of multi-billion-dollar oil companies. Right now, our country does not have a national energy strategy that addresses where our energy comes from, where it is going, or the high price of environmental devastation that comes with producing it. For nearly 20 years, Canada has lived with free trade agreements and free-market rules that are used to ensure that our energy resources keep fl owing out of the country with little or no direction from government. As one of the coldest countries on earth, Canada’s energy security is decided by the whims of the United States, the markets and the big oil companies.”

How many jobs do the oil sands provide?

Government of Alberta fact sheet (2011-02) entitled “Economic Activity in Alberta” claimed that, “Almost 139,000 Albertans [were] employed in Alberta’s mining and oil and gas extraction sectors. .. [O]n average over the next 25 years, oil sands are forecast by Canadian Energy Research Institute (CERI) to require more than 450,000 annual work positions across Canada. This totals more than 11.4 million person-years of employment.”
For example Husky has 4,380 permanent employees (Husky Annual Report 2010);

Why does Canada not have more oil refineries?

The Canadian Petroleum Products Institute (CPPI) commissioned The Conference Board of Canada study entitled “Canada’s Refining Sector: An Important Contributor Facing Global Challenges” . Pedro Antunes, (2011-10-31) argued that even if the upstream (oil and gas exploration and production) segment of the industry continues its robust expansion in Canada, “the future economic benefits, job creation, and profits from oil refining and processing are much less assured (Crawford, Todd. 2011-10-31. “Canada’s Refining Sector: An Important Contributor Facing Global Challenges.” The Conference Board of Canada. Commissioned by The Canadian Petroleum Products Institute (CPPI). 52 pages.

Document Highlights: Canada’s refining industry has undergone a massive restructuring over the past 30 years. Since the 1970s, the number of operating refineries has dropped from 40 to just 18 today. While global demand for petroleum products continues to rise and the outlook for Canada’s upstream energy sector is bright, Canadian refiners face a very particular set of challenges, since North American and other OECD markets will likely be characterized by declining demand.

Arguments for building more oil refineries in Canada

  • Increases in oil refinery facility size and improvements in efficiencies have offset much of the lost physical capacity of the industry.
  • Recent controversies surrounding the construction of pipelines to transport bitumen from the oil sands has raised questions about the reasons Canada does not develop a more integrated value-added industry.  “We would get far more value for our resources if we were to ship refined product.”

Arguments against building more oil refineries in Canada

  • “In 2009 through 2010, as revenue streams in the oil business dried up and profitability of oil refineries fell due to lower demand for product and high reserves of supply preceding the economic recession, oil companies began to close or sell refineries. Due to EPA regulations, the costs associated with closing a refinery are very high, meaning that many former refineries are re-purposed (Wayman E. Recession’s latest victim: oil refineries. Earth magazine. June 2010. Pgs 10-11).In 2009 Royal Dutch Shell Europe’s largest oil company closed oil refineries in the US and considered selling or closing its 130,000-barrel-per-day refinery in Montreal, which it has operated since 1933.
  • Shortage of qualified labour
  • risk-averse industry
  • oil industry is closing refineries not constructing new ones.
  • multinational oil companies lack motivation to protect Canadian interests. 16 of the largest 20 global oil companies are state owned, and together control over 80 per cent of oil reserves. Canada had a state-owned oil company Petro Canada but it was acquired by Suncor.
  • government needs to take leading role in motivating oil industry to build oil refineries in Canada to develop integrated oil industry
  • high standards for environmental protection would be required in new constructions of oil refineries
  • International companies like Imperial Oil, Husky look at profits for global company. Integrated firms, such as Calgary-based Husky (controlled by Hong Kong billionaire Li Ka-shing) with its crude storage system in Hardisty, pipelines, upgrader and refineries, use the cheaper oil sands crude oil as refinery and upgrader feedstock. The stocks of these integrated firms are substantially mitigated. Husky’s net earnings increased by 22% since April 2011 in spite of the volatility of price of crude. Light and heavy Canadian crude varieties were steeply discounted against WTI in 2012 on pipeline bottlenecks in the U.S. Midwest, made worse by high production and refinery downtime (Calgary Herald 2012-04). The Calgary-based American integrated company, Imperial Oil, with its refineries posted a 30% increase in earnings in the first quarter of 2012 (Calgary Herald 2012-04).
  • MIT has argued for a liquid fuel converted from natural gas to replace gasoline. “[T]he chemical conversion of natural gas into some form of liquid fuel may be the best pathway to significant market penetration in the transportation sector (MIT 2011).”
  • Kearn oil sands project: “The product will be transported to market through a pipeline system. Imperial and ExxonMobil own extensive refinery infrastructure in Canada and the U.S. that could receive bitumen or upgraded feedstock to make a variety of refined products. Production may also be sold to third parties. Any future upgrading capacity to support the Kearl project would be the subject of separate application.”
  • Multinationals are not concerned about Canadian economy
  • 1990s mergers created companies that have more market power
  • loss of competition
  • Athabaskan oil sands are extra heavy and high in sulphur involving most complex and expensive refining processes
  • green movement has oil sands under microscope
  • oil refineries are major polluters in themselves
  • oil industry has market power so control of oil refinery production can affect gasoline prices etc
  • weak anti-trust laws
  • poor global economic conditions
  • Albertan oil industry promises revenue and employment
  • it is costly to build an economically oil refinery that passes environmental standards
  • The biggest oil refinery Suncor in Edmonton, Alberta processes 135,000-barrel-per-day and runs entirely on oil sands-based feedstocks and produces a high yield of light oils.” Suncor be the fifth largest oil and gas company in North America with assets of $43 billion. When it acquired PetroCanada it became Canada’s largest upstream producer and second largest refiner of gasoline and oil products.

How much does it really cost to build a brand new and economically viable oil refinery?

The estimated cost of the Wallaceburg, Ontario oil refinery proposed by Shell Canada in 2007 was between $6 billion and $8 billion. The projections were for the employment of 700 people once operational and thousands of jobs during construction. The project was cancelled c. 2009 because of  “the current project execution environment, market conditions and the current inflationary pressures across the oil and gas industry.” Is there more of a financial benefit to Canada to see raw bitumen? Cooper, Mark. 2003-10. “Spring Break in the US Oil Industry: Price Spike, Excess Profits and Excuses.”

Supermajor oil companies oil sands’ profits: Oligarchy, concentration, Vertical Relationships, Competition in Retail Gasoline Markets

Among others, Canadian oil sands are being developed by supermajors, the world’s five or six largest publicly-owned oil and gas companies: BP p.l.c., Chevron Corporation, ExxonMobil Corporation, Royal Dutch Shell plc, Total S.A. and ConocoPhillips Company A supermajor is one of the world’s five or six largest publicly-owned oil and gas companies. In an effort to improve economies of scale, hedge against oil price volatility, and reduce large cash reserves through reinvestment, largely in response to the a severe fall in oil prices the major mergers and acquisitions of oil and gas companies took place between 1998 and 2002. (BP’s acquisitions of Amoco in 1998 and of ARCO in 2000; Exxon’s merger with Mobil in 1999, forming ExxonMobil; Total’s merger with Petrofina in 1999 and with Elf Aquitaine in 2000, with the resulting company subsequently renamed Total S.A.; Chevron’s acquisition of Texaco in 2001; and the merger of Conoco Inc. and Phillips Petroleum Company in 2002, forming Conoco Phillips.
This process of consolidation created some of the largest global corporations as defined by the Forbes Global 2000 ranking, and as of 2007 all were within the top 25. Between 2004 and 2007 the profits of the six supermajors totaled US$494.8 billion (wiki)

Reductions in storage capacity and the number of gasoline stations of over ten percent have also taken place in just the past half-decade. These reductions in capacity have been driven in part by a merger wave that has resulted in a significant increase in the concentration of ownership of refinery capacity and gasoline outlets. Four-fifths of regional refinery markets have reached levels of concentration that trigger competitive concerns, even by the standards adopted by the antitrust division of the Reagan administration’s Department of Justice. In these markets, the largest four firms account for at least one-half and as much as three quarters of the refined product output. A similar trend has been in evidence at the level of gasoline stations.

“In 1990, 22 integrated companies covered an average of 28 states. In 1999, 17 companies covered an average of 26 states.” (Gilbert and Hastings, p. 27; see also Hastings, Justine, “Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California,” Competition Policy Center, 2000.) “The rule of thumb reflected in all iterations of the Merger Guidelines is that the more concentrated an industry, the more likely is oligopolistic behavior by that industry…. Still, the inference that higher concentration increases the risks of oligopolistic conduct seems well grounded. As the number of industry participants becomes smaller, the task of coordinating industry behavior becomes easier. For example, a ten-firm industry is more likely to require some sort of coordination to maintain prices at an oligopoly level, whereas the three-firm industry might more easily maintain prices through parallel behavior without express coordination (U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, 1997, at section 0.1.).”

Where is oil found in Canada?

“Not surprisingly, the biggest Canadian producer is the province of Alberta, which accounts for two-thirds of Canada’s production. Saskatchewan is next at roughly 18 per cent, and Newfoundland produces 13 per cent with its off-shore resources. Manitoba, Ontario, British Columbia and the Northwest Territories round out Canadian output with a combined share representing 2.8 per cent of production (Council of Canadians).”

Where does Canadian crude oil and petroleum products go?

66% of Canada’s oil production goes almost exclusively to the United States in the form of exports (Council of Canadians).

How many oil refineries does Canada have in 2012?

“The refining, distribution and marketing of transportation fuels industry operates through an infrastructure with close to 100,000 employees. The industry’s infrastructure in Canada includes 19 refineries in 8 provinces, a complex network of 21 primary fuel distribution terminals, 50 regional terminals and 12,000 retail service stations ( The Canadian Petroleum Products Institute (CPPI) 2011 ).”

“Canada is home to 18 refineries, 16 of which are operated by Canadian Petroleum Products Institute (CPPI) members and represent the majority of the country’s refining capacity. CPPI claims Canada is a net exporter, mainly to the United States, of refined petroleum products and crude oil.” However, Canada imports most of its refined fuel from the United States. “Eastern Canada relies on imported oil — despite the fact that some provinces are oil producers. There are several offshore drilling operations in Newfoundland and Labrador, but none of the oil is actually used in Canada. The eastern provinces rely on an oil supply that’s imported from Saudi Arabia, Africa and Venezuela (CBC. 2012-01-25.”

Where are the existing oil refineries in Canada?

The following table is from Statistics Canada website. Statistics on Canadian Petroleum products — Refined petroleum products, refinery production by type

Centre for Energy: Canadian Oil Refineries Map

British Columbia

  • Husky Energy Inc. Prince George Refinery, Prince George BC.”Husky’s U.S. refining operations process a mix of different types of crude oil
    from various sources but are primarily light sweet crude oil at the Lima, Ohio Refinery and approximately 50% heavy crude oil
    feedstock at the Toledo, Ohio Refinery. The Company’s refined products business in Canada relies primarily on purchased refined
    products for resale in the retail distribution network. Refined products are acquired from other Canadian refiners at rack prices or
    exchanged with production from the Husky Prince George Refinery (Husky Annual Report 2011).” Husky is controlled by Hong Kong billionaire Li Ka-shing.
  • Chevron Canada Limited. Burnaby Refinery. Burnaby BC

Alberta

  • Suncor Energy Products Partnership. Edmonton Refinery. Edmonton AB
  • Shell Canada Products
    • Scotford Refinery Fort Saskatchewan AB
  • Imperial Oil Limited Strathcona Refinery Edmonton AB

Saskatchewan

  • Consumers’ Cooperative Refineries Limited Regina SK * Not a CPPI member
  •  Husky Energy Inc. Lloydminster SK* Asphalt plant and CPPI member. Husky is controlled by Hong Kong billionaire Li Ka-shing.

Nova Scotia

  • Imperial Oil Limited Dartmouth Refinery Dartmouth NS

Newfoundland

  • North Atlantic Refining Limited Come by Chance Refinery Come by Chance NF. North Atlantic Refining Limited is a downstream subsidiary of Harvest Operations Corporation which is a wholly-owned subsidiary of the Korean state-owned Korea National Oil Corporation (“KNOC”). The Korea National Oil Corporation, whose CEO is a KNOC executive who replaced is a “significant operator in Canada’s energy industry offering stakeholders exposure to an integrated structure with upstream (exploration, development and production of crude oil and natural gas) and downstream (refining and marketing of distillate, gasoline and fuel oil) segments. [] KNOC Upstream oil and gas production is weighted approximately 70% to crude oil and liquids and 30% to natural gas, and is complemented by their long-life refining and marketing business.” The replacement in 2012 of a Canadian CEO by a Korean CEO is considered to be a major paradigm shift in the Asian-Canadian oil investment partnerships.

Ontario

Ontario refineries had a capacity of 74,400 m3/day (468,700 b/d) in 2007. At that time these refineries included:

  • Imperial Oil – Nanticoke, Ont. 112,100;
  • Imperial Oil – Sarnia, Ont. 121,600;
  • Shell Canada Products a European Oil Major Sarnia Manufacturing Centre (Corunna refinery)  75,000 barrels of crude oil daily. Corunna ON Originally built in 1952 by Canadian Oil Companies Limited.
  • Imperial Oil Limited Sarnia Refinery Sarnia ON
  • NOVA Chemicals (Canada) Limited Sarnia ON “NOVA Chemicals’ Corunna site The Corunna facility started up in late 1977 and was purchased by NOVA Chemcals in 1988. It was the first fully integrated refinery and petrochemical complex in North America. It is a refinery and petrochemical complex that supplies between 30% and 40% of Canada’s total requirements for primary petrochemicals. The refinery is capable of producing in excess of 3.5 billion pounds (1.6 million tonnes) of basic petrochemicals and 3 billion pounds of refinery and energy products annually. The Corunna site processes crude oil, condensate and natural gas liquids (NGLs) that are delivered to the site by pipeline from western Canada. These products are the feedstocks used to manufacture ethylene, propylene, butadiene, iso-butylene, n-butylene, benzene, toluene and xylene. During petrochemical production, other co-products are also manufactured, including synthetic natural gas, liquefied petroleum gas, gasoline components, diesel fuel, home heating oil and heavy residual fuel oil. ” 500 employees work at the Corunna plant.
  • Imperial Oil Limited Nanticoke Refinery Jarvis ON. Approximately 25 percent of petroleum products sold in Ontario originate from the Nanticoke refinery. Approximately 260 employees. Daily capacity: 112,000 barrels of crude oil.
  • Suncor Energy Products Partnership Petro-Canada Lubricants Centre Mississauga, ON
  • Nova Chemicals – Sarnia 80,000; Corruna; Moore; St. Clair River;
  • Suncor Energy Products Partnership Sarnia Refinery Sarnia ON 85,100

Quebec

  • Suncor Energy Products Partnership Montréal Refinery Montréal QC
  • Ultramar Ltd. Jean-Gaulin Refinery Lévis QC

New Brunswick

  • New Brunswick Irving Oil Limited Saint John NB * Not a CPPI member

Context Timeline of Selected Events in Integrated Oil Industry

2012-07-23China National Offshore Oil Corporation (CNOOC Group) one of the largest state-owned oil companies in resource-hungry China, announced it had “agreed to acquire Nexen for $15.1 billion, China’s biggest foreign takeover bid. Shares of Nexen jumped almost 52 percent that day.” (Reuters. 2012-07-28. “SEC alleges insider trading ahead of CNOOC-Nexen deal.”).” CNOOC “promised to retain all employees and to make Canada home base for its Western Hemisphere operations.”
2012-03-05

    “In the crude market, the Enbridge pipeline outage deepened discounts for Canadian heavy crude against U.S. benchmark West Texas Intermediate. Western Canada Select heavy blend for April delivery traded at C$33.00 ($33.21) per barrel under the West Texas Intermediate benchmark, down from C$32.80 under the benchmark last week. Barrels for March delivery were bid at C$40 a barrel under WTI. Canadian crude was already suffering deep discounts due to limited pipeline space on Enbridge and other pipeline systems (

Reuters 2012-03-05

    ).”

  • 2012-03-05 U.S. April 2012 contract Light Crude Oil (Light Crude) [West Texas Intermediate (WTI) crude oil] rose 30 cents to $107.00 a barrel after settling $2.14 lower at $106.70. Front-month Brent rose 30 cents to $123.95 a barrel by 0332 GMT. Brent fell 2 percent on Friday after Saudi Arabia denied a media report of an explosion at a Saudi oil pipeline that had helped Brent crude prices shoot up $5 to $126.20, their highest level since 2008.”Jaganathan, Jessica. 2012-03-05.”
  • 2012-03-02 Brent crude rose $3.54, or 2.89%, to settle at $126.20 a barrel, then traded as high as $128.40 in post-settlement trading, the highest intraday price since July 23, 2008, when front-month Brent reached $129.50. Brent crude rose sharply reacting to an unconfirmed Iranian media report of an explosion on an unknown Saudi Arabian oil pipeline (Robert Gibbons and Lisa Shumaker 2012-03-01 Reuters)
  • 2012-03-01 Canada’s Oil Sands Innovation Alliance (COSIA), with Dr. Dan Wicklum as CEO, is an alliance of 12 oil sands producers who represent more than 80% of the oil sands production in CanadaBP Canada Energy Company, Canadian Natural Resources Limited, Cenovus Energy Inc., ConocoPhillips Canada Resources Corp., Devon Canada Corporation, Imperial Oil, Nexen Inc., Shell Canada Energy, Statoil Canada Ltd., Suncor Energy Inc., Teck Resources Limited, Total E&P Canada Ltd.. COSIA’s focus is on accelerating the pace of improvement in environmental performance in Canada’s oil sands through collaborative action and innovation. Through COSIA, participating companies will capture, develop and share the most innovative approaches and best thinking to improve environmental performance in the oil sands, initially focusing on four Environmental Priority Areas (EPAs) – tailings, water, land and greenhouse gases. COSIA will take innovation and environmental performance in the oil sands to the next level through a continued focus on collaboration and transparent exchange.Van Loon, Jeremy.
  • 2012-03-01.Oil-Sands Producers Group May Offer New Businesses, Suncor Says.” Bloomberg. Dr. Dan Wicklum was Director General of Water Science and Technology for Environment Canada. While working at EC, Wicklum’s stressed, “You can’t manage what you can’t measure.” Sustainability metrics is becoming more common but it is not enough. “Quality guru W Edwards Deming went further, putting ‘management by use only of visible figures, with little consideration of figures that are unknown or unknowable’ at No 5 in his list of seven deadly management diseases. Henry Mintzberg, the sanest of management educators, proposed that starting ‘from the premise that we can’t measure what matters’ gives managers the best chance of realistically facing up to their challenge (Caulkin 2008).”
  • 2012 Thomas Golembeski’s spokesman for Sunoco claimed that Sunoco’s Northeast refining business lost c. $1 billion from 2009-2012 (Philips 2012-03-01). Another source cited, “Thomas P. Golembeski, a Sunoco spokesman, said the company’s Northeast refining business has lost more than $900 million in the past three years (Penn lawmakers 2012-02-16).” “Thomas Golembeski, spokesperson for Sunoco claimed their oil refineries lost 8 out of the last 10 quarters between 2009 and 2011 to a total of $772 million (Nixon 2011-09-17).”
  • 2012-02 According to a recent report “the world is becoming more reliant on gasoline and diesel fuel refined in the U.S. This week, we learned that in 2011, the U.S. became a net exporter of gasoline, diesel and other fuels for the first time since 1949. Such refined products were the top U.S. export in 2011, beating out such staples of U.S. manufacturing as Detroit’s autos and Boeing’s (BA) airplanes (Philips 2012-03-02).
  • 2012-02-21 Roger McKnight, of Ontario-based En-Pro International Inc., senior analyst with 30 years experience in predicted that the price of gasoline will be up across Canada by 15% at the end of April. Challenging record prices in 2008: (ex. Estimated price per litre of gasoline in the summer of 2012: Calgary: $1.30; Vancouver: $1.50). McKnight argues that the major factor in the rise in prices is the distribution changes in the U.S. – “refinery implosion that we’ve had in the eastern part of the U.S., in the Philadelphia area, which has basically taken a million barrels of production out of the system.” “McKnight said the fire last week at BP’s Cherry Point refinery in Washington is also a factor in higher B.C. prices, because the plant – which contributes to Vancouver’s supply — is producing less. Making the price more volatile is the The uncertain geopolitical situation with Iran makes the price more volatile CBC News 2012-02-21) .
  • 2012-01-20 “TransCanada Corp. is considering possibilities for moving Bakken shale crude south to the US Gulf Coast via a stand-alone system following the US rejection of the company’s permit application for the Keystone XL crude oil pipeline. TransCanada had originally envisioned moving Bakken crude south as part of Keystone XL, concluding a binding open season for its Bakken MarketLink Project in early 2011. Options for moving Bakken crude south could include a completely new-built pipeline, or modification of Bakken MarketLink plans to route Bakken production to the existing Keystone pipeline, already delivering Canadian crude to Cushing, Okla. TransCanada declined to comment on specific possibilities, saying that discussions need to occur with customers and nothing has been finalized (TransCanada mulls Bakken options while reapplying for Keystone XL).”
  • 2012-01-18 President Barack Obama halted TransCanada’s proposed Keystone XL tar sands pipeline project, which would have brought bitumen from the Alberta oil sands (“dilbit”) through the U.S., to Gulf Coast refineries near Port Arthur, Texas, where the oil would then be exported to the global market.
  • 2012-01-26 Premier Alison Redford says her government will take a hands-off approach to the increased upgrading of bitumen in the province as Alberta’s oilsands production continues to ramp up. “With the energy spotlight focused recently on the proposed Keystone XL and Northern Gateway pipelines that would ship raw bitumen to the United States and Pacific Coast, respectively, there have been growing calls for increasing the capacity in Alberta to upgrade and refine oilsands into products like synthetic crude, gasoline and diesel.” “Redford said it is up to the market and energy industry to determine opportunities for more processing (if it makes economic sense) — not the government. “Redford remains committed to the planned North West upgrader, but there are no other projects in line for provincial involvement.” “If we have wheat, we’re not going to say to people you can only export bread.” (Wood 2012-01-26).” Critics claim that the metaphor is inappropriate. If we have good top soil than we can export wheat, flour and baked goods. If we give away our top soil we have no wheat.
  • 2012-02-13 The price for a barrel of WTI crude broke above $100 U. S. a barrel. “West Texas Intermediate (WTI) crude oil is of very high quality, because it is light-weight and has low sulphur content. For these reasons, it is often referred to as “light, sweet” crude oil. These properties make it excellent for making gasoline, which is why it is the major benchmark of crude oil in the Americas. WTI is generally priced at about a $5-6 per barrel premium to the OPEC Basket Price and about $1-2 per-barrel premium to Brent (Amadeo February 13, 2012).” Alberta Oil Sands Royalties are tagged to the price of West Texas Intermediate (WTI) crude oil.
  • 2012 “Most fundamentally, shipping unprocessed bitumen crude out of Canada has been attacked by the biggest of Canada’s energy labour unions, the Communications, Energy and Paperworkers Union of Canada, as a bad idea. The CEP estimates it means exporting 40,000 jobs out of Canada (figure based on jobs lost through the Keystone Pipeline). They prefer refining the crude here in Canada.  (The CEP is also not a group to which your allegation that opponents of Gateway also oppose all forestry, mining, oil, gas, etc is anything but absurd (May 2012-01An Open Letter to Joe Oliver“.)”
  • 2012-01 “Compared to 2010, Suncor’s annual operating earnings next, and as Firebag Stage 4 is expected to begin its own more than doubled in 2011 to a record $5.7 billion. Cash ramp up in 2013. Flow from operations was also the highest ever, at nearly $10 billion. While the results primarily reflected increased It’s estimated that some 80% of Canada’s oil sands production from our Oil Sands business and a strong reserves are buried too deep to be reached by crude pricing environment, we also saw increased price conventional mining. Of Suncor’s proved plus probable Oil realizations due to our capacity to upgrade bitumen and Sands reserves, nearly 60% are associated with the refine crude oil in-house (Suncor Annual Report 2011).”
  • 2011-12 Refining capacity in the U.S. has been steadily increasing, climbing 0.8 percent, to 17.7 million barrels a day in December, 2011 compared to December 2010 (Philips 2012-03-02).
  • 2011-11 In a joint business venture Cenovus and ConocoPhillips completed a new four-drum coker as part of the coker and refinery expansion (CORE) project at Wood River (Illinois). The new coker has a capacity of 65,000 barrels per day and is expected to expand our heavy oil processing capacity to approximately 200,000 – 220,000 barrels per day, increasing the production of clean transportation fuels for the U.S. Midwest market, including St. Louis and Chicago. The CORE project took about three years to build, with a total cost of US$3.8 billion (US$1.9 billion to Cenovus), and has increased clean product yield by 5% to approximately 85%. Cenovus is involved in a business venture with ConocoPhillips in upstream enhanced oil operations and downstream refining. Cenovus has a 50% interest in the Wood River (Illinois) and Borger (Texas) refineries. ConocoPhillips has a 50% interest in our Foster Creek and Christina Lake Steam Assisted Gravity Drainage (SAGD), enhanced oil recovery technology for producing heavy crude oil and bitumen. These two extraction upstream projects in the Athabasca region in northeast Alberta. This interest in two quality refineries is a strategic fit for Cenovus and allows us to capture the full value from crude oil production through to refined products such as diesel, gasoline and jet fuel (Cenovus).” “The Foster Creek project began in 1996 and in 2002 became the industry’s first commercial SAGD project. It has grown in five phases with an expected production capacity of 120,000 gross barrels per day. In the first quarter of 2010 Foster Creek achieved a significant milestone in becoming the largest commercial SAGD project in Alberta to reach royalty payout status. For a project to reach payout its cumulative revenues exceed cumulative allowable costs.” Cenovus is Alberta’s sixth largest energy company with more than 3,000 staff (Cenovus Energy). It’s a sign of commercial success for Cenovus and ConocoPhillips but what does it mean in terms of Alberta’s oil sands royalties if a project can reach royalty payout status?
  • 2011-10-31 In a report commissioned by the  The Canadian Petroleum Products Institute (CPPI), Todd Crawford claimed that Since the 1970s, the number of operating refineries in Canada dropped from 40 in the 1970s to 19 in 2011 although this was more from increased refinery productivity/efficiency than from a decrease in quantity. Crawford also predicted that there will be a decline in demand for refined petroleum products in the North American and other OECD markets as alternative greener forms of energy become competitive. The a strong dollar, tight labour markets, and rising wage pressures make it more difficult for Canadian refineries to compete on the global market. It would be difficult for Canada to upgrade aging refineries or to build new ones that could compete with the newly-operational U. S. oil refineries built to process Alberta’s bitumen that are already processing 2 million barrels per day of Canadian crude piped from Hardisty, Alberta. As well, Canada’s oil refineries would be competing against modern super-refineries in China and India to export gasoline to North America ( Crawford, Todd. 2011-10-31. “Canada’s Refining Sector: An Important Contributor Facing Global Challenges.” The Conference Board of Canada. Commissioned by The Canadian Petroleum Products Institute (CPPI). 52 pages).
  • 2011 In Alberta’s fiscal year 2010-11, synthetic crude and bitumen royalties totaled $3.72 billion, or 38% more than the $1.42 billion in royalties derived from natural gas – the province’s traditional cash cow (Alberta Oil 2011-10-11).
  • 2011 “According to the Energy Information Administration, the United States crude oil imports fell to 8.9 million barrels a day, the lowest level since 2001. Since 2005, foreign imports dropped from 60% of U.S. consumption to 45% in 2011, according to U.S. Department of Energy data (Philips 2012-03-02.)”
  • 2011-10-11 “Sunoco Inc. shut a fluid catalytic cracker for repairs at its Marcus Hook refinery in Pennsylvania. Gasoline rose to a three-week high on speculation fuel output will decline as refinery shutdowns and maintenance curb supply on the U.S. East Coast. Futures gained as refinery rates probably fell 0.78 percentage point to 86.9 percent last week, according to the median estimate of 14 analysts in a Bloomberg News survey.”Powell 2011-10-11).
  • 2011-09-30“ConocoPhillips stopped production at its Trainer, Pennsylvania, refinery saying if it couldn’t find a buyer, the plant would be shut permanently in six months Powell 2011-10-11).” The Trainer plant is one of three oil refineries recently closed in the Eastern states.

    “Unlike their counterparts in the U.S. Midwest and on the Gulf Coast, most U.S. East Coast operations are built to refine only light, sweet oil such as Brent crude. Since this oil is largely imported from such countries as Nigeria, its price is heavily affected by global events. The Arab Spring and threats of Iranian oil disruption have driven the price of Brent from $94 a barrel to over $120 in the last year, costing the U.S. East Coast refineries dearly. Demand for gasoline in the U.S., meanwhile, is close to a 15-year low, so refineries have been unable to pass on all their costs to customers. True, gasoline prices have been climbing—gas in New York State will probably hit $4 a gallon soon—but not enough to keep these refineries profitable. “The golden age of U.S. East Coast refineries is over,” says Fadel Gheit, an analyst with Oppenheimer (Philips 2012-03-01).”

  • 2011-09-17 Thomas Golembeski, spokesperson for Sunoco claimed their oil refineries lost 8 out of the last 10 quarters between 2009 and 2011 to a total of $772 million. Philadelphia-based Sunoco announced in September that they intended to exit the refinery business. They were planning on selling the last of its refineries, in Philadelphia and Marcus Hook. The refineries have a combined capacity to process more than a half million barrels of oil a day. Sunoco, which has 150 gas stations in the Pittsburgh region (Nixon 2011-09-17).”CBC.
  • 2011-09-13Former Alberta Premier Peter Lougheed, who championed and invested in the early development the oilsands in the 1970s opposed the Keystone pipeline.” In an interview with Anna Maria Tremonti of CBC Radio’s The Current September 13, 2011, Peter Lougheed argued, “We should be refining the bitumen in Alberta and we should make it public policy in the province [. . .] I would prefer…we process the bitumen from the oilsands in Alberta and that would create a lot of jobs and job activity [...] That would be a better thing to do than merely send the raw bitumen down the pipeline and they refine it in Texas that means thousands of new jobs in Texas.”
  • 2011 “Within the U.S. market, the price of oil, (which is set globally) compared to the price of natural gas (which is set regionally) is very important in determining market share when there is the opportunity for substitution. Over the last decade or so (2001-2011), when oil prices have been high, the ratio of the benchmark West Texas Intermediate oil price to the Henry Hub natural gas price has been consistently higher than any of the standard rules of thumb (MIT 2011).”
  • 2011-04 and 2011-05 The price of gas ($3.90 a gallon) and oil prices ($113 a barrel) peaked for the year (Amadeo February 13, 2012).
  • 2011-02-16 Government of Alberta (GA). 2011-02-16. “Bituman refinery agreement promotes value-added development.” The Way Forward.
  • 2011-03-20 The Canadian federal budget introduced changes to taxation that was essentially a subsidy for the oil sands. “Under the current policy, the cost of an oil sands lease can be written off at a rate of 30% a year; the budget proposes narrowing that to 10%. The change on mining expenses is more dramatic. Instead of writing off the entire cost of developing a mine in the years the costs were incurred, the budget calls for forcing those costs to be written off at 30% per year. That will align oil sands mines with other sectors of the energy industry (Vanderklippe, Nathan; Tait, Carrie. 2011-03-22. “Oil sands tax incentives targeted.” Globe and Mail).” oil sands subsidies
  • 2011-03-02 The price for a barrel of WTI crude broke above $100 U. S. a barrel. “West Texas Intermediate (WTI) crude oil is of very high quality, because it is light-weight and has low sulphur content. For these reasons, it is often referred to as “light, sweet” crude oil. These properties make it excellent for making gasoline, which is why it is the major benchmark of crude oil in the Americas. WTI is generally priced at about a $5-6 per barrel premium to the OPEC Basket Price and about $1-2 per-barrel premium to Brent (Amadeo February 13, 2012).” Alberta Oil Sands Royalties are tagged to the price of West Texas Intermediate (WTI) crude oil.
  • 2011-01-31 The U. S. Federal budget included a proposal to eliminate roughly $4 billion a year in subsidies and tax breaks for oil companies, in his third effort to eliminate federal support for an industry that remains hugely profitable (Broder, John M. 2011-01-31. “Obama’s Bid to End Oil Subsidies Revives Debate.” ).
  • 2010-12 Sunoco sold a refinery in Toledo, Ohio, “for $400 million to PBF Energy Co. LLC. Golembeski said the sale has not affected Sunoco retail stations in the Midwest. (Nixon 2011-09-17).”
  • 2009-02 Oil prices dropped to $39 a barrel (Amadeo 2012).
  • 2010-04-13Sinopec, China Petroleum & Chemical Corporation, a state-owned company and China’s second-largest oil producer and top refiner, announced acquisition of ConocoPhillips’ 9.03% interest in Syncrude — the largest oil sands project — with seven other partners controlling the rest. Canadian ownership of Syncrude remains at nearly 56%. The Canadian government granted regulatory approval on on June 25, 2010.(Reuters). Sinopec Group, parent of Asia’s largest refiner Sinopec Corp, has launched at c. 74 acquisition deals worth $48.1B since 2005, as part of China’s attempts to secure resources to feed the country’s rapid growth (source). CEO Wang Tianpu,
  • 2008-12 The price of WTI crude oil plummeted to a low of $30 per barrel (Amadeo February 13, 2012). The price of gasoline also dropped to $1.68 a gallon. (Source: EIA Oil Price Trends,EIA Gas Price Trends)
  • 2010-07-26 “Enbridge Energy Partners LLP (Enbridge) reported a 30-inch pipeline ruptured on Monday, July 26, 2010, near Marshall, Michigan. The release, estimated at 819,000 gallons, entered Talmadge Creek and flowed into the Kalamazoo River, a Lake Michigan tributary. Heavy rains caused the river to overtop existing dams and carried oil 30 miles downstream on the Kalamazoo River.” Cleanup by the numbers: 1,148,411 gallons of oil collected; 17.1 million gallons of oil/water collected and disposed; 187,276 cubic yards soil/debris disposed. Total Est. Oil Spill Cost $US 44,833,205. (From July 20, 2012, Situation Report) (source)
  • 2008-06 The price of WTI crude oil hit $145 per barrel which was an all-time high. The U.S. average retail price for regular gasoline also hit a peak in July 2008 of $4.10, rising as high as $5 a gallon in some areas [. . .] During 2008, there was fear that economic growth from China and the U.S. would create so much demand for oil that it would overtake supply, driving up prices. However, most analysts now realize that such a sudden increase in oil prices was due to increased investment by hedge fund and futures traders. (See What Causes High Oil Prices?) (Amadeo February 13, 2012). (Source: EIA Oil Price Trends,EIA Gas Price Trends)
  • 2008-06 According to the publicly-available Commitments of Traders (COT) reports, activity in the West Texas Intermediate (WTI) light sweet crude oil contracts has grown markedly since 2000. In the last three and a half years alone, open interest across all available contract maturities (the number of contracts open at the end of each day) in WTI futures and futures-equivalent (or “adjusted”) option contracts traded on the New York Mercantile Exchange (NYMEX) has more than tripled from around 900,000 contracts in January 2004 to more than 2.9 million contracts in June 2008. During the same period, the number of large traders has also grown – almost doubling since January 2004, from approximately 220 to just under 400 reporting traders. These figures speak to the competitiveness and depth of the crude oil futures markets in the U.S. (CFTC 2008-06).”
  • 2007 
  • 2008-05 The price of West Texas Intermediate (WTI) crude oil passed the $123 mark for the first time (BBC).
  • 2007-05-24 West Texas Intermediate (WTI), also known as Texas light sweet crude oil was priced at $63.58 per barrel as against $71.39 per barrel for Brent (Bloomberg). The anomaly occurred perhaps because of a temporary shortage of refining capacity. On April 13, WTI Crude at Cushing may have temporarily lost its status as a barometer of world oil prices.[2] A large stockpile of oil at the Cushing, Oklahoma storage and pricing facility (mainly due to a refinery shutdown[3]) caused price to be artificially depressed at the Cushing pricing point. As stockpiles decreased, the WTI price increased to exceed the price of Brent once again.[4] (West Texas Intermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content. It is the underlying commodity of Chicago Mercantile Exchange’s oil futures contracts. The price of WTI is often referenced in news reports on oil prices, alongside the price of Brent crude from the North Sea. Other important oil markers include the Dubai Crude and the OPEC Reference Basket. Brent Crude is a major trading classification of sweet light crude oil comprising Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known as the BFOE Quotation). Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum.) wikipedia
  • 2007-03-20The Conservative government of Canada announced it would gradually phase out some oil sands tax incentives including provisions allowing accelerated write-off of oil sands investments. The New Democratic Party, which had enough votes to keep the Conservatives in power, made eliminating accelerated capital cost allowances for oil sands a price for its support (“Canada to end oil sands aid, add green-car rebates“. Angola Press. 20 March 2007).
  • 2007Alberta`s oil sands, which rival Saudi Arabia`s conventional oil reserves in size, were the target of an unprecedented development rush as companies looked to cash in on North America`s thirst for secure energy supplies (“Canada to end oil sands aid, add green-car rebates“. Angola Press. 20 March 2007).
  • 2007 Crude oil prices were significantly in excess of the average cost of production, which was about $28 per barrel of bitumen. However, bitumen production costs were rising rapidly, with production cost increases of 55% from 2005 to 2007, due to shortages of labor and materials (“Oil sands costs up 55 percent“. UPI. 6 March 2007.)
  • 2007-01-31The European Commission announced plans to force energy companies to produce greener fuels. It says it will propose amendments to a directive on fuel quality, which will require a 10% cut in the CO2 released during production and use of the fuel (BBC News “Brussels presses for greener fuel.”)The changes would make companies use more biofuel, and develop greener biofuels where the production process results in lower CO2 emissions.
  • 2006 The Government of Alberta had “a vision for its hydrocarbon upgrading industry: “Alberta will achieve a competitive hydrocarbon upgrading industry through refining and petrochemical plants that expand the market for Alberta’s bitumen resource and produces higher value products in Alberta.” The vision for hydrocarbon upgrading is a key component in the development of an integrated energy strategy that looks beyond extraction to ensure both the highest value and best use of our resources for the benefit of all Albertans (executive summary) The returns to Alberta and Canada from a fully integrated system could be significant. Successful upgrading to finished products could add billions of dollars to the Alberta and Canadian economy and broaden Alberta’s markets for value-added products, ultimately helping Alberta companies to increase their global competitiveness. As well as the value-added consideration, the high level of activity in the oil sands has raised a concern among industry stakeholders. With the large number of project proposals to develop the oil sands within the next 10 to 15 years, production of the bitumen and synthetic crude oil from the oil sands may exceed current refinery capacity resulting in the value of these products declining over time. Increasing Alberta’s capacity to produce finished products would mitigate this potential problem and serve the North American market better. In addition, the lower cost bitumen derived feedstocks would help sustain Alberta’s worldclass petrochemical industry, which is currently based on higher-priced natural gas feedstocks (Natural Gas – Alberta Plant Gate – C$/MMBtu 2006:10.35).” … The vision for hydrocarbon upgrading [was] a key component in the development of an integrated energy strategy that looks beyond extraction to ensure both the highest value and best use of our resources for the benefit of all Albertans … As well as the value-added consideration, the high level of activity in the oil sands has raised a concern among industry stakeholders. With the large number of project proposals to develop the oil sands within the next 10 to 15 years, production of the bitumen and synthetic crude oil from the oil sands may exceed current refinery capacity resulting in the value of these products declining over time. Increasing Alberta’s capacity to produce finished products would mitigate this potential problem and serve the North American market better. In addition, the lower cost bitumen derived feedstocks would help sustain Alberta’s worldclass petrochemical industry, which is currently based on higher-priced natural gas feedstocks (p.6) . . . The growing demand for refined petroleum products in North America has resulted in constrained refinery capacity and increasing product prices. While refinery capacity expansions are being planned, the demand for refined products is expected to continue to exceed available domestic supply.” Both the natural gas price and the West Texas Intermediate crude oil price forecasts used in the economic model are from a published source, GLJ Petroleum Consultants Ltd. and are summarized here: Crude Oil – West Texas Intermediate – US$/bbl 2006:57.00 2007:55.00 2008:51.00 2009:48.00 2010:46.50 2015:47.75 2020:52.77; Natural Gas – Alberta Plant Gate – C$/MMBtu 2006:10.35 2007:9.00 2008:7.75 2009:7.25 2010:6.95 2015:7.15 2020:7.90 (Netzer 2006-03.”
  • 2005 The price of crude oil soared from $45 a barrel to above $70 a barrel. BP reported a 25% increase in annual profits “magnified enormously by the high price of oil, high refining margins, and high gas prices”. Profits for 2005 went up to $19.31bn with profits for the last three months of the year increasing by 26% to $4.43bn. Shell’s record profit was $22.94bn in 2005. (BBC 2005).
  • 2004 There was a large, unexpected jump in world oil consumption growth, fostered by strong growth in economic activity in Asia, reduced excess production capacity significantly (CFCT 2008-07).
  • 2003 Between 2000-12 and 2003 there were four gasoline price spikes caused by domestic refining and marketing that resulted in an increase of over $30 billion in gasoline prices. (Cooper 2003).”
  • 2003 Reductions in storage capacity and the number of gasoline stations of over ten percent have also taken place in just the past half-decade. These reductions in capacity have been driven in part by a merger wave that has resulted in a significant increase in the concentration of ownership of refinery capacity and gasoline outlets. Four-fifths of regional refinery markets have reached levels of concentration that trigger competitive concerns, even by the standards adopted by the antitrust division of the Reagan administration’s Department of Justice. In these markets, the largest four firms account for at least one-half and as much as three quarters of the refined product output. A similar trend has been in evidence at the level of gasoline stations (Cooper 2003).”
  • 2003-03-11 “Consumer Groups Seek Energy Price Probe,” Energy Daily, March 11, 2003, p. 4.
  • 2003 OECD oil stocks were at record lows in 2003, following a major strike by oil workers in Venezuela (CFTC 2008-07).
  • 2003 In the United States alone, 75 refineries were closed between 1988-2003 and no new refineries were constructed ( Cooper, Mark. 2003-10. “Spring Break in the US Oil Industry: Price Spike, Excess Profits and Excuses.” Consumer Federation of America.
  • 2002 In 2002, 58 firms were engaged in refining in the United States, down from 189 firms in 1981 (source).
  • 2001-05-21 Public Citizen, Record Oil Company Profits Underscore Market Consolidation, May 31, 2001; Fortune 500, July 18, 2001; Business Week First Quarter Results, May 21, 2001
  • 2000 Between 1985 and 2000, average refinery utilization increased from 78 to over 92 percent (source).
  • 1998 A wave of mergers, acquisitions, joint venture alliances, and selective divestitures started in 1998. The aim was cutting costs, gaining economies of scale, increasing returns on investment, and boosting profitability (source). Exxon and Mobil merged allowing both companies a larger share of the oil and gas market (horizontal merging).
  • 1990s “The 1990s were widely viewed by the industry as a period of unprecedented economic volatility and hardship, characterized by poor profit margins as a result of substantial excess capacity, the increasing cost of compliance with environmental regulations, and unfavorable crude oil price trends. At the same time, the refining industry in the United States has been dramatically changed by corporate restructuring and consolidation (RAND).”

Webliography and Bibliography

There are major challenges in locating reliable sources of useful, comprehensible information on the oil industry. The following sources are not necessarily neutral. Wikipedia entries on concepts and organizations related to the oil industry constantly include warnings to readers that the entries may not be neutral and indeed reflect advertisement more than unbiased, information based on reliable sources. Citations often lack references.**

Who’s Who?

  • Bitumen Royalty-in-Kind (BRIK):”In Alberta, royalties are a share of production from resources the government owns on behalf of Albertans. Under the Mines and Minerals Act, the government has the option to take its royalty share either in cash or in kind. Currently, the government takes its share of conventional crude oil production in kind and collects its royalty share for other resources in cash. The decision to exercise the in-kind option for bitumen was identified in October 2007 as a way for the Crown to use its share of bitumen strategically to supply potential upgraders and refineries in Alberta, and to optimize its royalty share by marketing those volumes (Government of Alberta. Energy. BRIK. FAQ.”
  • China National Offshore Oil Corp (CNOOC)CNOOC is “an $89 billion company with oil and gas assets in Indonesia, Iraq, Australia, Africa, North and South America, as well as China… The $15 billion bid by China National Offshore Oil Corp (CNOOC) to buy Canada’s Nexen, Inc will help the Chinese state giant gain the expertise to drill in deep, disputed waters of the South China Sea without relying on risk-averse foreign firms (Eckert, Paul. 2012-08-04. CNOOC-Nexen deal seen helping China’s South China Sea thrust. Reuters).” By 2018-2023 China would probably have the experience, knowledge and technologies like those Nexen already has to “set up and maintain stable rigs in 5,000-10,000 feet of ocean water” and “drill 10,000-18,000 feet deep in sediment (Eckert 2012-08-04)”. How might China’s access to an expanded South China Sea deep drilling, affect the future of oil sands bitumen market and the Northern Gateway pipeline in five or ten years?
  • Conference Board of CanadaAn independent, not-for-profit, applied research organization in Canada, self-describes as non-partisan.
    “Experts in running conferences but also at conducting, publishing, and disseminating research; helping people network; developing individual leadership skills; and building organizational capacity. Specialists in economic trends, as well as organizational performance and public policy issues. Not a government department or agency,
    although we are often hired to provide services for all levels of government.” Published report entitled “Canada’s Petroleum Refining Sector: An Important Contributor
    Facing Global Challenges
    ” in 2011 by Todd Crawford.
  • Council of Canadians“Founded in 1985 by a handful of citizens including Maude Barlow, Farley Mowat and Margaret Atwood, the Council of Canadians is Canada’s largest citizens’ advocacy organization; with 72 chapters across the Canada who work to protect Canadian independence by promoting progressive policies on fair trade, clean water, energy security, public health care, and other issues of social and economic concern to Canadians.” They produce promotional material such as “Take Charge! A National Day of Action in support of a Canadian Energy Strategy” encouraging Canadians to “write their Prime Minister Stephen Harper and demand a National Energy Strategy that puts people and the environment ahead of corporate interests.”
  • Ferguson, Brian is President & Chief Executive Officer of Cenovus Energy’s strategic and operational performance. He is also a Director of Cenovus Energy. His background is in finance, business development, reserves, strategic planning, evaluations, communications and accounting. Brian is a member of the highly influential Canadian Council of Chief Executives who are considered by some to be an unofficial arm of the federal government. Brian is currently serving a two-year term on the Canadian Association of Petroleum Producers (CAPP) Board of Governors. In November 2011, in a joint business venture Cenovus and ConocoPhillips completed a new four-drum coker as part of the coker and refinery expansion (CORE) project at Wood River (Illinois). The new coker has a capacity of 65,000 barrels per day and is expected to expand our heavy oil processing capacity to approximately 200,000 – 220,000 barrels per day, increasing the production of clean transportation fuels for the U.S. Midwest market, including St. Louis and Chicago. The CORE project took about three years to build, with a total cost of US$3.8 billion (US$1.9 billion to Cenovus), and has increased clean product yield by 5% to approximately 85%. Cenovus is involved in a business venture with ConocoPhillips in upstream enhanced oil operations and downstream refining. Cenovus has a 50% interest in the Wood River (Illinois) and Borger (Texas) refineries. ConocoPhillips has a 50% interest in our Foster Creek and Christina Lake Steam Assisted Gravity Drainage (SAGD), enhanced oil recovery technology for producing heavy crude oil and bitumen. These two extraction upstream projects in the Athabasca region in northeast Alberta. This interest in two quality refineries is a strategic fit for Cenovus and allows us to capture the full value from crude oil production through to refined products such as diesel, gasoline and jet fuel (Cenovus).” “The Foster Creek project began in 1996 and in 2002 became the industry’s first commercial SAGD project. It has grown in five phases with an expected production capacity of 120,000 gross barrels per day. In the first quarter of 2010 Foster Creek achieved a significant milestone in becoming the largest commercial SAGD project in Alberta to reach royalty payout status. For a project to reach payout its cumulative revenues exceed cumulative allowable costs.” Cenovus is Alberta’s sixth largest energy company with more than 3,000 staff (Cenovus Energy). It’s a sign of commercial success for Cenovus and ConocoPhillips but what does it mean in terms of Alberta’s oil sands royalties if a project can reach royalty payout status? ConocoPhillips and Cenovus are in a shared business venture involving 2 high quality refineries (Wood River Refinery near St. Louis which is the largest of the 12 refineries operated by ConocoPhillips and Borger in Borger, Texas) and in upstream extraction projects in Alberta, ConocoPhillips has a 50% interest in our Foster Creek and Christina Lake Steam Assisted Gravity Drainage (SAGD).
  • Steve Williams, Suncor’s president and COO has a background in strategy development, company performance improvement, refinery & chemical company management. He has also provided leadership in the areas of environment, health and safety, finance, sales and marketing, human resources, and information technology. Bloomberg’s Jeremy van Loon about an industry-led effort to reduce the environmental impact of oil-sands production. Encana was formed in 2002 merging two Canadian oil and gas companies, PanCanadian Energy Corp. and Alberta Energy Company (AEC). Encana Corporation split into two distinct companies on December 1, 2009: one a pure play natural gas company (Encana) and the other an integrated oil company (Cenovus) which absorbed the assets formerly belonging to PanCanadian Energy Corp. and Alberta Energy Company (AEC), the two Canadian oil and gas companies that merged to form Encana in 2002 as well as a stake in 2 high quality refineries (Wood River Refinery near St. Louis which is the largest of the 12 refineries operated by ConocoPhillips and Borger in Borger, Texas).
  • The Energy Resources Conservation Board (ERCB) is an “independent, quasi-judicial agency of the Government of Alberta. They regulate the safe, responsible, and efficient development of Alberta’s energy resources: oil, natural gas, oil sands, coal, and pipelines. Their mission is to ensure that the discovery, development and delivery of Alberta’s energy resources take place in a manner that is fair, responsible and in the public interest.”
  • Premier Alison Redford says her government will take a hands-off approach to the increased upgrading of bitumen in the province as Alberta’s oilsands production continues to ramp up. (Wood 2012-01-26).”
  • Neil Shelly, “executive director of the Alberta Industrial Heartland Association, said the pipeline is a mixed blessing because it does open up the area to opportunities in a whole new market. But he echoes Rigney’s concerns that the pipeline represents more Alberta bitumen being shipped away without any upgrading. “We definitely need to diversify the market for Alberta. Just shipping out raw bitumen, even if it is to an upgrader in China or India or wherever, does (diversify) a little bit, but it doesn’t really.” Shelly said more upgrading and refining in Alberta would give the province a lot more options when it came to selling its products, along with all the jobs and benefits from the industry. “What if we extract the bitumen in Alberta, turn into synthetic crude oil and then we could supply eastern Canada with the fuels they need?”(Gateway a Potential Blow to Upgrading Industry.)
  • “Don Rigney is Mayor of Sturgeon County, town through which the proposed Gateway Pipeline will pass. Several upgraders were once proposed for Sturgeon County and Mayor Rigney argued that the Pipeline represents another example where Alberta will sell raw bitumen rather than upgrade it. “We would get far more value for our resources if we were to ship refined product.” Sturgeon was once projected to be home to four upgraders, but only one — North West Upgrading’s 50,000 barrel per day project — is currently expected to go ahead. Rigney said he would rather have the pipeline carry raw bitumen than not have the pipeline at all, but he would like to see more effort made to encourage more upgrading in Alberta.” “The Canadian Centre for Energy Information (
  • Centre for Energy) is a non-profit organization created in 2002 to meet an urgent need for information on all aspects of the Canadian energy system from oil, natural gas, coal, thermal, and hydroelectric power through to nuclear, solar, wind, and other sources of energy. More recently, the Centre for Energy has taken steps to broaden its reach to encompass energy end use in Canada (“About: Centre for Energy’s web page)” Wikipedia editors cautioned that the Wikipedia article on the Centre “may be written like an advertisement with promotional content that was not written from a neutral point of view (October 2009). Wikipedia editors expressed concerns that citations provided no reliable references or sources (October 2009).**
  • Catherine J Laureshen “is a Senior Research Manager, responsible for the upgrading and university research programmes of the Alberta Energy Research Institute (AERI). Prior to joining AERI, she taught in the Department of Chemical and Petroleum Engineering at the University of Calgary, and was a member of the In Situ Combustion Research Group. Dr Laureshen is an active member of the Petroleum Society of the Canadian Institue of Mining, Metallurgy and Petroleum (CIM), sitting on the national board and chairing the publications board. She is the Technical Chair for the 2006 Canadian International Petroleum Conference and will be the Conference Chair in 2007. Dr Laureshen is also a member of the Canadian Heavy Oil Association (CHOA), the Society of Petroleum Engineers (SPE) and the Association of Professional Engineers, Geologists, and Geophysicists of Alberta (APEGGA). She has a PhD in mechanical engineering, with a specialisation in fluid dynamics.” The
  • Consumer Federation of America (CFA) is an association of non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization’s Board of Directors (CFA about). Peter Boag, president of the Canadian Petroleum Products Institute, argues that “Canada’s 19 refineries produce two million barrels of day, but they are only operating at 80 per cent capacity. The ideal, according to the industry, is to be operating at 95 per cent. Canadians consume about 1.8 million barrels of oil a day.” Mark Corey, the Assistant Deputy Minister of Natural Resources Canada’s Energy Sector agreed. Lindell, 2012-01-31). Brenda Kenny, president of the Canadian Energy Pipelines Association, said that using imported oil eliminates certain costs (CBC 2012-01). In the pipeline versus refinery debate her interests are clearly on the side of pipelines.
  • Rep. Patrick Meehan, R-Penn., said the U.S. House Homeland Subcommittee on Counterterrorism and Intelligence he chairs will launch a hearing entitled “The Implications of Refinery Closures for U.S. Homeland Security and Critical Infrastructure Safety” on March 19, 2012 (Meehan 2012-02-24), into how nationwide refinery closures, including the three Philadelphia-area refineries, could increase risks to the nation’s critical infrastructure and threaten supply shortages in the event of a global crisis. Meehan said the three imperiled refineries in the Philadelphia area account for 50 percent of the Northeast’s refinery capacity. He said more than 30 U.S. refineries have closed in the past decade. “This hearing will help us understand the homeland security consequences of our declining domestic refining capacity, both in terms of threats to critical infrastructure and our dependence on imports from unstable parts of the world,” said Meehan, adding he would schedule the hearing as soon as possible. Casey has called for a Senate hearing on the impact that the possible refinery closures could have on energy prices. He has warned that if no buyer is found and the refineries are permanently shuttered, the closures could drive up energy prices on the East Coast (Miga 2012-02-16).” “SPRINGFIELD, PA – U.S. Representative Patrick Meehan (PA-07) today announced the House Homeland Security Subcommittee on Counterterrorism and Intelligence will hold a hearing on Monday, March 19 at Neumann University in Aston entitled, “The Implications of Refinery Closures for U.S. Homeland Security and Critical Infrastructure Safety.” The hearing will examine the homeland security consequences of nationwide refinery closures – including three in the Philadelphia area – both in terms of threats to critical infrastructure and our dependence on imports from unstable parts of the world. “The closure of two refineries and the expected closure of a third in our area not only mean significant job and economic loss,” said Meehan. “They’ve also resulted in a significant decline in our country’s refining capacity, causing our country to have greater reliance on foreign oil imports from the Middle East, Africa and Venezuela. This brings up important questions about how this could increase the risks to domestic critical infrastructure and threaten supply shortages in the case of a global crisis.” Meehan noted that the three Philadelphia area refineries account for 50 percent of the Northeast’s entire refinery capacity, and more than 30 U.S. refineries have closed in the last decade. Meehan said the subcommittee is in the process of finalizing the witnesses expected to testify at the March hearing (Meehan 2012-02-24).”
  • Will Roach, was chief executive of UTS Energy Corp., which held a 30% stake in Petro-Canada`s planned Fort Hills oil sands project, one of numerous multibillion-dollar projects on the drawing board in 2007.

Urls (legacy blog systems)

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IN PROCESS

Journalists acted as cheerleaders for buying stocks [...] The market values journalists advice more then of analysts, and journalists advice are believed to contain more new information compared to analysts advice [...] The lesson for investors is this: If either journalists or analysts come with a “sell” recommendation the stock drops significantly right away and continues to yield abnormal negative return. If an analyst issues “buy’s” there is only a slight chance that the stock will show abnormal positive return and more likely that the return will be negative. But if journalists issue “buy’s” it offers investors a short time of positive and significant abnormal positive returns, before the returns disappear and become severely negative. This is what Lidén calls a classic overreaction. “…it is obvious that analysts and journalists were fooled by the over-optimism from the positive information, but they were not from negative information. In turn, this is due to positive information being more intricate to interpret.”
25(source 2005).”

“The British financial journalism had been molded in the hands of people like J.R. McCulloch the editor of the Scotsman and the first real economist to write regularly in a newspaper. The influence of McCulloch is evident as he edited such works as The Wealth of Nations by Adam Smith in The Works of David Ricardo (source). Today magazines like The Economist and The Financial Times rely on McCulloch’s heritage while the American Barron‘s and the Wall Street Journal have for long been more finance oriented sources based on Alsanger’s foundation. In general this could be described as Speculators vs. Economic theory. This difference is important when retrieving, analyzing and valuing information from different sources on both sides of the Atlantic Ocean. Different cultural background and general rivalry has for example led many US financial journalist still today to consider The Economist the most overrated journal in the world!
(source 2005).”

2005 “Publishers such as Pearson (Financial Times, Economist) and Dow Jones (WSJ) are striving to become journalistic brand names that integrate news content and media around the basic product which paper is. The environment of the 90s has been called paradoxical concerning these two publishing giants. On one hand they are forced to adopt multimedia strategies, particularly developing a range of non-print products. On the other hand they have to do so while maintaining a historical focus on financial news, with clear growth limitations when considered nationally (source 2005).”

2005-1995 This “decade has been described by some scholars as the decade of popular capitalism, materialized in the growth of the “citizen investor” and of the globalization – primarily corporate and financial (Arrese and Medina (2002). The success of electronic financial media has forced economic dailies to stop identifying with just the traditional newspaper.”

2005 An example of the opposite opinion would be how Michael Bloomberg the Governor of New York City starts up his day. Bloomberg is a former stockbroker and owns one of the worlds most powerful finance quotation and informational media bearing his name. Remarkably enough Mr. Bloomberg says he gathers information the old-fashioned way starting with printed media. Among these are The Wall Street Journal, The Financial Times and The New York Times but he seldom goes to a story inside. He reads The Economist from cover-to-cover, never misses Fortune and usually reads Business Week. As for TV news, “I never watch TV, even my own [news channel].”

2004 Rupert Murdoch, “president of the News Corporation which publishes newspapers such as The Times in the UK and The New York Post, has urged newspaper editors “to embrace the internet saying print news executives sat by and watched as a generation of digital consumers turned away from newspapers…The challenge for each of us in this room is to create an internet presence that is compelling enough that users make it their home page. Just as people traditionally started their day with coffee and a newspaper, in the future I hope that the way they start their day online will be with coffee and our website,” Murdoch said at the annual meeting of the American Society of Newspaper Editors last April. If quotes of closing price would have been accessible to investors in a similar way back in 17th century surely there would have been no need for papers like the Lloyd’s List.” (source 2005).”

1996 Dan “Dorfman was fired from his 450.000 dollars-a-year job in 1996 after he refused to turn over his confidential sources. Federal investigation was made whether he had personally profited from his reports, either by trading on them or tipping others in exchange for favors. In an investigation made by the WSJ it was found that Dorfman maintained a brokerage account that was managed by one of his frequent sources, a broker who later left the business after being acquitted of fraud charges (source 2005).”

1990s “Dan Dorfman worked as a financial journalist at the Money magazine and as a commentator for the CNBC in the early 90s to become the highest-paid and the most influential business reporter in his time. Dorfman’s expertise was tied to his linguistic skill – not his analytic skills. He was a reporter, not an analyst. Dorfman went on television and mentioned a stock that someone had told him that was a possible
takeover target. The stock moved up and although only briefly, everybody was happy – for a while [. . .] But that evolution seems to be part of the everyday life of the modern journalist. Investment bankers, arbitrageurs, corporate raiders, analysts and people in corporate public relations all try to spin the story to their favor. To analyze how this evolved into a serious problem is the case of one of the most influential US business journalist who “moved market” for years with exclusive stories, but then was found guilty in the court of public opinion for unethical behavior regarding his work (source 2005).”

1980s As the golden age of economic controversy came to pass in the 80s the turmoil left a deep mark on the financial press. Privatization, deregulation of the financial markets, advances in information technology along with increased private share ownership helped to unleash a powerful new figure in the financial media which had mostly been overlook for many decades – the financial analyst. The bull market of
the 80s and again in the late 90s led “the tipster” to become in greater demand then teachers and scholarly journalists. “Now, as in the 1920s, speculation is a game all the family can play for the price of an evening paper.” (source)

1973 The oil crisis in 1973 and the collapse of the Bretton Woods exchange system seriously dented the limelight of the Keynesian economic gurus and gave rise to antiKeynesians intellectuals such as the Nobel-winning Austrian economist Friedrich A. Hayek (source).

1960s and 1970s The standing of the American economic profession rose highest and the leading men of this period became celebrities and gurus (Galbraith, Samuelson and Friedman) and in demand as commentators. Some people hoped that the ideas of a new breed of economists would rid the world from economic and financial crises [. . .] A prime example of this is the successful selling of Milton Friedman’s “supply-side economics” in the Wall Street Journal and the “monetarism” in the Financial Times. Both journals experienced tremendous success at this time where the WSJ climbed to a top position in circulation, toppling such newspapers as the New York Times and the Washington Post. The basis for creating a solid specialized news groups in the 60s was supported by the lack of interest for economic and financial news of the general news media (source).”

The seeds of this craze were planted in 1593. A man by the name of Conrad Guestner imported the first tulip bulb into Holland from Constantinople, in present day Turkey. After a few years, tulip bulbs became a status symbol and a novelty for the rich and famous. Eventually, tulip bulbs became a hot
ticket item in neighboring Germany, as well. Initially, only the true connoisseurs bought tulip bulbs, but the rapidly rising price quickly attracted speculators looking to profit. By 1634, tulip mania had feverishly spread to the Dutch middle class. Pretty soon everybody was dealing in tulip bulbs, looking to make a quick fortune. The majority of the tulip bulb buyers had no intentions of even planting these bulbs! The name of the game was to buy low and sell high, just like in any other market. The whole Dutch nation was caught in a sweeping mania, as people traded in their land, livestock, farms and life savings all to acquire 1 single tulip bulb! (Source: http://www.stock-market-crash.net; http://cepa.newschool.edu/het/profiles/mcculloch.htm)”

Analysts,
financial journalists,
stock recommendations,
efficient
market
theory,
contrarian signal
“dead tree media”


Sitting in her forest green long velvet dress storyteller and word magician Orunamamu perused the small book of poetry looking for the poem our host had read just before her arrival at the neighbourhood friendship potluck gathering. I had told her about it because I knew she would like it. Something about the combination of courage, gaiety and the quiet mind.

On my hands and knees in my ridiculous but practical hort outfit I spend hours tending to dozens, maybe even, hundreds of plants, perennials, heritage, gifts, volunteers, seeds, flowering, vegetables, herbs, invasives (too enthusiastic at the wrong place and time).

The garden is one place where some of us find courage as we see the tiny new growth on a plant that has looked forlorn for months, barely alive in the fall many of them transplanted perhaps too late in the season surviving somehow the trauma of roots being wrenched apart, moved far from the others in a cold place that will only get colder. Death would have been a logical conclusion but somehow they survived protected by layers of mulch and snow and God’s grace.

I never use the old word gaiety but it does describe the “sweet moment” of gardening when you see a clump of early blue violets flourishing in an urban garden in Calgary, a reminder of my older sister’s uncanny ability to speedily find and make a wild blue violet bouquet; single shooting star plant chosen for the garden because of the Garry Woods fields on Vancouver Island; a single brilliant orange poppy opening in May; and too many to describe because the garden and the robins are waiting.

A quiet mind in an anxious world where even one’s own home and garden is temporary and insecure.

Two years ago the 1950s bungalow across the street with its very old heritage garden was demolished, the fertile ancient river bed soil was scraped away and a duplex quickly filled the entire lot. The front landscaping is as polite as that in any new development.

Last year a neighbour sold and moved back east. The new owner tore out the old garden that had been tended for 15 years replacing it with more practical grass which requires less work in their busy schedule.

On the corner one of our oldest neighbours has finally agreed to his family’s desire to sell. The house was built in 1945 and moved in the 1950′s and is surrounded by a horticultural heritage garden, sun rooms, inviting comfortable sitting areas in every corner, sheds overflowing with tools . . . It too will be sold, demolished, the garden uprooted, the topsoil scoured and replaced by other built forms like the one next door, and the one next to that and the next one: walls of sensible stucco with ubiquitous earth colours coordinating with other homes, designs and forms. Perhaps its what postmodernism has become in the booming housing market, picking up on details from Tudor, Victorian, Queen Ann, etc from here and there and tacking them on superficially. Their height is maximized to the zoning limits and the walls extend to the edge of the property. The intelligent pragmatic architecture and materials of these buildings will be easily recognized in the future as D1 of the 21st century many surviving only as photos since the actual buildings are not made to the same standards as pre-1980s. Fortunately the set back gives room for some old trees and tasteful, smart urban landscapes spaces.

This is not “my” garden. I for a short period of time am simply the worker for the robins, plants and the worms. It is a gift to the street. I work outside the fence. I have to be realistic.

As I dig up ancient river stones I write on them, words that I then reread when I am taking out the braids in the rhizome of roots.

But for today I will compost, mulch, feed, plant, transplant, water, tidy, admire, get tired, feel courage, gaiety and enjoy fleeting moments of a quiet mind.

Locating the Concept of  Success

"We thank Thee for this place in which we dwell;
for the love that unites us;
for the peace accorded us this day;
for the hope with which we expect the morrow;
for the health, the work, the food, and the bright skies,
that make our lives delightful;
for our friends in all parts of the earth,
and our friendly helpers in this foreign isle.
Let peace abound in our small company.
Purge out of every heart the lurking grudge.
Give us grace and strength to forbear and to persevere.
Offenders, give us the grace to accept and to forgive offenders.
Forgetful ourselves, help us to bear cheerfully the forgetfulness of others.
Give us courage and gaiety and the quiet mind.
Spare to us our friends, soften to us our enemies.
Bless us, if it may be, in all our innocent endeavours.
If it may not, give us the strength to encounter that which is to come,
that we be brave in peril, constant in tribulation,
temperate in wrath, and in all changes of fortune,
and, down to the gates of death,
loyal and loving one to another.
As the clay to the potter,
as the windmill to the wind,
as children of their sire,
we beseech of Thee."
Robert Louis Stevenson

Stevenson wrote the Valima Letters after he and his wife Fanny settled In the village of Valima on Upolu island, Samoa. He also became an much-appreciated activist highly critical of European colonial administrators worked very hard on land he had purchased in Vailima. He published A Footnote to History. He died in 1894.

http://wp.me/p1TTs-qH


There is a strong relationship between housing, healthy cities, healthy neighbourhoods and healthy individuals (Sawatsky and Stroick 2005).” Access to shelter is listed among the pre-requisites for health in the Ottawa Charter. Along with peace, adequate economic resources, food, a stable eco-system and sustainable resource use. These pre-requisites highlight “the inextricable links between social and economic conditions, the physical environment, individual lifestyles and health. These links provide the key to an holistic understanding of health which is central to the definition of health promotion (Ottawa Charter).”

affordable housing project, Ogden Road SE

Canada’s Gross National Product in 2010 was $1.600 trillion based on Statistics Canada data.

Calgary needs to control its urban sprawl which is among the worst in Canada. Higher density to limit the sprawl is crucial as Calgary anticipates to double its population over the next 50 years. Mayor Nenshi on Twitter argues that we need government housing for the really tough cases, nonprofit for some, and private sector for most. He is really promoting the concept of allowing secondary suites in Calgary neighbourhoods. It seems to me that the Attainable Housing initiatives are the only one on the block. What about economic diversity in every neighbourhood through a number of different initiatives not just secondary suites which are not ideal living situations? Calgary does not respond well enough to the need for rental housing for those earning less than the attainable homes initiatives target.

In some markets, the secondary market – the universe of basement apartments, apartments over storefronts, flats in single-and semi-detached homes and row houses, and rented condominiums – has acted as an important safety valve. But, it is a less stable source of supply, and so by itself cannot provide a long-term solution to the affordable housing shortage. (TD 2003).
Why is affordable housing located under Corporate Properties in the City of Calgary? When was it moved there?

Fact Sheet on Affordable Housing

    1. The federal government estimates that the cost of homelessness by 2007 had reached c. $4.5 – $6 billion annually. This includes costs of health care, crime and other social services (Laird, 2007: 5). Yet Canada’s Economic Action Plan for all kinds of affordable housing options only provides c. $500 million annually leaving most of the costs to the municipal level residential tax base. Canada’s Economic Action Plan provides $475 million, over two years; to build new rental housing for low-income seniors and persons with disabilities, and $850 million to provinces and territories over two years for the renovation and retrofit of existing provincially/territorially administered social housing. Overall, the Economic Action Plan includes $2 billion for the construction of new and the renovation of existing social housing, plus up to $2 billion in low-cost loans to municipalities for housing-related infrastructure. Canada’s Economic Action Plan builds on the Government of Canada’s commitment in 2008 of more than $1.9 billion, over five years, to improve and build new affordable housing and help the homeless. As part of this commitment the Affordable Housing Initiative (AHI) was extended for two years, bringing the total federal investment in housing under the AHI to $1.25 billion since its inception.
    2. Across Canada emergency shelter use is on the rise particularly in urban centers. By 2007 40,000 people every night including children used emergency temporary shelters (Federation of Canadian Municipalities 2007).
    3. Research suggests that on average moving a homeless person from an emergency shelter to stable housing saves taxpayers $9,000 a year (FCM 2011-04).
    4. On an annualized basis costs in existing responses, averaged across four cities (Vancouver, Toronto, Montreal and Halifax) in 2005 were: Institutional responses (prison/detention and psychiatric hospitals: $66,000 to $120,000; Emergency shelters (cross section of youth, men’s women’s, family and victims of violence): $13,000 to $42,000; Supportive and transitional housing: $13,000 to $18,000; Affordable housing without supports (singles and family): $5,000 to $8,000 (Pomeroy 2005). In terms of public policy then “Where the cost advantage of the supportive and affordable housing options become meaningful is in addressing future demand, which will inevitably increase as populations continue to expand. Directing new investment to the lower cost (and arguably more effective) supportive option is likely to be more cost efficient than investing in new prisons, psychiatric hospitals and
      emergency shelters (Pomeroy 2005).”
    5. “Approximately 35,000 Calgary families are having difficulty affording adequate housing. Over the past ten years [2000-2010?], housing prices have increased 156 per cent, yet incomes have increased only 34 per cent over that same time (OLSH).”
    6. “There is currently a waiting list of more than 4,200 individuals and families with the Calgary Housing Company (CHC), Calgary’s leading affordable housing provider  (OLSH).”
    7. In 2004 the estimated cost of building was c. $1,890/m2 ($175/sq. ft) for concrete and $1,512/m2 ($140/ sq. ft) for wood. In 2011 the average cost per sq. ft is $125 – 155 sq ft. Unit sizes affordable housing: one-bedroom units from 500 sq. ft, two-bedroom units 700-800 sq. ft [800 sq. ft. @ $150 = $120, 000 x 36 units = $4 320 000] and three-bedroom units up to 1,000 sq. ft.
    8. Since 1993, the Provincial and Federal governments substantially reduced the capital funding of new affordable housing. This was part of a widespread decentralization, devolution and deregulation process intended to make housing markets more fairly competitive by eliminating state involvement at the same time cutting public costs. This did not work to advantage on a number of social issues such as affordable housing which has resulted in unintended and very costly consequences.
    9. There is a fiscal imbalance between municipal, provincial and the federal governments that jeopardizes the municipalities ability to respond to affordable housing issues. Cities like Calgary are highly and almost singularly dependent on property taxes (92.7%) as the primary source of funding (along with user fees and intergovernmental grants) to finance service provisions (T.D. ECONOMICS, 2004) such as affordable housing and social services. This is inherently flawed. There are many reasons why property tax revenues are inherently flawed as a source of funding for cities’growing needs and are a poor match for funding in the area of income redistribution services (more).
From Land Use Amendment Proposal
  1. The market is unable to deliver new rental stock. An astonishing 95% of the housing starts in the most recent five-year period have been in the ownership market, with rental construction accounting for only 5% of the market. Just 15 years ago, the proportion was 75% ownership and 25% rental.
  2. “A1996 Cambridge University study  that compared the housing systems and housing policies of 12 Western  nations found that, compared to all other countries, “Canada has an essentially free market approach to housing finance.  Owneroccupation has the advantage of not paying capital gains tax, whilst there is very little support for investment in the private rental sector, and tenants receive very little support in paying rents” (Hulchanski, 2002: 7, citing Freeman, Holmans, and Whitehead, 1996: n.p. cited in (Sawatsky and Stroick 2005).”
  3. Existing formal rental stock has been demolished or converted to condos.
  4. A buoyant economy in Calkgary bolstered in-migration causing a higher demand for rental housing.
  5. Alberta’s minimum wage is the second-lowest in Canada (BC has the lowest). Alberta’s minimum wage is $8.80 per hour. A total of 11 Canadian provinces or territories have a minimum wage rate higher then Alberta. Full time hourly minimum wage workers in Alberta earn a total of $352.00 per week and approximately $18,304.00 per year (based on a 8 hour days and a 260-day work year).
  6. Social Assistance rates did not increase between1993 and 2002
  7. In 2008, “as the nation headed into a brutal recession, there were just over 3 million Canadians living in poverty using the standard measure, Statistic Canada’s after-tax low-income cut-off (LICO) (more).”
  8. Approximately 1.27 million households (or 12.4 percent of Canadian households) live in housing that requires major repairs, is overcrowded, and/or costs more than 30 percent of household income (more).
  9. One in five Calgarians lived in poverty in 2002.
  10. Minimal new social housing was built for people who cannot afford market rents. 2002
  11. In Canada the federal, provincial and municipal governments have roles and responsibilities to address housing issues. But most of the responsibility has fallen to municipal governments to find and fund solutions.
  12. According to a 2003 KPMG study of corporations in the United States, quality of life indicators were important key business environment factors. It was also important that a city had low crime, good access to health facilities, access to affordable housing and educational facilities (more).

References

Further Reading

External Links
Federation of Canadian Municipalities http://www.fcm.ca/CMFiles/bcmcfinal1LND-3282008-4938.pdf
Policy Alternatives http://www.policyalternatives.ca/publications/commentary/fast-facts-electing-house-canadians-or-not

http://www.policyalternatives.ca/publications/commentary/canadas-poverty-hole

http://www.calgary.ca/docgallery/bu/cns/homelessness/thresholds_locating_affordable_housing.pdf

(OLSH

Sawatsky and Stroick 2005
Ottawa Charter

Death of paradox

April 30, 2011


James Arthur Baldwin (August 2, 1924 – December 1, 1987) was an American novelist, writer, playwright, poet, essayist and civil rights activist. Baldwin described the ambiguous situation of black Americans in the 1950s as Kafkaesque. He predicted that American nation will be put to death by paradox, itself a paradox since Americans seemed intent on putting paradox to death. He then situates American author Richard Wright fictional character Bigger Thomas in Native Son (1940) as a character controlled, defined by hatred and fear as a descendant of Uncle Tom. Bigger Tom’s hatred and fear later drive him to murder and rape. Baldwin saw Richard Wright as the 1940s Negro novelist locked with the 19th century New England author in a deadly timeless battle. He decries the fact that Bigger Tom’s tragedy is that he has accepted a theology that situates him as subhuman eternally constrained to fight for his humanity. Baldwin then summarizes, “But our humanity is our burden, our life, we need not battle for it; we need only do what is infinitely more difficult, that is accept it. The failure of the protest novel lies in its rejection of life, the human being, the denial of beauty, dread, power, in its insistence that it is his categorization alone which is real and which cannot be transcended (Baldwin “Everybody’s Protest Novel” in Zero 1955: 58).”

1852 American author Harriet Beecher Stowe published her anti-slavery novel entitled Uncle Tom’s Cabin; or, Life Among the Lowly. Although some argued that the novel “helped lay the groundwork for the Civil War” (Will Kaufman) James Baldwin claimed that is reeked of self-righteousness and virtuous sentimentality. Baldwin argued that sentimentality is the mark of dishonesty which betray the sentamentalist’s aversion of experience, fear of life and an arid heart. Baldwin states that sentimentalism is a signal of secret and violent inhumanity, a mask for cruelty. Uncle Tom’s Cabin is a “catalogue of violence”. He described Harriet Beecher Stowe as an impassioned pampheteer not a novelist who wrote solely to reveal the immorality of slavery (Baldwin “Everybody’s Protest Novel” Zero 1955: 57).

1924 James Baldwin was born

1938 Shoghi Effendi (1938:36) Guardian of the Bahá’í Faith, wrote that racial prejudice was the most vital and challenging issue confronting the Americas.

“Freedom from racial prejudice, in any of its forms, should, at such a time as this when an increasingly large section of the human race is falling a victim to its devastating ferocity, be adopted as the watchword of the entire body of the…believers, in whichever state they reside, in whatever circles they move, whatever their age, traditions, tastes, and habits (1938:36).”

“The ceaseless exertions which this issue of paramount importance calls for, the sacrifices it must impose, the care and vigilance it demands, the moral courage and fortitude it requires, the tact and sympathy it necessitates, invest this problem…with an urgency and importance that cannot be overestimated (1938:34).”

” [Freedom from racial prejudice] should be deliberately cultivated through the various and everyday opportunities, no matter how insignificant, that present themselves, whether in their homes, their business offices, their schools and colleges, their social parties and recreation grounds, their Bahá’í meetings, conferences, conventions, summer schools and Assemblies (1938:36).”

1940 American author Richard Wright published Native Son. James Baldwin in his essay entitled “Everybody’s Protest Novel” (c. 1950s?: 54-59) published in Zero situated American author Richard Wright fictional character Bigger Thomas in Native Son (1940) as a character controlled, defined by hatred and fear as a descendant of Uncle Tom. Bigger Tom’s hatred and fear later drive him to murder and rape. Baldwin saw Richard Wright as the 1940s Negro novelist locked with the 19th century New England author in a deadly timeless battle. He decries the fact that Bigger Tom’s tragedy is that he has accepted a theology that situates him as subhuman eternally constrained to fight for his humanity. Native Son is number 71 on the American Library Association’s list of the 100 Most Frequently Challenged Books of 1990-2000. The Modern Library placed it number 20 on its list of the 100 best novels of the 20th Century. Time Magazine also included the novel in its TIME 100 Best English-language Novels from 1923 to 2005.

1941 Seventeen-year-old James Baldwin studied at The New School, Greenwich Village, New York City.

1948 James Baldwin lived in Paris, France and became involved in the cultural radicalism of the Left Bank. His work started to be published in literary anthologies, notably Zero.

1949-1956 Albert Benveniste and Themistocles and Hoetis were editors of Zero, Gotham Book Mart Selection. James Baldwin’s essay entitled “Everybody’s Protest Novel” (pp 54-59) was published in Zero. http://books.google.com/books?id=9wdVDKAZZFoC&pg=PP5&lpg=PP5&dq=New+York+Times+’Zero’+Themistocles+Hoetis&q=New+York+Times+’Zero’+Themistocles+Hoetis&hl=en#v=snippet&q=New%20York%20Times%20′Zero’%20Themistocles%20Hoetis&f=false

“It is the peculiar triumph of society – and its loss – that it is able to convince those people to whom it has given inferior status of the reality of this decree; it has the force and the weapons to translate its dictum into fact, so that the allegedly inferior are actually made so, insofar as the societal realities are concerned. This is a hidden phenomenon now than it was in the days of serfdom, but it is no less implacable. Now, as then, we find ourselves bound, first without, then within, by the nature of categorization. And escape is not effected through a bitter railing against this trap upon us. We take our shape, it is true, within and against that cage of reality bequeathed us at our birth; and yet it is precisely betrayed. Society is held together by our need; we bind it together with legend, myth, coercion, fearing that without it we will be hurled into that void, within which, like the earth before the Word was spoken, the foundations of society are hidden. From this void – ourselves – it is the function of society to protect us; but it is only this void, our unknown selves, demanding forever, a new act of creation, which can save us – “from the evil that is in the world.” With the same motion, at the same time, it is this toward which we endlessly struggle and from which, endlessly, we struggle to escape(Baldwin “Everybody’s Protest Novel” Zero 1955: 57).”

“It must be remembered that the oppressed and oppressor are bound within the same society; they accept the same criteria, they share the same beliefs, they both alike depend on the same reality. Within this cage it is (Baldwin “Everybody’s Protest Novel” Zero 1955: 57) romantic, more, meaningless, to speak of a “new” society as the desire of the oppressed, for that shivering independence on the props of reality wyhich he shares with the herrenvolk makes a truly “new” society impossible to conceive. What vengeance will be exacted; either there will be no oppressed at all or the oppressed and the oppressor will change places (Baldwin “Everybody’s Protest Novel” Zero 1955: 58).”

1955 James Baldwin published Notes of a Native Son. The title refers to Richard Wright’s 1940 protest novel entitled Native Son.

1963 James Baldwin’s book entitled The Fire Next Time was considered to be one of the most influential books about race relations. In it Baldwin predicted, “The Negroes of this country may never be able to rise to power, but they are very well placed indeed to precipitate chaos and ring down the curtain on the American dream.” Could he have imagined President Obama?

“James Baldwin’s collection of essays, The Fire Next Time, is considered one of the most influential books on race relations published during the 1960s. Divided into two sections, the book urges the politicization of both African Americans and European Americans on the issue of racism. Baldwin explains that the radicalism and militancy of many prominent African Americans is a reaction to feelings of alienation inspired by traditional American society. Originally published as two separate works – “Letter from a Region in My Mind” in The New Yorker and “A Letter to My Nephew” in the Progressive – the essays were retitled “Down at the Cross” and “My Dungeon Shook: Letter to My Nephew on the One Hundredth Anniversary of the Emancipation Proclamation” for their appearance in book form. Using rhetorical devices learned in his youth as a Pentecostal preacher and examples from his own life, Baldwin argues for an end to racism (Gale Free Resources).”

“In order to survive as a human, moving, moral weight in the world, America and all the Western nations will be forced to reexamine themselves and release themselves from many things that are now taken to be sacred, and to discard nearly all the assumptions that have been used to justify their lives and their anguish and their crimes so long (Baldwin).”

1979-1981 Atlanta Child Murders were a series of murders committed in Atlanta, Georgia, United States in which a minimum of twenty-eight African-American children, adolescents and adults were killed creating an atmosphere of panic and paranoia. James Baldwin documented these murders in his nonfiction book entitled The Evidence of Things Not Seen. Although Atlanta African American Wayne Williams was convicted of two murders and suspected to be guilty of more Baldwin criticized the “untidy” criminal investigation process and felt it was incomplete.

1987 James Baldwin died.

Who’s Who

James Arthur Baldwin (August 2, 1924 – December 1, 1987) was an American novelist, writer, playwright, poet, essayist and civil rights activist.

Webliography and Bibliography

Baldwin, James. 1962-11-17. “Letter From a Region of My Mind.The New Yorker. “Letter from a Region in My Mind.” p. 59.

Baldwin, James. 1963. “Down At the Cross; Letter From a Region of My Mind.” The Fire Next Time. Dial Press. USA.
Baldwin, James. 1963. The Fire Next Time. Dial Press. USA.
Baldwin, James. 1964. The Fire Next Time. Penguin Books. UK.

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