Edmonton, Alberta – Without aggressive government intervention, Alberta will almost certainly miss out on the opportunity to create thousands of high-quality oil sands jobs, according to a new report released by the Alberta Federation of Labour (AFL). The report said that if the government does not intervene, Canadian jobs will not be created in oil sands upgrading and petroleum refining, and a historic opportunity to diversify the Alberta economy and build a more robust, value-added petroleum industry will probably be lost forever.
The report, Lost Down the Pipeline, states that despite the global recession, energy companies are proceeding with aggressive plans to dramatically expand U.S.-based bitumen-refining capacity, and American-bound bitumen pipeline capacity. Energy companies are in the process of spending about US$31 billion to build, retool or expand at least ten refineries in the U.S. specifically to upgrade and refine raw bitumen from the Alberta oil sands. At the same time, two major pipelines are nearing completion, and will have the capacity to move about 1.4 million barrels per day (bpd) of raw bitumen from Alberta to U.S. refineries in the Midwest, while six other pipelines are being planned that will have the capacity to move 2.3 million bpd from Alberta to refineries on the U.S. Gulf Coast.
Currently, Alberta oil sands output totals about 1.3 million bpd. By 2020, it is expected to rise to total production of 3.3 million bpd.
“Government and business leaders have left the impression that once the global recession ends, it will mean a return to business as usual in the oil sands,” said AFL president Gil McGowan. “But nothing could be further from the truth. What our research shows is that American refineries will have the capacity to process all of the expected increase in oil sands output from Alberta. As a result, unless the Stelmach government steps in much more aggressively than it has, the raft of upgrader postponements we’ve seen here in Alberta will amost certainly turn into permanent cancellations. We’ll be losing literally thousands of jobs down the pipeline.”
The AFL report said that two solutions suggested by the government, to enact pipeline tolls and to collect bitumen in lieu of royalties, are ineffective and doomed to failure. “The government’s own consultants have been saying for years that Alberta’s real competitive advantage when it comes to refining is easy access to cheap feedstock in the form of cheap bitumen,” McGowan said. “But by actually promoting the construction of bitumen pipelines to the U.S., the government has been helping to build a bigger market for bitumen in the States which, in turn, has had the effect of reducing the price differential between bitumen and conventional crude oil. So, in an effort to get a few extra dollars per barrel for bitumen, they’re giving away the advantage upon which we could build an entire new value-added industry.”
The report recommends using regulations to prohibit the export of raw bitumen and use government resources to create a publicly-owned energy company with a mandate to advance the interests of Albertans.