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article imageOp-Ed: Should Canada diversify its energy industry?

By Karl Gotthardt     Feb 19, 2013 in Politics
Ottawa - Canada's conservative government has put all its eggs in one basket, with its emphasis on oilsands development. With the recent largest rally in Washington to stop the Keystone pipeline, should Canada change its direction and diversify?
With declining revenues in the resource sector, ongoing protests against the Northern Gateway and XL Keystone Pipeline, Canada's conservative government continues to push the resource energy sector as one that creates billions of dollars of revenue for the GDP, for government coffers to run social programs, including investments in R&D for clean technology,
According to Alberta's Premier Alison Redford, Alberta will have a budget shortfall of $6 billion which would translate into a $27 billion shortfall in federal coffers.
Talking to a business audience in Toronto, Redford said that Alberta will lose $6 billion and Canada $27 billion due to the gap in oil prices between Alberta bitumen oil and Texas and Mexico heavy oil. This gap has always existed and is nothing new. What is new is the way the Redford government calculated their oil and gas revenue, without taking the volatility of the market into consideration.
Canada's Economic Action Plan calls for responsible resource development and an ad campaign is expected to hit the air this spring highlighting “the importance and impact of Canada’s energy sector.” According to the National Post, Natural Resources Canada has budgeted $9 million for this campaign for the 2012-13 fiscal year.
Canada was in a better position than most G8 countries during the financial crash in 2008, due to stronger regulations for that sector and the relative strength of the resource energy sector. The decline of the housing market in the US was absent in Canada and interest rates were kept artificially low. Since then growth has slowed significantly, the job market is stagnant and there is a glut of oil in the United States, due to increased production and decreased consumption with a weak economy.
Ottawa has put all of its eggs in one basket, depending on a pipeline, the XL Keystone pipeline to double the flow of Alberta crude to Texas. Another bet has been the construction of the Northern Gateway pipeline, with a tanker port in Kitimat, BC, which would transport oil to China and other Asian markets. Both pipelines are part of a high stakes waiting game. Both pipelines may never become reality.
Some opposition Members of Parliament are questioning the governments emphasis on resource development. Among the most vocal anti-oilsands crusaders are Megan Leslie,of the NDP, and of course, Green Party leader, Elisabeth May. While their crusade often is very emotional, Megan Leslie told CTV on Monday that Canada can't possibly win when it puts all of its eggs in one economic basket.
“Instead of just talking about, ‘Let’s diversify our energy purchasers if the U.S. won’t take our bitumen and let’s go to China,’ why isn’t this government actually thinking about how to diversify our energy sector? Why aren’t we actually using the oilsands strategically to help us towards a just transition to a green-energy economy?”
In view of daily attacks on the oilsands, which can only be expected to intensify, does Megan Leslie have a point? As an example, yesterday there was another negative report on the status of oilsands monitoring. This was supposed to be the federal governments defense in fending off oilsands critics. Instead the program is marred in bureaucracy and a dispute of who actually controls the oilsands, Alberta or the federal government.
The revamping of environmental monitoring of the oilsands was supposed to be the federal government's defense against suspicions of widespread damage.
Now, a full year after Alberta and Ottawa unveiled a three-year plan to set aside their differences and keep a closer watch on the air, water and habitat in northern Alberta, there are still no formal results.
The Conservatives are striving to shore up their environmental credentials in the wake of a public chiding from the federal environmental watchdog and weighty words about climate change from U.S. President Barack Obama.
Dating back to Pierre Elliot Trudeau's National Energy Program (NEP) Albertans have been protective of their natural resources, sometimes to a fault. This appears to be the case again with the oilsands monitoring program. While it there is definitely some jurisdictional bureaucratic red tape, politics is also clearly involved.
But politics are clearly involved, too. Alberta has long resisted federal involvement in how it manages its natural resources. While natural resources are indeed a provincial responsibility, environment is a shared federal-provincial jurisdiction.
The province has made it clear that it wants to take a more dominant role in how the oilsands are monitored. To that end, Alberta is setting up an arm's-length environmental monitoring agency led by scientist Howard Tennant, who pointedly criticized federal involvement when he was appointed last October.
"This is Alberta and it's our resources and it's our responsibility,"
The pressure to stop oilsands production and expanded development will continue. President Obama faces a balancing act, where job creation and his new emphasis on climate-change and green energy will be weighed to reach his decision. While the president is under pressure from environmentalists, there is also pressure within his own party to approve the pipeline. With pump prices reaching $4 a barrel, political pressure is growing and the president may find a compromise.
While the likelihood of approval of the XL Keystone pipeline has a higher probability than Enbridge's Norhern Gateway pipeline, Canada's conservatives should probably heed Megan Leslie's advise and start at diversifying its resource sector, making investments in green energy, while pursuing other avenues to get Alberta crude to markets.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
More about Environment, Energy sector, Oilsands, keystone, northern gateway
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