Globe and Mail has been really nailing it recently..
Why Keystone XL is a mistake
Giving Keystone XL the go-ahead would be a huge blow to Canada’s diversification strategy, such as it is, and the efforts to create value-added businesses and high-paying, skilled jobs. This country has always moved with alacrity to export raw, or semi-raw, materials into the U.S. market—oil, minerals, logs, fish and commodities. It’s a never-ending cycle of unambitious or non-existent industrial strategies. Just think of what the Chinese, Koreans, Indians or Japanese would do with Alberta, home of the world’s second-largest oil reserves. The province would be stuffed with upgraders, refineries and factories that would make everything from rubber duckies to tires.
Alberta, thank you, would rather take a pass. To be sure, it has endless excuses, some valid, many more not. The main excuse is that the technology to upgrade the tarry oil sands bitumen is still imperfect and very expensive, meaning it’s not attractive to investors. Note: Canada’s large pension funds are among the most powerful investors on the planet, but they’d rather pump money into European infrastructure than Canadian refineries. Profit margins are better when existing refineries (largely American) are modified to upgrade heavy oils and turn them into a broad range of products that can be pumped into nearby markets.
The traditional argument is leaky, however, because upgraders are now—ever so slowly—being built in Alberta. About 60% of the current output from the oil sands is upgraded in the province, but that percentage would likely shrink drastically if production soars.
With the Canadian dollar falling again, oil prices stubbornly high in spite of looming recessions, and technology that is improving, the risks of building upgraders and refineries are declining. They may not be as profitable as U.S. refineries, but they would make money. And think of the spinoffs from a new industrial base. Shiny new Canadian refineries would probably be cleaner than the old bangers south of the border.
Expanding the oil sands should be conditional on upgrading the output somewhere in Canada—Alberta or the refinery complexes in Montreal and Sarnia, Ontario, which rely on imported oil. Building the Keystone XL pipeline is a cop-out, especially since Canada is awash in capital. If the oil sands are to be expanded to the point where they melt the planet, at least stud them with refineries to create some wealth along the highway to hell.
Why Keystone XL is a mistake - The Globe and Mail
