Tar Sands

This is a featured issue.

The Athabasca Tar Sands in the watershed of the Athabasca River are considered to be a major energy resource in Canada, which will serve an increasing share of the North American oil demand, once peak production of conventional oil has been passed. The tar sands are notable as a source of pollution, profit for the energy industry and increasing political tension over climate change.

The most common environmental concern is that converting tar to oil is fundamentally energy-intensive, labour-intensive and capital-intensive, and guarantees that the tar sands will remain a large emitter of carbon dioxide and other greenhouse gases.

There are also more local concerns. Health Canada has been urged to undertake a full investigation into the downstream health impacts of Tar Sands developments including communities in Saskatchewan and the North West Territories. The Sierra Club of Canada is among them, and believes that full disclosure of the results of a neutral study would not favour continuing their use as an energy source: The health, social and environmental impacts of rapid tar sands expansion are profoundly and obviously negative using any near-term technology.

public subsidies

Since 1996 all capital asset costs associated with Tar Sands development in Canada have been written off in the year they are incurred. Also since that year, Alberta has charged only a 1 per cent oil and gas royalty rate on these developments until the capital costs have been paid off, compared to 25 per cent for all others.

According to Shifting Sands, by Don Gillmor, The Walrus, full text "Jean Chrétien, who had been Trudeau’s lieutenant during the National Energy Program era and who might have been lynched had he come to Fort McMurray in 1980, arrived in 1996 to publicize extensive federal tax breaks for oil sands development. Companies could write off 100 percent of their capital costs, including overruns, in the year they were incurred. The provincial government introduced an incentive package that charged only a 1-percent royalty on oil sands revenues until capital costs were paid off. The effect was immediate: housing starts in Fort McMurray rose almost 300 percent within twelve months, and the leases along the Athabasca River quickly solidified into a checkerboard of international interests." Since then China has gained a stake in the developments, and seems to view it as a strategic hedge against US interests.

Formally the Tar Sands are, Gillmor continues, "owned by the citizens of Alberta and managed, in trust, by the provincial government, but as the latter doles out generous tax incentives to private industry, its own revenues diminish in the process. While oil sands production increased by 74 percent between 1995 and 2002, royalties from the oil sands decreased 30 percent, a function of the low 1-percent royalty rate. The royalty jumps to 25 percent of net revenues once the operator has recovered all project costs." However, Tim Howard of the Sierra Legal Defence Fund says:

: “You have got to believe in the tooth fairy to believe that these companies are going to present their accounts in a way that shows a profit.” See Hollywood accounting and there is no net.

Companies now regularly defer payment of the 25-percent royalty rate simply by expanding existing mining operations to endlessly defer the time when the higher royalty rate applies. Gillmore says "Suncor tested the limits of that idea by building a new facility, then arguing that it was an expansion of their original project. The Alberta government sees it as an independent operation, and the matter will be decided by the courts, with the industry watching closely." The government has come under increasing scrutiny for this and other errors: Alberta’s Heritage Savings Trust Fund had in 1996, according to Gillmor, "$13.7 billion compared to Alaska’s $26.5 billion and Norway’s $11.1 billion in similar funds. In 2002, Alberta had dropped to $11.8 billion, while Norway’s had risen to $101 billion. Alaska was at $35.7 billion, but it also distributed an annual oil dividend that was between $1,000 and $1,900 (US) to every Alaskan citizen. Furthermore, the Klein government took in less than half the revenue per unit of oil that the Lougheed government did in the 1970s."

Canada also "provided $60 million in research and development funding for oil sands projects between 1996 and 2002. During the same period, it allowed Syncrude to reduce its taxes by $507 million, and there are mutterings among Calgary oil analysts that the government will never see a profit on Syncrude... Without the tax incentives, analysts say, the oil sands would never have been established, and they remain necessary, or future investment will wither".

:“The oil sands are very heavily subsidized,” says Tim Howard.

Gillmor claims that "the oil sands companies are becoming bureaucracies — inefficient, supported by tax breaks and research money, but providing jobs, education, and environmental management. They are Big Daddy."

However, the myth that they somehow profit the Canadian public continues. What they seem to do in practice is to attract vast amounts of foreign capital investment to do harm to the atmosphere via climate damage, all the while creating narrow categories of jobs in Alberta and causing the Canadian dollar to rise to the point where other industries suffer and die off.

[+] oilco propaganda

[+] health effects


position: Stop extracting oil from tar - forever.

argument for: Even the somewhat questionable "EROI" analysis used in the industry itself suggests that Tar sands will never be economical without government support.

argument against: Alberta's ruling class is too stupid to think of any other way to make money and will become a problematic political group like Texas oil billionaires if they are not allowed to do their harm.

argument against: Alberta is as brainwashed as Nazi Germany and its citizens will rebel and probably try to end Canada if told they cannot use the world's largest "energy pool" to get rich.

position: Allow only "clean energy" extraction

Development of the oil sands should be halted until the technology exists to extract clean energy from them, e.g. using a chemical process to extract and export electricity, or using in situ methods such as thermal boreholes to process energy-rich products such as aluminum.

position: leave alone until advanced extraction and refining make it as clean as other oil

While development need not wait until all extraction of fossil fuels can be ended in favour of exporting only electricity, it should wait at least until the technologies are in place to render the greenhouse gas and other output no worse than other oil.

position: Hands off: No special regulation is required, but all subsidies must also end.

All subsidies and regulation must cease immediately, and the clear uselessness of Tar Sands under current technology will become quite plain and "investment" will cease.

position: Hands off the profits, but hand over the subsidies!

Status quo: oilcos continue to receive lavish subsidies and be subject to zero dollars per barrel carbon tax on their emissions, while paying only 1 per cent royalty.