blog2009

Wake up, Alberta – Obama's going for the hard cap on emissions

JEFFREY SIMPSON
Globe and Mail
February 23, 2009

On Thursday, President Barack Obama will present his 2010 – yes, 2010 – budgetary proposals. Albertans in particular and Canadians in general might get a shock.

Heads firmly in the sand, such as those in the Alberta cabinet, might miss what will be proposed, but no one else will. Mr. Obama will propose what he's always promised: emissions caps for greenhouse-gas emissions that cause global warming. He will create a market for permits to be purchased from the government, then traded among emitters. These permits might bring the U.S. government $300-billion in a decade or so.

Nothing like this has been proposed by the Harper government. It has preferred useless policies such as tax credits for public transit and expensive subsidies for corn-based ethanol that waste taxpayers' money. The centrepiece of the Harper approach has been that companies will have to reduce the intensity of their energy use and emissions and, if not, pay into a technology fund that might some day come up with ways of lowering emissions.

This intensity approach is quite different from Mr. Obama's hard cap. But we are now in the Orwellian world of Ottawa's climate-change policy. The Prime Minister and his spokesmen have been saying the two systems – intensity and hard caps – amount to the same thing, when, in fact, they do not. It's the same weird disconnect that had Mr. Harper blaming George Bush for the failures of Canada's own climate-change policies.

The disconnect in Ottawa, however, is not as wide as the one in Alberta, the major per capita source in Canada of emissions, where the provincial government steadfastly refuses to see the way the world is changing.

The day Mr. Obama was in Ottawa, Premier Ed Stelmach appeared on television saying how pleased he was that the President and the Prime Minister had agreed with Alberta's approach that emissions would best be reduced by technology, especially burying carbon through so-called sequestration projects.

Someone has got to shake Mr. Stelmach awake, or else Alberta is going to get a nasty shock. A cap-and-trade system is coming in the U.S. with hard limits. Canada is going to try to join that system. A wise premier would be starting to prepare his province for what lies ahead, not issuing new policy documents such as the one on tar sands that merely reconfirm existing and inadequate approaches.

Now would be a perfect time to take a deep breath in Edmonton, study what's coming from Washington, and change direction, because the recession has put on hold so many tar sands projects. Alberta has a perfect opportunity to change course without upsetting much ongoing work, because there is so much less of that work now going on.

It is illusory to the point of hallucination to insist, as Alberta has, that the province might create its own cap-and-trade system. Think about that: an Alberta-only scheme, instead of one involving the rest of North America. Who does Alberta think it's kidding? Every oil company in Alberta will want to trade in the larger system, not the tiny provincial one.

Last week, the Alberta government introduced legislation to provide the authority to administer the $2-billion in provincial funding for sequestration projects. There's nothing wrong with funding research and projects for sequestration, and the government deserves credit for spending the money even in recessionary times.

Many countries, including the U.S., are making the same investments. Studies make it clear that large-scale sequestration projects are long-term, technically demanding bets. Even if some commercial sequestration arrives within a decade, Alberta's tar sands emissions will keep growing, as its recent document admitted. The government believes sequestration might capture five million tonnes of carbon by 2015 (wishful thinking); from 1990 to 2006, Alberta's total emissions rose by 62 million tonnes.

The Harper government has remained mute on the Alberta approach. In fact, the subtext of its pitch to the Obama administration for an energy and climate-change pact – a pitch that went nowhere – was to protect the tar sands from any adverse U.S. policies.

The Harper government has told the world that Canada will reduce emissions by 20 per cent by 2020 from 2006 levels. This cannot be done if Alberta's emissions rise by 20 per cent in that time frame, as the province's policy allows.

Happily for Canada, the Obama administration is prepared to lead within North America, and we will have no choice but to follow. The sooner heads-in-the-sand politicians understand this new reality, and prepare for what's coming, the better.

Bust-town, Alta.

COMMENT: Are raw bitumen exports the Albertan equivalent of raw log exports from BC?

GORDON PITTS
Globe and Mail
February 20, 2009

FORT SASKATCHEWAN, ALTA. — In a snow-swept field northeast of Edmonton, a slender green smokestack rises like an impudent finger gesturing rudely at the economic carnage around it.

The stack is surrounded by industrial debris, including big tube-like steel vessels that cost more than $5-million apiece. The clutter suggests the scene at a messy apartment where the occupant got an unexpected phone call to vacate in a hurry.

This is the would-be home of a massive bitumen upgrading project, which, after a $530-million investment in land, equipment and technology, now lies abandoned by all but security guards. Its corporate owner, BA Energy, is in bankruptcy protection.

The site and the surrounding fields are where Upgrader Alley, a hotly anticipated $80-billion complex of oil sands processing and related industry, has hit its physical and symbolic dead end.

Columba Yeung has developed a technology that he touts as a more energy-efficient and productive way of turning bitumen into synthetic crude.

Of all the Alberta victims of the energy price implosion, the retreat from Upgrader Alley is the most crippling for the province and the country. Fort McMurray will continue to churn out raw bitumen from its mines and steam-fed underground wells, but the upgrader boom around Fort Saskatchewan, a half hour from Edmonton, cannot go ahead under the current economics.

It is a blow to countless dreams, not only in the 533-square-kilometre Fort Saskatchewan industrial complex but also the counties around it – an area that, even before the upgraders, had been branded Alberta's Industrial Heartland. It will be a crushing setback to Edmonton and its manufacturing complex of Nisku, south of the provincial capital, where a lot of the fabrication would have taken place.

Above all, it will dash Alberta's hopes of being not only the grubby mine site for oil sands extraction, but a value-added centre for upgrading raw bitumen into synthetic crude oil – and possibly a petrochemical cluster built around the byproducts of the process. The province's long-running pursuit of industrial diversification is once again on hold.

The hope was that the Heartland would upgrade two million barrels of bitumen a day. Now, there are fears that the action will shift south, as new and existing upgraders on the Gulf Coast or the U.S. Midwest suck away the lion's share of that new processing.

“That would be a horrible thing for the province,” says Debbie Hamilton, chief administrative officer for the town of Redwater, a village of 2,100 that has dreams of becoming a bedroom community for the upgraders. “It's like raping our natural resources.”

Upgrader Alley would have come with a huge environmental price. The Pembina Institute, an environmental research group, estimates that, with all plants operating under original projections, the upgraders would have generated as many greenhouse gas emissions as 10 million vehicles – and consume 10 times as much water as the City of Edmonton.

Those kinds of numbers will buttress the anti-oil-sands sentiment in the administration of U.S. President Barack Obama. But Alberta could also argue that if separate upgraders are now built in, say, Fort Saskatchewan, Omaha and Chicago, the total environmental footprint is much bigger because these are one-off investments. In Upgrader Alley, producers could cluster for efficiencies in areas like carbon capture and water use.

“I think that kind of logic would be something Canada and Alberta would want to discuss with the new U.S. administration,” says Joseph Doucet, a professor of energy policy at the University of Alberta.

Officially, there are still plans to build or expand eight upgraders in the region, which already boasts about 20 hydrocarbon processing plants and refineries.

But in reality, only one new project is a sure thing – a large expansion of Shell Canada Ltd.'s upgrader on its Scotford refinery site, where construction is now under way a little more than a kilometre away from BA Energy's abandoned operation.

All the others are under review or delayed, including the massive $10-billion project to be built by Petro-Canada and its partners; sites owned by foreign players Total SA (France) and StatoilHydro ASA (Norway); and independent “merchant” operations such as North West Upgrading Inc. and BA Energy itself.

The projects would have drawn an estimated 22,000 construction workers to the area by 2012, and as many as 12,000 permanent jobs. Now, when 4,000 workers wind up their building jobs at Scotford over the next two years, there is no assurance they will find a place to work locally. (Shell has 1,000 permanent workers on the site.) “A year ago, the big problem was, where will we find workers?” says Neil Shelly, executive director of the Alberta Industrial Heartland, a coalition of municipalities. “Today, we're switching to: How do you find work for these people?”

The shifting economics has choked off a local land boom, which Mr. Shelly calls “the Gold Rush of 2005 to 2007” – the period when, it seemed, every Fort McMurray operator was nailing down land positions here – even if they didn't have a project in mind. “It was like a tulip market back then,” he laughs.

The land grab fired entrepreneurial plans in housing, services and hospitality. But now the noon-hour crowds are dwindling even at the Atlantic Kitchen fish and chips restaurant a couple of blocks away from the constituency office of the local MLA, Premier Ed Stelmach.

“I'm a little bit worried now,” says Agnes Street, the restaurant's owner who relocated to Alberta from Newfoundland 13 years ago. The movement of her fellow Newfoundlanders is always a sure barometer of the state of Alberta's economy, and now, she says, the exodus is all back home.

Inside the halls of Alberta's legislature, there remains a keen optimism that the Heartland is not dead, but asleep.

“We hope soon to see a turnaround,” said Finance Minister Iris Evans. “We're optimistic that [shelved upgraders] will go ahead. The opportunity to develop our petrochemical and refining industries is part of a very great advantage of Alberta's future.” Upgrader Alley has been a victim of the oil price as it has tumbled from $147 (U.S.) a barrel to below $40 in less than eight months. But the writing was on the wall at least a year before the meltdown, as operators were scared off by soaring costs of construction and processing in Alberta. Upgrader Alley is as much a casualty of the Alberta boom as its subsequent bust.

The industry hates the term “tar sands,” but Mr. Shelly says it is entirely appropriate to describe bitumen from Fort McMurray – the stuff has the consistency of road tar on a hot summer day.

For it to be refinery-ready, it needs to be upgraded into synthetic crude, which means applying extreme pressure and heat to the gooey substance to separate coke, sulphur and other byproducts. At the moment, close to 70 per cent of the upgrading is done in Canada. Most of that work is done in Fort McMurray, but that area, with already massive mines and upgraders, faces huge cost and logistical challenges for future upgraders. So the idea was to dilute the bitumen and pipe it 400 kilometres to Fort Saskatchewan.

Fort Saskatchewan (pop. 17,000) is one of those places that garners dramatically different responses – a chemical engineer's dream, but an environmentalist's nightmare. Since the 1950s, energy processors have been drawn to this rolling farmland and bush along the North Saskatchewan River. It's near the hub of major pipelines; both major railways have lines running close to the site. While Fort Mac is isolated and hardscrabble, Fort Saskatchewan is almost a suburb of Edmonton with its amenities and urban lifestyle.

What's more, the area is blessed with huge salt caverns beneath the surface. When water is added and the salt solution flushed out, you have millions of cubic feet in storage capacity for natural gas and gas liquids. In addition, you have a ready supply of water from the North Saskatchewan.

The result is the largest hydrocarbon processing facility in Canada, home to operations of Dow Chemical, Sherritt International, Nova Chemicals and Agrium Inc., among others. The Industrial Heartland park boasts 3,500 direct jobs, but the number doubles in indirect employment.

According to Mr. Shelly, the potential to pipe in bitumen would have taken the Heartland to a new level of adding value. He paints a vision of using byproducts, such as petroleum coke, to fire up a chemical cluster patterned after industrial complexes in Europe, such as in Marl, Germany.

But in the crazy world of gyrating energy prices, the perverse economics of the oil sands took hold. First, there is the plunge in oil prices, which combined with the still lofty costs of labour and construction, put projects in peril.

But the killing blow was the arcane pricing of bitumen, which has raised doubts about the economics of upgrading the tarry oil in Canada. The idea behind Canadian upgraders was to capture the differential in price between raw bitumen and the more expensive synthetic crude that is produced through upgrading.

Under normal circumstances, that gap amounts to about 40 per cent of the price of West Texas intermediate crude, but in the past year it was narrowed to about 20 per cent.

The price of bitumen is set in the U.S. South and Midwest. In the past, upgraders in the region took a lot of their heavy oil from Venezuela and Mexico. But for reasons of politics and declining investment, those sources are in decline, and the U.S. players are looking north for supply. That demand is raising the price of raw Canadian bitumen and reducing the price differential sharply with upgraded crude.

As the gap narrows, it becomes more efficient to fill upgrading capacity in the U.S. – or to bolt an upgrader on to an existing refinery – instead of adding an expensive greenfield project in Fort Saskatchewan. The narrowing margins, combined with high construction costs, outweigh the expense of piping diluted bitumen from Fort McMurray to Galveston or Chicago.

Yet, amid the downturn, there is also a recognition that Upgrader Alley may not live up to its early billing.

“It was never clear that all of [the upgraders] were going to go ahead,” provincial energy spokesman Jason Chance said. “We're confident that many of those projects will come back. But there's a mistaken assumption that there are no benefits to the province if we sell our bitumen to other jurisdictions. What we know and believe is that the best value for Albertans comes in selling a whole range of products ... If it's all about one product, and an upgraded product, you're putting all of your eggs in one basket and we're not interested in seeing that happen.”

One great hope for the Heartland area is that the Alberta government uses more of its muscle to get upgrading done in Alberta. Particularly promising is a commitment to receive royalties from the oils sands in the form of actual bitumen – royalty-in-kind – instead of cash. Under this scenario, Alberta would use its bitumen supply to force-feed at least one new upgrader in the area. And if you build one, more will presumably follow.

“With bitumen in kind, you may have product for at least one large upgrader right there,” says Prof. Doucet, the University of Alberta energy specialist. Once that upgrader is a sure thing, the province could assemble infrastructure in Fort Saskatchewan to pool resources – water, steam, electricity, even space – among several plants. The economies of scale could be significant. “If you do it effectively, that should get you lower fixed costs per barrel,” he says.

The government repeated its commitment to a bitumen royalty in its oil sands development plan released last week and hopes to make a decision in “the next several weeks” on whether to begin soliciting companies for proposals, Mr. Chance said. That may be the best hope for BA Energy, which ran out of money last year, shut down its site and filed for bankruptcy protection. The story is poignant because BA is the brainchild of Columba Yeung, an entrepreneurial maverick in an otherwise Big Oil environment. Mr. Yeung was born in Hong Kong to a Catholic family – hence, the name Columba, an Irish saint. Trained in Canada as an engineer, he was once a key manager for Shell Canada, and was instrumental in designing the Scotford refinery.

Mr. Yeung, who controls BA's parent, Value Creation Inc., is an engineering genius who developed a unique technology that he touts as a more energy-efficient and productive way of turning bitumen into synthetic crude. But he ran into the global credit crunch, and, as an independent, lacks ready cash. He did not return a phone call for this article, but court documents have indicated BA is in talks with a large global company.

Whatever the outcome, it puts a serious crimp in his dreams of being a player in the Alberta oil patch. Still, he owns a big piece of real estate in the oil sands northwest of Fort McMurray. To succeed in the bitumen business, “you have to have a lot of dirt,” he said two years ago.

BA Energy has a lot of land and some of it may be bitumen-rich dirt. But what is missing now, as all the oil sands players have discovered, is capital and a profitable business model.

Albertans should have known that not everything on the drawing board would get done in Upgrader Alley. Now with just one project in the works, they are hoping something, anything, gets done.

With files from reporter Nathan VanderKlippe in Calgary

Harper & Obama: A new era of co-operation

CAMPBELL CLARK
Globe and Mail
February 20, 2009

'Threats to the United States are threats to Canada,' Harper says after meeting with U.S. President and agreeing to work together on green technology

OTTAWA — Barack Obama and Stephen Harper reset Canada-U.S. relations in three hours of meetings Friday, bending over backwards to dispel tension from the George W. Bush era and pledging to co-operate at the border and around the world.

Mr. Obama used a visit to a close neighbour to send a message that the U.S. wants to work in concert with allies – jumping in at a news conference to say he hadn't pressed for Canadian troops to stay in Afghanistan past 2011, and pledging to consult closely with Ottawa on strategy.

And more than ever, Mr. Harper, now dealing with a president who is popular in Canada, offered to do public business in close touch with the United States. He made a direct-to-Americans, we've-got-your-back pledge that Canada considers any security threat to the U.S. a threat to itself.

The 44th U.S. President arrived on snowy Parliament Hill to give a sunny wave to the thrilled crowd – urging Mr. Harper to join in – and stopped downtown to buy a BeaverTail treat six hours later on his way back to Air Force One.

Obama, Harper hail green technology agreement U.S. President Barack Obama and Canadian Prime Minister Stephen Harper reached an agreement Thursday to begin a clean-energy dialogue. (AP) Play Video

In between, Mr. Obama, clearly well-briefed on Canadian relations, hit the key notes: He spoke out against protectionism and in favour of co-ordinating auto-industry bailouts, said he's committed to ensuring trade flows smoothly across the border, and even declared, “I love this country.” The two leaders also announced the launch of a “Clean Energy Dialogue” to co-operate on developing technology to reduce greenhouse-gas emissions, although it fell short of launching talks for the broad North American climate and energy pact Mr. Harper has proposed.

“I came to Canada on my first trip as president to underscore the closeness and importance of the relationship between our two nations, and to reaffirm the commitment of the United States to work with friends and partners to meet the common challenges of our times,” Mr. Obama said at the opening of a four-question news conference that stretched to 40 minutes.

“As neighbours, we are so closely linked that sometimes we may have a tendency to take our relationship for granted.”

Mr. Harper closed with his own suggestion that the two can do business together, on a two-way street.

“As we all know, one of President Obama's big missions is to continue world leadership by the United States of America but in a way that is more collaborative,” he said. “And I'm convinced that by working with our country he will have no greater opportunity than to demonstrate exactly how that model can operate over the next four years.”

One potential sticking point was brushed aside by the U.S. President, who intervened to answer a question posed to Mr. Harper, about whether he would reconsider Canada's decision to withdraw troops from Afghanistan in 2011.

“I certainly did not press the Prime Minister on any additional commitments beyond the ones that have already been made,” he said, adding he only complimented Canada on its troops there, and the 108 who have fallen.

“There has been extraordinary effort there and we just wanted to make sure that we were saying thank you.”

Mr. Harper, however, dodged a direct answer on extending the mission, saying the principal goal is to train the Afghan army to take over.

With recession ravaging the U.S. and deepening around the world, the two leaders expressed joint commitment to global stimulus.

Mr. Obama, knowing the audience, not only cautioned against protectionism in a recession, but played down his desire to re-jig the North American Free Trade Agreement, reassuring “it can be done in a way that is not disruptive” to trade.

But it was on cross-border trade flows that the two leaders sent key signals.

Mr. Obama's Homeland Security Secretary, Janet Napolitano, has ordered a review of security at the Canada-U.S. border – heightening Canadian concerns that U.S. security measures are clogging the flow of goods across the border.

Mr. Harper looked past Ottawa reporters to send a message to Americans: “Threats to the United States are threats to Canada.…”

“We as Canadians have every incentive to be as co-operative and alarmed about the threats that exist to the North American continent in the modern age as do the government and people of the United States. And that's the approach with which we treat the border.”

Mr. Obama responded with a signal that may have impact with his own officials, stressing the need to invest in “easing bottlenecks” and balance security concerns with an “open border.”

“We have no doubt about Canada's commitment to security in the United States as well as Canada,” he said.

On the environment, however, Mr. Obama stepped cautiously around Mr. Harper's calls for a broad, joint pact on greenhouse-gas emissions and energy. The two leaders announced a Clean Energy Dialogue, but it had a limited focus on sharing technology for things like capturing and storing carbon emissions – falling far short of launching a drive to a broad North American system for regulating emissions.

Mr. Obama said the U.S. has to first work out its own system at home, leaving Mr. Harper to suggest Canada might try to join when that's done.

“We'll be looking ourselves for our own sake at opportunities for harmonization to make our policies as effective as they can [be],” he said.

The important intangibles of the relationship – whether the two struck a bond – remain, of course, difficult to judge from outside.

Mr. Harper's communications director, Kory Teneycke, pointed out that the scheduled 10-minute, no-aides chat between the two leaders stretched to 33 minutes, calling it a “a nice way to start” the relationship.

However, Liberal Leader Michael Ignatieff, who had his own 25-minute chat with Mr. Obama, noted there was little solid advance.

“I don't feel from what I heard that anything very substantial or substantive was agreed today,” he said in a CBC interview.

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Obama's élan, and trumped up 'clean energy dialogue'

JEFFREY SIMPSON
Globe and Mail
February 20, 2009

The U.S. administration is too new and Canada too internally divided for the two countries now to tackle together, and seriously, greenhouse-gas emissions.

Yesterday, President Barack Obama and Prime Minister Stephen Harper announced a “clean energy dialogue.” It was an announcement with much less than met the eye. And it was certainly miles from an energy and climate-change pact that had been floated by Mr. Harper in the weeks before Mr. Obama's visit.

With a U.S. president so popular in Canada and displaying such an astonishingly polished understanding of Canadian files, there were no areas of discord to mar such a happy day – but nothing important to announce, either. Hence the trumped up virtues of the “clean energy dialogue.”

Both countries are investing in clean technologies. Both are pouring money into research about carbon sequestration, a process of burying carbon rather than releasing it into the atmosphere.

That work and research was going to continue, “dialogue” or not. Exchanging information about how things, technologically speaking, are going is no bad thing. It's just not a substitute for serious policy. Indeed, the Obama stimulus package had much more in it for boosting investments in clean energy technology than the Harper budget.

What really will count in curtailing emissions was not mentioned yesterday, because the Obama team is not ready with its proposals: putting a price on carbon and imposing stiff new emissions on vehicles.

When those proposals are made public, Ontario will have to swallow hard over new emission regulations for cars, and the edifice of Alberta's climate-change policies will collapse. Those inevitabilities are coming soon, but not right now.

A carbon price will arrive through a cap-and-trade system of the kind that Mr. Obama has promised but that must be laboriously negotiated with Congress and the states. Canada will follow along, trying to join the system, just as Canada will eventually take its cue from the U.S. over vehicle emissions. Whether the Mexicans, with their very different standard of living, will participate in what emerges remains unknown.

Perhaps to flatter the President, Mr. Harper invented a most extraordinary justification for Canada's record as the country whose emissions have grown the fastest among advanced industrialized countries.

It was hard, Mr. Harper said yesterday, to make progress in Canada when no willing partner existed in the United States. It turns out by this twisting of history that Canada's terrible record was the fault of Mr. Obama's predecessor, George Bush. Hello?

Emissions actually grew faster in Canada than in the U.S. under Mr. Bush. Canada signed and ratified the Kyoto Protocol on climate change; the U.S. did not but still had a slightly better record than Canada.

U.S. states, not Canadian provinces, started banding together to form interstate carbon-trading systems, which some provinces then joined. California, then other states, created tougher vehicle-emissions standards.

The Harper government never once tried to reach a Canadian consensus on reducing emissions. The reduction target the government eventually set – a 20-per-cent drop in emissions by 2020 from 2006 levels – is not considered attainable by any Canadian experts who have studied the policies the Harper government has proposed.

Canadians continue to fool themselves and to try to fool the world over climate change. To suggest that Canada's failure was because the Americans were an unwilling partner is historical revisionism of a brazen kind.

Mr. Obama must have understood the revisionism, but he certainly was not going to underscore it, for yesterday belonged to him in Canada. He displayed not only his customary élan but showed – in a way that was hard to recall from any U.S. president, especially one so new on the job – a knowledge of bilateral files and facts that made it appear he had been dealing with Canada for decades.

It helps in Washington that people in the administration and the beau monde know that the occupant of the White House is favourably inclined toward a particular country.

Coming to Canada first, saying so many well-honed things about Canada, mentioning that his brother-in-law is Canadian, and showing sensitivity to the feelings of the smaller country in the relationship bodes very well indeed.

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Obama edginess in Ottawa

RICK SALUTIN
Globe and Mail
February 20, 2009

Stephen Harper, along with the security legions, got a discomfited look on his face when Barack Obama asked if they could step outside to wave to the crowd yesterday after arriving on Parliament Hill. Oh no, he seemed to fret. I don't want it to end this way: taking a bullet for the big-spending liberal. On the other hand, it's his normal expression.

But Barack Obama makes many people edgy, including some on the left, where he's supposed to be. Tom Walkom in the Toronto Star: “He is not God. The best thing … is that he's not George W. Bush.” Alexander Cockburn of Counterpunch: “There's always something cloudy about Obama, just when I've almost persuaded myself to like the guy.” That includes me.

He eludes easy analysis. I've decided that's because his life and experience are so different from most public figures, to whom we have our responses ready. We know he's different because of his book, Dreams from My Father, on his life till about 30. Anyone who read it 15 years ago would have thought: No chance he's planning to run for office. From it, we learn not just the unusual things he did but the unusual ways he processed them.

When his mother took him to a hospital for stitches in Indonesia, she seemed to fear “her child's life might slip away when she wasn't looking, that everyone around her would be too busy trying to survive to notice.” When he worked for a corporate consulting firm: “Like a spy behind enemy lines, I arrived every day at my mid-Manhattan office.” Recently, speaking of Canadian health care – seen as too radical in the U.S. – he said: “When I drive through Toronto, it doesn't look like a bunch of Maoists.” Hmm. He may not be a leftist, but he seems to know some.

His community organizing in Chicago centred on shuttered factories. That's the subtext when he talks to Stephen Harper about protectionism. Stephen read up on it in Fraser Institute publications, and Barack tried to save jobs in dying neighbourhoods: “Men and women who smoked a lot and didn't watch their weight … drove late-model cars from Detroit and ate at Red Lobster on special occasions.” He sat at kitchen tables and talked to them about their lives and ideas. He organized meetings in church halls when almost no one came and the odd soul wandered in to ask where the bingo was. Occasionally, he saw “what every organizer dreamed about – someone with untapped talent … excited by the idea of a public life, eager to learn.”

At the Republican convention, Sarah Palin sneered that community organizers sound like small-town mayors without the responsibility. Everyone hee-hawed. But he found “there was always a community there if you dug deep enough … there was poetry as well.”

When he looks around his cabinet table, he will see no one with that kind of experience. He has been in worlds they are clueless about.

It isn't your average presidential CV, and the discomfort comes from not knowing how it will play out with the guy as president. He has what I think of as the Bob White look: I'm already so far ahead of anything I could have expected that I can't not feel good. Compare that to the Al Gore look: No matter what happens, the most I can ever do is meet expectations.

Yet, it's also very primitive. Imagine Barack Obama waking up yesterday. Already, for hours, thousands have been astir, focused on his day, making his breakfast, welding manhole covers shut in Ottawa etc. It dwarfs the Roman imperial cult. He likes to talk about teachable moments, but what's teachable about this hubbub? It's so undemocratic, so uncommunity organizing. It isn't far from the world of Russian peasants who thought: If only the czar knew, he'd fix everything. The fact that, in the Obama case, he may be the only one at that cabinet table who would fix it, makes the primitiveness even more conspicuous.

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Obama and Harper forge common front

Mitch Potter
Washington Bureau Chief
Bruce Campion-Smith
Ottawa Bureau Chief
The Toronto Star
Feb 20, 2009

President Barack Obama and Prime Minister Stephen Harper walk down the Hall of Honour on Parliament Hill on Feb. 19, 2009. It was Obama's first foreign trip as president. (STEVE RUSSELL/TORONTO STAR)

U.S. president turns on the charm, heralding a new era of friendly ties with Canada

OTTAWA–Barack Obama swept aside eight years of jangled Canadian nerves and cross-border tensions yesterday, singling out his northern neighbour as the first choice for a new American partnership with the world.

In a lightning visit designed to turn a fresh page in Canada-U.S. relations and tamp down trade worries, Obama made all the right sounds, including a declaration that "I love this country and think that we could not have a better friend and ally."

It was consummate Obama – a charm offensive the likes of which Ottawa has seldom, if ever, seen. And it was reciprocated, from the rock-star welcome for his motorcade to the thrilled cheers of those who witnessed the president's unscheduled hunt for souvenirs in the capital's ByWard Market.

The day was a triumph, too, for Prime Minister Stephen Harper, who found his level with Obama in an expansive question-and-answer session with journalists, the only unscripted moment of a carefully scheduled day.

Despite big differences in philosophy and style, Obama and Harper presented a common front on issues as varied as the war in Afghanistan, reversing the recession and pushing back the hot-button issue of trade protectionism.

Together, they announced a "clean energy dialogue" aimed at finding technological answers to the twin environmental dilemmas of Alberta oil sands and American coal.

Obama called the development of clean energy "one of the most pressing challenges of our time" but also conceded there were no "silver bullets."

But the agreement, which won cautious praise as a good first step, was hardly the centrepiece of day intended as a symbolic break with the Bush era.

Instead, tone triumphed over substance yesterday as Obama used the first foreign trip of his presidency to broadcast to Canada and the world his clear intention to "work with friends and partners to meet the common challenges of our time.

"The United States is once again ready to lead, but strong leadership depends on strong alliances and strong alliances depend on constant renewal. ... That's the work that we've begun here today," Obama told a Parliament Hill news conference.

He pledged to do "everything that I can" to make sure Canada-U.S. relations become ever stronger in the coming years.

Obama then told the media gathered in the Centre Block's Reading Room – and a continent-wide television audience – that he was "a little biased,'' because of his family and staff ties to Canada. "I love this country,'' he said.

Harper, aware of Obama's popularity among Canadians, then jumped on-board, declaring that no two nations are "closer friends."

It was all that Harper's Conservatives could have hoped for – in image and substance, perhaps more, and chance to renew ties left frayed by eight years of George W. Bush.

Between the lines of their pledges to expand trade in the years to come, there remains a question of whether the NAFTA pact might eventually be reopened. Obama spoke of rolling side agreements on environmental and labour standards into the overall package; Harper suggested such a move risked "unravelling" the entire agreement.

On Afghanistan, both chose their words with extreme care, mindful of the political minefield, with Canada approaching a troop withdrawal in 2011 even as Obama is sending 17,000 fresh American troops. Their comments left the picture unchanged.

The president reassured Harper that he sought to boost trade, not stifle it, and that he hoped to streamline a clogged border that has been a chronic and costly irritant to Canadian travellers and shippers alike.

Harper used the day to deliver his own message to the president – and a U.S. audience – on the idea that Canada is somehow a safe haven for terrorists.

"The view of this government is unequivocal: threats to the United States are threats to Canada," Harper said. "And that's the approach with which we treat the border."

Harper blamed his government's climate change record on the previous Bush administration.

"Canada has had great difficulty developing an effective regulatory regime alone in the context of an integrated continental economy. It's very hard to have a tough regulatory system here when we are competing with an unregulated economy south of the border," Harper said.

Obama and Harper met one-on-one for 33 minutes, stretching far past the 10 minutes scheduled for their private meeting. Harper aide Kory Teneycke later said the meeting was a good signal about the fledgling relationship between the two men.

Obama's highly anticipated visit officially got underway at 10.25 a.m. when Air Force One touched down at Ottawa International Airport, where he was greeted by Governor General Michaëlle Jean.

The two appeared to hit it off, chatting and smiling as Obama moved down the line of dignitaries, which included Michael Wilson, Canada's ambassador to the United States and past a line of Mounties standing at attention.

As Obama's motorcade sped downtown, he saw first-hand how the nation's capital embraced their moment of Obamamania, however brief.

The giddy display saw clusters of cheering bystanders crane for a glimpse of the passing motorcade, one woman holding aloft a red paper heart, another toting a sign that said, `Yes we Canada.'

The crowds grew thicker as Obama's motorcade approached Parliament, where a crowd of about 2,500 people included some demonstrators – not against Obama, but rather, in support of the progressive change on which he campaigned. One banner reading "Climate Emergency" said it all.

The much-anticipated photo-op with the two leaders almost never happened. For a few seconds, Harper seemed satisfied to shake hands with the president and pull him inside Parliament.

Only when Obama insisted on extending a wave to the waiting crowd did the pair step back into the cold for their historic photos.

A radio sound bite later confirmed the sequence, with Obama saying to Harper, "Do you mind if we go out there and take a quick wave at some of the people there?"

A White House aide, speaking on background to the Toronto Star, proclaimed the Obama visit "tremendously successful. We are leaving having achieved everything we set out to accomplish."

Harper and Obama, the aide said, found a connection based on their mutual ability to sort through policy detail. "Even on points where there wasn't total agreement, there was respect for the ability to talk policy at a very detailed level. Not every leader can do that. And they saw in each other a capability they like."

Foreign Affairs Minister Lawrence Cannon, who was among the senior officials who lunched with Obama and Harper, told the Star that the visit will help kickstart action on cross-border files.

"I felt quite honestly I was in front of two pragmatic leaders who wanted results," Cannon said.

Obama, who has a brother-in-law in Burlington, Ont., ended the news conference by declaring he's looking forward to coming back to Canada, "as soon as it warms up."

Asked later whether the president has any specific plans for a return visit, a White House aide said nothing firm yet.

With files from Tonda MacCharles

I Hope Obama Jumps the Right Way on Canada's Tar Sands

by George Monbiot
The Guardian/UK
Thursday, February 19, 2009

One story, two contradictory reports.

The first, on Bloomberg news, suggests that ahead of a meeting with Canada's prime minister, Barack Obama believes the US's northern neighbour can green its tar sands, becoming compatible with his clean energy revolution.

The second, in Nature, suggests that his environmental measures will destroy tar sands production - which mostly supplies the US - by making it prohibitively expensive to sell south of the border.

I think you can probably guess which outcome I'm hoping for. For the sake of argument, let's accept the following improbable propositions:

1 That the Albertan tar sands operation can adopt universal carbon capture and storage, cutting the emissions from processing the fuel by 80-90%.

2 That this can be done so cheaply that tar production remains economically viable.

3 That it can happen quickly enough to help prevent global climate breakdown.

This still leaves us with two intractable problems. The first is that even if the extraction and processing of tar sands produces scarcely more carbon than the production of ordinary petroleum, the stuff will still be burnt in cars, and there's no foreseeable carbon capture and storage technology which can deal with that. We will have a chance of preventing full-scale climate breakdown only if we reduce the amount of fossil fuel we take out of the ground.

The second is that carbon pollution is just one of the impacts of tar sands production. The strip-mining destroys vast tracts of forest and wetland. The processing poisons great volumes of water, which sit in ever-growing toxic lagoons, or are flushed down the rivers, at potential hazard to both wildlife and human health. You have only to see some pictures of these operations to recognise that there can be no such thing as clean tar sands, just as - when all the impacts are taken into account - there is no such thing as clean coal.

Alberta's oil production ensures that Canada is trashing its own environment, and is further from meeting its Kyoto commitments than any other country that has ratified the treaty. Its government has no intention of closing the Alberta tar patch. Let's hope Obama jumps the right way when he meets Canadian PM Stephen Harper today, and ensures that this industry becomes impossible to sustain.

© 2009 Guardian News and Media Limited 2009

George Monbiot is the author of the best selling books The Age of Consent: a manifesto for a new world order and Captive State: the corporate takeover of Britain. He writes a weekly column for the Guardian newspaper. Visit his website at www.monbiot.com

So what happened when Obama met Harper? Click here.

Alta. family fights for court costs after battle with oil company

By Jamie Komarnicki
Edmonton Journal
February 12, 2009

From right, Agnes Ball, Craig Graham and Susan Graham successfully took Imperial Oil to court after the oil company went on Ball's land to fix a sour gas pipeline without her permission and caused a leak that [killed and sickened] her cattle south of Bragg Creek, Alberta, Feb. 12, 2009. (Photograph by: Stuart Gradon, Calgary Herald)

CALGARY — Six years ago, the Ball Ranch near the small community of Bragg Creek, Alta., experienced its worst calving season in memory.

“We had weak calves, premature calves, sick calves, dead calves and we lost some cows, as well,” said Susan Graham, who runs the ranch with her husband, Craig, and her mother, Agnes Ball, 72.

“We had never experienced anything like that with our herd — ever.”

The decimated herd was the latest blow in a mounting battle pitting the small ranching family against one of the nation’s largest corporations.

It’s a fight some legal experts describe as the oil-and-gas industry playing “hardball.”

Recently, a Calgary judge ruled in the ranchers’ favour.

A Court of Queen’s Bench justice found in December that an Imperial Oil pipeline leak exposed a portion of the family’s cattle to hydrocarbon contamination.

The two parties were in court Thursday to argue over costs.

An Imperial Oil spokesman declined to comment on the case but said the company is proud of its relationship with local communities.

“We take great pride in our environmental record, particularly in maintaining positive relationships with our neighbours, which makes this case particularly troubling,” Pius Rolheiser said.

Nigel Bankes, chairman of natural resources law at the University of Calgary, suggested the judge’s ruling indicates the case could have been settled out of court “without putting the family to the cost, expense and emotions associated with proving a case in court.

“What that suggests is oil and gas companies will play hardball with landowners,” Bankes said.

The dispute began in the summer of 2002, when Agnes Ball returned from a weekend vacation to find a massive pit dug near a sour gas pipeline running through land where some of her cattle grazed. The leased land has been in the family since the 1940s, she said.

She said an Imperial employee later told her it was doing some work on a sour gas pipeline.

Cattle were grazing nearby, she said.

“I was furious,” Ball said Thursday.

The family’s concerns over contamination mounted.

When the calving season proved disastrous, they decided to take further action.

After repeatedly tangling with the company, Ball launched a lawsuit against Imperial Oil in 2004.

Family members insist that if they had known about the pipeline work and contaminated soil and water, they would have moved the cattle — and avoided the crushing calving season and damage to their herd that followed.

In December, the judge awarded the family nearly $70,000 in damages.

Their lawyer argued Thursday in court that the ranchers deserved as much as $150,000 for legal costs.

“If the David is ever intended or able to take on the Goliath, so to speak, costs do need to be acknowledged at the outcome of this decision,” said Spencer Bates outside of court.

Calgary Herald

jkomarnicki@theherald.canwest.com

© Copyright (c) The Calgary Herald

Majors stake out oil sands holdings

Claudia Cattaneo
Financial Post
Tuesday, February 17, 2009

While no one seems to be looking, the oil sands landscape is poised to change once again as global oil majors take steps to stake out even bigger holdings.

But in contrast to the last wave of foreign takeovers, made at hefty premiums and sometimes for marginal properties, multi-nationals including Paris-based Total SA, London-based BP PLC and Irving, Tex.-based Exxon Mobil Corp. are hunting for top-drawer properties at today's cheap stock prices or taking advantage of the sector's downturn to bolster their presence.

As one investment banker put it: "If you are a major, this is a once-in-a-generation opportunity to build a huge position."

Why now? Oil majors remain financially healthy even in today's environment of depressed oil prices. They've been in the business long enough to know that oil prices are cyclical and that the current downturn won't last. Those that missed acquisition opportunities in the past see the current downturn as a reentry point at low prices.

They see access to new reserves globally as a challenge. They have refineries in the United States that need feedstock. There are plenty of buying opportunities that were not there when oil prices were high.

Paris-based Total has been front and centre with this strategy. The company made a hostile bid for UTS Energy Corp. that could ultimately put it in the drivers' seat of the cost-challenged Fort Hills oil sands project.

If the UTS takeover, now in progress, is successful, giving it 20% of the Petro-Canada run project, Total is expected to secure another 20% by buying out Teck Cominco Ltd.'s 20%, and possibly get Petro-Canada to hand over another piece, increasing its stake to at least 50%.

Industry sources say it wouldn't be a stretch for Petro-Canada and Total to split the integrated oil project into two, with Petro-Canada developing the mine near Fort McMurray and Total building the upgrader near Edmonton.

Total seems to be confident no one will challenge its move on UTS. The bid and its Canadian oil sands plans were mentioned a surprising number of times by Total in its analyst call last Thursday to discuss fourth-quarter results.

"Heavy oils are an important component of our strategy," Yves-Louis Darricarrere, president of Total's exploration and production division, said in Paris. "So, we are grasping at opportunities available to us to consolidate our portfolios while making acquisitions at reasonable costs, as you know, Synenco [Energy Inc., another oil sands company acquired by Total] in 2008 and of course the bid we made for UTS."

If Total is successful, expect others to test the hostile takeover route in a world where white knights are in short supply due to liquidity constraints.

The other name to watch is BP. The company has appointed Anne Drinkwater to run its Canadian operation, which has been quietly elevated in the British major's hierarchy to a "strategic" unit. Ms. Drinkwater, a former executive assistant to BP CEO Tony Hayward, a role reserved for up-and-coming executives, started her new job in Calgary in January. Ms. Drinkwater previously ran BP businesses in Norway, Indonesia and Angola.

The new leader will have a broader role in Canada than her predecessors, said BP spokesman Robert Wine from London.

"[Canada] has been a bit of a quiet corner of the BP empire and has picked up," with the Husky Energy Inc. oil sands joint venture and its links to BP's refineries in the United States, and planning for the Alaska gas pipeline, he said.

Industry sources say one of Ms. Drinkwater's mandates is to build the oil sands business, an area where BP has the smallest presence among oil majors because of its late entry last year with the Husky partnership.

While BP's name has come up in connection with a possible move on Suncor Energy Inc., whose value in the market has shrunk to a bargain $23-billion, the British company is likely eyeing a large in-situ position, which it sees as more environmentally palatable than mining projects.

BP is slowing down its Husky joint venture to take advantage of lower costs during the downturn. But the company has said repeatedly it would like more oil sands. As Mr. Hayward put it: "The future is not cancelled."

Exxon Mobil Corp. is the other oil major that will have a greater presence in the oil sands, a sector for which it had only passing interest in the past.

For now, the world's largest oil company is growing internally by developing the Kearl mining project with its Canadian subsidiary, Imperial Oil Ltd., while almost everyone else has put plans on hold.

Will Exxon Mobil make a large oil sands acquisition? It's certainly been talked about in connection with Suncor as well as Canadian Oil Sands Trust, which has the largest interest in the Syncrude Canada Ltd. joint venture. Already, Exxon Mobil is managing the project and Imperial owns a 25% stake. Regardless, Exxon Mobil will be more visible and more influential in Alberta, and the oil sands are becoming even more of a global oil village.

© 2008 The National Post Company.

Ignatieff eyes energy as way to win western votes

COMMENT: Ignatieff views the road he will take to the Prime Minister's office to be one that must play nice with entrenched energy interests in Alberta. He wants to absolve himself and today's Liberal Party from historical Liberal "missteps". Read: the National Energy Program of 1973. Ignatieff says that his Liberals won't have energy or environment policies that alienate the west.

This is bad news.

Canada's democracy and environment need a government with progressive and somewhat fearless views on energy and the environment. We need a national energy strategy. And the last thing we need to do is make nice with the oil and gas head offices in Calgary and all the business-as-usual vested interests in Alberta's energy biz.

By Angela Hall
Regina Leader-Post
February 16, 2009

Liberal Leader Michael Ignatieff speaks to a group of supporters at a brunch held on Sunday at the Conexus Arts Centre. (Photograph by: Troy Fleece, Leader-Post)

REGINA -- Michael Ignatieff used his first visit to Regina since becoming Liberal leader to acknowledge some of his party’s past missteps in Western Canada's energy sector and appeal to voters in the “new economic centre” of the country.

“I’m willing to put in the time and the effort because I know one thing: My party needs to be where the economic action is, and the economic action is here,” said Ignatieff, whose party has just one of Saskatchewan’s 14 seats, and none in neighbouring Alberta.

"We need to, I think, constantly send the message that we're here to listen and learn," he said in an interview Sunday with the Leader-Post.

"We need to figure out energy and environmental policies that don’t alienate the west, that treat the energy sector not just with respect but say 'How can we work together to be environmentally and socially sustainable? How can we use the federal lead in research, for example, to partner with industry to get technological solutions to some of the environmental challenges?'" he said, adding the party also has to work with aboriginal communities and farmers and ranchers.

In a speech later to a sold-out crowd of more than 300, Ignatieff reiterated the importance of the Western oilpatch to the Canadian economy - adding that "the dumbest thing you can do is run against the energy sectors in Western Canada."

He explained the comment by saying his party has sometimes failed to understand the tremendous importance of the sector, dating back to the 1980s-era National Energy Program.

The Liberals also had a tough time selling the carbon tax proposed in former leader Stephane Dion’s Green Shift environmental plan.

Ignatieff, who became leader in December, insisted he’s not walking away from commitments Dion made to environmental sustainability, but said some lessons have been learned.

"We want to bring energy policy and environmental policy together around a simple goal, which is make Canada the most efficient user of energy and the most efficient developer of sustainable energy on the planet," he said to reporters at the event, where he was flanked by Regina Liberal MP Ralph Goodale. "When we elaborate those policies in details, I think it'll be a vote winner out west."

Ignatieff also said it's tough to attract votes in a province with a huge agricultural industry, “if all you’re saying to people is we’re going to add to the price of diesel in your tractors."

"When a policy doesn’t work you have to change the policy, period," he told the Leader-Post.

Ignatieff also said it was the West’s strong feelings about the proposed Liberal-NDP coalition, supported by the Bloc Quebecois, that contributed to his decision not to continue to pursue it.

“You are after all looking at someone who turned down the chance to become prime minister of Canada and I did so, in part, because I felt that it would divide the country,” said Ignatieff. "I want to be someone who unites the country and that includes the West."

Ignatieff is on record saying the coalition wasn't mistake, but Liberal support of the recent federal Conservative budget essentially killed the deal that had threatened to topple the minority Tory government late last year.

“I’m in this business to win a majority Liberal government. But I have to also responsibly say if we fall short of that then it might be conceivable to be in discussions with, say, the NDP. Not on a coalition basis but, ‘Let’s get some legislation through. How do you feel about that?’ That’s the normal business of Parliament and so I wouldn’t exclude that. But I think we’ve had an interesting debate about coalition in Canada and we’ve decided that we’re not comfortable with it,” Ignatieff said in the interview.

As for where he can draw voter support in the Conservative stronghold of Saskatchewan, Ignatieff said he’s not a “unite the left guy," but he does want to pull votes from both sides.

“The Liberal party is a party of the centre. Part of my difficulty with a coalition is that I felt it would take my party off the centre,” said Ignatieff.

“I need a lot more votes and I’m not saying I wouldn’t be grateful to have NDP voters come to me, but I have to tell you there are more compassionate Conservatives out there than there are NDP. Just in straight terms those are the votes I need," he said.

Meanwhile, Ignatieff, as Leader of the Official Opposition, will meet briefly with the President Barack Obama on Thursday during the U.S. leader’s short visit to Ottawa. Ignatieff said trade is one of the issues he expects to raise, including the concerns of livestock producers struggling with new American country-of-origin-labelling rules.

“(Protectionism) is a huge problem in the agricultural sector and unless we get some movement in Congress and from the U.S. administration the livestock industry is going to continue to be hurt,” he said.

The Liberal leader - who has an honorary doctor of laws degree from the University of Regina - is a Harvard alumnus, as is the president, and counts three members of Obama's senior staff as personal friends.

"I don't want to overdo that," he said of the connection. “My job in Canadian politics is to defend the national interests of my country, you know with friends, with foes, with anybody."

ahall@leaderpost.canwest.com

© Copyright (c) The Regina Leader-Post

Gauging gouging

COMMENT: This is quite lengthy. Skim if you like. It contains two news items; one each about two reports which were issued in February examining retail gas pricing in Alaska. Both reports conclude it's mainly market forces at work, but the House Judiciary Committee report figures someone is still "hiding the ball," but it just couldn't find where or how.

By Brendan Joel Kelley
Anchorage Press
Wednesday, February 11, 2009

After last summer’s extraordinarily high gas prices, which peaked around $4.70 a gallon, then-Speaker of the House John Harris (R-Valdez) tasked the House Judiciary Committee with investigating why our prices didn’t drop when the rest of the nation’s did, and to prepare a report with solid recommendations for legislative action during this recently begun session.

The report came out February 2, authored by Judiciary Committee Chair Jay Ramras (R-Fairbanks), but it didn’t contain any definitive answers to why our prices remained high. From 2002 to 2007, retail gasoline cost an average of 17 cents per gallon more than in Seattle; in October of last year, the difference was 71 cents per gallon. Ramras’s report suggests that the two in-state refineries that produce automobile gasoline needed to make up for losses in the jet fuel market—Flint Hills Resources in North Pole and Tesoro Alaska in Nikiski produce primarily Jet A fuel, which accounts for 60 percent of their sales, while auto gas makes up only about 10 to 15 percent of their production.

The Attorney General’s Office of Consumer Protection is due to release a similar report any day now, looking into whether there was price fixing or collusion by the refineries. Lawmakers point out that, unlike the House Judiciary Committee’s investigation, the attorney general’s office had access to proprietary information, and may have more answers than Ramras’s report.

Ramras’s conclusion was “meddling in the free market is likely to produce negative consequences with lasting effects on Alaska’s economy and employment.” It suggested that legislation such as house bill 68 and senate bill 54, which would prevent Alaska refiners from selling gas wholesale for more than 10 percent of what refiners in Washington sell for, could have unintended consequences and possibly be disastrous for the Alaska refineries.

Ramras, who authored the report and then asked other legislators on the Judiciary Committee to weigh in via addendums, told the Associated Press that his findings were based on “intuition.”

“I got hammered a bit for that word,” Ramras says. “But I’m not sure what else you would call it, you know? We just kind of have a working idea, we think, of what’s going on, and it’s not fair.”

“There must be a better answer,” the report reads. “Somebody must be playing ‘hide the ball.’ But we could not find it.”

“If the committee used layman’s language to describe how Alaskans feel, the profanity would be much too graphic and would compromise the professionalism of this report. Suffice it to say, Alaskans feel taken advantage of,” Ramras wrote.

“Alaskans feel like they’re getting screwed,” Ramras says. “And I should have left that in [the report], because it captures the sentiment.”

The two Democrats on the Judiciary Committee, Lindsey Holmes and Max Gruenberg (both of Anchorage), issued dissenting addendums to Ramras’s report disagreeing with Ramras’s conclusions. “I haven’t heard all of the evidence yet,” Gruenberg, one of the co-sponsors of HB 68, says. “I think we need to have some hearings on this price gouging legislation. We haven’t even had a hearing on the bill.”

Gruenberg’s dissenting addendum concerns procedural and substantive issues with Ramras’s report. He believes the report was premature, since the attorney general’s report hadn’t been published yet. There was no opportunity for discussion and debate, Gruenberg wrote. The findings are incomplete, and the conclusions unsubstantiated, according to his addendum.

“Despite the directions by Former Speaker John Harris to prepare a report with solid recommendations for legislative action, the report fails to recommend a solution to the problem presented,” the Gruenberg addendum reads. “The report is authored from a laissez-faire point of view—that, if the government remains hands-off, the best result will be achieved. Alaskans are depending upon our state government to help find a solution.”

“The people who wrote that report are from that mindset, that if government interferes it causes problems,” Gruenberg says. Indeed, the report and the dissenting addendums reflect a fundamental difference between Republicans and Democrats: Republicans preferring the free market approach and Democrats interested in exploring regulation. Ramras agrees, “but without animosity,” he says. “We have an extraordinarily warm and collegial point of view with [Gruenberg], so it’s hard to find fault. We just simply disagree.”

Ramras also defends the process—his writing the report himself, then asking other Judiciary Committee members to weigh in via addendum. “Down here where you have philosophies at battle, I don’t know that you could achieve better than a generic point of view to agree on, where we’d sit down and try to edit things together, when you have such a breadth of points of view, political and philosophical,” Ramras says. “We thought it was very constructive to offer members the opportunity to do their own addendum, and I read [Gruenberg’s] addendum, and I thought it was very fair. I thought it was inbounds and I thought it was very fair criticism.”

So the questions remain: Why didn’t our gas prices drop at the same rate as in the Lower 48, and should the legislature enact laws to prevent price gouging by the refineries?

Lawmakers are hoping that the attorney general’s report will answer the former question to a better degree than the Judiciary Committee’s investigation. As for the latter, “I think we need to do something,” Gruenberg says. “I think we need to take some action. [The public] can understand if we do X; they can understand if we do Y, but I think [Ramras] is a big target out there if he doesn’t do anything. People are gonna say it’s a lot of hot air.”

bjk@anchoragepress.com

---

Alaska Gasoline Pricing Report

House Judiciary Committee
http://housemajority.org/ramras/pdfs/26/gasoline_pricing_report_20090204.pdf (15 MB)

CONCLUSION (excerpt)

Economic Drama Meets High School Economics
Our Conclusion

[The report concludes that any action on the part of the state to regulate retail gas prices in Alaska increases the risk that one or both of the refineries in the state will be sold, or close down. The refineries main product is jet fuel, sold on the international market. Gasoline is incidental to that, but the revenues from gasoline are a make-or-break factor in the economic business case for the refineries.

If the state interferes with gas prices, the refineries may close, and Alaska will have to barge its gasoline up from Washington State. Hello, BC - more petroleum products moving off our coast as more oil will be exported from Alaska, and more gasoline will be barged north. Barges are not required to respect the Tanker Exclusion Zone, and therefore will be exposing the near coast to greater risk. That's if you buy the threats of abandonment from the owners of Alaska's two refineries.

But the House Judiciary Committee didn't completely surrender to the arm-twisting. It still suspects that someone is "hiding the ball." It just couldn't find out how or where it was being done.]

Do Alaskans want price parity with Seattle gasoline prices, or do they want the opportunity-cost driven, sometimes erratic, pricing of Alaska’s refined gasoline that comes with 10% of Alaska’s jobs and Gross Domestic Product? This, in the Committee’s opinion, seems to be the multi-billion dollar question.

It is the dilemma of economic drama. Do we want the Alaskan roller coaster or the Seattle merry go-round, plus .15 cents per gallon more, in perpetuity? Which ride do we want to put Alaskan consumers on, given that jet aviation fuel is the mother’s milk of much of the Alaskan economy? The recent economy has shown us that during some petroleum cycles, Alaskan consumers subsidize the volatile and extremely competitive global market of jet aviation fuel through their consumption of retail gasoline. On balance, the Committee chooses the free market and robust economic drivers. The Committee recommends it is a worthwhile tradeoff for a little more price volatility at the pump in exchange for the most promising value-added industry Alaska has been able to create since the onset of the TAPS era.

This conclusion not withstanding, the Committee, after meeting in September, October, November, and January, shares the cynicism of the Alaskan public. There must be a better answer – somebody must be playing “hide the ball.” But we could not find it. This report attempts to find it. This report attempts to lay out the most likely, plausible theory as to why gasoline price-parity with the Seattle market has been lost since March of 2008, and why we have seen periods of intermittent lost price-parity as well as inverse price-parity with Seattle, which has resulted in Alaska having better pricing than the Seattle rack rate.

Finally, the Committee also uncovered disturbing price patterns in Southeast Alaska that have not been fully incorporated into this report. The committee recommends that the Speaker of the House of the 26th Legislature direct a joint effort by the House Judiciary Committee and the House Resources Committee to explore inconsistencies in pricing patterns that affect this vital and vulnerable region of the state.

Read the full House Judiciary Committee's report here
http://housemajority.org/ramras/pdfs/26/gasoline_pricing_report_20090204.pdf (15 MB)

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No evidence of illegal activity behind high Alaska gas prices

By Rena Delbridge
Fairbanks News-Miner
Thursday, February 12, 2009

JUNEAU — Two investigations into high state gas prices found no illegal activity but are offering ammunition for people for and against legislation that would prevent price gouging by setting profit margin caps.

At the same time, spokespeople for the state’s two gasoline refiners, Flint Hills and Tesoro, say government control of prices and profits could drive them to do business elsewhere.

“It’s the uncertainty,” Tesoro spokesman Kip Knudsen said. “We have opportunities to invest in other markets without that intrusion.”

Jeff Cook, spokesman for Flint Hills Resources Alaska, forecast fuel shortages and other dire consequences should lawmakers approve anti-gouging or price cap bills.

He said lawmakers might have good intentions in protecting consumers but are playing a “dangerous game” considering price control.

“Government intervention in prices ultimately creates far more harm than good,” Cook testified at a Senate Energy Committee hearing Thursday on Senate Bill 54. “It would be a very serious threat to the future of the North Pole refinery.”

Flint Hills officials said the company may sell, shut down or seriously modify the North Pole refinery within a few months. The state stepped in, and Flint Hills now is discussing possible assistance with the state. Options have ranged from a state buy-out to breaks on royalty oil prices.

Two separate committees on Thursday addressed gas prices investigation reports and legislation aimed at price gouging. Senate Bill 54 is sponsored by Anchorage Democrats Sens. Bill Wielechowski, Johnny Ellis and Hollis French and Fairbanks Sen. Joe Thomas. House Bill 68 also is sponsored by a coalition of Democrats, including Rep. Scott Kawasaki of Fairbanks and Anchorage Reps. Pete Petersen, Les Gara, Chris Tuck and Max Gruenberg. Tuck and Petersen are members of the House Energy Committee that compared details of the two investigation reports.

One report was released Thursday morning. The much-anticipated investigation by the state attorney general’s office found no evidence of illegal activity in Alaska gas prices.

“Our investigation did not reveal any evidence that this kind of illegal collusion or price fixing has occurred among the refiners, distributors or retailers of gasoline in Alaska,” the report found.

Economic realities in Alaska likely explain the high prices, the report stated. Those factors include small market demand and low competition and dramatic and unpredictable changes in the price of crude oil through 2008.

“It’s the market at work, and it’s not a very perfect market, that’s for sure,” said Ed Sniffen, a state attorney who handled the investigation. “Competition here isn’t that great.”

Many Alaska consumers are puzzled why pump prices are so high when the resource, oil, comes from so near. In particular, a de-coupling of retail average prices in Alaska and Washington state has stymied some who wonder why Alaska’s prices have remained so high when those Outside have dropped.

The attorney general report stated gas prices reached record highs across the country in 2008, driven by high oil prices. Alaska’s market takes longer to react, which at one point created a wider spread than usual in prices. However, the attorney general report noted the Anchorage-Seattle price spread is narrowing as oil prices stopped falling.

Gov. Sarah Palin, who directed the state attorneys to investigate, had no comment on the report, spokesman Bill McAllister said.

Rep. Petersen is a sponsor of anti-gouging legislation. He said the wild swings of the market amplify the need for consumer protection.

The other report, the fruit of four hearings conducted by the House Judiciary Committee at the direction of former House Speaker John Harris, R-Valdez, recently was released by Rep. Jay Ramras, R-Fairbanks.

His study considered possible legislative action to address high retail prices. Ramras’ report found that high prices can be attributed to market conditions, including lack of competition. His underlying theory is that Alaskans sometimes pay higher gas prices so that refineries can balance losses on aviation fuel, which supports air cargo operations and the military, representing about 10 percent of state employment and of gross domestic product.

“The underlying conclusion is that Alaskans are getting screwed, period,” Ramras said.

The Senate Energy Committee took testimony Thursday on SB 54.

Cook said the bill could be “so oppressive” to the refining industry, Flint Hills could cease fuel production and distribution in Alaska.

“A lower price is of no use to the consumer if there is no fuel available to buy,” Cook said.

Flint HIlls’ North Pole refinery produces less than a fifth of the state’s gasoline supply. Tesoro supplies about 85 percent of in-state gas through its Nikiski refinery. Knudsen testified that Tesoro imports about 25 percent of the oil refined into gas in Alaska.

He spoke in opposition to SB 54. Like Cook, Knudsen said price control will damage his company’s ability to do business and could hurt one of the few value-added industries in Alaska.

Several people testified in favor of the bill as consumer protection.

“We need to regulate the companies; they need to have their books open,” said Pete Roberts of Homer. “You’re here to protect the citizens of Alaska. The big companies do very well here.”

Rep. Bryce Edgmon, D-Dillingham and co-chair of the House Energy Committee, said the reports were enlightening and frustrating.

“I walk away with more questions than answers,” he said. “There is a lot of frustration in my district. ... We’re paying incredibly high prices.”

He said the fundamental conclusion of both reports is the same: Market forces will prevail.

Ramras agreed and said he anticipates a highly partisan debate on the price gouging legislation.

“Are you in favor of more government control or the free market?” he said. “I’m going to pick the free market every damn time.”

Sniffen acknowledged he simply didn’t know if price gouging legislation would have prevented high prices.

“That’s a difficult crystal ball question,” he said. “It would just depend on how the legislation was drafted. It is really important for us to predict what that would do. ... You don’t want to drive the refiners out.”

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2008 Alaska Gas Pricing Investigation

Attorney General's Report
http://www.law.alaska.gov/pdf/press/2008GasolinePricingReport.pdf

Executive Summary

Gasoline, like all other commodities, is not regulated by the state. Instead, prices are determined by the forces of supply and demand. Competition in the marketplace is ultimately responsible for determining the price of all consumer goods and services, with few exceptions.3 We do not live in a "cost plus" society. Sellers are not required to price their goods and services based on what it costs to acquire them "plus" a reasonable profit. Instead, sellers can and do price their goods according to the market conditions. If demand is strong and/or supply is limited, prices may exceed cost by 200% or more. Because gasoline is not regulated, the state does not have the authority to tell sellers how to set their prices. Thus, simply having a "high price" is not illegal by itself. Alaska does not impose price controls or "caps" on any product, and there is no "price gouging" law in Alaska. The price of many consumer goods in Alaska is higher than the price you would pay in Seattle or another large metropolitan area. Gasoline is no different.

Prices can be illegal, however, if they are the result of price fixing or other collusive behavior. The laws directed at ensuring that competition remains fair and unrestricted are state and federal antitrust law. Antitrust laws make it illegal to engage in any concerted action that unreasonably restrains trade.4 It is also illegal to monopolize, attempt to monopolize, or conspire with another to monopolize any part of trade or commerce.5 The purpose of the antitrust laws is to ensure that competition remains fair and unrestricted, which in turn results in lower prices and better service. Thus, if the sellers of gasoline were colluding with each other to "fix" the price of gasoline, they would be violating the law.

Our investigation did not reveal any evidence that this kind of illegal collusion or price fixing has occurred among the refiners, distributors, or retailers of gasoline in Alaska. Instead, there are economic realities of the Alaska gasoline market that likely explain the price of gasoline in Alaska and the relationship between Alaska gasoline prices and prices in the Lower-48.

First, the market for gasoline in Alaska is structurally different than most other gasoline markets in the U.S. Gasoline demand in Alaska is small, and we do not enjoy the same degree of competition as most markets in the Lower-48. There are few participants in Alaska’s gasoline markets at the refining and wholesale distribution level. When few competitors account for the majority of sales, the market is known as an oligopoly. In addition, Alaska is geographically isolated from alternative supply sources outside the state. As a result, potential competition from the Pacific Northwest -- which might otherwise be expected to keep prices in parity with Lower-48 prices -- is limited, particularly during short-term price disruptions such as occurred in 2008. Based on this market structure alone, it is unrealistic to expect that gasoline prices in Alaska should be the same as prices in other parts of the country. The level of competition and available sources of supply in the Lower-48 create supply and demand conditions that are not present here.

Second, the changes in crude oil prices during 2008 were dramatic and unpredictable, making it the most volatile year in crude oil pricing history. After rising $60 per barrel during the first part of the year, crude oil prices dropped by more than $100 per barrel in less than six months. These events created market conditions that have never occurred before. The rapid rise and following decline in oil prices, coupled with Alaska’s unique oligopolistic market structure appears to account for the unusually high spread between gasoline prices in Alaska and the Lower-48 experienced during the second half of 2008.

This unusually large spread is not, however, inconsistent with historical pricing patterns in Alaska. Alaska’s gasoline markets have historically responded more slowly to changes in crude oil prices than larger, more competitively structured markets in the Lower-48. In oligopoly markets there can be a wide range of pricing outcomes depending on the behavior of the individual market participants. Prices can range from a very competitive level to monopolistic. The specific outcome can vary across time and depends on the behavior and goals of the market participants, as well as the potential for competition from non-incumbent sellers to access the market when prices rise above competitive levels. Prices in these types of markets can and do deviate from long-term historical patterns, particularly when input costs change quickly.

Gasoline prices have fallen dramatically in Alaska since the start of this investigation. At the time of writing this report in late January 2009, Anchorage gasoline was selling at about $2.35 per gallon on average, a drop of more than $2.00 per gallon since July 2008. In Seattle, gasoline prices have risen over the last month and now average about $2.10 per gallon. On a tax-adjusted basis this difference is approximately $0.65 per gallon. While still larger than historical norms, the spread between Anchorage and Seattle has started to narrow over the past several months, consistent with historical patterns.

In Southeast and Western Alaska, where fuel is supplied by barge, some of the same economic principles apply. There are few competitors, and alternative sources of supply are scarce. In addition, barge markets are characterized by relatively few large deliveries of fuel throughout the year. Unlike markets where supply is replenished every few days, fuel may not be delivered by barge for several weeks or months. Until new deliveries of fuel are made, the price of fuel is not likely to change. If a supply of higher-priced fuel is delivered in summer, lower priced fuel may be months away. When you add the dynamics of the barge market to other factors that affect supply and demand in Southeast and Western Alaska (for example, low volumes and higher transportation costs), prices tend to be higher.

The Attorney General’s investigation spanned five months. Thousands of pages of confidential documents were reviewed, and key personnel were interviewed. The Attorney General also retained the services of Barry Pulliam, Senior Economist with the Los Angeles-based economic consulting firm Econ One Research, Inc., to assist in this investigation. Mr. Pulliam assisted the Attorney General’s office in its prior investigation of gasoline prices, concluded in 2002. Mr. Pulliam has extensive experience in the analysis of competitive issues involving gasoline markets, and assisted the Attorneys General in California and Hawaii in several investigations involving gasoline prices. Econ One assisted in the preparation of this report.

The key findings of our investigation are set forth below.

Read the full Attorney General's report here:
http://www.law.alaska.gov/pdf/press/2008GasolinePricingReport.pdf

Oilsands critics blast plan

Responsible Actions: A Plan for Alberta’s Oil Sands

Alberta’s oil sands offer tremendous economic opportunity for the province and the country. The Government of Alberta’s vision for responsible oil sands development involves responsible management of this valuable resource in a way that protects the environment, optimizes economic growth and future development, and enhances the lives of Albertans now and in the future.

Responsible Actions: A Plan for Alberta’s Oil Sands outlines an integrated approach for all levels of government, for industry, and for communities to address the economic, social and environmental challenges and opportunities in the oil sands regions. In the near term, it identifies priority actions, some of which are already underway, to address immediate challenges associated with oil sands development. The plan also looks to the future to guide long-term investment in social and physical infrastructure and innovative technology, and to reduce the environmental footprint associated with oil sands development.

This 20-year plan was based on extensive stakeholder consultations described in Investing in our Future: Responding to the Rapid Growth of Oil Sands Development, the Multistakeholder Committee Final Report, and the Aboriginal Consultation Final Report. Responsible Actions also builds on existing Alberta government policies, programs, and initiatives, particularly the Provincial Energy Strategy and Land-use Framework. Regular reporting on the Government of Alberta’s progress in achieving our vision will occur and will provide accountability in helping us reach our goals.

News Release: Province outlines long-term development plan for Alberta’s oil sands (February 12, 2009)
High resolution map of the oil sands regions: jpg / eps (for download only)

Responsible Actions: A Plan for Alberta’s Oil Sands (PDF, 3MB, complete document)

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Alberta's Oil Sands Just Got Dirtier

Media Release
The Pembina Institute
Feb 13, 2009

New Policy Could Lead to 66 Per Cent Increase in Greenhouse Gas Pollution

Media Contact: Simon Dyer, Chris Severson-Baker

Today the Pembina Institute submitted comments on a draft Alberta Government policy that would allow in situ oil sands operations to burn dirtier fuels, which would significantly increase the intensity and total amount of greenhouse gas pollution and air emissions from the sector. The draft policy, "Emission Standards for the Use of Non-gaseous Fossil Fuels for Steam Generation in In-Situ Bitumen or Heavy Oil Recovery Projects," was posted on the Alberta Government's website with no fanfare on December 23, 2008. The public had until today to submit comments.

The policy would allow oil sands companies operating in situ projects to switch from burning natural gas to much dirtier, more carbon intensive fossil fuels such as raw bitumen or the waste from oil sands upgrading (petroleum coke and asphaltenes). Compared to conventional oil production, in situ oil sands production produces four times the greenhouse gas pollution per barrel when burning relatively cleaner natural gas. According to the Pembina Institute's analysis, in situ oil sands operations burning petroleum coke without any mitigation would produce 66 per cent more greenhouse gas pollution than if the same operation were to burn natural gas.* The Alberta Government document states that the policy may be expanded to include other industrial activities in the future.

"The Alberta government is encouraging a carbon intensive industry to get even dirtier," says Chris Severson-Baker, Policy Director with the Pembina Institute. "This is very bad news for the global climate and for people living in areas already heavily affected by the air pollution from oil sands operations and areas downwind, including Saskatchewan."

The draft policy, which was posted for public comment on December 23, 2008, appears to be related to an objective of Alberta's Energy Strategy to "support the replacement of natural gas as an oil sands input . . . from the bottom of the bitumen barrel." The policy includes a requirement that in situ plants be designed to be capable of capturing carbon emissions in the future, but Alberta and Canada have no regulations or reduction requirements that would require carbon capture and storage (CCS), nor has CCS been proven for application with in situ oil sands operations.

"While Canada seeks to assure the U.S. that efforts are underway to clean up "dirty oil" from the oil sands, Alberta is unveiling a policy that takes us in exactly the opposite direction," notes Simon Dyer, Oil Sands Program Director with the Pembina Institute. "It's ridiculous to suggest that requiring that facilities be carbon capture ready is enough. It's like having a mousetrap with no cheese -- it's capture-ready but it doesn't catch the mouse."

In its written submission to Alberta Environment, the Pembina Institute recommends that Alberta Environment withdraw the policy until such time as regulations are in place that cap and reduce total GHG pollution from the oil sands, and regional air pollution limits are in place to protect human health and the environment.

-30-

* Impact of the Introduction of a Carbon Capture and Storage System in the Oil Sands Sector on Air Contaminant Emissions Part 1 Air Contaminant Emissions Impacts for the Oil Sands Sector, prepared by Canadian Energy Research Institute for Environment Canada, June 2008. Note: This analysis assumes that the gasification of petroleum coke without carbon capture and storage generates the same carbon dioxide emissions as directly burning petroleum coke (Table 3.2).

The Pembina Institute's letter to Alberta Environment regarding the new oil sands emission policy is available here.

The Government of Alberta policy is available here.

For more information, contact:

Simon Dyer
Oil Sands Program Director
The Pembina Institute
Tel: 403-721-3937

Chris Severson-Baker
Policy Director
The Pembina Institute
Cell: 403-899-7423

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Oilsands critics blast plan

By Darcy Henton and Hanneke Brooymans
The Edmonton Journal
February 13, 2009

President of Treasury Board, Lloyd Snelgrove discusses the release of Responsible Actions, a 20-year strategic plan for the oil sands regions of the province, with the media, Thursday at Shaw Conference Centre. Photograph by: Rick MacWilliam, Edmonton Journal

20-year blueprint dismissed as public relations exercise to improve Alberta's environmental image

The Alberta government Thursday outlined what it believes is a more environmentally and socially responsible approach to oilsands development, but the plan failed to quiet growing criticism.

The report, which sets out immediate and long-term ways to address social, economic and environmental challenges created by oilsands projects, was slammed by opposition parties and environmental groups. They called it a compilation of old ideas from previous studies, with no timetable for implementing changes.

They suggested the 47-page brochure was aimed at convincing the United States that oil extracted from the oilsands is not dirty. There is a move afoot in the U.S., Canada's main market for oil, not to buy so-called dirty oil.

Liberal MLA and energy critic Kevin Taft said the report was too vague.

"Pretending this is a plan is like pretending it's not winter outside," he told reporters at an oil industry conference at the Shaw Convention Centre. "I have to think this is part of their multibillion-dollar public relations campaign. They're trying to smooth things over, but I am afraid it will backfire. Instead of building confidence, this reveals them for not really knowing what they're doing at all."

The report, Responsible Actions: A Plan for Alberta's Oilsands, recommends steps to reduce the environmental damage of the massive strip-mining operations near Fort McMurray.

"The real title should be Look Busy: Obama is Coming and We're in Trouble," NDP Leader Brian Mason told Premier Ed Stelmach during question period, drawing roars of laughter from opposition MLAs. "Why don't you admit this so-called plan is just window-dressing to placate world opinion?"

Stelmach countered criticism that the report had no teeth by saying: "This is the brains. This is a long-range plan to work together in a co-ordinated approach so we develop this world-class resource responsibly. This is the road map to the future."

He said he was confident that government, working with industry and other interested parties, will successfully manage environmental and social problems.

Liberal Leader David Swann called the plan "profoundly" disappointing.

"The oilsands' image is under fire across the world, and, with it, Alberta's key economic engine," Swann said.

"This is a serious issue and demands real action. The glossy vision document released today fails to address the key issues affecting Alberta and Canada."

Treasury Board President Lloyd Snelgrove, whose ministry spearheaded the report, conceded there wasn't a lot new in the document, but said the principles it sets out will be a blueprint for development.

"I think it clearly sends a message to the rest of the country and the world that the oilsands are going to be developed, they are going to be developed for a long time and they're going to be developed in an environmentally responsible way," he said.

The report, compiled four decades after the first oilsands projects began, was released the same week the provincial and federal governments charged oilsands giant Syncrude after about 500 ducks died last spring on one of its massive tailings ponds.

Wood Buffalo deputy mayor Mike Allen feels relief that there's finally a plan for the area.

"We've been dealing with these growth issues upwards to about nine years now, and at least seven of those years were without any form of plan."

Allen said the plan will allow the community to move forward on some priorities, including issues involving quality of life.

Greenpeace, which is waging war on the oilsands, lamented the plan's lack of targets.

"We hope that other jurisdictions won't be fooled by what seems to be more of a public-relations ploy than a strategy that will stop the incredible environmental damage caused by the tarsands," spokesman Mike Hudema said.

One recommendation in the report calls for the establishment of partnerships with industry, Ottawa and municipalities to build public infrastructure.

Energy companies have balked at the prospect of building public facilities, such as roads, bridges and overpasses, because they pay taxes and royalties.

Roman Cooney, a spokesman for the Canadian Association of Petroleum Producers, said oil companies do realize they have to work with resource communities.

"We recognize that resource development is a partnership with everybody from the folks who live in the community to our friends south of the border," he said. "I think there is a very much higher level of engagement and activity than the industry gets credit for, both in terms of environmental commitment and its engagement with the community."

The report recommends a shift to studying the cumulative effects of the oilsands projects rather than just assessing each project individually.

It calls for oilsands companies to move more quickly to reclaim land after the bitumen -- the tar-like sand that is used to produce crude -- has been strip-mined from the earth.

It says the province should also secure land in the oilsands regions to support biodiversity, wetland and environmental management objectives.

The plan also called for government consultation with aboriginal communities affected by the developments, including a plan for a pilot project to assess the cumulative impact of oilsands development on six adjacent Métis settlements.

Chief Allan Adam of the Athabasca Chipewyan First Nation said he wants to see action.

"There were a lot of good words said about the oilsands strategy plan and how they were going to engage the First Nations and the communities surrounding the development. But until those things are implemented, it's only talk."

Aboriginal Affairs Minister Gene Zwozdesky said the Métis pilot project is expected to be completed over the next year at a cost of "several thousand dollars."

Simon Dyer, director of the Pembina Institute's oilsands program, said the plan still doesn't address the No. 1 concern Albertans identified when they were consulted two years ago -- the pace and scale of development.

The institute is an Alberta-based environmental research centre.

Dyer said the most telling aspect of the plan is that it talks about the government setting environmental thresholds and regional planning.

"The government talked about this in 1999 as part of the regional sustainable development strategy, and very little actually happened. So the government is recycling commitments it made 10 years ago."

The oilsands are the second-largest petroleum reserves in the world, with deposits containing an estimated 1.7 trillion barrels of bitumen, although only about 10 per cent can be recovered through current mining processes.

To date, a 104-hectare parcel of Syncrude land has been reclaimed, which is a fraction of the 40,000 hectares used by the oilsands industry.

dhenton@thejournal.canwest.com

hbrooymans@thejournal.canwest.com

REPORT SETS PRIORITIES

- Create economic, social and environmental performance measures and report progress to the public annually.

- Continue to commit to carbon capture and storage projects to reduce greenhouse gas emissions.

- Increase the effectiveness of multi-stakeholder groups and associations.

- Better assess social and infrastructure needs related to oilsands development.

- Work with industry to develop financial contribution strategies to support the development of public and community infrastructure.

- Initiate an independent review of oilsands research and innovation systems to identify gaps.

- Establish Alberta as a world-class centre for clean-energy research.

The full report is available at www.treasuryboard.alberta.ca.

© Copyright (c) The Edmonton Journal

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Alberta's new oilsands plan focuses on economic growth, environment

Renata DAliesio
The Calgary Herald
February 12, 2009

One of Suncor's succesesful reclamation projects is Crane Lake, which now boasts sightings of 129 species fo birds, 43 of which nest in the area. The province's new 20-year strategic plan for the oilsands calls for more environmental and managerial accountability, along with economic development. Photograph by: Chris Schwarz, Edmonton Journal

Four years after the Alberta government retreated from a contentious oilsands plan that would have given energy activity priority over the environment and other development, the province today released a 20-year blueprint to better manage the economic, social and environmental challenges related to developing the vast petroleum resource.

The plan aims to optimize economic growth while reducing the environmental footprint of the second-largest oil reserves in the world, after Saudi Arabia. Its priorities include:

- revising the environmental impact assessment process to support cumulative effects management;

- increasing the pace of reclamation;

- continuing with Fort McMurray’s community development plan to address housing shortages, while investigating opportunities to regionalize service delivery;

- initiating an independent review of oilsands research to identify gaps and develop a co-ordinated approach to oilsands development;

- leveraging bitumen royalties to develop value-added oilsands products;

- developing a regional plan for the Lower Athabasca Region, part of the provincewide land-use framework

- launching a pilot project to assess the cumulative environmental impacts of oilsands development on the rights and traditional land uses of aboriginals.

“When it comes to Alberta’s oilsands, we believe that Canada can be a leader in finding innovative ways to ensure both economic growth and greater environmental protection,” said Treasury Board President Lloyd Snelgrove in a statement. “This strategy will guide our responsible approach to development, with an increased focus on the environment and the importance of this significant resource to local communities.”

The plan, called "Responsible Actions," comes after a 2005 government oilsands strategy sparked a backlash because it gave energy activity priority over the environment and other forms of development in northern Alberta. Since then, the province has assembled committees and commissioned several reports.

In July 2007, a 19-member committee, which included representatives of governments, industry, and municipalities, made 120 recommendations for “orderly development” of the region. The committee's report followed an oilsands examination by former deputy minister Doug Radke, who found the province's traditional budget and planning formula ill-equipped to aid rapidly growing communities, detailing to great length Fort McMurray's health care and housing woes.

Snelgrove, whose department houses the oilsands secretariat, will address the plan at a speech later today to a manufacturing and exporting conference in Edmonton.

rdaliesio@theherald.canwest.com

© Copyright (c) The Calgary Herald

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'Devil's in the details,' say cautious producers

By Lisa Schmidt, Calgary Herald, February 13, 2009

Province Reveals Oilsands Development Strategy

Energy players expect to be consulted Alberta's long-term plan to manage oilsands development won initial nods from industry already throttling back projects amid slumping oil prices and tighter credit markets.

The long-awaited report released Thursday by the provincial government outlined broad strategies such as faster environmental cleanup, increasing Alberta's refining and processing capacity and addressing social strains resulting from the booming sector.

Oilsands producers said the plan lacks specifics, but welcomed the approach and expected consultations with the sector.

"We're very supportive of the over-arching strategies, but I think the devil's going to be in the details," said Shawn Davis, a spokes-woman for Suncor Energy.

"Until we know what practical application is going to look like, it's really hard for us to say whether we think this is going to affect us or not" in making future investment decisions.

Falling oil prices and tight credit markets have slowed the pace of development in Alberta's oilsands, where several major projects and expansions have been cancelled or delayed. Suncor, along with Petro-Canada and Royal Dutch Shell, are among those who have announced delays to oilsands plans.

Energy Minister Mel Knight said the plan will ensure"sustain-able development" of the resource over the next three decades.

"We all need to be realistic and understand that in the global economy situation that we have today, there is going to be some staging of development,"he said in Edmonton.

"None of what we're doing with respect to the strategies we have in place--the energy strategy, this oilsands strategy, the land-use framework--none of those things will slow development pace."

Alberta's oilsands have faced growing criticism over environmental impacts and the pressures of rapid growth on local communities, prompting a series of government reports and studies over the past few years that have served as the backdrop to the 20-year plan.

This plan will help address most of those issues without deterring investment, said Don Thompson, president of the Oil Sands Developers Group.

"The focus on the long-term, solid planning base . . . actually facilitates moving forward with the development," he said.

"I see this as simply continuing with the approach that industry has always taken."

The plan will also push increased refining and processing in Alberta by taking provincial royalties as bitumen and selling it to upgraders.

That was welcomed by North West Upgrading Inc.,which has been working to line up customers for its planned merchant plant near Edmonton.

"Building what we're building really creates an enormous amount of activity at a time when Alberta could really use it," said Ian MacGregor, chairman of North West Upgrading.

"It reaffirms the government's support for adding additional value to the raw materials here in Alberta . . . I'm encouraged."

Under its environmental strategies, the province will also speed up reclamation efforts of tailings ponds and commit to carbon capture and storage projects to help reduce greenhouse gas emissions.

It will also work with oilsands players to help fund construction of roads and other infrastructure needed in the oilsands region, but stopped short of making it a requirement.

Oilsands developers said the industry already pays for its share.

"The number of dollars contributed through royalty and taxes is a matter of record, so I think we do our part in terms of supporting public expenditures in the province of Alberta," said Thompson.

---------

Key Points

1. Environmentally responsible development

2. Promote healthy communities

3. Maximize long-term value

4. Better consultation with aboriginals

5. Use research to unlock oilsands potential

6. Bring more accountability to management of oilsands

© Copyright (c) The Calgary Herald

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Oilsands report calls for increased focus on environment

By Darcy Henton, and Hanneke Brooymans, Vancouver Sun, February 13, 2009

Alberta government study calls for reducing the project's footprint and raising the quality of life in the Fort McMurray region

The Alberta government unveiled its plan for the development of the oilsands Thursday with a 47-page report that calls for reducing the environmental footprint of the massive mining operations and increasing the quality of life in the Fort McMurray region.

The report outlines immediate and long-term actions to address social, economic and environmental challenges and strategies to take advantage of opportunities in the region.

"When it comes to Alberta's oilsands, we believe that Canada can be a leader in finding innovative ways to ensure both economic growth and greater environmental protection," said Treasury Board President Lloyd Snelgrove, who spearheaded the strategy.

The report is a long-awaited response to calls from all quarters to slow the pace of development and reduce the environmental effects of the oilsands projects.

Environmentalists have waged an international campaign against the development, branding oilsands products "dirty oil."

One recommendation in the report calls for the establishment of partnerships with industry, the federal government and municipalities for timely investment in public infrastructure, the lack of which has been the bane of Fort McMurray, about 450 kilometres northeast of Edmonton and the home to many oilsands workers.

Energy companies have balked at the prospect of building public facilities like roads, bridges and overpasses, saying they already pay taxes and royalties.

But Roman Cooney, a spokesman for the Canadian Association of Petroleum Producers, said it wouldn't be a change in course for industry to be involved in supporting infrastructure projects.

"We recognize that resource development is a partnership with everybody from the folks who live in the community to our friends south of the border," he said. "I think there is a very much higher level of engagement and activity than the industry gets credit for -- both in terms of environmental commitment and its engagement with the community."

He said the association has every confidence the industry and province can move forward in addressing the challenges of oilsands development.

"It's complicated and it's challenging and it's important to capture the environmental, the economic and the energy-related dimensions to the issues," he said. "The bottom line is we're moving forward."

The report bows to calls for the government regulatory bodies to start studying the cumulative effects of the oilsands projects rather than just assessing each project individually.

It calls for oilsands companies to move more quickly to reclaiming land after the bitumen -- the tarlike sand that is used to produce crude -- has been strip-mined from the earth.

It says the province should establish an offset program to secure high-value conservation lands in the oilsands regions to support biodiversity, wetland and environmental management objectives.

The plan also called for consultation with aboriginal communities affected by the developments, including a plan for a pilot project to assess the cumulative impact of oilsands development on six adjacent Metis settlements.

Chief Allan Adam of the Athabasca Chipewyan First Nation said development to date has been so frantic, "It seems like [it's] build it first and we'll come up with a plan later."

He reserved judgment on the plan, released Thursday.

"There were a lot of good words said about the oilsands strategy plan and how they were going to engage the first nations and the communities surrounding the development. But until those things are implemented it's only talk."

One of the recommendations of the plan is to develop a plan to implement the plan.

Simon Dyer, director of the Pembina Institute's oilsands program, said the plan lacks specifics, timelines and accountability.

"It doesn't address the No. 1 concern Albertans identified when they were consulted two years ago, which was the pace and scale of development. And it lacks substance, so I don't think it will stand up to the increased scrutiny we're getting."

Dyer said it is positive to hear that companies will be held accountable to meet their reclamation schedules and Albertans will be better protected in terms of financial liabilities.

But the most telling thing about the plan is that it talks about the government setting environmental thresholds and regional planning. "The government talked about this in 1999 as part of the Regional Sustainable Development Strategy and very little actually happened. So the government is recycling commitments it made 10 years ago."

The report does contain a call to strengthen member associations, like the Cumulative Environmental Management Association, which have been rendered nearly ineffective by defections over its lack of progress in addressing oilsands issues.

One key recommendation calls for measurement of the impacts and the release of an annual report card that sets out how efforts to mitigate negative impacts are progressing.

The report appears to be a response to the 20-month-old Vance MacNichol report that summarized the views of 19-stakeholders in 120 recommendations.

The oilsands are the second- largest petroleum reserves in the world with deposits containing an estimated 1.7 trillion barrels of bitumen although only about 10 per cent can be recovered through current mining processes.

Last March, the provincial government issued the first-ever reclamation certificate for an oilsands mine. The 104-hectare parcel of land, known as Gateway Hill, belongs to Syncrude.

It's a tiny fraction of the 40,000 hectares that have been disturbed by the oilsands industry thus far.

Meanwhile, environmental groups continued their onslaught against the "tarsands" Thursday, focusing their current efforts on U.S. President Barack Obama's forthcoming trip to Ottawa.

Environmental group ForestEthics has placed "In Search Of" personal ads in dozens of North America's largest newspapers in an effort to highlight growing concern surrounding Canada's oilsands.

The ad buy, which includes purchases on both sides of the border, reads: "Patriotic, busy, Chicago-Hawaiian man, must like basketball and know how to do the fist bump. I saw you on TV. You said 'Yes we can' and talked about a clean energy future. Meet me in Canada and we'll sweep aside the world's dirtiest oil, the Tar Sands, and make sweet climate change solutions together."

© Copyright (c) The Vancouver Sun

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Oil-sands plan vague, critics say

KATHERINE O'NEILL AND NATHAN VANDERKLIPPE
The Globe and Mail
February 13, 2009

Alberta's strategy to shrink environmental impact has no timelines

EDMONTON and CALGARY -- Alberta Premier Ed Stelmach billed a long-awaited report on oil-sands development released yesterday as the "road map to the future," but many are complaining the document is short on specifics and long on vaguely defined goals.

The Alberta government report, Responsible Actions: A Plan for Alberta's Oil Sands, sets out a 20-year strategy and calls for reducing the environmental footprint of the multibillion-dollar energy projects.

The 47-page document says there needs to be an increased focus on managing the effects of oil-sands development on the environment and communities, and calls for regional targets and thresholds for air and water quality, land use and biodiversity. However, it contains no timelines showing how the province plans to meet those goals, nor does it lay out steps for staggered development that community leaders have called for as a way to reduce the crush of development Alberta has faced in recent years.

"Pretending this is a plan is pretending like it's not winter outside," Liberal MLA Kevin Taft said. He said he suspects the document is part of a multimillion-dollar public-relations campaign the Alberta government has been waging to counter allegations from environmentalists that the oil sands, which involve a carbon-intensive extraction process, are the source of "dirty oil."

Many are also questioning the timing of the plan's release, just days before U.S. President Barack Obama's trip to Ottawa on Feb. 19. The oil sands are expected to be on the agenda during his visit.

Mr. Stelmach said the plan has been in the works for at least two years, and dismissed as "speculation" suggestions that its release is linked to the presidential visit.

In 2007, a committee struck by the Alberta government released a 66-page document that called for changes to the way oil is extracted and encouraged the development of new technology. But the committee, which was made up of industry officials, provincial and municipal civil servants, aboriginal representatives, and environmentalists, failed to agree on a wide range of issues, including whether to cap greenhouse-gas emissions.

At the time, Mr. Stelmach said he would prefer to let the market self-regulate rather than risk "touching the brake" on development. Since then, the credit crunch and dramatic slide in commodity prices has brought most new oil-sands developments to a halt. In the past six months, dozens of companies have suspended or cancelled $230-billion in planned capital spending, the Canadian Energy Research Institute said.

Don Thompson, president of the Oil Sands Developers Group, said the government's 20-year plan includes little that is new, and he doesn't expect it to "constrain investment."

Greenpeace Canada said it is disappointed the document sets no targets or timelines for reducing the environmental impact of development of the oil sands, the second largest petroleum deposits in the world.

Syncrude charged in duck deaths

Claudia Cattaneo
Calgary Bureau Chief
Financial Post
Tuesday, February 10, 2009

500 birds died after landing in tailings pond

The federal and Alberta governments laid unprecedented charges yesterday against the Syncrude Canada Ltd. oil sands venture over last year's death of 500 ducks in a tailings pond.

Jim Prentice, the federal Environment Minister, called the incident "a serious issue with serious consequences."

"What this illustrates is that both the government of Alberta and the government of Canada are intent on ensuring that our environmental laws are respected -- whether it's in the oil sands or other industrial activities, or by all of us as individuals," he said in an interview.

The ducks died last spring after landing in a tailings pond at Syncrude's Aurora mine site, after the company failed to set up a noisemaker to scare away the migrating fowl because of a storm.

The April 28 incident captured global attention and reenforced critics' portrayal of oil sands operations as an environmental blight.

Industry players and both levels of governments are fighting that image, particularly in the United States, where they are presenting the oil sands as a source of secure oil that is taking steps to minimize its impact on the environment.

The federal government has charged Syncrude under the Migratory Birds Convention Act for allegedly "depositing or permitting the deposit of a substance harmful to migratory birds in waters or an area frequented by birds."

Environment Canada said the deaths represented the single largest reported incident of oiled birds in the oil sands region.

The charge carries a maximum penalty of a $300,000 fine or six months in jail, or both.

The Alberta government's charge, under the Alberta Environmental Protection and Enhancement Act, is for "failing to have appropriate deterrents in place at a tailings pond." It carries a maximum penalty of $500,000.

Ogho Ikhalo, a spokeswoman for Alberta Environment, said the province took the step after an investigation.

Hundreds of thousands of water birds travel through oil sands leases in the Fort Mc-Murray area and effective bird deterrence is an important part of the province's approval requirements for tailings ponds, the province said.

Syncrude spokesman Alain Moore said the consortium is reviewing the charges and has not decided whether to fight them.

"We have taken this very seriously, and we have cooperated with the government throughout the whole process and we will be appearing in court as requested," Mr. Moore said.

The first court appearance has been scheduled for March 25 in provincial court in Fort McMurray.

"All of our employees feel horrible this happened at our facility," Mr. Moore added. "Ever since this occurred there has been resolve in our organization to make the appropriate changes required to prevent it from happening again."

Syncrude is a joint venture of Canadian Oil Sands Trust, ConocoPhillips, Imperial Oil Ltd.,Murphy Oil Corp., Nexen Inc. and Petro-Canada.

Mr. Prentice said the federal government is in the process of updating environmental laws and significantly increasing penalties so they are in line with those in the United States and other countries.

The charges against Syncrude are unique under both long-standing federal and provincial laws.

ccattaneo@nationalpost.com

---

Syncrude execs may face time in jail

By Darcy Henton and Hanneke Brooymans
The Edmonton Journal
February 10, 2009

Ottawa to increase fines as charges laid in deaths of 500 ducks in tailings pond

Rob Renner, Minister of Environment and Alison Redford, Minister of Justice and Attorney General answer media questions at a news conference at the Alberta Legislature after the government announced laying charges against Syncrude Canada for failing to have appropriate deterrents in place at a tailings pond. The charges result from an incident on April 28/08 where waterfowl died after landing on a tailings pond at a facility north of Fort McMurray. Photograph by: Ed Kaiser, Edmonton Journal

Shortly after Syncrude was charged Monday for failing to prevent the deaths last spring of 500 ducks, the federal environment minister revealed the government is considering dramatically increasing fines for environmental crimes.

Syncrude was charged by both the Alberta and federal governments for failing to take precautions to prevent the deaths of 500 ducks on a northern tailings pond.

If convicted, the company faces a maximum of $800,000 in fines and its executives could be sent to jail for up to six months.

Federal Environment Minister Jim Prentice said Monday his government is committed to bringing in new legislation that deals with such environmental issues.

"We've spoken about significantly increasing the penalties. Penalties for companies of this size would range in the multimillion dollars and we will be proceeding with those legislative amendments in future."

Prentice said both he and Prime Minister Stephen Harper consider the incident unacceptable. "We have environmental laws in Canada. We expect them to be abided by, and there will be consequences for people who don't live up to the full extent of the Canadian conservation environmental laws."

Alberta Environment Minister Rob Renner said the provincial charge was laid alongside a federal charge under the Migratory Birds Convention Act, and both will be dealt with during the same court hearing.

"This is the first of its kind for charges to be laid in this manner in Alberta," said Renner, who sees no need to tweak Alberta's environmental law or toughen penalties.

"We're constantly looking to improve the effectiveness of regulation, but the legislation is very robust and I don't think it is necessary to be doing that."

But Jodie Hierlmeier, staff counsel for the Environmental Law Centre, thinks the federal plan to increase fines is a good idea.

"I think that might be a good thing from the deterrent perspective, because the penalties for a large corporation, fines of half a million or a million dollars, are not that significant depending on the size of the corporation. And perhaps the federal government is looking to the U.S., where the fines are in the multi-million dollar range."

Alberta Justice Minister Alison Redford said the province will seek an alternative penalty that may require Syncrude to perform technical or environmental work.

Syncrude's first court appearance will be March 25 in Fort McMurray Provincial Court.

The company hasn't said how it will plead to the charges.

"We'll be looking at the charges, understanding the charges and how they apply. And our legal team, after the analysis, are hoping to decide the appropriate path forward and that will be taking place over the next few weeks," said Alain Moore, a company spokesman.

Meanwhile, the company is working to prevent a repeat incident.

"The system had worked well for decades, but obviously last spring showed it didn't work as well as intended, so changes had to be made. Since then, we've had a thorough investigation to help understand what barriers we encountered and how we can help incorporate steps to prevent it from happening again."

Moore said the company looked at many things from technology to the way it deploys deterrents. It plans to announce changes to the program before the start of the spring migration.

"We have spoken to both Alberta Environment and Alberta Sustainable Resource Development and they've provided input to the plan.

"This incident was horrible," Moore said. "There's a huge resolve in our organization to help prevent it from happening again."

The charges under the Alberta Environmental Protection and Enhancement Act accuse Syncrude of failing to have proper equipment in place to deter ducks and geese from landing on the tailings pond.

The maximum fine under Alberta law is $500,000, while federal regulations allow for a fine of $300,000 and six months imprisonment.

The federal charge accused Syncrude of depositing "a substance harmful to migratory birds in waters or an area frequented by birds."

The charges were laid after about 500 ducks landed on the Aurora mine tailings pond north of Fort McMurray last April 28. The birds became covered in oily residue floating on the surface and sank to the bottom of the pond.

Only five ducks were recovered and sent to the Wildlife Rehabilitation Society of Edmonton. Three survived and were released, said Cheryl Feldstein, the society's executive director.

The company blamed a late-spring snowstorm for delaying deployment of noise cannons at the pond to prevent the ducks from landing.

NDP MLA Rachel Notley called Alberta's $500,000 penalty "laughable," saying it will not deter similar incidents from occurring.

"It's just not good enough," she said. "Five hundred thousand is a slap on the wrist."

She called on the government to boost the fine by 10 to 100 times.

Liberal Leader David Swann questioned why it took the governments 10 months to lay charges and said Alberta must do a better job of enforcing its environmental regulations.

"We have a law that says polluters pay and contaminated sites have to be redressed," he said. "Unfortunately, it's a law that has been seldom enforced. Those who pollute should be prosecuted to the full extent of the law."

Notley also criticized the length of time it took the province to lay the charge.

"It's profit first; protecting people and the environment second," she said. "That's the way the government operates, and the kind of delays we see are indicative of that fact."

Oilsands companies use tailings ponds to settle the sand and clay and unrecovered bitumen out of water that has been used in the oil upgrading process. The Energy Resources Conservation Board announced new rules governing tailings ponds last week that require oilsands companies to reduce the fine particles in liquid tailings by 50 per cent within four years, on top of what is already being captured.

The directive requires tailings ponds be reclaimed within five years after they are no longer in use.

Companies that don't meet requirements face shutdown orders and delays in upgrade approvals.

dhenton@thejournal.canwest.com

hbrooymans@thejournal.canwest.com

© Copyright (c) The Edmonton Journal

---

Syncrude charged over Alberta duck deaths

DAWN WALTON AND NATHAN VANDERKLIPPE
Globe and Mail
February 9, 2009

CALGARY — Alberta and Ottawa moved Monday to charge an energy heavyweight with breaking environmental laws after the industry – and the country – were humiliated last spring by the image of hundreds of oil-soaked ducks dying in a toxic byproduct of the oil sands.

Syncrude Canada Ltd. could face fines of up to $800,000 if convicted under provincial and federal environmental legislation in connection with the deaths of 500 waterfowl at one of its tailing ponds north of Fort McMurray, Alta.

The charges are the first of their kind against an oil sands company. They come as Alberta and Canada attempt to promote the resource as a safe, secure supply of energy at the same time as environmentalists are waging a “dirty oil” campaign against the so-called tar sands.

“I think we have an obligation not only to the environment, but to the public and to the credibility of our system if we don't lay charges,” Alberta Environment Minister Rob Renner told reporters Monday.

A Mallard duck gets cleaned by Focus Wildlife Canada personell Bruce Adkins and Hilary Pittel at the Wildlife Rehabilitation Society of Edmonton on Sunday May 4, 2008. The duck was transported to the center after being rescued from a Syncrude tailings pond a week earlier near Fort McMurray. (Jordan Verlage/Edmonton Sun/The Canadian Press)

On April 28, 2008, the birds were found dead or dying in a toxic soup located along a migratory route for hundreds of thousands of waterfowl. Alberta requires effective bird deterrence by energy producers, but at the time, Syncrude explained that a spring snowstorm prevented the company from erecting noisemakers around the massive pond to scare away flocks.

Under the Alberta Environmental Protection and Enhancement Act, Syncrude could be fined up to $500,000 for failing to ensure that “a person who keeps, stores or transports a hazardous substance or pesticide shall do so in a manner that ensures that the hazardous substance does not directly or indirectly come into contact with or contaminate any animals, plants, food or drink.”

Syncrude also has been charged federally under the Migratory Birds Convention Act for “allegedly depositing or permitting the deposit of a substance harmful to migratory birds in waters or an area frequented by birds.” The maximum penalty is $300,000.

“We expect all Canadians and certainly Canadian companies operating in Canada to respect our environmental legislation and we will demand full accountability in law, in terms of any type of environmental problems,” federal Environment Minister Jim Prentice told reporters in Ottawa.

Syncrude spokesman Alain Moore said this was the first time anything like this has occurred in the decades the company has been operating in the region.

“We feel horrible it happened. There's a huge resolve in our organization to make appropriate changes to prevent it from happening again,” he said.

The company is scheduled to appear in Provincial Court in Fort McMurray on March 25.

Frustrated with how long it was taking governments to act, a member of the Sierra Club of Canada launched a private prosecution against the company last month. The joint prosecution by Ottawa and Alberta will now likely take precedence.

“It's nice to see that they've finally actually laid charges,” said Mike Hudema, a spokesman for Greenpeace Canada. “It's unfortunate they are doing so by being spurred on by a private prosecution, and at the same time the fines under the legislation are ridiculously low.”

Syncrude does not issue overall financial results, but, based on a rough calculation, an $800,000 fine represents less than an hour of production revenue from the mine.

Mr. Prentice said the Conservative government plans to introduce legislation to deal with environmental crimes, including “significantly increasing the penalties” for large companies that could reach the multimillion-dollar range.

Alberta Justice Minister Alison Redford said the province would push for “creative sentencing” options that focus on such things as technology and the environment.

Despite the charges against Syncrude and last week's announcement by Alberta's energy regulator to set new rules for the cleanup and management of tailings ponds, observers say it's too early to know whether this amounts to a crackdown that should worry the oil patch or improve Canada's reputation around the globe.

“Everybody is concerned about the environmental issues associated with the oil sands,” said Duff Harper, an environmental lawyer with Blake, Cassels & Graydon LLP in Calgary. “It seems to have become almost a rallying cry for a lot of people.”

Mr. Hudema suggested the timing could be linked to U.S. President Barack Obama's visit to Ottawa this month.

“I think that they're trying to do minor things to try to improve that image,” he said, “especially leading into a presidential visit that could have major implications for the tar sands for sure.”

Market elusive for US West Coast LNG imports

By Edward McAllister
Reuters UK
Wed Feb 4, 2009

NEW YORK (Reuters) - Woodside Petroleum's decision to scrap a liquefied natural gas import terminal in California last month bodes ill for developers on the U.S. West Coast already struggling to bring projects to fruition.

Australian-based Woodside said poor market conditions prompted it to shelve its Oceanway project offshore Los Angeles, clouding the fortunes of the remaining West Coast proposals.

Problems in attracting supply, as well as a questionable need for more imports in the near term, have made the West Coast less friendly territory than the East and Gulf coasts for building import terminals.

In 2007, California authorities vetoed BHP Billiton's $800 million (553.27 million pounds) Cabrillo Port facility over environmental concerns.

Analysts say scant demand and low U.S. natural gas prices threaten the other four plans to import super-cooled gas to the region in the short term.

"Our view is that it is unlikely in the short and medium term that an LNG terminal on the West Coast (of the) U.S. will be built," given the healthy supply scenario there, said Murray Douglas, a global LNG analyst at Wood Mackenzie.

Northern Star Natural Gas' Bradwood Landing project in Oregon has won regulatory approval and three other terminals are proposed. Together they have a potential import capacity of nearly 5 billion cubic feet of natural gas per day.

But convincing federal and state authorities of the need for LNG is a major hurdle.

Developers say that the Pacific Northwest and California face a gas supply shortage, but analysts disagree.

"At the moment with peak demand in the winter, storage levels are pretty high, prices are down and it appears by all accounts that demands for natural gas are being met," said Randy Roesser, California Energy Commission energy analyst.

California is a beneficiary of the recent jump in gas output from unconventional onshore sources like shale plays.

Total U.S. marketed gas production is estimated to have increased by 5.9 percent in 2008, thanks to shale gas development, according to U.S. government figures.

Two pipelines are being considered to bring gas to the West Coast from the Rocky Mountain region -- the Ruby pipeline to California and the Sunstone pipeline to Oregon.

The existing Kern River line is currently being expanded.

"Given approvals for new pipelines out of the Rockies and the increase in Rocky supply makes you wonder whether people will even bother with imported LNG," said Martin King, vice president of institutional research at FirstEnergy Capital.

ATTRACTING LNG SHIPMENTS

Developers also face the problem of attracting supply from producers such as Australia and Indonesia, which traditionally supply LNG to the high-paying markets of Japan and South Korea across the Pacific.

Low U.S. gas prices compared to Asia make it difficult to attract supply without firm commitments from suppliers.

Earlier this year, the developers of the Kitimat LNG project in Western Canada swapped plans to import gas in favour of developing an export plant to supply Asian importers.

"The sponsors of projects like Bradwood will only raise finance if they have a credit-worthy company committing to the capacity. I don't see many of those around," one analyst said.

Financing is also made more difficult by the current global credit crunch, which affects all large energy projects.

Spot gas prices in southern California have been under $4 per million British thermal units. Even prices of $7 per mmBtu and higher for the East Coast terminals saw cargoes diverted to markets in Europe and Asia.

However, Northern Star, which is also developing the Clearwater Port project offshore of Southern California, remains positive.

Bradwood Landing could break ground as early as late this year as the company has received "significant interest" from both suppliers and customers, said Senior Vice President for External Affairs Joe Desmond.

"We feel confident that there is support for the project in light of the need for additional gas supplies," he said. "There are many suppliers looking for long-term contracts into the U.S. West Coast market."

(Editing by Jeffrey Jones and Christian Wiessner)

© Thomson Reuters 2009 All rights reserved.

Boom in gas drilling fuels contamination concerns in Colorado

COMMENT: 'Fraccing" - fracturing the host substrate in which natural gas is contained - is of increasing concern in British Columbia. It is a common practice with conventional natural gas production, but will escalate phenomenally with the wholesale move to BC's shale gas prospects. Shale doesn't give up its gas readily, and wells require almost continuous fraccing to produce efficiently. Similarly, fraccing of coal to produce coalbed methane is standard industry practice.

As with Colorado, there is very little disclosure in BC of what goes into fraccing "muds" and no regulation, that I am aware of, that restricts fraccing, requires baseline and operational testing and monitoring, or requires disclosure of what substances are being injected into the ground. This article says that benzene, glycol-ethers, toluene, 2-(2-methoxyethoxy) ethanol, and nonylphenols are used in fraccing fluids. In 2004, EnCana was fined in Colorado when toxic fluids it was using seeped into groundwater. EnCana is the leading shale rights owner in BC.

By Josh McDaniel
The Christian Science Monitor
February 5, 2009

A natural gas drilling rig on the Wattenberg field, located northeast of Denver. (NEWSCOM)

Some scientists and citizens want firms that extract natural gas to reveal what chemicals they’re using.

Grand Junction, Colo.

When Lisa Bracken noticed gas bubbling to the surface of Divide Creek, which runs along one side of her 60 acres in western Colorado, she suspected another gas “seep.” It had happened once before, in 2004, after faulty natural-gas drilling in the vicinity contaminated the creek with benzene and methane.

Her concern, though, is not confined to the small waterway. Her cottonwood and pinyon trees are dying, along with parts of meadowland that her family manages for wildlife, and Ms. Bracken believes the likely culprit is methane seepage stemming from one or more of the 11 natural-gas wells within a mile of her property – though independent investigations have not been able to prove a link.

“It is so frustrating to watch the land die,” she says. Bracken does not think the current drought is responsible. “We have seen it go through drought cycles, but nothing like this. The land has lost its ability to sustain itself.”

Her concern and that of others is putting new scrutiny on a drilling practice knows as “fracing,” short for hydraulic fracturing.

A common component of natural-gas extraction worldwide, fracturing operations inject water, sand, and a cocktail of chemicals at high pressure into rock formations thousands of feet below the surface, opening existing fractures in the rock and allowing gas to rise through the wells. The practice makes drilling possible in areas that 10 to 20 years ago would not have been profitable, including parts of Colorado, which accounts for 6.2 percent of natural-gas produced in the US.

The concerns center mainly around the injected fluid. Most comes back to the surface, but 30 to 40 percent is never recovered, according to industry estimates.

The composition of hydraulic fracturing fluids is proprietary, and energy companies are vehement about the need to keep the contents secret to protect their competitive edge. That confidentiality is protected by the federal Energy Policy Act of 2005, which exempted hydraulic fracturing from regulation under the Safe Drinking Water Act.

“We now use five to 10 ‘frac’ jobs per well, with up to 100 million gallons of fluid used per frac,” says geologist Geoffrey Thyne of the University of Wyoming, whose analysis of the large gas fields around Divide Creek found elevated methane and chloride levels in groundwater samples.

“They are injecting fluid that may or may not be hazardous into thousands of wells and not recovering all of it. We have to ask, what is in those fluids and where does the fluid go?” says Mr. Thyne.

Theo Colborn, a leading researcher on the effects of toxins on the human endocrine system, has been trying to glean what is in the injection fluid.

Preliminary results of her study identify 65 chemicals that are probable components. She is urging that groundwater sampling be expanded to determine whether these chemicals or their byproducts are showing up in areas where hydraulic fracturing is being used.

“We know less and less about what chemicals are being used, but the ones that we do know are being used are very dangerous,” says Dr. Colborn.

Chemicals such as benzene, glycol-ethers, toluene, 2-(2-methoxyethoxy) ethanol, and nonylphenols were used in the fracturing fluids, her study found – all of which have been linked in previous research to health disorders when human exposure is too high.

Pushing for legislation

Colborn’s work and complaints from residents living near drilling operations are spurring policymakers to take a closer look at hydraulic fracturing. US Reps. Diana DeGette (D) and John Salazar (D), both of Colorado, have introduced legislation that would repeal the Safe Drinking Water Act exemption for hydraulic fracturing and force energy companies to reveal the contents of the fracturing fluids.

“There is little reason to continue the exemption,” says Representative DeGette in a phone interview. “Communities have a right to know what is potentially threatening their water.”

Energy industry officials say there’s no evidence that hydraulic fracturing contaminates groundwater or threatens public health.

“This is an answer in search of a problem,” says Doug Hock, a spokesman for EnCana, the firm that is drilling near Bracken’s land. “Chemicals in themselves do not create risk; risk is created when the proper technology and procedures are not in place. We take very stringent precautions.”

Colorado fined EnCana $371,000 – the largest fine in state history for a drilling-related incident – after finding the company responsible for the 2004 gas seep in Divide Creek. But the state is allowing drilling to continue in the area.

The proposed federal legislation would only increase the regulatory burden on industry but do little to protect human health, suggests Dollis Wright, a public-health consultant who has conducted studies for the Colorado Oil and Gas Association. “There are groups out there that are listing chemicals found in the fluids, and they always say such and such chemical causes cancer.

Well, just because a chemical is in the fluids does not mean it is going to get into your water. And if it gets into your water, it does not mean that it is going to cause harm,” she says. “It may have to be inhaled, rather than drunk, to cause the negative effects they cite.”

Others argue the legislation is well past due. “If you don’t know what you are looking for, it is hard to do analysis,” says Susan Griffin, a toxicologist with the US Environmental Protection Agency in a phone interview. “There are a lot of good scientific tools out there, but we need opportunities to apply them. Those opportunities don’t exist right now.”

‘Fracing’ to blame for explosion?

Ben Bounds, for one, would like additional assurances about fracing’s safety.

In the summer of 2007, methane seeped from his domestic well and exploded inside his pump house. The explosion lifted the pump-house roof off the frame and melted or singed everything inside. A few days later, a state inspector with a methane detector investigated the Bounds property in rural Huerfano County, at the base of the Sangre de Cristo Mountains.

“When he opened the door to the garage, the detector went absolutely crazy,” says Mr. Bounds.

While 50 methane drilling wells and active hydraulic fracturing operations are nearby, a lack of independent monitoring and testing has made it impossible to prove that fracing created pathways for methane to collect in Bounds’s domestic water system.

Bounds and his family immediately evacuated the home, and they’ve had to evacuate many times since when detectors Bounds installed have signaled the presence of methane.

The state advised that Bounds not allow his grandchildren or any visitors to come to the property, and his insurance company has threatened to drop coverage. He has thought about simply abandoning the home since he could not in good conscience sell the property.

“Why are they allowed to keep this a secret? That’s not right,” Bounds says. “It only seems like common sense to me that they would have to release the contents of those fluids and prove they aren’t causing problems.”

The mighty tug protects state waters

COMMENT:The rescue tug to which Fred Felleman refers in this article is based in Neah Bay, toward the northwest corner of the Olympic Peninsula. Its funding, which at present is picked up completely by the State of Washington, is in jeopardy. The continued operation of this tug is a serious matter for British Columbia, and Canada, but we have consistently avoided contributing anything to the effort.

Why is it a serious matter for us in BC?

Because Neah Bay is the ONLY appropriately equipped rescue tug that services the entire offshore region of BC. That is - the ONLY one. Other tugs, privately owned ones which are busy up and down the coast, can be dragged into service. Called "tugs of convenience", these work boats are not appropriately equipped, might not be anywhere within proximity to a ship in distress, and they first have to find a safe moorage for whatever barges or booms they are towing when called into emergency service. The tugs of convenience - merchant rescue boats - are not an adequate alternative, and should not be construed as an acceptable alternative to dedicated rescue tugs.

For BC, the Neah Bay rescue tug is an excellent boat to have so close. But in times of extreme weather, it may be busy dealing with other incidents when it is needed on the BC offshore. Its response times outside the entrance to the Strait of Juan de Fuca, and halfway up Vancouver Island are excellent. Beyond that, we could be looking at two days for it to get to the waters west of Haida Gwaii.

Our precious BC coast is the location of an increasing amount of large marine traffic. Tankers from Alaska and barges from Vancouver and Puget Sound regularly carry oil and other petroleum products between Alaska, BC, Washington and California. Our coast is on the great circle route from Japan, Korea, and China - source of all that container, bulk and vehicle shipping, and destination for all of our coal and other resource shipping. All these ships have huge fuel capacity, and most of them use ugly Bunker C when they are not in port areas (many switch to diesel when inshore).

Canada needs to have its own rescue tug, at least one, based somewhere mid-coast. The whining about who will pay for it - and it should be the shipping industry - will stop dead the day a tanker or another vessel fails, thousands or hundreds of thousands of barrels of oil are released, and crew lose their lives.

Felleman makes reference to the density of shipping traffic in the Strait of Juan de Fuca and Puget Sound. The combined ports of Metro Vancouver rival Puget Sound and California for shipping activity. VIRTUALLY ALL OF THAT TRAFFIC SAILS THROUGH HARO STRAIT AND BOUNDARY PASSAGE. Home to hundreds of thousands of British Columbia and Washington residents, home to imperilled and poisoned Orcas and whale watchers, also the busiest recreational boating and fishing waters in BC, Haro Strait's days are numbered. The same odds that will fail us offshore one day, will deliver the same dirty payoff in Haro Strait, perhaps sooner.

How ready for that Haro Strait catastrophe are we? Well, actually we're in better shape there than elsewhere - close to emergency response facilities in Vancouver, Victoria, and Washington State, good bilateral sharing arrangements between BC/WA and Canada/USA. But the emergency response regime in place now is hardly up to the demands of today. Traffic is increasing, though global economic collapse and climate change may put temporary brakes to it.

In the aftermath of that dark and awful wintersnight, when disaster occurs, we're going to realize how far our emergency preparedness fell short of what was needed. Firm regulation is required - limiting size, speed, and frequency of vessels; raising the bar on vessel construction (more double hulls, redundant propulsion and steering); requiring escort tugs for a lot more vessels than is required today; simply banning others. Adequate readiness of rescue tugs.

The proposed expansion of Kinder Morgan's Trans Mountain Pipeline from Alberta's tar sands to Vancouver means a ten-fold increase increase in oil tanker traffic leaving Vancouver, through Haro Strait. From 3 or 4 tankers a month to 30 or 40. Unacceptable.

The prospect of oil tankers and condensate tankers coming and going from Kitimat, on BC's north coast, while lucrative for the shareholders in the companies concerned, is madness for the coast. Even if there were rescue tugs nearby, by the time they get called to action and finally arrive, most often the damage is done.

The mighty tug protects state waters

By FRED FELLEMAN
Guest Columnist
Seattle Post-Intelligencer
February 3, 2009

While riveted to the CNN coverage of President Barack Obama's inauguration, I was stung by the irony of Exxon commercials at every break between promises of how things will be different under his leadership. I guess some changes won't come easily.

It is inspiring to think that our economic recovery could be directed toward critical environmental investments. Trade-dependent port communities throughout Washington are subject to the benefits and risks posed by maritime traffic.

But we can't limit environmental protections to flush times, as suggested by Port of Seattle's Charlie Sheldon in the Jan. 15 P-I, for we need to trade responsibly and there's no good time for a major oil spill. Containership traffic is down temporarily but cruise ships and risky bulk carriers are booming.

March 24 will be the 20th anniversary of the Exxon Valdez oil spill in Prince William Sound, Alaska. While the environment and communities are still recovering, Exxon is the only U.S. oil company still sailing single-hulled tankers on the West Coast. Approximately 40 percent of all tankers calling on Washington are still singled-hulled. Three Valdez-sized spills lie within each tanker entering our waters. One came within just feet of grounding in San Francisco Bay recently.

More than 800 oil tankers and 3,000 oil barges entered state waters in 2006, feeding Washington's five refineries' annual thirst for 9 billion gallons of crude, roughly double their original capacity. While tanker companies have made substantial progress in spill prevention and response, far less equipment is in place to respond to ever-growing cargo and cruise ships that made 4,000 round trips through Strait of Juan de Fuca in 2006.

In 1999 the wood chip bulk carrier New Carissa spilled 70,000 gallons off Coos Bay, Ore. Its remains were finally removed from the coast this year at a cost exceeding $140 million. In 2007 the containership Cosco Busan spilled 58,000 gallons of bunker fuel in San Francisco Bay, costing more than $90 million. With relatively small spills costing $2,000/gallon, the maritime and insurance industries should support spill prevention and response investments.

The response tug in Neah Bay fills the largest gap in our state's oil spill program, protecting the vast wealth of cultural and marine ecological resources found along the Olympic Coast where the state's largest spills have occurred. The tug has responded to 41 ships in need of assistance since 1999 with public funding that will run out next year.

In addition to towing, a properly equipped tug also could help fight fires, rescue people and is needed to improve coastal oil spill response and salvage capability. A contract with such a tug provider could help commercial vessels meet state and federal requirements concurrently.

Washington Sen. Maria Cantwell advocated for a permanent, industry-funded tug for years and saw to it that the Coast Guard finally issued its salvage and firefighting rule. While its lack of rigor was yet another Bush administration gift to the oil industry, it allows for state tug requirements.

HB1409, sponsored by Rep. Kevin Van De Wege, and SB5344, sponsored by Sen. Kevin Ranker, require commercial shippers, not taxpayers, to fund the tug.

Oil industry officials have said they are willing to pay their part, knowing that they could raise the price at the pump less than 1 cent to cover the de minimis costs. When Crowley Maritime built exceptional tugs for the oil industry in Prince William Sound, they used Seattle engineers, Anacortes shipyards and Ballard outfitters. Washington's tug also will be provisioned in Port Angeles and stationed at the Makah Marina.

In time, a Neah Bay tug provider would be able to finance the initial cost of a new multi-mission tug approaching the capabilities of Crowley's Washington-built "PRT's" -- backed by the long-term contracts regulations afford. It would better protect the environment and crew and employ the best tug makers in the world versus using the old tugs deployed to date.

Ex-Coast Guard lobbyists for cargo shippers continue to threaten ports and longshoremen with purported trade impacts despite the tug's minimal relative costs. If all ships of more than 300 gross tons entering the Strait of Juan de Fuca funded the tug equally per transit, it would cost cargo ships less than they pay in fees and taxes for some containers that fund dredging in other parts of the country.

Rather than fight over the tug, we should work together to alter the Harbor Maintenance Tax for border ports where it, not the tug, can affect the balance of trade with Canada.

Fred Felleman is the Northwest consultant for Friends of the Earth. A hearing for SB5344 will be held at 10 a.m. Tuesday before the Senate Environment, Water and Energy Committee.