This piece originally appeared on the Dogwood website.

“Sunny ways, my friends. Sunny ways!” For most people, that line in Justin Trudeau’s victory speech two years ago heralded a return to “positive politics” after 10 years of Stephen Harper’s icy glare.

It’s also a reference to tricking someone into taking their clothes off.

As the Liberal Party website reminds us, Trudeau’s “sunny ways” is a tribute to Prime Minister Wilfrid Laurier (the guy on the five dollar bill). Laurier believed in disarming his opponents with charm and flattery. In 1895 he invoked one of Aesop’s fables to illustrate his political philosophy.

It goes like this: One day the Wind and the Sun were arguing about who was more powerful, when a hapless traveller passed by on the road below. The Sun said “Whichever of us can cause that traveller to take off his cloak shall be regarded as the stronger. You begin.”

The Wind started huffing and puffing. But the harder he blew, the tighter the poor human clung to his cloak. Then the Sun came out and “shone in all his glory upon the traveller, who soon found it too hot to walk with his cloak on.”

Perhaps it’s not surprising that Justin Trudeau would identify with a celestial sky-king, toying with us mortals on the earth below.

During his election campaign Trudeau promised ad nauseum that “governments grant permits, but only communities can give permission.” He was talking, of course, about pipelines. But soon after winning power, his position shifted to “Father knows best”.

One year ago today, Trudeau approved Kinder Morgan’s pipeline and oil tanker proposal.

Perhaps it’s not surprising that Justin Trudeau would identify with a celestial sky-king, toying with us mortals on the earth below.https://t.co/eK6TUiN4w6 @kainagata

— DeSmog Canada (@DeSmogCanada) November 29, 2017

If completed, the project would drain 890,000 barrels of crude oil every day to refineries in California and Washington. Like a maritime Keystone XL, it represents a last-ditch liquidation attempt by oil sands operators looking to get as much raw bitumen out of the ground as possible before demand drops.

By signing on to this desperate scheme, Trudeau put the lie to his own election promises and ignored the explicit lack of consent from First Nations communities disproportionately affected by pipeline construction, oil spills and climate risk.

This week the women of the Secwepemcul’ecw Assembly vowed to shut down any “Man Camps” Kinder Morgan tries to build in their vast North Thompson territory. As the Secwepemc declaration notes, a growing body of research is finding links between remote work camps and violence against women.

Farther south is the Nlaka’pamux village of Coldwater, whose leaders were barred from hiring lawyers when the first pipeline came through in 1952. The government handed over a lump-sum payment of $1,200 and told them to sign. The people have lived with an oil pipeline hissing over their water aquifer ever since. They don’t want to triple that risk.

Nor do the Tsleil-Waututh in Burrard Inlet, who have coaxed healthy, edible clams and other sea life to grow again in a waterway hurt for decades by industrial pollution. Or their neighbours the Squamish, who are reviving their language – a language born thousands of years ago from the very landscapes and ecosystems that would be obliterated by an oil tanker spill.

Days before Trudeau gave Kinder Morgan the green light, Tsleil-Waututh leaders flew to Ottawa to deliver, in person, their “informed withholding of consent”. What they didn’t know is the federal government was already setting up a website to announce the Kinder Morgan approval, before the leaders’ plane even landed.

What kind of self-professed feminist decides that “no” really means “yes”? In Justin Trudeau’s case, a Prime Minister who also fought to preserve discrimination against women in the Indian Act, and still refuses to provide equal health care or education funding for Indigenous children.

Some cloaks – like human rights – are too important for people to discard no matter what sunny charms are beaming down on them. Lucky for Trudeau, if his tousled hair and boyish stutter fail to change people’s minds, he has all the power of the state to enforce his will.

With two years until the next election, Trudeau will have to decide how important this Texas pipeline is to him. Important enough to expropriate reserve lands to shove a pipeline through? Important enough to do as his oil minister suggested, and send in the army to quell resistance?

Sunny ways, indeed.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

This article originally appeared on Dogwoodbc.ca. 

It’s a rare dose of honesty from a company with a history of bending the truth. Kinder Morgan filed a final prospectus last week with securities regulators, setting the stage for a last-ditch attempt to raise enough cash to build its Trans Mountain expansion project.

Now all the Texas pipeline barons can hope is that investors don’t read the fine print.

The company is essentially trying to crowdfund $1.75 billion through an initial public offering. Kinder Morgan executive Ian Anderson sounded confident in a press release announcing the IPO: “Our approvals are in hand and we are now ready to commence construction activities this fall,” he said.

But the approvals are not in hand, and a mandatory risk analysis accompanying the share offering makes clear how difficult it will be to start construction. Provincial politics, lawsuits, blockades by First Nations – any one of these could kill the Trans Mountain pipeline project, the company admits.

Even if Ottawa sends in the army to get the thing built, all sorts of events over the coming decades could leave investors stranded: oil spills, Aboriginal title claims, shifting market conditions, earthquakes and yes, global warming.

Publicly, Kinder Morgan’s top Canadian executive has questioned the reality of climate change. But in these disclosure documents, the company admits rising sea levels could actually disable its Burnaby oil tanker terminal.

“An investment in Restricted Voting Shares,” the prospectus soberly declares, “should only be made by persons who can afford a significant or total loss of their investment.”

Kinder Morgan’s lawyers identify five major pitfalls for shareholders, any of which could wipe out their hopes of a return.

1. “The development and construction of the Trans Mountain Expansion Project and other major expansion projects, are subject to significant risk and, should any number of risks arise, such projects may be inhibited, delayed or stopped altogether.”

This is where the prospectus contradicts Kinder Morgan’s Ian Anderson, who claimed “our approvals are in hand”. According to the document, risks to the Trans Mountain expansion include “inabilities to overcome challenges posed by or related to regulatory approvals by federal, provincial or municipal governments, difficulty in obtaining, or inability to, obtain permits (including those that are required prior to construction such as the permits required under the Species at Risk Act), Land Agreements, public opposition, blockades, legal and regulatory proceedings (including judicial reviews, injunctions, detailed route hearings and land acquisition processes), delays to ancillary projects that are required for the Trans Mountain Expansion Project (including power lines and power supply), increased costs and/or cost overruns, inclement weather or significant weather-related events (including storms and rising sea levels (potentially resulting from climate change) impacting the Business’ marine terminals) and other issues.”

Quite a paragraph.

The prospectus continues: “To the extent the Business is not able to acquire land rights through negotiated agreements for the sections of the Trans Mountain Expansion Project that require new land rights, the Business will need to seek right of entry orders from the NEB, which could result in delays and increased cost.”

Translation: People may fight us when we show up to expropriate their homes.

The company also acknowledges the 19 separate lawsuits it faces, any one of which could halt the project. “In addition to the judicial reviews of the NEB recommendation report and Governor in Council’s order, parties have also commenced judicial review proceedings at the Supreme Court of British Columbia seeking to quash the Environmental Assessment Certificate that was issued by the BC Environmental Assessment Office. In the event that an applicant for judicial review is successful, among other things, the Environmental Assessment Certificate may be quashed, provincial permits may be revoked […] or the Trans Mountain Expansion Project may be stopped altogether.”

1. “The debt levels of the Business, including increases in such debt levels, could have significant negative consequences for the Business.”

This is an issue flagged by investment blog The Motley Fool, which calls this IPO “a dog with fleas” and warns readers “under no circumstances should you buy any shares.”

Will Ashworth writes: “Take a look at the balance sheet for Kinder Morgan’s Canadian business, and you’ll see that it’s got $159 million in cash and $1.4 billion in debt; that’s net debt of $1.2 billion. Assuming the over-allotment is exercised, the IPO will raise $2 billion, leaving Kinder Morgan with $800 million in net cash and $6.6 billion short of what its projected needs are to complete the Trans Mountain pipeline expansion.”

Sure enough, the prospectus says more cash infusions will be required if the company actually decides to build: “The Business is expected to incur substantial additional indebtedness to fund capital expenditure requirements related to the Trans Mountain Expansion Project.”

#KinderMorgan Warns #TransMountain Investors Pipeline May Never Be Built https://t.co/AWTkf7lKQX #IPO via @dogwoodbc @kainagata #bcpoli

— DeSmog Canada (@DeSmogCanada) May 29, 2017

Company-wide, Kinder Morgan is groaning under $35.1 billion in debt. With its credit downgraded as a result, the pipeline giant admits that rising interest rates could pose a problem: “The growth plans for the Business, including the Trans Mountain Expansion Project, require access to significant amounts of external capital. Limitations on the ability of the Company or the Business to access external financing sources could impair the ability of the Business to complete these significant projects, including the Trans Mountain Expansion Project.”

1. “The failure by the Business to resolve issues relating to Aboriginal rights and title and the Crown’s duty to consult could have a material adverse effect on the Trans Mountain Expansion Project.”

This is an important one. Here’s what the company’s own lawyers say: “In some cases, respecting Aboriginal rights may mean regulatory approval is denied or the conditions in the approval make a project economically challenging or not feasible.”

They’re also worried about First Nations along the route proving title to the land, like the Tsilhqot’in did in 2014. That could force Kinder Morgan to dig up and reroute the existing pipeline, not to mention the expansion.

Even with First Nations leaders that have tentatively signed impact benefit agreements, the prospectus anticipates Kinder Morgan could find itself back in court: “Future disagreements with Aboriginal groups could result in legal challenges by Aboriginal groups alleging breach of contract.”

1. “Changes in government, loss of government support, public opposition and the concerns of special interest groups and non-governmental organizations may expose the Business to higher costs, delays or even project cancellations.”

The part about “changes in government” seems particularly relevant now that the Green Party holds the balance of power in the provincial legislature. The Greens and the NDP have sworn to fight the project with all legislative tools available. Kinder Morgan acknowledges in this document that the province does indeed have the power to stop the pipeline.

Construction of the Trans Mountain expansion could also be abandoned “due to increasing pressure on governments and regulators by special interest groups including Aboriginal groups, landowners, environmental interest groups (including those opposed to oil sands and other oil and gas production operations) and other non-governmental organizations, blockades, legal or regulatory actions or challenges.”

In addition, “market events specific to Kinder Morgan, the Company or the Business could result in the deterioration of Kinder Morgan’s reputation with key stakeholders,” the prospectus warns.

“In particular, Kinder Morgan’s reputation could be impacted by negative publicity related to pipeline incidents, unpopular expansion plans or new projects and due to opposition from organizations opposed to energy, oil sands and pipeline development and particularly with shipment of production from oil sands regions that are considered to increase GHG emissions and contribute to climate change.”

On the bright side, if climate activists are successful, perhaps Kinder Morgan can salvage its marine terminal.

1. “The Business is subject to significant operational risks, including those relating to the breakdown or failure of equipment, pipelines and facilities; releases and spills; operational disruptions or service interruptions; and catastrophic events.”

This last section is pretty scary. It confirms everything intervenors tried to raise during the biased NEB review (that Prime Minister Trudeau and Premier Clark both rubber-stamped).

“There are a variety of hazards and operating risks inherent in the transportation and storage of crude oil, such as: leaks; releases; the breakdown or failure of equipment, pipelines and facilities (including as a result of internal or external corrosion, cracking, third party damage, material defects, operator error or outside forces); the compromise of information and control systems; spills at terminals and hubs; adverse sea conditions (including storms and rising sea levels) and releases or spills from vessels loaded at the Business’ marine terminals; and catastrophic events including but not limited to natural disasters, fires, floods, explosions, earthquakes, acts of terrorists and saboteurs, cyber security breaches, and other similar events, many of which are beyond the control of the Company, the Business and Kinder Morgan.”

“Some climatic models indicate that global warming may result in rising sea levels, increased intensity of weather, and increased frequency of extreme precipitation and flooding. To the extent these phenomena occur, they could damage physical assets, especially operations located near rivers, and facilities situated in rain susceptible regions. In addition, the Business may experience increased insurance premiums and deductibles, or a decrease in available coverage, for its assets in areas subject to severe weather.”

“The occurrence or continuance of any of the risks set out above could result in serious injury and loss of human life, significant damage to property and natural resources, environmental pollution, impairment or suspension of operations, fines or other regulatory penalties, and revocation of regulatory approvals or imposition of new requirements, any of which also could result in substantial financial losses.”

“For pipeline and storage assets located near populated areas, including residential areas, commercial business centers, industrial sites and other public gathering areas, the level of damage resulting from these risks may be greater. In addition, the consequences of any operational incident (including as a result of adverse sea conditions) at the Business’ marine terminals or involving a vessel receiving products from one of its marine terminals, may be even more significant as a result of the complexities involved in addressing leaks and releases occurring in the ocean or along coastlines and/or the repair of the Business’ marine terminals.”

In other words, there is no technology to clean up diluted bitumen once it spills into seawater. Kinder Morgan makes clear that it bears no responsibility for the oil tankers once they leave the dock at Westridge – but warns that a tanker spill could still hurt the company’s reputation, halt its operations and wipe out its investors’ profits.

The company also admits that it may not have enough insurance to cover a serious incident: “The Business is covered by an insurance program which is renewed annually and has $1 billion worth of financial capacity for spill events in accordance with the Pipeline Safety Act. However, the Business’ insurance program may not cover all operational risks and costs and/or may not provide sufficient coverage in the event a claim is made against the Business.”

In 2010 an Enbridge pipeline carrying diluted bitumen burst into the Kalamazoo River in Michigan. Cleanup costs sailed well north of $1 billion – a fact that can’t have escaped Kinder Morgan.

Finally, the pipeline company comes close to acknowledging that its entire business model may be on the way out. A piece of infrastructure like the new Trans Mountain pipeline is supposed to last for at least 40 years. But the company doesn’t sound confident that the world will still be burning heavy oil in the late 2050s.

“Changes in the overall demand for hydrocarbons, the regulatory environment or applicable governmental policies (including in relation to climate change or other environmental concerns) may have a negative impact on the supply of crude oil and other products. In recent years, a number of initiatives and regulatory changes relating to reducing GHG emissions have been undertaken by federal, provincial, state and municipal governments and oil and gas industry participants (including, for example, the decarbonization targets set forth in the Paris Agreement). In addition, emerging technologies and public opinion has resulted in an increased demand for energy provided from renewable energy sources rather than fossil fuels. These factors could not only result in increased costs for producers of hydrocarbons but also an overall decrease in the global demand for hydrocarbons.”

What’s the point?

So why go through this whole song and dance to raise cash for a project that even Kinder Morgan agrees is a long shot? The answer may lie in an investor call held just before the B.C. election.

Financial blogger David Alton Clark asked Kinder Morgan reps what would happen if the project were abandoned. “It would certainly be a major setback, but with ground not broken yet, KMI could direct most of the cash we would use for this project to other projects,” Clark reports them saying.

“The investor relations team indicated only $600 million in sunk costs on TMEP presently,” Clark writes. So, how much cash will Kinder Morgan Canada net if next week’s IPO goes to plan? Somewhere between $500 million and $750 million.

I’ll give the last word to Grand Chief Stewart Phillip.

“This company was founded from the ashes and rubble of Enron, a company synonymous with scandal, corporate fraud and bankruptcy,” said the President of the Union of B.C. Indian Chiefs in a news release.

“Today these same reckless cowboys are trying to convince gullible investors to plow cash into a pipeline they know will never be built.”

Image: Burnaby Mountain protest. Photo: Mark Klotz via Flickr

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

I was in my last year of high school when U.S. President George W. Bush decided to invade Iraq. Driven by grief and a sense of helplessness (I couldn’t even vote, let alone in America) I did the only thing I could: I joined protest marches. During that spring in 2003, I watched the crowds grow beyond anything I’ve seen before or since in Vancouver: 10,000 at a rally in January, then 40,000 in February as millions of people across the globe cried out for the President to stop.

It wasn’t enough. The war went ahead, and the whole world is still suffering the consequences. But the outpouring from Canadians was enough to cement the Chretien government’s position against the invasion, despite support from the Canadian Alliance party, led by Stephen Harper. The Alliance subsequently lost the 2004 election.

Today Harper was on Twitter, congratulating President-elect Donald J. Trump:

Congratulations to Donald Trump on his impressive victory. Canada/US partnership is strong. There is much to do, incl moving ahead with KXL.

— Stephen Harper (@stephenharper) November 9, 2016

“KXL” is shorthand for Keystone XL, the oil sands pipeline blocked by the Obama administration amid backlash from Nebraska ranchers, U.S. climate activists and Native American tribes.

Keystone is not the only fossil fuel mega-project supported by President-elect Trump, who famously believes that climate change is a hoax perpetrated by the Chinese government to undermine the U.S. economy. Trump has given his blanket support to fracking, drilling, coal mining and oil transport, vowing to cut regulations, roll back climate action and walk away from the Paris Accord.

That’s not something we have control over in Canada. But in their grief and helplessness, I predict Canadian voters will inflict heavy consequences on politicians who align themselves with Trump’s policies, including his apocalyptic vision of a fossil-fueled future.

There are other lessons from Trump’s victory — and Hillary Clinton’s defeat — that should give Canadian politicians pause. Last night was a stark repudiation of old-school establishment politics. Anyone still relying on big-ticket fundraisers, pork-barrel cronyism, traditional polling or friendly media outlets should be very worried. There’s a backlash building, and it transcends the traditional political spectrum.

Justin Trudeau and Christy Clark’s cash-for-access dinner parties, friends in high places and we-know-best approach to policy are reminiscent of the Democratic Party when it was riding high. That puts Canadian liberals in a tough spot. If they alienate grassroots conservatives with their lavish spending and elitist ways — but also alienate progressives by aligning their pipeline plans with Trump’s pro-oil, anti-science administration — they’re in big trouble.

I don’t want to diminish the tragedy of what happened in the United States last night. My American friends and many Canadians are in tears today, fearful for how a Trump presidency will hurt women, the LGBTQ community, Black, Indigenous and Latino communities, Muslims, Jews, veterans, people with disabilities. Sadly, even the downwardly mobile white people who gave Trump the win are likely to suffer further once he takes power.

But the same combination of disenfranchisement and cheap digital technology harnessed by Trump’s campaign also gave us Bernie Sanders and Standing Rock.

.@JustinTrudeau & @ChristyClarkBC’s cash-for-access is reminiscent of the Democratic Party https://t.co/J82ZdY7pDD #bcpoli #bcelxn17

— DeSmog Canada (@DeSmogCanada) November 14, 2016

We’re entering an era of populist, mobile-driven movement politics. As Trump toured the “Rust Belt” of America in the final days of the campaign, he told workers in each factory how many jobs they had lost. It was another reminder that all politics is local. If we can find a way to use communications tools to harness that ground-level feeling of having your home destroyed by faraway elites, I think we stand a fighting chance.

After all, there’s a reason Mr. Harper is cheering on Trump from the sidelines rather than the Prime Minister’s office. His policies created an existential threat for thousands of voters — First Nations families living in grinding poverty, students and young workers with no economic future, British Columbians defending their health and safety from the global oil and coal industry. Those people rose up and tossed him out.

The key is to tap into that emotional reality without scapegoating our neighbours. We need to direct what are legitimate feelings of fear and anger toward the people who hold real power over our lives.

Unlike the Iraq War, we actually can slow down the destructive force of climate change with local action. That’s what threatens coal plants in China as people lash out against an authoritarian regime that is choking their children with toxic ash. On the supply side, Trump’s emergence as the pro-coal, Big Oil boogeyman could spur a lockdown on carbon exports, especially in the Pacific Northwest.

Reducing dangerous climate pollution means keeping coal, oil and methane in the ground. That will come down to local resistance — political, legal, maybe physical. And the more President Trump cracks down on protesters, the harder he pushes to build pipelines through tribal land, the more I think he will galvanize opposition around the world.

The storms are coming. As our glaciers deteriorate, drought and wildfires intensify, we face a tipping point every bit as dangerous as that spring in 2003. We can’t afford to get this wrong. Having a monster in the White House does not absolve us of the moral obligation to keep fighting, wherever we call home.

This article originally appeared on Dogwood's website.

Photo via Alex Hansen on Flickr

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

This article originally appeared on the Dogwood Initiative website.

“Oil to tidewater.”

It’s an industry mantra happily adopted by politicians — and even some environmentalists. But ask yourself this: what happens when you pump more product into an oversupplied market? Answer: the price goes down.

Who benefits from cheaper crude oil? First, the customers — like China’s state-run heavy oil refineries. And later, competitors with lower overhead, like Saudi Arabia.

You’ve probably heard these twin arguments before:

1. Canada’s oil would fetch ‘global prices,’ if only it could access ‘tidewater.’
2. If we approve pipelines to the coast, the ensuing bonanza will make us all rich.

Let’s address each of these political talking points in turn.

What’s the ‘Global Price?’

The first thing to remember is that pipelines don’t magically add value to crude oil. What they do is reduce transportation costs from point A to point B, allowing the seller to pocket a few extra dollars per barrel.

The real problem for Canadian oilsands producers is that prices all over the world are low. If oil is selling for $45 and it costs you $46 to dig up a barrel of oil, no pipeline can fix that.

Worse, we’re talking about heavy oilsands bitumen, which is worth even less than the global “price of oil” you see quoted in the newspaper.

That’s because oilsands crude is heavy, sticky and high in sulfur, which means you need more lube to get it through pipelines and special refineries to turn it into gasoline.

Most refineries in Canada are not set up to chew through heavy oilsands bitumen. It would be like trying to fuel up your grocery getter with creosote: bad idea. So we export this low-value crude, mostly to the United States, while importing lighter crude and fuel products.

For a real comparison, we have to look at another sea-traded heavy crude. Mexico has a blend comparable to oilsands bitumen called “Maya.” The Alberta finance department tracks the average price spread between the two in a graph they update every month.

Canada is the blue line. We’re chasing the green line:

What would happen if oilsands producers hit their expansion targets, and put all that heavy crude on tankers?

The current oil price slump, which you can see started in summer 2014, was triggered by an oversupply of global markets. Oil producers were pumping out about two millionbarrels per day more than people needed.

Hang on. Enbridge Northern Gateway is designed to carry 525,000 barrels per day. Kinder Morgan’s Trans Mountain expansion would carry 890,000. And Energy East would carry a whopping 1.1 million barrels per day.

“We’re in favour of all pipelines, to be honest,” Alberta energy minister Marg McCuaig-Boyd told the Edmonton Journal in April. “We see the need for more than one pipeline, and what helps one will help another.”

If the Alberta government could wave its magic pipeline wand and build all three of these projects, 2.5 million barrels of heavy crude would flood overseas refineries. With demand growth slowing, this would put downward pressure on prices.

Who Would Benefit?

Subtract the corporate welfare our governments give to oil companies, the billions in damage caused by climate change and the public cost of oil spills. Imagine for a minute the oil companies get their way and sell a whole bunch of crude in Asia at rock-bottom prices. Who benefits?

Not British Columbians, that’s for sure. We get no royalties and not even a guarantee of temporary construction jobs.

The federal government might at least break even, by collecting more income tax from oil workers.

The Alberta government has given itself no other choice. With no sales tax and an electorate hostile to tax in general, Albertan politicians depend on whatever oil royalties they can get to pay for social services.

The real winners would be the state-owned refineries in China, which would get a reliable supply of cheap feedstock. That’s why the government in Beijing has been pushing for these pipelines for 10 long years. And sourcing that crude from Canada would come with a strategic geopolitical bonus.

Dire Straits

With 21.1 million passenger vehicles sold last year and the world’s largest active military, China goes through a lot of oil: 11 million barrels a day.

The majority of that is imported through two geographic choke points: the Strait of Hormuz and the Strait of Malacca. That makes China’s rulers nervous, which is why they’re expanding overland oil and gas pipelines — and looking to Canada as a future supplier.

U.S. Department of Defense

We could help ease China’s reliance on those contested shipping lanes, but it appears increasingly doubtful prices will climb again to the levels that had oil producers rubbing their hands at the prospect of West Coast exports.

In 2012, the pro-pipeline Fraser Institute predicted the Enbridge Northern Gateway pipeline would allow oil producers to make an extra $2.50 more per barrel  than if they sold in the U.S. Yes, that’s the pot of gold at the end of the “tidewater” rainbow: a toonie and two quarters per barrel.

Since then the pace of growth in China has slowed while global oil supply has expanded — thanks in part to fracking technology. More worrisome, from the perspective of Canadian oil companies, is the strategic shift by Saudi Arabia.

The End of the Oil Age

“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” That prophecy came from the Saudi oil minister, Sheikh Zaki Yamani, in 1973.

In February 2016, Yamani’s successor took the idea a step further. Ali al-Naimi told a crowd of oil executives in Texas why, despite low prices, his country refused to turn off the taps: “We’re going to let everybody compete.” Addressing investors in high-cost deposits like the oilsands, al-Naimi said “inefficient, uneconomic producers will have to get out.”

The Saudi regime slaughters its own citizens and harbours religious extremists. It is, by all metrics, repressive, brutal and corrupt. But when it comes to the realpolitik of oil markets, the Saudis have an advantage. They can pump it out of the ground cheaper than anyone else.

With climate treaties coming and electric transport set to cut into oil demand, the Kingdom is not counting on the return of $100 prices. Instead, it’s planning to crank up production even further, to wring every last drop out of the sand before the rest gets locked underground forever.

What’s becoming clear is that Canada is pursuing the same strategy, despite having a product that costs more to dig up and sells for less.

Under relentless pressure from oil lobbyists, politicians of all ideological stripes have accepted the industry’s logic: just pump more crude and pray for higher prices.

Let’s get real. These pipelines are not nation-building projects. They are catheters designed to drain a giant pool of carbon as cheaply as possible, so oilsands companies can keep the lights on for a few more years.

The irony is that flooding the market with cheap crude would make it less likely for prices to recover. That’s fine for the Saudis, who are happy to compete in a low-price environment. But it’s a poor long-term strategy for Canadians.

Approving Enbridge or Kinder Morgan’s oil tanker terminals will lay the path for a furious final expansion of the oilsands, before creditors stop lending money and the heavy-oil producers start going bankrupt.

We can’t change the end-times mindset of the global oil industry. But we can give our politicians a reality check.

For more on a provincial vote on oil tankers visit LetBCvote.ca.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

This article originally appeared on the Dogwood Initiative blog.

With final arguments in the Kinder Morgan pipeline review underway in Burnaby, a top Chinese official is using the moment to offer Canadians a deal. During his visit to Ottawa last Friday, Han Jun, China’s Vice-Minister of Financial and Economic Affairs, said the world’s second-largest economy would be willing to sign a Free Trade Agreement with Canada — but only if we build a pipeline to the West Coast.

Signing an FTA, Han suggested, would give Canadian agriculture and energy producers greater access to China’s domestic market. In return, Beijing also wants restrictions lifted on takeovers of Canadian companies by Chinese state-owned enterprises (SOEs).

China has been working to gain access to Canadian oil reserves for more than a decade. As Enbridge’s first partner on Northern Gateway in 2005, state-owned PetroChina pledged to purchase up to half of the pipeline’s capacity, but became frustrated by delays and eventually pulled out of the project.

In the years following, China’s SOEs invested billions into the Canadian oil patch, culminating in the 2013 purchase of Nexen by the Chinese National Offshore Oil Corporation (CNOOC) for $15 billion. (In a tragic coincidence, hours after Han spoke in Ottawa, an explosion at Nexen’s Long Lake facility killed one worker and left another critically injured.)

After the Nexen takeover, which prompted concerns about China’s human rights record, labour practices and one-way approach to investment, Prime Minister Stephen Harper brought in restrictions on future purchases of Canadian firms by Chinese SOEs. Angered by the gesture, the Chinese administration shelved negotiations on a Canada-China trade deal.

Now Beijing is back, once again dangling the prospect of free trade. Right on cue, two friendly think tanks — the Canada-China Business Council and the Canadian Council of Chief Executives — released a report arguing that a trade deal with China would boost Canadian exports by $7.7-billion over the next fifteen years and create 25,000 additional jobs.

“During the term of Prime Minister Justin Trudeau there are rare, historical opportunities between China and Canada,” Han told the Globe and Mail. Here in Canada, influential members of the Liberal family are working hard to prove him right.

Having served as Jean Chretien’s former Deputy Prime Minister (as well as Minister of Finance, Foreign Affairs, and Industry), John Manley is perhaps the most visible former Liberal lobbying for closer economic ties to China. Manley is President and CEO of the Canadian Council of Chief Executives, which co-authored the Canada-China FTA report.

The CCCE’s Chairman is Paul Desmarais Jr., whose day job is Chairman and Co-CEO of Power Corporation of Canada. Having employed at different times Jean Chretien, Paul Martin, and Pierre Trudeau, the late Paul Desmarais Sr. was also the founding Chairman of the Canada-China Business Council, which is the other co-author of the above-cited FTA report.

The CCBC is stacked with Liberal heavyweights. Its current Chairman, Peter Kruyt, works for Desmarais at Power Corporation, while its Vice Chairman is former Liberal Justice Minister Martin Cauchon. The CCBC’s President is Peter Harder, a highly-respected former federal civil servant. When Justin Trudeau needed an experienced set of hands to oversee his transition into government, he called Harder.

None of this is to suggest that further trade with China is in itself a bad idea. But the terms on which we negotiate such a deal must be fair to Canadians, as well as uphold the country’s duties to First Nations. By cheerleading publicly for an FTA, old-guard Liberals like Manley and Desmarais increase the pressure on Trudeau to cut a quick deal on China’s terms.

Don’t forget, any new trade deal would take effect in addition to the Canada-China Foreign Investment Promotion and Protection Agreement ratified by the previous government. The FIPA, from which Canada cannot fully withdraw for the next 30 years, locked in more wide-ranging investment rights for Chinese companies than Canadian firms get in China. That’s why signing the FIPA before negotiating a Free Trade Agreement was a mistake by the federal government, according to one of the treaty’s most vocal critics.

“The sequencing works in China's favour,” says Osgoode Hall law professor Gus Van Harten. “China is the capital exporter in the relationship, so it has the greater interest in a FIPA that provides special rights and protections to each country's investors in the other country. I would say that, with the FIPA, the Harper government gave away one of Canada's bargaining chips to get a favourable trade deal. Now we should be going into trade negotiations with a view to repairing some of the flaws in the FIPA, which will not be straightforward or easy.”

Among the problems with the FIPA — at least for Canadians concerned about environmental laws or labour standards — is the right of Chinese corporations to sue Canada over decisions by courts or legislatures that are seen to interfere with their investments. These investor-state disputes are settled in secretive international tribunals overseen by for-profit arbitrators, and can force host countries to pay damages in the billions of dollars. (For more on the Canada-China FIPA, see Sold Down the Yangtze by Gus Van Harten).Add up the lopsided terms of the FIPA and the sudden pressure on Trudeau to conclude a Free Trade Agreement and the picture becomes clear. China intends to use this next round of trade talks to get what it has wanted for more than ten years: ownership of Canadian energy assets and secure access via pipelines and supertanker terminals on the West Coast.

Let’s curtail any accusations of Sinophobia, right here and now. My family was the victim of the same ‘yellow peril’ discourse that has simmered below the surface of B.C. politics for more than a century. This is not about racism toward Chinese people. This is about protecting our sovereignty — Canadian sovereignty, B.C. sovereignty and Indigenous sovereignty — from a powerful international trading partner.

Prime Minister Trudeau’s job is to balance the pressure coming from the likes of Han Jun, John Manley and Paul Desmarais Jr. with the legal and political realities here in British Columbia. Just last Monday the B.C. government came out in opposition to Kinder Morgan because the company has no credible plan to clean up toxic, sinking bitumen. Municipalities and First Nations around the Salish Sea applauded the province’s move.

Then on Wednesday the B.C. Supreme Court delivered the game-changing Gitga’at ruling, concluding that B.C. erred in signing away its duties of consultation around Enbridge’s Northern Gateway proposal. That ruling has clear implications for theKinder Morgan review, which relies on the same “Equivalency Agreement” between B.C. and Ottawa. Pipelines, as it turns out, are not the exclusive domain of the federal government.

As Beijing ramps up its campaign for a West Coast pipeline approval, our job will be to support those Members of Parliament looking to do right by their constituents — and prevent another cave-in like what happened with the FIPA. Simply put, if the cost of a trade agreement involves dangerous bitumen-laden supertankers on our coast, then the people of B.C. aren’t going to accept the terms. We have just under two months to make that clear before Trudeau heads on his first trade mission to China.

Image: Prime Minister Photo Gallery

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This post originally appeared on the Dogwood Initiative blog.

I should confess: I talk to lamp fixtures.

I wink at ceiling vents, sing to the dashboard in my car, apologize to the people eavesdropping on my phone calls for how boring my conversations are.

I can’t pinpoint when this running joke began, but it was sometime after I left television journalism and began to publicly criticize the government. Now that I work at Dogwood Initiative — where we’ve actually been the target of homeland surveillance — the joke is less funny.

Last week Dogwood organizers testified at a secret hearing of the Security Intelligence Review Committee — the “watchdog” tasked with keeping CSIS on a leash. We allege not only that Canada’s spy service broke the law by gathering information on peaceful civilians inside Canada, but that government spying has put a chill on democratic participation.

Do you know that feeling, that you’re being watched? It’s like when you park your vehicle in a bad spot and have to walk there after dark. Or you come home after a trip and the door is unlocked. Or you peer into the webcam on your phone or computer and wonder, is anyone there?

This spring I couldn’t shake that creepy sensation. I told myself I was being silly, that I had nothing to hide, that all my interesting consumer data is swept up by marketers already. But the feeling wouldn’t go away, so I sent CSIS a request under the Privacy Act to see if they had a file on me.

A few weeks later a brown envelope arrived from Ottawa with my address hand-written on the front. Inside was a single, watermarked page with the Canadian Security Intelligence Service logo at the top.

“Dear Mr. Nagata,” it began. “The personal information bank listed below was searched on your behalf with the following results:

(CSIS PPU 045) – Canadian Security Intelligence Service Investigational Records — The Governor-in-Council has designated this information bank an exempt bank pursuant to section 18 of the Privacy Act. If the type of information described in the bank did exist, it would qualify for exemption under section 21 (as it relates to the efforts of Canada towards detecting, preventing, or suppressing subversive or hostile activities), or 22(1)(a) and/or (b) of the Act.”

I looked up the exemptions in the Privacy Act. It says agencies can refuse to release information about “activities suspected of constituting threats to the security of Canada,” including details “that would reveal the identity of a confidential source of information.”

In other words, I may be under investigation by CSIS. If I am, they can’t tell me — because it might blow the identity of a source. Other friends and organizers have received the same letter. 

Let’s rewind to January 2013 when along with allied groups, Dogwood helped organize an unprecedented number of people to participate in a public review of the Enbridge Northern Gateway project. Most governments would view that as a good thing. Our government sent federal agents after us.

Thanks to U.S. intelligence whistleblower Edward Snowden, security researchers at Queen’s University and journalists at the Guardian, Vancouver Observer and other outlets, the picture has slowly become clear: CSIS and other agencies in Canada see peaceful opposition to private oil company projects as a threat to national security.

We found out long after the fact that a Dogwood-organized meeting in a church basement in Kelowna came under federal surveillance. Later, it appears CSIS agents shared intelligence they had gathered with oil patch executives at a secret briefing sponsored by Enbridge.

Let me try to explain why this makes me so angry.

My dad’s parents were born in Vancouver and grew up speaking English. But because their folks had emigrated from Japan, in 1942 the whole family was reclassified as a threat to Canada. Everything they couldn’t fit in a suitcase — land, houses, shops, boats, farm tools — was seized and auctioned off. More than 25,000 men, women and children were rounded up and deported, put in prison camps or on remote work sites for the next four years.

It emerged after the war that the RCMP had never actually considered Japanese-Canadians a threat. It was the politicians who wanted a scapegoat. Our community has had a wary relationship with the Canadian government ever since. It’s hard to fully identify with a country that has shown you just how fragile your rights are as a citizen.

Still, I tried. After university I volunteered for the infantry reserve. I wanted to be proud of my Canadian identity, to wear the flag on my shoulder, to defend our values at home and overseas. Ironically, they tried to recruit me to do intelligence work in Afghanistan.

Instead I got a job doing radio journalism, ending my army career before it really began. I was disappointed to leave my regiment, but glad to be defending Canada and the public interest in a different way.

What I’m saying is, I work with Dogwood Initiative because I’m a patriot.

I believe in a country where power comes from the people. Where politicians are held accountable to their constituents. Where decisions are made together, not forced down our throats. And yes, where you need consent from First Nations and British Columbians if you want to build a pipeline to an oil tanker port on our coast.

I believe citizenship means thinking for yourself, not just blindly repeating what some politician wants you to say. I believe there’s a difference between our national interest and the interests of state-owned oil companies in China, or pipeline executives sitting in Houston. And I believe that Canada needs to plan for the threats to our economy and security created by climate change — not make them worse.

If you agree with any of that, then I guess we’re both enemies of the state.

The language is ridiculous, but don’t forget — it always starts with language. At a recent event in Vancouver South a Mandarin-speaking woman wanted to sign our Let BC Vote pledge, but explained that she was about to write her citizenship exam. She didn’t want to anger the government.

I laughed it off as paranoia. Sure, there are countries around the world where politically inconvenient people disappear. Secret agents torment families. Peoples’ careers and reputations are ruined. But we tell ourselves that’s not supposed to happen in Canada.

Well, here’s the ugly truth: she’s not wrong to harbour those fears. This country was built on cultural genocide. We invaded territory, stole children, wiped out languages — all of this was official government policy. Canada really did impose a racist head tax on immigrants. And in the First and Second World Wars thousands of citizens were stripped of their rights and property and interned for years in prison camps. These are difficult events to come to terms with, but they’re part of our history.

The only thing protecting us from such abuses today are limits on state power. These checks and balances are not given to us — they had to be fought for. Our job is to guard them vigilantly from the political and corporate interests that would weaken our democratic institutions to their own advantage.

This is one of those moments.

It’s becoming clear that oversight of spy agencies in Canada is dangerously weak. Dogwood only found out about the Kelowna incident long afterwards, by fluke. We have no way of knowing what other events or communications CSIS or other agencies have monitored. But we do know one thing: the situation is about to get worse.

Bill C-51, the government’s so-called antiterrorism law, beefs up the powers of Canada’s clandestine agencies to violate our constitutional rights — with no improvement in transparency or accountability. The violations we allege happened long before C-51 was on the books. Our spy agencies are already breaking the law, because there are no real consequences.

Last week’s hearing were far from perfect. The contents are secret, closed to media and the public. The adjudicator hearing our case is a former director of the TransCanada pipeline company. But it’s a good thing we have this opportunity, however fleeting, to hold Canada’s spies to some degree of accountability. It’s also a reminder of what’s at stake in the current election.

We can go in one of two directions as a country. We can vote to give even greater powers to spy agencies to violate our rights and freedoms. Or we can vote for rational civilian oversight: measures that balance the need to keep our population safe with the need to know how spy agencies are spending public money — and whether they’re obeying Canadian law.

The choice is yours. I invite you to sign the BC Civil Liberties Association “don’t spy on me” petition at SecretSpyHearings.ca. Ask your local candidates where they stand on government surveillance. Make sure they understand it's an election issue.

Above all, please get out and vote. It’s still the most dangerous act of defiance you can possibly undertake.

Image Credit: 707d3k via Flickr

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This is a guest post by Kai Nagata, energy and democracy director at the Dogwood Initiative. 

Climate change shouldn’t be a left-wing versus right-wing political issue. I might take some flak for saying this, but “progressives” who claim only they have the correct ideas to fix the world are guilty of terrible hubris. And for "conservatives" to align themselves uncritically with global oil corporations betrays either intellectual laziness or cowardice.

All of us have a moral obligation to leave things better off for our kids. We might have different priorities or policy ideas, but at the end of the day we have to share this country — and parliament. And whether you believe in climate change or not, its social and economic impacts will eventually affect all of our lives.

The choice we face is whether to hunker down into polarized political camps, or reach out and find ways to work together.

This month I attended the Manning Networking Conference in Ottawa for the third year in a row. It’s the country’s preeminent annual gathering of conservative activists, academics, campaign experts and candidates — and I look forward to it every spring.

Rex Murphy addressed the crowd at the Manning Networking Conference. Photo: Corporate Knights

People ask me “but you oppose oil tanker projects. What are you doing at a conservative conference?"

Why do conservatives in British Columbia oppose oil tankers? For one thing, they believe the integrity of our democracy is more important than the profits of Chinese state-owned oil companies — or a bunch of ex-Enron executives in Houston. The same conservatives believe the rights of local people should trump the reelection plans of politicians in Ottawa. And many believe that if we can’t find a way to use our oil safely and fairly, we should leave it in the ground for another day.

There’s nothing conservative about blanketing the sea floor in bitumen because we couldn’t figure out how else to balance a budget. And there’s nothing conservative about building bigger and bigger fossil fuel infrastructure when common sense tells us we need to head in a new direction.

Don’t take my word for it. Look up Bob Inglis, a former six-term Republican congressman from the “reddest corner of the reddest state in America:" South Carolina. Lauded by pro-life groups and the National Rifle Association, Inglis is very conservative. But in 2010 the Tea Party (backed by oil billionaires Charles and David Koch) helped a rookie Republican challenger defeat congressman Inglis in a primary.

Why? According to Inglis, it’s because he started raising the alarm about climate change.

Inglis spoke on a panel at the Manning conference called “Market-based Environmental Conservation.” His argument, delivered in a folksy drawl, was this: as mega-storms, drought and sea level rise kick in, fearful citizens will demand a response. Conservatives can either get ahead of the emissions curve now, or watch their nightmare come to life: big government running everyone’s lives.

Tax polluters now, Inglis says, and you create incentives for companies to emit less carbon. Keep pretending climate change is fiction, and the only option left when things get really bad will be top-down management by the state – the socialist response.

In reality we need a combination of both. We need government policy makers and private-sector innovators pulling in the same direction. Right now we have political gridlock — and emissions keep rising. Getting past that is going to require a bit of Naomi Klein, a bit of Bob Inglis.

It’s a myth that conservatives don’t care about the environment. Our province is full of good-hearted gun owners in big pickup trucks who spend a lot more time outdoors than the typical Gastown activist. These hunters and anglers, farmers and ranchers know that humans have a duty to steward the land. They agree with Preston Manning that “conservatism and conservation come from the same root.”

One of Manning’s friends, former Conservative cabinet minister Monte Solberg, explained this worldview to conference-goers in terms I found quite moving:

“That’s the milieu I grew up in: Conservatism and conservation. Conservatism was about human flourishing, families and faith, markets and individual freedom,” said Solberg, who grew up in rural Saskatchewan and Alberta.

“But it was also about stewardship of the land, respect for nature, and an acknowledgement that our surroundings and the kind of communities we grow up in matters, because our communities shape us. That’s a conservatism that is integrated and whole, and it’s still the conservatism I believe in.”

Glacier Lake in Banff National Park. Photo: National Parks Conservation Association

Solberg advocates conservation projects as a bridge between political solitudes. You know, like sloshing around in waders planting marsh grass or counting birds. Whether you think climate change is “hokum,” as Solberg puts it — or the biggest problem ever to face humanity — we need to roll up our sleeves and get used to working together.

“Restoring wetlands, forests and prairie does much more than just create habitat for animals, or clean the air, land and water, or mitigate flooding, or provide water for livestock, or give us new places to camp, hunt and fish,” says Solberg. “Wetlands, prairie and trees naturally sequester huge amounts of carbon dioxide.”

Is that enough to fix the whole world? Perhaps not. But conservation is something people can get behind no matter where they sit on the political spectrum. And going for a hike sure beats shouting at each other from different ideological silos. I think Solberg is offering a worthwhile idea that could make it easier to tackle more difficult tasks later on, like drafting collaborative legislation.

So, progressive comrades, I’m tired of hearing that “Stephen Harper is destroying Canada.” It may feel satisfying to say around the dinner table or brave to post on Facebook, but it just makes Conservative organizers chuckle. If your goal is to elect somebody else, you’re going to have to convince people who voted for a Conservative MP in 2011 that their representative has done a poor job on their behalf and no longer deserves their support. That conversation has to start with mutual trust and respect.

Conservative friends, if you think letting global energy companies write their own rules is responsible governance — well, you’re just being taken advantage of. Alberta tried that and look where they ended up: public finances a mess, nothing in the Heritage Trust Fund, treaties broken, water polluted and reputational damage worldwide (ironically now restricting market access in the U.S. and Europe).

If we’re going to ride out the next few decades without major disruption to our lives due to climate change, burnable fuels will need to be conserved. Each province will need a plan for how to ration out that fossil energy long enough to power the transition to cleaner sources of power. And we’ll need a strategy to integrate those policies at the national and continental level.

Waiting around for the perfect solution is not an option. We have to find whatever common ground will be supported by a democratic majority of citizens at the local level and start from there. Don’t worry, saying the words "climate change" doesn’t make you a pinko: look at Bob Inglis. And taking inspiration from Monte Solberg doesn’t make you a progressive traitor.

At the end of the day, energy use is not a left-right issue. You can still read Ayn Rand by the light of a photovoltaic cell — just as people enjoyed Das Kapital next to their coal-oil lamps.

Image Credit: Typhoon Halong via NASA

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It's up to the U.S. President to decide whether the cross-border leg of the Keystone XL pipeline is in the national interest of his country. Ultimately, his criteria are less scientific than political. Does he stand to lose more by alienating those who support or oppose the project?

With midterm elections coming up in November, Obama doesn't have time to worry about Canada's hurt feelings. Our economy, environment and opinion are very low on his list of priorities.

But the strongest pro-Keystone arguments on the American side raise an uncomfortable question: if the pipeline is approved, who benefits a little bit — and who benefits a lot? In other words, who gets the short end of the stick?

Houston-based Forbes contributor Loren Steffy lays out the business logic behind Keystone XL with a clarity you'd be hard-pressed to find on our side of the border:

"[In 2011], for the first time in six decades, the U.S. exported more gasoline and diesel than it imported. The bulk of the exports went to Mexico, Canada and Brazil. Mexico and Canada, even without Keystone, are two of our biggest suppliers of crude (Canada is No. 1; Mexico is No. 4 behind Saudi Arabia and Venezuela). Gasoline, of course, is more expensive than crude, so we are in effect importing raw materials, adding value, and selling it back at a higher price – and maintaining U.S. jobs in the process."

Catch that? It sounds a lot like the old story about exporting logs and buying back the furniture. Our domestic politicians tell us we're an "energy superpower," but to hear U.S. analysts describe it, we're more of a convenient resource colony.

Canada is a rare duck indeed: a developed nation that is also a net exporter of crude oil. But the U.S. is catching up, thanks to a different kind of oil. The crude coming out of North Dakota's Bakken shale is light and sweet. Canada's is higher in sulphur and carbon content, while lower in energy and therefore value.

We produce light crude too, but not enough to match domestic consumption. And we don't have the refineries to handle our own heavy oil. So we import light crude and gasoline to make up the difference, and send our low-grade stuff to the U.S.

We're producing so much oil sands crude that we've overwhelmed cross-border pipeline capacity. Now the industry is stuck in a Catch-22. Profit margins have dropped dramatically. To reassure investors, bitumen miners talk about dramatically expanding production. But the more we produce, the more we exacerbate the supply glut.

The industry's best hope right now lies in pipelines like the Keystone XL.

Back to Barack Obama. He doesn't care about the woes of Canadian oil sands producers. His job is to calculate the U.S. national interest — or at least a version he can sell to voters. Last week's State Department environmental impact report gave him more political cover on the question of increased carbon emissions.

Yes, operating the pipeline would be like adding 300,000 cars to the road. Yes, Canadian crude is worse for the atmosphere than the other heavy grades it would displace. But, the report argues, without Keystone much of the same oil would find its way to the same refineries by rail — creating even more emissions than the pipeline, and significantly increasing the risk of accidents.

Rejecting Keystone, the report finds, won't stop Canadian producers from digging up oil. The question is how they get it to customers.

"Keystone is important to the U.S. because it amounts to an energy insurance policy," wrote Loren Steffy in Forbes. "Keystone gives us improved access to Canadian crude, which, with or without Keystone, is likely to remain some of the cheapest in the world."

Is it smart for the president to lock in a stable supply of cheap oil from an eager neighbour? Yes. Is it smart to provide short-term jobs for U.S. construction and refinery workers? Yes. Will the political benefits outweigh the backlash? It's a good bet Obama will decide yes.

The voters who will be most upset are probably the Nebraska ranchers whose lands will be expropriated. But they're already Republicans.

Many backs will be slapped and victory cigars chomped in Calgary and Ottawa, the day Keystone XL is approved. Stephen Harper and his cabinet ministers will, no doubt, claim full credit.

Who will be the real winners? Oil companies, certainly. The Government of Alberta, which badly needs the royalties.

On a more modest level, perhaps the Canadian treasury. More than half the federal government's revenue now comes from personal income tax. So the bean counters will be happy at the prospect of higher wages in the oil patch, so long as wages don't drop in other parts of the economy.

But remember, oil and gas together make up less than 7% of Canada's GDP. The entire sector pays 4.2% of total corporate taxes. And it provides only 3% of the jobs in the country. What's good for oil sands companies is not necessarily the same as what's good for the nation.

How about ordinary Canadians? Perhaps we'll feel a fleeting sense of pride that our low-grade crude has found a loving home in the big Gulf Coast refineries. Then we'll go fill up our gas tanks.

Image credit: www.keystone-xl.com

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It turns out we have yet to reach peak oil, after all. And in this topsy-turvy world where the U.S. now produces more oil than it needs to import, it may be Prime Minister Stephen Harper's power that has peaked instead. Why? Because in his quest to build an "energy superpower," Harper tied his political fate to the price of Canadian crude.

Harper won his long-coveted majority in May 2011, with a simple promise to energy producers: he would do whatever necessary to get their wares to market. Higher export prices would unlock deeper, more marginal reserves. And for the Tories, the resulting spurt of growth could pay for tax cuts, helping to paper over voters' concerns about environmental tradeoffs. But Harper's plan, like a runaway oil train, is going off the rails.

The day before the last federal election, Canadian heavy crude was trading at $82.87 a barrel. Since then the price has gone up and down, only to end up right back where it started. Thanks to fixed-date election laws he himself brought in, Harper has at most 20 months to fulfill his promise to energy producers — or they will find someone else who can.

If your profits depend on getting crude oil to saltwater, you need the right political salesman. Right now those companies are looking for someone who can reboot Canada’s relationship with First Nations, maintain trust with voters and ultimately secure social licence for development. On all three, Harper is poised to fail. His current troubles may be largely self-inflicted, but they were set in motion by events beyond his control.

In the middle of the last decade, a technological revolution in U.S. oil fields inverted the logic on which North America's energy infrastructure was built. Instead of refineries around the edge of the continent sending imported petroleum inland, it's the interior that is suddenly brimming with oil and gas. Eventually those fracked wells will see their production drop off sharply, but for now the U.S. is swimming in high-grade crude. Canada's oilsands, more costly to extract and refine, have lost their lustre in all but the hungriest energy markets.

Harper's decline likely began in November 2011, with a nasty surprise from Barack Obama. The President announced he would push back his decision on the Keystone XL pipeline — indefinitely, it turns out. That "no-brainer" lifeline to heavy-oil refineries on the Gulf Coast was supposed to be open by now, draining nearly half the daily output of the oilsands on its own. That November, Harper met with the commander-in-chief in Hawaii to convey his grave disappointment. "In fact he was furious," reported Maclean's political editor Paul Wells.

According to Wells, "two days after the chat with Obama, at a meeting of cabinet’s priorities and planning committee in Ottawa, Harper handed out orders to a half-dozen ministers. Energy exports were the government’s new top strategic priority."

Why? Because Harper knew his political survival depended on the price of Canadian crude.

One of the people around that table was Peter Kent, who began using his platform as environment minister to gut any laws impeding the energy industry — all the while championing Canada's "ethical" oil. Of course, if refinery operators had the luxury of caring about human rights, they wouldn't buy oil from the places they do. What they care about are price and quality. On both fronts, oilsands producers find themselves at a disadvantage.

Eventually Kent's rhetorical gymnastics wore thin, and the hapless former newscaster was dismissed.

Another cabinet colleague was Denis Lebel, transport minister and Harper's lieutenant in Quebec. On his watch, rail companies ramped up their shipments of crude, in an effort to circumvent the slow approval process for pipelines. Then the Lac-Mégantic disaster struck, killing 47 people and prompting a backlash by municipalities. A week after the flames were finally put out, Lebel was shuffled off the transport portfolio. A string of derailments since has only deepened public anxiety over oil trains.

Another minister at that 2011 meeting would have been rookie MP Joe Oliver, a career investment banker chosen to quarterback the natural resources file. Less than two months after Obama sent the team scrambling for other pipeline routes, Oliver launched his attack on British Columbia's "radical groups," whom he implied were paid agents of shadowy foreign saboteurs. The episode galvanized grassroots opponents, adding friction to proposals across the country.

Seen through this lens, a pattern of events over the past two years comes into focus. The use of CSIS to spy on environmentalists and First Nations, on behalf of oil and gas companies. The use of the National Energy Board to stifle citizen input on project proposals. The use of the RCMP to break anti-fracking blockades at Elsipogtog. The use of millions in public money to buy ads for the energy industry.

With a four-year deadline, Harper bent the mandates of federal ministries and agencies to serve his "top strategic priority." And yet it's doubtful any new pipelines will be under construction before the next election. Meanwhile, international energy markets are shifting. On all fronts, time is running out.

Strongman tactics tend to conceal fear and weakness.

Harper's weakness stems from the pact he signed with energy exporters, while his fear is that voters' perception of Canada's economic performance will come unglued from his political brand. The irony is that one may be helping the other come true.

As University of Alberta economist Andrew Leach points out, despite Harper's outsized focus on oil and gas extraction, that sector now makes up less than seven per cent of Canada's GDP. Since the Conservatives took power in 2006, corporate taxes collected from the oil and gas industry have fallen from eight per cent of the total to 4.3 per cent.

All that political capital spent, for an industry that doesn't even pull its weight. Meanwhile, December's job losses brought the unemployment rate up to 7.2 per cent. Consumer debt has surged, while the income gap has only widened. Even if Harper's pipeline dreams come true, the resulting spike in crude prices could easily create more losers than winners.

It's not true that a rising tide of oil would float all boats. But if the price of Canadian crude falls, so too will Prime Minister Stephen Harper.

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It's a phrase that has wafted up from the oil sands to the airwaves. It pops up in speeches by politicians and editorials by journalists: A "fair price" for Canadian oil. The key to this, we are told, is pipeline access to "tidewater" (another marketing term adopted by media and government).

The basic argument goes like this: A barrel of oil sands crude currently trades at a lower price than other global oil benchmarks. That price gap means Canadians are losing money on every barrel sold. Access to world markets will fetch higher prices, elevating our collective prosperity.

It's a persuasive story, tickling the part of the brain associated with loss aversion. No one wants to bleed money day after day. At the same time it paints a picture of one nation, our fortunes rising and falling in unity. It's good politics. But the reality is more complex. As individuals and businesses calculate whether the risks of these pipelines outweigh the rewards, three broad trends should be kept in mind.

First, what kinds of energy do those global markets want? Second, who can get it there at the lowest price? And most importantly, who wins and who loses if the price of Canadian oil climbs? The answers point to 2014 as a crucial year in the pipeline battle. That's because the window in which these projects are viable may be closing faster than we think.

Comparing apples

If an apple is light and sweet, an orange is more heavy and sour. That's the difference between Western Canada Select (WCS), blended out of oil sands bitumen, and West Texas Intermediate (WTI), the benchmark often cited on the news as "the price of oil." They're not the same product.

As the National Energy Board website explains, "all crude oil is not valued equally. Light oil that is low in sulphur (sweet) is more valuable to refiners than heavy oil with higher sulphur content (sour)." In a chemical sense, oil containing more carbon and less hydrogen delivers less energy — unless refiners inject more hydrogen molecules, which costs them money. So the price gap is partly due to geography, and partly due to a difference in quality.

University of Alberta environmental economist Andrew Leach explains it this way: "People could say, 'Oh, this hotel owner in Red Deer is really getting ripped off. He only charges $120 a night, versus New York, where it costs $500 a night. If only he could get world prices for his hotel room.' But that's not how it works."

Leach, who was appointed last year as the Enbridge Professor of Energy Policy at the Alberta School of Business, says "as far as the world price for Canada's oil, there's a lot of confusion created in general. People mix up geographic discount versus quality discount." Pipelines can help with one, but not the other.

The business case for a pipeline depends on what margins it can create for its clients, the companies shipping oil. The longer the pipeline and the more it costs to build, the more shippers pay to use it. Northern Gateway, for example, has jumped from a $5.5 billion project to $7.9 billion — money Enbridge will have to make back from its customers. On top of that, those producers are factoring in the costs of mining bitumen and diluting it for transport. The bottom line is the price of other countries' crude, against which, in a global market, Canadian oil must compete.

Maya, Brent, meet Barack.

Refineries equipped to handle light, sweet crude must be retooled at considerable expense if they're going to switch to heavy, high-sulphur oil — and vice versa. The argument for the Keystone XL pipeline is that it would carry Canadian crude to refineries on the U.S. Gulf Coast that are currently set up for heavy oil. But those refineries have another supplier, just a short tanker ride away.

Mexico's heavy crude, priced on the Maya benchmark, is chemically closer to WCS and arguably a better comparison for oil sands crude than WTI. Either way, Mexican producers are gunning for the same heavy-oil refineries. "Mexico is recovering from depressed oil outputs, in part due to low investment," says Werner Antweiler, Chair in International Trade Policy at UBC's Sauder School of Business. That's because last month, the country's new president broke a 75-year state monopoly on oil production, opening up underproducing fields to the world's energy giants.

"The shortest path is to refineries on the southern coast of the United States, meaning there could be even more of a glut in the North American market, driving down prices," says Antweiler. Meanwhile, thanks to hydraulic fracturing, the U.S. itself is in the middle of a oil-drilling renaissance. Pipelines and refineries are suddenly awash in lighter crude, from the Bakken formation.

With the U.S. lumbering toward energy independence, some lawmakers argue the country should focus on refining its domestic riches. Others say it's time to break a decades-old ban on exporting crude oil. That's right: Canada, which has no such law against exporting unrefined bitumen, could find itself competing with output from both Mexico and the United States.

Antweiler also points to Venezuela, another heavy-oil producer opening up markets after the death of Hugo Chavez, and even Iran — which could further add to global oil supply as sanctions lift. "These markets change, and they can change quite rapidly," says the economist. "When you speculate on these price gaps persisting, others see that too. Everybody is trying to go after these margins." As easier, higher-quality sources of crude come online, Antweiler is doubtful that prices for Canadian oil will climb for long. "Put it this way. The people who forecast oil markets have gotten it wrong more often than they've gotten it right."

Either way, the long-term trend starts to flatten. The International Energy Agency forecasts slowing growth in the demand for oil as climate change forces the adoption of more natural gas, renewables, and nuclear power.

Oil price differentials before and after the shale boom in the U.S. Kristen Smith, University of Alberta.

Winners and losers

Still, what if the best-case scenario described by politicians comes to pass? The pipelines reach salt water, tankers reach overseas customers, and suddenly the price of Canadian oil jumps. Who benefits then? Oil producers, says Andrew Leach, and government treasuries. But that money will not flow to all parts of Canada equally. "Oil sands royalties are ridiculously complicated," he warns. But the end result is predictably skewed. "Pretty much any way you model the benefit flows, it's all in Alberta. And though I loathe economic impact analysis, if you look at GDP or employment, a lot of it is still in Alberta."

That would be presumably help the province's long-governing Progressive Conservatives, who have drained the Alberta Heritage Savings Trust Fund and racked up a $2.8 billion dollar deficit, which they blame on the bitumen price gap — and massive floods last June.

As for federal taxes, Leach says "I can probably weave you an example where the federal government is better off either way, pipeline or no pipeline." He compares it to suddenly banning wheat exports. "Farmers would be mad and pasta producers would be overjoyed. Would that change the world price for pasta? Probably not. But you would see a transfer of wealth from the food producing sector to processing."

In other words, pipelines giveth jobs, but they also taketh away — in particular, at Canadian refineries. That's why unionized refinery workers pledge to employ civil disobedience if pipeline construction ever proceeds.

Who else loses? Former CIBC World Markets chief economist Jeff Rubin says everyday consumers. As Rubin wrote in the Globe & Mail, "connecting land-locked oil to an ocean is a great outcome for the Suncors, Shells, and Imperial Oils of the world, but what does it do for Canadians filling up at the pumps?" Rubin argues that "as more Alberta oil ends up on the high seas, the more Canadian oil prices will mirror the higher prices paid in the rest of the world. When the price of oil rises, clearly, the cost of gas at your neighbourhood station goes up as well."

Other economists, including Leach and Antweiler, say it's not that simple. However, most can agree on one result: as the price goes up, oil sands operations will expand. Bitumen is complicated and costly to extract. When the price of a barrel falls too far, the product is not worth mining. A report published in December by two former Deutsche Bank analysts calculates that break-even minimum at $65 per barrel. Werner Antweiler says even below $80, most deeper reserves are effectively locked away. But new export pipelines would prompt a surge in new production — at least until the next supply glut.

The showdown

Last month Bloomberg Businessweek magazine called Canada's oil sands a "shaky investment". State-owned Chinese oil companies are frustrated with the slow pace of pipeline approval, voiced most memorably by CNOOC executive Chen Weidong: "It’s the same situation as the leftover single women. It will be the same for the oil sands, they will be outdated." That was more than a year ago. If Chen was right, perhaps the window is already closing.

Certainly a sense of urgency is gripping both camps. On the one side are those with the most to gain from a hypothetical spike in WCS prices: foreign and Canadian-owned oil producers, pipeline companies, and Alberta politicians. On the other side are those who bear the most risk: First Nations, refinery workers, B.C. municipalities, the B.C. government, and citizens concerned about oil spills or climate change. Whether the pipelines are worthwhile depends on one's personal situation.

The proponents spend impressive sums to fund think tanks, ad campaigns, and lobbying — all of which helps push their language into the mainstream. Like a "fair price" for Canadian crude. But in a free market, fairness is determined by the buyer, not the seller. It's curious that journalists and government officials would feel bitumen needs their help to sell. The fact is, if crossing B.C. is not an option, the product will find buyers in other directions. Or it won't.

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Our premier capped off 2013 — the most impressive year of her political career — with a trade mission to Asia, where she hopes to sell fracked-in-B.C. natural gas. Speaking in Tokyo on December 2, Clark offered a startling glimpse into her vision for our province’s economy.

It could be that Clark was simply telling some overseas businessmen what they wanted to hear. Or perhaps her new messaging reflects her true economic beliefs. Either way, British Columbians are about to be offered a false choice.

Here’s what Clark said in a speech at a natural resources conference, according to the Globe and Mail’s Justine Hunter:

“The fundamental challenge for B.C. – and in fact, all developed economies in the world – goes beyond the recent global downturn and a fragile recovery. We need the courage to take a broader and deeper look, and admit the truth about most of the developed economies around the world.”

Amen, Premier. You’re absolutely right. Please continue.

“When was the last time we had real growth? It was the 1950s and ’60s, when 6- or even 8-per-cent growth was the norm.”

Well, okay. Bear in mind, the post-war boom was a different era. The global population only cracked 3 billion in 1960. That year, Canada’s GDP was $2,295 per person. Oil cost less than three dollars a barrel. Even adjusted for inflation, that’s less than a quarter what we pay now. With all that cheap energy, it’s not surprising the economy grew.

“That wealth set a standard for government investments – for infrastructure, for health and education, for social programs.”

Canada’s corporate income tax rate was also 50%. Again, a different era.

“But over the past four decades, economic growth for most developed economies has been more like 2 or 3 per cent at best.”

That’s right. As we’ve burned all the easy, irreplaceable energy, costs have gone up. And because we’re still heavily dependent on fossil fuels, when oil prices spike — the economy slows down. You can’t build infinite economic growth on finite resources. That’s not philosophy, it’s physics.

“So how can we afford to maintain the high standards that were set more than 40 years ago?”

To start with, we could focus on four things: equality, efficiency, education, and energy security.

By equality, I mean sharing wealth in ways that reduce the overall burden on social services. Efficiency means reducing the amount of energy we currently waste. Education means training and retaining more innovators and problem-solvers, so our province can stay competitive. And energy security, frankly, means leaving some of our fossil fuel wealth in the ground. What we do withdraw should primarily be used here at home — to power our transition to a sustainable, low-carbon economy.

Why, what did you have in mind?

“There are two choices. Manage decline year after year – and get by with less. Or take a bold step and grow the economy. I say let’s grow the economy.”

(Cue polite Japanese hand-clapping.)

Did you catch that? This is the great false choice of 2014. Get used to this rhetorical framework, because you’re going to hear it a lot this year: “Either we build more pipelines, or grandma languishes on the waiting list for surgery.” “Either we run more oil tankers down the coast, or close another school.” “Either we frack our own province for the foreign LNG market, or we all shiver in darkness and deprivation.”

It’s blackmail, and it’s premised on three deeply problematic assumptions.

The first assumption is that fossil fuels, including liquified natural gas, will be a fiscal bonanza for the province. The second is that energy exports lead to balanced government budgets, and funding for social services. The third is that 6-8% economic growth, year after year, would be a good thing for British Columbia.

Assumption #1: The LNG bonanza. Simply put, B.C. is late to the party. Russia holds the largest natural gas deposits in the world, with a liquefaction terminal already built and more on the way. Russian companies pay Russian wages, Russian taxes, and operate according to Russian environmental standards. They also share a land border with China, with an agreement to ship gas by pipeline — skipping the entire process of putting it on a boat. Further south, Australia is building seven LNG terminals at once. Meanwhile, Asian countries are in talks to form a buyer’s club, to bargain down the price of natural gas. All of this adds up to lower government revenues than Clark predicts. (Click here to read more from Ben Parfitt in The Tyee.)

Assumption #2: Social services. If you believe that accelerated resource development makes for well-stocked public larders, take a look next door. Alberta, the province with all the oil, has somehow drained its rainy-day fund and fallen into a $2.8 billion deficit. They have the highest wages in the country, but they also have the lowest. A steady flood of new workers is straining government programs and facilities. Strapped for cash, the environment ministry is currently outsourcing enforcement duties to industry. Dependence on commodity exports has been a blessing for producers, but a curse for government. That’s something for B.C. to think about, before we tie our fortunes to LNG or bitumen. (Click here to read more from Graham Thomson in the Edmonton Journal.)

Assumption #3: Infinite growth. This is a fantasy, one that serves politicians more than it serves ordinary people. At 8% growth, the B.C. economy would double in size every nine years. There’s no way our infrastructure could keep up. In fact, it would be a nightmare — for workers, for municipalities, and the environment. Ask planners in Kitimat, B.C.’s latest gold rush town. The fact is, Christy Clark made promises on the campaign trail that were too good to be true. Now she’s grasping for a short-term solution, which is exactly what the fossil fuel industry has to offer. Another spurt of growth, until the market crashes or the resource runs out. Then what — find another, riskier, finite source of energy? That’s no way to run a province. (Click here to read more about infinite growth in the Vancouver Sun.)

To save her own political skin, Clark appears willing to sign our whole province to a Faustian deal. What she fails to realize is that the solutions whispered by energy lobbyists are in fact the source of the problems she now faces as Premier.

“There are two choices. Manage decline year after year – and get by with less. Or take a bold step and grow the economy. I say let’s grow the economy.”

There’s another option, and that’s to focus on the four E’s: equality, efficiency, education, and energy security. What’s more courageous — to do the same thing we’ve been doing for the last fifty years, or to ready our economy for the next fifty? That’s the real choice, the one faced right now by Christy Clark. I hope her bravery is real.

This article originally appeared on KaiNagata.com.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.