Oil refineries are ugly. I suppose it’s hard not to be when your job is to change black goo into a clear liquid— and it's no secret that Canadians have long shunned the refining industry along with the polluting issues that attend it out of fear and revulsion for their impact.
Refineries may have become much cleaner in recent times, but their history is terrible and many of us have long memories.
Unfortunately, this particular prejudice may be leading us down a road that puts even greater pressure on our environment and economy than if we chose to accept and support the concept of refining Canadian oil in Canada.
The Enbridge Northern Gateway, Keystone XL, and other controversial pipeline projects presently under debate are all about moving dirty oil to other countries— and I emphasize dirty. It's so dirty it’s classed as bitumen, which means it must be mixed with other products, mostly toxic solvents, to make it flow in a pipeline.
If it were refined on-site, the environmental threat caused by the pipelines would be reduced substantially.
Also, adding insult to injury, because of its low quality, we sell our dirty oil at a large discount—as much as $40 per barrel less than full market price. A refined product we would get full market price.
A few of the major refining companies who actually want this bitumen have spent billions of dollars in modifications to their plants in Texas, Louisiana, and the Midwest to prepare them for the extra levels of processing raw Canadian oil demands.
The investments, although far away from the source, are deemed sensible because the basic refining infrastructure already exists in these locations, along with shipping facilities to distribute the gas, diesel, and other oil-based products to worldwide markets.
But why doesn't it make even more sense to build new refineries on-site in Alberta and forgo the cost of multi-billion dollar refinery upgrades and massively long and risky pipelines? Is it because the Gulf Coast refineries would then be under-utilized, putting thousands of American jobs at risk?
Americans are starved for manufacturing jobs, and their Congress has put in place some very inviting incentives for the oil industry to create more. Indeed, two new refineries, the first totally new American refineries built in many years, are under construction in North Dakota, just across the Canadian border.
In spite of Canada’s position as an important oil producing and exporting country, we haven’t even created enough refining capacity to supply our own needs—let alone to ship refined products abroad.
The best indicator of this is the fact that a significant portion of the product we are shipping to Texas and Louisiana is—once refined—being pumped into tankers and shipped back to eastern Canada, where it is being sold back to us at full market price. They are buying our cheap oil and selling it back to us at the world price so we are, in effect, paying them to refine our oil, keeping their refineries profitable, and creating jobs for their workers, while we lose jobs and revenue and put our environment at extreme risk from pipeline leaks as part of the bargain.
Is this really the best compromise?
Many parts of Canada are screaming about the loss of manufacturing jobs, yet we don’t appear to consider refineries as a viable alternative, and neither the major oil companies nor our governments are showing leadership to change the situation.
There are three refineries in Alberta, all in the Edmonton area, processing less than half a million barrels a day. A few companies also have “upgraders” but they are primarily for refining dirty oil into a higher grade crude for ease of shipping, and to qualify for the higher world price.
However, it has recently become evident that not only are there no plans to expand this capability but production has also been cut and major expansion proposals have been put on the back burner. Suncor has just this year shelved its plans to build an $11 billion “upgrader” because it is cheaper to ship dirty oil to the United States.
The new upgrader, upon which construction had already begun, would have cleaned up 200,000 barrels per day and was projected to be in operation for up to 40 years, creating many new jobs for Canadians—and that was just to upgrade the bitumen to crude without even refining it to a useable product.
There is one new, homegrown refinery proposal on the table— and I find this truly weird— a group has formed with the goal of building a refinery in Kitimat. They want the multi-billion dollar Enbridge pipeline carrying dirty oil and toxic solvents to be built across the entire province endangering hundreds of watersheds, major salmon rivers, and remote wilderness areas. And when it arrives at the coast, it would then be refined and put it on ships bound for Asian Pacific countries (who are heavily involved in the financing).
At least it would be employing Canadians to refine Canadian oil, but why couldn’t it be refined in the oil patch and shipped by rail to the coast, avoiding a large portion of the risk posed by a pipeline and providing for the flexibility of moving Canadian gas and diesel east to supply our own markets?
The industry and government are desperate to have the Keystone and British Columbia pipelines built. The federal government has even written and pushed through new environmental regulations to facilitate this process, while Alberta has gone so far as to suggest the future financial health of the province rests on its approval.
According to a report issued by CIBC, Canada has lost as much as $25 billion in revenue last year because of production bottlenecks caused by the lack of ability to ship our dirty oil. What no one seems to be talking about is why we are so anxious to ship much-needed, well-paying, long-term jobs to other countries along with it.
A big fuss is being made over the short-term construction jobs and all the revenue they bring (politicians like short-term revenue pumps), and much is being made over the value of the longer-term tar sands projects, but that is pure raw materials mining. What happened to our desire to reclaim the manufacturing jobs we’ve lost abroad?
Why is our government so ready to put our environment at extreme risk and sacrifice thousands of better jobs that go with manufacturing in their haste to achieve quick gains in revenue? They certainly have no problem supporting manufacturing jobs in the auto industry in southern Ontario with billions of dollars in aid, so why are they so anxious to sell out our refining capacity to the United States for a quick buck?
Is this simply about Canadians not liking refineries—or are other factors at work here?