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5 lessons learned from the failure of Keystone XL

5 lessons learned from the failure of Keystone XL

After President Obama labelled Keystone XL a conduit for transporting "dirty" Canadian crude oil through US soil, our Prime Minister responded that he was "disappointed by the decision" but hoped we could still be friends. How's that for a polite Canadian response? Not exactly what most in the energy patch were thinking.

In contrast, Obama managed to congratulate himself for lowering gas prices, doubling oil production and leading the fight on climate change, all in one breath. Perhaps there's something we can learn from our neighbours to the south. In fact, if there's any hope in getting Energy East built, there are many take-aways from the whole Keystone XL experience.

1. Facts don't beat opinion

Most of us would like to believe the old adage "facts beat opinion", but sadly nothing could be further from the truth. If we were a logically-driven species, we would have started building pipelines the day after the Lac Megantic disaster.

❝ At the end of the day, facts and truths should prevail. ❞

- Rick George, former CEO of Suncor Energy

The oil industry made (and continues to make) a huge mistake in assuming that facts would eventually prevail and everyone would soon come to undestand that Canadian oil is on par or better than oil from many other countries with respect to environment, safety and human rights. 

While we all agree energy is an integral part of life as we know it, humans aren't necessarily driven by facts. We wage war on other countries and choose to saddle our children with enormous public debt. Humans are emotional beings. Very little of what we do makes logical sense. 

So it's not about jobs, its not about government revenues, it's not even about public safety. That message will likely fall on deaf ears. The oil industry needs to stop relying on data and start putting a human face to the energy sector.

2. Perception is everything

The United States is now one of the world's largest oil and gas producers. The country that invented NASCAR, monster trucks and consumerism is responsible for 30% of all greenhouse gases and pollutants ever spewed into the atmosphere.

In contrast, over 80% of Canadians already live in jurisdictions that have a carbon pricing program in place. Alberta was the first jurisdiction in North America to put a price on carbon. Canada already has a huge carbon tax in the form of some of the highest gas prices in the world, taking tens of billions in carbon dollars out of people's pockets and redirecting them towards social programs and infrastructure projects. While most Americans are enjoying the savings that come with US$2 a gallon gas, many Canadian cities are still well over C$1 a litre, even over C$1.25 if you're lucky enough to live in Vancouver (that's US$3.60/gallon in case you're interested in the math).

But Canadian politicians paint a very different picture, jet-setting around the globe taking every opportunity to trash Canada's (specifically Alberta's) environmental record. In the meantime, the US have crowned themselves as world leaders in "the fight against global warming" despite not having made one legally-binding commitment to lowering GHG emissions. 

It was clearly wrong for the Harper government to de-fund Environment Canada and the Department of Fisheries and Oceans, while trying to get pipelines approved. Regardless of the motives, it created the perception that the oil industry has something to hide. Canadian scientists who voice their opposition to the oil sands get tremendous publicity, both in Canada and abroad. But everyone has a right to chase their 15 minutes of fame, even if it's funded by the Canadian taxpayer. The freedom to speak your mind is paramount in this country. Perception is everything. Facts have become meaningless.

3. Politicians aren't engineers, neither are most Canadians

After getting two Bachelor of Arts degrees (one in Literature, the other in Education), Justin Trudeau tried his hand at engineering for 2 years, but quit and switched to environmental science, then quit again before finally deciding to move into politics. All that sciency stuff is hard for politicians to digest. By their nature, the world's best politicians are motivated by power and showmanship, and not so much into science and data.

One of the biggest reasons often cited for opposing Keystone XL (and several other pipelines) is the export of jobs and "raw" bitumen, a concept severely misunderstood by Canadian politicians and often distorted by the media.

❝ We’re also exporting jobs, since exporting unrefined heavy oil creates no value-added jobs in upgrading or refining. It’s equivalent to exporting raw logs, a practice typical of under-developed nations. ❞

- Federal NDP Leader Thomas Mulcair in an essay entitled "Tar Sands: Dirty Oil and the Future of a Country"

There's little point in trying to explain to a politician that Alberta does not export "raw" bitumen. Alberta exports multiple streams of crude oil and petroleum liquids at varying densities, blended to meet the needs of each individual customer. If Canada upgraded every last drop of bitumen before exporting it, our GHG emissions would actually go up (which is bad) and cost of production would go way up (which would be really bad). It makes perfect sense to say every Canadian refinery should run on Canadian oil, but it makes no sense to refine 4 million bbl/day in this country considering we only consume half that amount.

The oil sands industry clearly dropped the ball on this topic. You can't expect politicians to understand the oil extraction and refining business (mostly because they have no vested interest). But we need to get the message out that Canadian heavy oil is physically and chemically no different than heavy oil produced in Venezuela, Mexico or even California. It's silly to label diluted bitumen as a "raw" material and we need to get rid of this misconception.

4. Taking the high road doesn't always pay - sometimes you've got to fight back

 

In April 1996, Oprah Winfrey did an episode on mad cow disease, commenting that she would never again eat another hamburger, despite there being no cases of mad cow in the US. The episode caused beef prices to plunge for 2 weeks, eventually reaching a 10 year low. The beef industry responded by filing a defamation lawsuit. Winfrey eventually won the case, but there's an important lesson to be learned. Sometimes, you have to flight back. Although the National Cattlemen's Beef Association lost the case, the media treads very carefully when specifically targeting the US beef industry.

❝ The truth is not as interesting. It doesn't produce ratings. ❞

- David Mullin, attorney for Texas cattle producers

In 2008, American lobby groups launched a smear campaign against the Alberta oil sands with the explicit intent of stranding Canadian oil production. Billions have been spent buying out politicians, celebrities, scientists, First Nations groups, and even blocking Canadian oil sales to Europe. These US-based organizations hide behind "climate change" in an effort to get public funds directed towards their renewable energy programs and other pet projects. Non-profit organizations and political parties are more than happy to take their money in exchange for throwing up roadblocks and scaremongering at every possible turn.

Response from Canada's energy sector was meek at best. They took the high road, dismissed these groups as fanatics, even invited some of them to come tour their oil sands operations in Fort McMurray.

 

That turned out to be a big mistake. In contrast to the $18 billion a year the oil industry pays in federal taxes and royalties, an estimated $1 trillion in taxpayer funds has been directed towards renewable energy initiatives worldwide in just the past few years. The climate change pie is much bigger and far more lucrative. It's dangerous to dismiss these organization as fringe lunatics. We need to start taking these groups seriously and demand they disclose where their funding comes from.

5. You can't ask other people to do something you're not willing to do

To be fair, we're asking Americans to pipeline Alberta oil to tidewater, something we've not been able to do within our own boundaries.

In the old days, governments built roads, airports, railways and power plants because it was good for the majority of the country. You could argue it's important to get everyone's opinion and make sure all stakeholders are happy, but that's being a little naive.

And it's not just oil pipelines that are affected. Newfoundland could not convince Quebec to allow a right-of-way for hydroelectric power lines from Labrador to the US. So getting a pipeline through that province might be next to impossible without federal intervention. You can't expect provinces to play nicely with each other.

We now live in a world where anyone, anywhere can block any project, regardless of their merits. The Supreme Court of Canada ruled every person, band, municipality or entity along the route of a pipeline has a right to stop it. In fact, even those who live far away from a project have a right to intervene.

If unanimous acceptance is required for every energy infrastructure project, whether it be power lines, pipelines or LNG terminals, then nothing will ever get built in this country. It's something we Canadians need to really think about.

American appetite for Canadian oil reaches record high

American appetite for Canadian oil reaches record high

TransCanada abandons plans to build oil export terminal In Quebec

TransCanada abandons plans to build oil export terminal In Quebec

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