Alberta Oilsands Production Pressures Increasing.

The Alberta oil sands are coming under increased pressure. According to the Globe and Mail, demand for additional production is coming out of the U.S. to move from the current 1.2 million barrels per day to more than 3 million by 2015 in one estimate and over 3.4 million in the same time frame by another estimate.

Pipeline capacity is strained and the lead time for new capacity is a problem but some relief is expected by 2010 with new projects doming on stream. Then we have the refining issues and Midwest American refiners are reported to be spending abut $18billion up to 2012 to adapt to increased bitumen availability.

That additional refining capacity in the States brings another problem that may not sit well with Albertans. It could cause the discount between the conventional oil prices and the synthetic crude that is derived from oil sands to increase impacting negatively on provincial revenues.

Then you have expanded American refining capacity as a potential to undermine the over $40billion of scheduled Upgraders in the Edmonton area because they may not be cost effective. Albertans want the value added benefits of upgrading and refining in the province so this American refining capacity adaptation and energy demand is something the province is going to have to respond to aggressively.

Alberta is already suffering and not keeping up under the social and environmental, economic and inflationary strain of 1.2 million barrels pf daily production. To triple that in about 8 short years is going to take some serious adjustments to wages, investment in all kinds of infrastructure from physical to human, to social and natural stewardship initiatives.

If anyone thinks this is going to be resolved purely by market forces, the evidence today is that it is only going to get worse. The Canadian Press out of Toronto quotes the CIBC World Markets with some interesting observations. The story says the Canadian oilsands gain importance as other cut exports. “Canadian oilsands”…and out here in Alberta we thought the province controlled its natural resources by virtue of the Constitution…how naïve of us.

The prediction is that OPEC other countries like Russia and Mexico will be cutting exports in a few short years due to production lags and increasing domestic demands. The estimates are for a 7% decline in exports by 2010 – causing much higher oil prices.

Reports say that last year OPEC countries plus Russia and Mexico consumed about 12 millions of oil per day. That was 60% more than China and a td more than all of Western Europe. Canada’s oil consumption is reported to have actually declined last year.

CIBC economists Jeff Rubin predict oilsands will expand in the next decade and surpass deep-water sites as the largest sources of new supply…almost all of which he says will be exported to the U.S.A.

Alberta is rapidly emerging in the cross-hairs of geo-political energy battles and the forces that will be brought to bear on us are going to be substantial. We better get ready for that reality and quickly. A good start would be to find the new person to go to Washington DC to act on Alberta’s behalf on US issues, not the least of which will be energy export followed by demands for water exports.

NOTE TO READER: The impact of other countries and their oil policy was the subject of an editorial on Policy Channel on August 13. It adds fuel to the fire.

Does Chandler Have Opposition in Calgary Egmont Nomination?

Some efforts are starting to emerge to take on the Craig Chandler campaign in Calgary Egmont. I expect Mr. Chandler would be more comfortable in Link Byfield’s Wildrose Party not the Progressive Conservative Party of Alberta.

I smell something between political opportunism (a la Chandler) and real democracy (a la the August 29th posting by The Enlightened Savage) in the air.

If the Enlightened Savage is seriously into running for the Calgary Egmont PC nomination – I am behind him all the way.

It is Time to Resolve the Teacher's Unfunded Pension Issue

As school starts for a new year in Alberta the old issue of teacher’s unfunded pension liability is working its way through the political system. Premier Stelmach took the position during the PC leadership that the issue of pensions and contract negotiations were separate issues. He was then, and still is, keen to resolve the unfunded pension liability…if for no other reason it is still a real debt hanging over the head of the province and it is a significant burden on young teachers.

There is lots of history here and divided opinions – mostly based on ideology rather than logic. Some recent blogger and media commentary is available. For full disclosure, a few years ago I helped the ATA in their attempts to get the Klein government to revisit the unfunded pension liability issue with some moderate success but nothing conclusive. The efforts eventually paid off became it was a key issue in the PC leadership campaign. Many of the candidates took policy stands saying it needed to be resolved as a priority issue.

This is a key public policy issue that demands political leadership and there has never been a better time to resolve it. The issues are well understood and the solutions are obvious. To go through the current exercise of a province wide consultation on this matter is not going to add any light on the issues. The solution is to be found in the exercise of some pure political will and leadership. The current round of public consultations is no reason to delay a Government of Alberta decision on resolving the unfunded liability issues either.

It is time to get the unfunded pension liability issue dealt with and behind us. Then the system can move on to deal with the outstanding teacher contract concerns right afterwards. Nothing is really standing in the way of this resolution happening, except some old attitudes and personal grudges of a past Minister arising out of the 2002 teacher's strike.

The Greatest Canadian Premier

The Calgary Grit has narrowed the Greatest Canadian Premier Contest to Peter Lougheed of Alberta versus Oliver Mowat of Ontario.

I was just the 223 person who voted and the race was a 1 vote separation. Of course my choice was Lougheed, being that I am from Alberta but my reasons run deeper than that.

The poll is open Monday until 11 pm Mountain time. Visit the Calgary Grit and play along an make your choice in this interesting exercise.

Stelmach Touches the Brakes and Shifts Gears At the Same Time

So Premier Stelmach has once again exercised a bit of political muscle. He first did it over Alberta teacher’s unfunded pension liability and set the wheels in motion to resolve that problem when the old attitudes of the Klein – Dr. Oberg regime threatened to derail doing the right thing for all Albertans again.

Now with Stelmach’s personal intervention to reverse the Dr. Morton decision to allow seismic testing on Marie Lake he has shown that there is a way to "touch the brakes" and not mess with the market place. You do that by accepting that the environment is the trump card in all long and short term planning decisions. Stelmach did and he led yesterday and played the eco-logical trump card last night. Stopping any testing on Marie Lake is touching the brakes for reasons more significant than the sanctity of the marketplace. It was about sound stewardship and nothing less than an overarching concern about the sustainability of the biosphere.

He also personally intervened on the big cities infrastructure funding issues. The need to provide assured long-term, flexibility for sustaining intelligent planned growth in Edmonton and Calgary is a no-brainer. What ever political forces that came into play to put a great urban infrastructure policy initiative in jeopardy have been culled by Stelmach. By cutting the Municipal Sustainability Initiative strings for the big cities yesterday he set another smart political direction and reassured Albertan of a good governance stance going forward.

Marie Lake and the plight of Alberta’s municipalities, especially the two big cities, have emerged as symbols of what as been out of whack in the governing principles of Alberta in the past decade. Economic growth at any cost is not sustainable. The messy inefficient but largely effective policy tools of the free marketplace and democracy are sometimes blunt instruments to resolve complex issues.

As a good friend once told me “Sometimes you have to put away your principles and do the right thing.” Ed Stelmach believes in the free marketplace but he also knows it has its place and it alone cannot solve all of society’s ills. He also believes in democracy but he also knows it can sometime result in pooled ignorance instead of collective wisdom. When the blunt instruments are found wanting to resolve issues or to achieve the common ends of the society, that is when the sound judgement of quality leadership comes into play.

Growth has a cost and demands investment and planning – long range integrated planning. Short-sighted incrementalism is not good enough any more. Integrated sustainable approaches with full life-cycle cost-benefit analysis are what we need to embrace in our governing principles from now on. Ed Stelmach showed yesterday that he understands that and he is starting to act accordingly.

P.S. Congratulations to MLA Denis Ducharme for his good work on Marie Lake and to Mayor Mandel of Edmonton and Mayor Bronconnier of Calgary for their efforts on the MSI policy changes too.