Refining Begins at Home

February 01, 2017

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Politicians like meddling in markets. So here’s one I’d like Ottawa to tinker with and create a win-win-win situation for oil workers, the environment and tax payers—refining. Tilting the playing field back to Canada so more Prairie crude gets processed in the Atlantic-access provinces. It would improve the trade balance, create jobs, recoup the government investment through the resulting corporate tax
top-up of provincial and federal coffers, and reduce emissions.

Normally I’m in favor of letting Adam Smith’s unseen hand do most of the work. But in a world of trading blocs, cartels and critics who selectively choose which nation’s oil tankers to throw rotten eggs at, I’d like our leaders to even things up a little.

The winning combo would include: an Eastern carbon price that impacts Canadian competitors too; an Energy East pipeline approval; and incentives to refiners on its route to upgrade their plants to take some bitumen. And while they’re at it, our governments can give these refiners a nudge to reach for the bar set by Alberta’s Sturgeon refinery—Canada’s cleanest—whose SOx, NOx and carbon controls are way ahead of the curve. The Conference Board of Canada says the $8.5 billion complex’s operations phase will increase Canada’s GDP by $2.3 billion, create 6,658 jobs across the economy, and generate $385 million a year in government revenues—silencing critics over the government help it received.

But first, credit where credit is due.

Prime Minister Justin Trudeau is greenlighting pipelines despite his strange comments about phasing out the oil sands.

Carbon pricing is here whether we like it or not. China introduces a national carbon trading scheme this year, joining those U.S. states that have carbon pricing, including California, a major oil producer and refiner that will welcome Albertan crude via the Trans Mountain pipeline expansion. But Eastern Canadian carbon pricing also needs to target source emissions, no matter which country they come from, and discount any upstream carbon price already paid. So Nigerian and Bakken flaring and Saudi tanker emissions would all be covered by well-to-wheel carbon pricing that cuts Albertan firms some slack as they’ve already paid up.

Alberta, under right and left governments, sometimes with federal help, has supported petrochemical and refining development and is eyeing more upgrading capacity. The 1.1 million b/d Energy East can transport both upgraded syncrude, and bitumen which could be processed in the east in low-carbon-emission upgraders. Eastern Canada already exports some of the world’s cleanest power, so why not follow the western provinces’ global leadership in clean refining? If the political groundwork is done first, and done skillfully, this push could be given with cross-party support. The world’s cleanest plants processing oil from fields operating under world-class regulations would underline the Albertan ideal that “the world needs more Canada.”

More posts by Nick Wilson

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