Played by the Great Crusader

Canada is now in the midst of a protracted, unusually long federal election. There is hope among many people that this will be prime minister Stephen Harper’s last hurrah, not least the country’s progressives whose animosity toward the Conservative leader has been identified by some pundits as ‘Harper derangement syndrome’ because of the tendency of those afflicted to lay the blame for any problem or issue confronting Canada at Harper’s feet.

In the initial McLean’s leaders’ debate all three of the aspirants hoping to unseat Mr. Harper referenced energy and environmental policy and, more specifically, how dismal, in their view, the Conservative record is in these areas. In today’s world, more often than not, when concern is expressed for the environment it is a proxy for concern over catastrophic anthropogenic global warming – climate change – caused by the burning of carbon-based fuels. Proposed solutions inevitably hinge on a massive reduction, or the outright elimination, of carbon dioxide (CO2) emissions – something that is now referred to as ‘carbon pollution’ despite carbon dioxide being a colourless, odourless gas essential to virtually all forms of life.

From a policy perspective then, energy and the environment are inextricably bound to one another. We cannot make progress on either front without due consideration of the impacts any proposed policy will have on the corollary issue. It is now commonplace to hear that the world’s, and Canada’s, core objective must be a shift to a low-carbon economy and the solution is to move firmly and rapidly to ‘renewables’.

Renewables today typically means wind, solar and biofuels. Hard-core environmentalists also dislike zero-carbon energy sources such as nuclear and hydro because of the potential contamination risks and waste issues associated with the former, and the impact on local ecosystems implied by the latter. This leaves a pretty limited set of alternatives with which to effect the desired shift away from carbon-based energy sources.

It should be noted that self-described environmentalists have done a great job propagating their views among politicians and the media so that today, what a rational, pragmatic person might consider to be, at a minimum, an outrageously ambitious and likely unachievable solution is now considered to be the way forward.

Faith in renewables has long been a core element of any self-respecting progressive’s thinking on energy and the environment. The icing on the cake is the increasingly espoused idea that shifting to renewables is also the path to a robust and vibrant economy. This notion is almost Orwellian in that it implies that the wealth we enjoy and largely take for granted has been generated despite, rather than because of, carbon-based fuel use.

For Canadian environmental and energy policy this line of thinking has profound implications. The Conservative government under Harper’s direction is accused of having put all of the economy’s eggs in a single basket – oil exploitation. They are further accused of gutting environmental regulation in their haste to turn Canada into an energy superpower. The sitting government is apparently all about fast-tracking risky pipeline projects, permitting waterways to be used as open sewers and allowing oil companies to ride roughshod over Canadian laws and values.

In the debate and in their daily campaign pronouncements, Ms. May, Mr. Mulcair and Mr. Trudeau toss words like ‘climate’, ‘responsible’, ‘sustainable’, ‘renewable’ and ‘technology’ around like confetti. These are code words intended to convey to voters that these leaders’ thinking is aligned with the widespread progressive view on energy and the environment. Factual data are, however, conspicuously absent.

As with so many aspects of Canadian political, cultural, and economic life, the influence of the United States in this sphere is palpable. U.S. president Barack Obama has clearly made solving the climate problem a legacy project. He has delivered much overheated rhetoric on the subject and taken some deliberate, but arguably symbolic actions. These include signing a ‘landmark’ carbon emissions agreement with China, subsidizing the solar power industry, bringing in tough new regulations for coal-fired power generation and, most critically for Canada, blocking the northern leg of the Keystone XL pipeline which is intended to move Canadian (and American) oil south to U.S. refineries on the Gulf of Mexico.

Keystone XL is a project of energy giant Trans Canada Corporation and is not fundamentally different from any other pipeline project in North America other than it has been demonized by environmental groups in the U.S. and Canada and become the focal point for the anti-oil movement. The environmental movement in the U.S. has been an important constituency for president Obama and he has quite willingly pandered to their positions on energy and the environment. Doing so has allowed these groups to propagate the idea that oil from Canada’s oil sands is ‘dirty’ and that stopping development of the oil sands is critical to the planet’s survival. The environmental lobby in the U.S. has effectively positioned blocking Keystone XL as a test of Obama’s credibility as a climate crusader and Obama appears to have swallowed not only the bait, but the hook, the line, and the sinker as well.

As a consequence of Obama’s inaction, Canadian oil production has been prevented from getting to market easily and has been forced to sell at a discount. Rail transport has been used as a much riskier and more costly alternative. The obstruction of Keystone XL has also put wind in the sails of opponents of other proposed pipelines, notably Enbridge’s Northern Gateway and Kinder Morgan’s Trans Mountain projects in B.C., and Enbridge’s Energy East project that will reverse the flow of an existing pipeline and move western oil through Ontario and Quebec to New Brunswick where it will be refined.

Even before the election campaign started in Canada the leaders of the opposition parties made pretty clear that they were much enamoured of Mr. Obama’s positions. Mr. Mulcair opposes the Northern Gateway and Keystone, wants a more rigorous approval process for Trans Mountain, and has waffled furiously trying to appease competing constituencies on Energy East. He likes the idea of “sustainably” refining oil in New Brunswick but has a thorny problem trying to square the need for a pipeline with provincial sentiments to facilitate that. Many people in Quebec, a province critical to the NDP’s electoral hopes, are anti-oil and strongly opposed to reversing the flow of an existing pipeline that runs through the province.

Mr. Trudeau is all over the map but appears to be opposed to Northern Gateway, lukewarm toward Kinder Morgan, supportive of Keystone XL and fuzzy on Energy East, while Ms. May is fundamentally opposed to oil and pipelines, and the oil sands in particular. Mr. Trudeau’s position might be seen as a little cynical; it’s relatively safe to support Keystone XL when you enjoy the comfort of knowing your confrere in the White House is never going to permit it.

These three use concern over the approval process for pipeline projects to bolster their positions on the various proposals in play. According to this trio, the fourteen-year process that the proponents of Northern Gateway have had to navigate is insufficient. For the record, the Joint Review Panel that evaluated the submission determined that the project was in Canada’s best interest and gave conditional approval for the project in December 2013. The National Energy Board (NEB) has said the project can only proceed if all 209 of the conditions catalogued by the Joint Review Panel are met.

That process is ongoing but apparently is not robust enough for progressives. It is hard to fathom what would constitute a sufficiently robust process to satisfy the concerns of these people. It is probably reasonable to suspect they don’t know either, as their objections appear to be based more on emotion than how to resolve particular engineering, safety or social/economic issues. Never mind though, complaining about a gutted environmental regulatory process is sure to be a vote winner among like-minded progressives.

Having been a leading actor in the blocking of Canadian pipeline development, Obama adopted the role of climate change emissary and signed an agreement with China, much heralded by progressives. Under the agreement, Chinese carbon emissions will continue to rise for the next fifteen years until they peak in 2030, when, it is promised, they will begin to decline. For its part, the U.S. must reduce its emissions 28% from 2005 levels by 2025. Due to the substitution of gas for coal in electricity generation and a reduction in energy demand because of the Great Recession, the U.S. has already seen a 10% reduction in its CO2 emissions.

Chinese CO2 emissions are forecast to increase by about 40% over this time frame and, as China is already responsible for around 25% of global emissions, but the U.S. only 15%, the impact of this ‘historic’ agreement will be negligible. Meanwhile, Canada accounts for barely 2% of global emissions, and its oil sands production only 0.12%, but suffers the unchallenged criticism of the great crusader.

U.S. emissions have gone down over the past few years primarily because of abundant natural gas from fracked shale deposits displacing coal for electricity generation, not because of any policy action on the part of the Obama administration. Concurrent with the increase in gas production, oil production in the U.S. has increased by more than 40% during his presidency. Over the same time frame, Canada’s oil production has only increased about 25% and total Canadian production is less than half that of the U.S. Turning a vast area of the lower 48 states into a pin cushion through a massive fracking program that will make the U.S. the world’s largest oil producer gets scant attention, while a dubious agreement to reduce greenhouse gas emissions is lauded as some sort of climate change breakthrough.

The “dirty oil” tag attached to Canadian oil sands product refers to two aspects of its production: the energy intensity and related CO2 emissions of the extraction process and; the physical degradation of local environments as a consequence of mining-type operations. The industry has invested heavily and successfully in technology to reduce energy intensity, and significant effort is put into land reclamation following extraction. The industry also operates under a robust regulatory regime, as do all resource extraction and other heavy industries in Canada.

An interesting analysis by a branch of the International Energy Agency found that emissions related to oil sands production were equivalent to those for extra heavy oil, around 9.3-15.8 gCO2/MJ (grams per megajoule), while for oil shale (fracked oil) the emissions range between 13.0 and 50.0 gCO2/MJ. Fracked wells typically release significant amounts of methane during the well completion process and often flare off large quantities of natural gas (methane) during production because there is no facility to capture, store and transport it. Flaring is preferable to releasing the gas in its raw state from an emissions perspective because methane as a greenhouse gas traps about 25 times the amount of heat that CO2 does. Without even taking into account the strain fracking places on water resources, it’s evident that fracking is a pretty “dirty” undertaking in its own right. Perhaps president Obama might have looked in his own backyard before describing Canadian oil sands production as “extraordinarily dirty”.

The southern leg of the Keystone XL pipeline, long since approved, built, and put into service, now transports U.S. oil from fracking projects to refineries in Texas. At the same time, pipeline projects to transport fracked gas in the U.S., which will likely displace Canadian natural gas from eastern Canadian and U.S. markets, are moving ahead. The latest move by the president has been to approve exploratory drilling off the coast of Alaska which upsets environmentalists but which Obama defends in terms of balancing economic and environmental interests. Apparently, Canadians are to be discouraged from seeking a similar balance and encouraged to castigate those who advocate such plans.

The president’s other climate initiatives have not exactly produced stellar results. The Obama administration’s $80 billion clean technology program was tarnished when flagship solar panel maker Solyndra, the recipient of a $500 million federal loan guarantee, went bankrupt. An electric-car battery plant that received $250 million also filed for bankruptcy.

In 2014, renewables accounted for 9.8% of U.S. energy consumption but much of that energy was supplied by hydro-electricity generation, and the burning of wood and waste, as well as liquid biofuels such as ethanol and biodiesel, rather than from wind and solar generation. That’s up from around 6.23% of total consumption since 2005, an increase of 54% but, at the same time, overall energy use has declined 2% so the gain is less than it appears. Carbon-based fuel consumption has declined about 6% but overall energy use from all sources has only declined 2%. Energy consumption fell dramatically in 2009 because of the recession and has been slowly rebounding since. Liquid biofuels are also questionable in terms of net benefits as they are energy intensive to produce and remove agricultural resources from food production.

So, does this represent a dramatic shift away from carbon-based fuels and toward renewables, to a low-carbon economy? In a word, no. Solar and wind projects in the U.S., as in jurisdictions like Ontario, Germany, or other European countries, are directly subsidized by government. Without those subsidies investment in these wholly inadequate technologies would disappear. Unlike the ‘subsidies’ that progressives believe are enjoyed by the carbon-based fuel industry, these are real cash transfers, not imputed social and environmental costs based on scenarios of cataclysmic events that progressives are convinced will happen if we don’t stop using carbon based fuels forthwith. And nor are they capital cost allowances that all businesses receive when they invest in new equipment or other means of production. One wonders, when they do their math, do they ever look at the other side of the balance sheet and consider the almost inestimable contribution carbon fuels have made to the developed world’s health, wealth and general quality of life? When your outlook is as gloomy as most progressives’, probably not. The world will be run on carbon-based fuels for decades to come. As Mr. Harper has noted, switching to a low-carbon economy is a long-term endeavour and will require “serious technological transformation” – carpeting the planet with solar panels or creating forests of windmills won’t cut it.

The progressive trio of Mulcair, Trudeau, and May have all publicly expressed a wish to leap aboard the climate change bandwagon in Paris at the upcoming 21st Conference of the Parties (COP) in December and commit Canada to an agreement that will align its environmental and energy policies with those of the ‘enlightened’ countries of the world, including the U.S. under Obama. Much of their motivation seems to come from a desire to rid Canada of its shame at having been such an unwilling, uncommitted participant at past COPs. This eagerness betrays the frightening reality that these three, and their legions of progressive followers, have been played.

Masquerading as an environmental crusader, Obama has effectively pursued a protectionist policy that has negatively impacted the Canadian economy and severely strained a long-standing and valuable relationship. His obstructionist behaviour goes against the grain of fair-trading and probably violates NAFTA. He has subtly, but also openly, maligned the Canadian government over its handling of the environment portfolio yet there is little in his own record to crow about. But, that’s Obama, if overheated rhetoric, verbal contortions, and hubris were the principal measures of national leadership, rather than material accomplishments, his two-term presidency would be the yardstick against which the records of past and future presidents would be measured.

Let’s check the scorecard. Under Obama, the U.S. has massively increased its oil production through fracking, a “dirty” process if we accept progressive nomenclature. In addition it has entered into an agreement with the world’s largest greenhouse gas emitter, China, that gives license to unfettered Chinese emissions for at least fifteen years. One leg of a single pipeline project, Keystone XL, has been obstructed preventing Canadian oil from getting to market easily. Approval may be granted, according to Obama, if Canada tightens up its management of its oil sands and makes its “dirty oil” cleaner, even though Canadian oil sands emissions are but 1/10th of 1% of the world total while Chinese and U.S. emissions are 40+%. U.S. CO2 emissions have declined modestly, largely due to cheap fracked gas substituting for coal in electricity generation and because of the lingering impacts of the Great Recession on demand for energy. Shell has been given a green light to start exploratory drilling off the Alaskan coast and renewables, through cash subsidies, have managed to deliver a small, insignificant share of overall energy consumption.

Canada, meanwhile, has had to trade its oil at a discount, has seen rising opposition to new pipeline and energy projects in part because of the influence of opinion makers like Obama, has had to ship much of its oil by rail, a riskier, more energy-, and emissions-intensive means of transport, and has seen its reputation tarred by progressive activists both within and without its borders. Through all of this, Canada’s federal government has pushed for fair treatment of its energy industry by its largest trading partner and principal international ally, waited patiently for the regulatory process to finally deliver approval for energy projects, eased out of the hopeless Kyoto accord that the U.S. never signed on to, and tried to defend its positions against a rising cacophony from agitated and largely irrational, or at least unthinking and poorly informed, progressives.

The teaching moment that Obama provides for progressives in Canada is that enlightened self-interest is more important than heart-felt but unrealizable dreams about a buzzword-laden, oil and pipeline-free future. Stephen Harper has managed the environment and energy files masterfully. His singular failing has been his inability to articulate and explain his actions; something not easily done when you are swimming against an absolute torrent of adverse opinion. He is almost the polar opposite of Obama, whose ability to gain traction arguing that black is white, or up is down, is nothing, if not remarkable. It is a sad prospect that the leadership alternatives in this country can be so easily played and cannot readily identify what is in the national interest.

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