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General · 2nd April 2013
Ray Grigg
Bitumen is the current subject of much discussion in Canadian economic and energy policy. Getting Alberta's version of this carbon-intensive crude from the tar sands to market by pipeline is the cause of considerable concern, study, frustration and tension. The proposed Northern Gateway to BC's treasured West Coast is laden with controversy, as is the Kinder-Morgan expansion to Vancouver. The Keystone XL pipeline that would send bitumen south to be refined in the US Gulf Coast has become more complicated than the “no brainer” envisioned by those promoting bitumen exports. Now a report released jointly by the Canadian Centre for Policy Alternatives (CCPA) and the Polaris Institute (PI) is casting doubt on the wisdom of the federal government's avid promotion of resource extraction as its primary economic strategy (Shawn McCarthy, Globe and Mail, Feb. 2/13).

Alberta may be the best example of this economic folly. The so-called “bitumen bubble”, the hollowing out of Alberta's oil prices, has left the seemingly wealthy province with a staggering budget deficit of billions. With an economy now mostly dependent on the value of its bitumen, the province is vulnerable to price fluctuations determined by international market forces. Now, with new extraction technology flooding the market with oil and gas from shale deposits, Alberta is cornered and in financial crisis. The federal government's attempts to establish Canada as an “energy superpower” is now in doubt. The report by the CCPA and PI refers to this situation as the “bitumen cliff”.

As Tony Clarke, director of the Polaris Institute explains, “Canada's current bitumen strategy is not only damaging to the environment, but is leaving our economy highly vulnerable to shrinking markets for bitumen as the world moves to less polluting fuels” (Ibid.). The problem is the intensive energy required to extract bitumen from the tar sands. As climate change advances and the international community becomes more sensitive to carbon emissions, the preference for cleaner fuels will rise and the demand for bitumen will fall. In a age of growing environmental concerns, bitumen becomes a sunset fuel.

But the “bitumen cliff” is expressed in more serious structural effects. As a primary economic strategy, resource extraction offers a questionable future. One of Canada's famous economic historians, Professor Harold Innis, succinctly identified the danger of relying on resource extraction as the source of national wealth. In summarizing Innis's thinking, the CCPA report notes, “As staples are exported in raw form to more industrialized trading partners, Canada is left to buy back processed, value-added products and services at a much higher cost. The combined outcome is a self-reinforcing staples trap (a phrase borrowed from Professor Innis), whereby the faster Canada exports its latest staple, the less diversified and capable the economy becomes and hence all the more dependent on finding more staples to export” (Ibid.). However well-intentioned, a strategy of resource extraction drifts a country downward in status, sophistication, wealth and stability.

A lack of economic diversity means a lack of economic resilience and greater economic vulnerability. Not only do boom-and-bust cycles become more common but a country's economic health is wholly dependent on the needs of other economies. Bitumen is a classical example. It seemed like a good idea when the world was facing peak oil — the federal plan, in concurrence with Alberta, was supposed to make Canada an “energy superpower”. Now that other oil and gas is flowing freely from multiple shale deposits around the world, bitumen is in danger of becoming an expensive burden.

As well as the environmental risks and costs associated with the production and distribution of bitumen, such a resource comes with other consequences that are not so obvious. Economies that are dependent on a single resource are compelled to safeguard its production, to cater to its interests and to those who control it. The inevitable result is a deformation and erosion of democracy. Saudi Arabia is an extreme example. But the economic power of oil almost invariable comes with a politically corrupting influence. Economic diversity invariably creates better government, greater resilience and more social stability — and broadly educated societies that are healthier and happier.

The most valuable resource in a modern society is its people. They are nourished and developed by schools, universities, health care, open inquiry and the free-flow of information. Informed people invent their own wealth. A country such as Canada has the raw resources that are best used by Canadians. Professor Innis's “staple trap” is an economic cliff to be avoided. Short term political objectives are inclined to exploit the immediate cash of raw resource extraction. But the best and most enduring investments are made in the people themselves. They, after all, are the real substance of nations.

And finally, at the bottom of the “bitumen cliff” is environmental mayhem. In Alberta, it's open pits of toxic wastes, and an endangered Athabaska River which flows northward to expansive valleys and deltas ecologically rich with fish and wildlife. In adjacent places, it's pipelines, tankers and trains with the certain threat of disastrous spills. For the planet, it's greenhouse gas emissions, a polluting process with unfolding consequences that science describes as being catastrophic to both natural ecologies and to human societies.

So the “bitumen cliff” also comes with a moral dimension. Is it strategically wise to develop a resource that comes with a suicidal component? Shouldn't our human energy and ingenuity be applied to avoiding weather extremes, rising oceans and the plethora of other environmental disasters awaiting a hotter planet? The most important discussions today are no longer about the economy and oil but about the fate of future generations. Bitumen belongs in this broader and deeper conversation.