Sunday, August 19, 2012
David Daniel had never been to an environmental protest before this week, but as hundreds converge in Washington for civil disobedience against a massive oil pipeline, the retired carpenter from Texas is spearheading opposition against what he calls "dirty Canadian tar sands oil".
Some 275 environmentalists have been arrested since protests began August 20 against TransCanada's proposed 2,700 km Keystone XL pipeline. Currently, TransCanada operates the Keystone line which can carry 591,000 barrels of tar sands oil to Oklahoma and Illinois.
The $7bn project aims to expand daily capacity to 1.1 million barrels of crude oil travelling from Alberta, Canada, through America's heartland, to refineries on the Gulf coast.
"For me, from day one, it has always been about safety issues," Daniel said, as he drove to Washington to rally opposition. "They are disrespecting the safety of our water supplies. They lied to me about permitting, payments and damage systems," Daniel told Al Jazeera in reference to TransCanada. "I don't want my family to be a lab rat for a foreign oil company."
The Calgary-based multinational did not respond to Al Jazeera's interview request.
Although only operational for a year, the Keystone pipeline has already had 11 leaks in the US – including one that sent a geyser of oil shooting 20 meters into the air in South Dakota, spilling 79,000 liters.
"Obviously, we don't want any spills and what happened [during the BP disaster] in the Gulf [of Mexico] last year was a horrible accident and we have learned a lot from that," said Sabrina Fang, spokesperson for the American Petroleum Institute, an industry lobby group.
"This pipeline will have thousands of censors. If a spill was to happen it would be detected quickly," Fang told Al Jazeera. "TransCanada is making every effort to make this the safest pipeline out there."
Supporters say the pipeline will create 20,000 jobs, while opponents fear it will will leak and expand production from the Canadian tar sands, some of the world's most environmentally destructive oil.
"With an unemployment rate of 9.2 per cent, the president has the opportunity to sign off on this shovel ready project," Fang said. "While we welcome the views of everyone, we think the rallies going on right now are rallies against jobs," she said of the ongoing protests in Washington.
Opposition to the mega-project does not cut evenly across party lines. Unions representing pipefitters and tradespeople – usually backers of Obama's Democrats support the pipeline as a "shovel ready" job creation programme. Some back-to-the land rural Republicans – including Nebraska senator Mike Johanns, have voiced concerns about the pipeline's route and possible environmental damage.
TransCanada's assessment of the project estimates less than 11 spills discharging more than 50 barrels over the pipeline's 50 year lifespan. But a recent study from John Stainsbury, professor of water resources and engineering at the University of Nebraska, finds the company underestimates possible dangers.
His independent analysis, the first on the proposed pipeline, finds that Keystone XL could spill as much as 29.9 million liters of oil above the Ogallala Aquifer and more than 26 million liters of raw tar sands crude at the Yellowstone River crossing.
The Environmental Protection Agency (EPA), which warned of possible risks from the project, had its budget slashed by 16 per cent or $1.6bn in April as part of a budget deal between Democrats and Republicans. The move deliberately weakens enforcement of clean air and water legislation in favour of big business, environmentalists say.
Tar sands oil - or bitumen - is a thick, goopy substance which is often mined, rather than pumped like traditional crude. To force sludgy bitumen through a pipeline, operators mix it with other chemicals.
Given leaks from the first TransCanada pipeline, Daniel asked representatives of the company if bitumen would lead to faster pipe corrosion and thus more spills. The company told him the issue had not been studied.
Canada is the largest foreign supplier of oil to the US, sending 2.4 million barrels – more than 20 per cent of imports - to its southern neighbor every day. Because of the tar sands, Canada has the world's second largest oil reserves after Saudi Arabia, according to 2010 figures from the CIA.
Extracting one barrel of oil from the tar sands requires three barrels of water and produces three times more greenhouse gas emissions than conventional crude, environmentalists say. Industry contends that most emissions are created when oil is burned in a car or power plant and the extra emissions from tar sands, given the full lifecycle of oil, are comparatively small, only about 15 per cent above conventional oil.
Lakes full of toxic water, polluted during the extraction process, cover 170 square kilometers in Alberta and they are growing with increased demand.
"Oil sands crude is nasty, and the sooner the world stops burning it, the better," The Washington Post wrote in an editorial. "But that's actually not much of a reason to kill the pipeline."
The Keystone XL is crucial for broader tar sands expansion. Stephen Harper, Canada's conservative prime minister who hails from the oil patch, wants to create an "energy super power". The Canadian Association of Petroleum Producers, an industry lobby group, hopes production from the tar sands will rise from 1.5 million barrels per day to 3.5 million by 2025.
But hundreds of environmentalists are willing to risk arrest to stop this from happening. "The Keystone XL is one of the keys to opening the Alberta tar sands," Erich Pica, president of Friends of the Earth, told Al Jazeera. "That is why the Canadian government is pushing it so vigorously."
If the US pipeline is not built, Canadian officials might aim for a Pacific route to accommodate expanded production. Enbridge, TransCanada's rival pipeline builder, dreams of a Pacific gateway line, allowing heavy oil to be marketed to energy hungry China.
"China is a big player in the world market and is definitely looking at investing in Canadian oil," Fang said. "Canada is going to produce this resource no matter what we do."
But the proposed Enbridge line must cross the traditional territory of dozens of indigenous groups, many of which oppose the plan on environmental grounds.
"The opposition is not going away," Brant Olson, oil campaign director for the Rainforest Action Network, told Al Jazeera. He thinks the threat of China usurping Canadian oil is just a "politically expedient argument to try and evoke nationalist concerns in the US," as the nominally communist giant does "not have heavy oil refining capacity".
Governments and oil barons have eyed the Alberta's tar sands sludge for decades, but only in the last 15 years have high prices and new technologies made it cost-effective to extract. A barrel of oil must cost around $50 for new developments to be viable, according to figures from Shell.
"The sands rank with the US shale deposits as the world’s most extensive known, largely untapped oil source," said a 1972 declassified memo from the CIA, which forecasted the environmental damage of the project.
"The pollution issue and opposition to defacing Alberta's landscape may arise but has not as yet," the CIA wrote.
Some American politicians consider the new pipeline a matter of energy security – a way to reduce dependency on "unstable, undemocratic countries" including Saudi Arabia and Venezuela. But military planners are increasingly viewing global warming as a security threat.
The US Army War College has hosted conferences with names like "The National Security Implications of Global Climate Change" where global warming is considered a "threat multiplier for instability".
Worrying about the safety of his land, David Daniel has a different take on national security. "The regulatory authorities are looking at the short term interests of the oil industry, not our long term interests," he said. "We need to be considering our air and water as national interests."
|Canada mulls China's massive oil takeover bid|
State oil firm offers $15.1bn for Nexen, worrying US politicians as China aims to increase hard assets, not buy US debt.
Chris Arsenault Last Modified: 15 Aug 2012 12:13
China is looking to convert more of its $3.1tn in foreign reserves into hard assets, including western oil firms [Reuters]
Backed by a massive trade surplus and bulging overseas currency reserves, and fuelled by a voracious appetite for commodities, China has launched one of its largest foreign takeover bids to date, aiming to control a Canadian oil giant.
China National Offshore Oil Corporation (CNOOC) wants to buy Calgary-based Nexen for $15.1bn, a premium 60 per cent above the company's listed value, in a deal analysts say Canadian regulators are likely to approve, despite opposition from some US politicians.
James Inhofe, a Republican from Oklahoma, has "serious national security concerns" over the bid, while Charles Schumer, a Democrat from New York, said China's "blatant disregard for US intellectual property rights makes this transaction even more concerning".
Canada is the largest foreign supplier of oil to the US and Nexen has operations in the Alberta tar sands, one of the world's largest petroleum deposits, along with international investments in Africa, the Gulf of Mexico, the North Sea and the Middle East.
Regulators from the Canadian government, led by Prime Minister Stephen Harper, a Conservative who hails from Alberta and has close ties to the oil industry, are currently mulling whether the takeover deal represents a "net benefit" to Canada. It is unclear when exactly a decision will be announced.
In search of stability
China is the world's second largest oil consumer, according to the CIA, burning about 9.4 million barrels per day in 2011.
"Over the past couple of years, the boom in unconventional extraction has made North America the centre of the mergers and acquisitions world," Erica Downs, a former CIA energy analyst, now with the Brookings Institute, told Al Jazeera. "Canada and the US are increasingly where these companies want to be."
Nexen's Canadian assets in the tar sands, where oil is often mined rather than pumped, are far more expensive to access than conventional crude. But companies such as CNOCC are willing to pay an extra premium for energy which comes from a politically stable western country such as Canada.
"It's no secret that geostrategic instability affects most oil exporters," Gordon Houlden, director of the University of Alberta's China Institute, told Al Jazeera. "The Chinese got burned in Libya [after rebels ousted Gaddafi’s government and the Chinese lost their contracts]."
"They got badly burned in Sudan with the break-up of the country [most of the oil is in South Sudan while China had signed deals with the former government in the north] and there are questions over Iranian production because of sanctions and the risks of war," he said. "The premium for security is reasonable."
With 175 billion barrels of recoverable crude, Canada has the world's third largest proven oil reserves, behind Saudi Arabia and Venezuela, according to the CIA. Producing oil from Canada's tar sands requires an oil price of more than $50 per barrel to be profitable, according to Shell and other energy companies.
Extracting one barrel of oil from the tar sands produces three times more greenhouse gas emissions than conventional crude, leading conservationists to oppose the China takeover plan, as it is likely to mean increased production and investment in one of the world's most environmentally harmful fuel sources.
"A Chinese owned company is going to want pipelines [to the Pacific coast]," said Gordon Laxer, director of the Parkland Institute, a left-leaning think-tank in Edmonton. "I don't think Canada should be increasing tar sands production, we should be capping and phasing it out," he told Al Jazeera.
Two controversial pipeline proposals - the Northern Gateway spearheaded by the energy giant Enbridge and the Kinder Morgan pipeline - are hoping to bring Canadian oil to Asia, but environmentalists and some indigenous groups are battling to stop them.
"As a world power, much like the Americans, the Chinese want diversity in their energy sources," Laxer said.
China's ocean ambitions
The region could contain as much as 213 billion barrels of oil, according to Chinese studies, making it a geopolitical prize comparable with Saudi Arabia. Most of this potential for oil is deep under water.
In May, China's first deep-water drilling rig, CNOOC 981, began operations in the South China Sea. It can operate at a maximum water depth of 3,000 metres, which is a significant improvement over past Chinese technology, but still less than the capacity of major western energy firms.
"The deep sea component is one of many attractive components of Nexen to CNOOC," Houlden said, calling the acquisition "one of the ways" for the Chinese to add to their capacity.
The US government will review if China's ownership of Nexen's offshore assets in the Gulf of Mexico - accounting for 14,000 barrels of oil per day, or 6.6 per cent of the company's production - poses a national security risk.
Above and beyond any particular concerns about technology, some politicians are worried about firms backed by the Chinese state going after hard assets.
US debt conundrum
China controls more than $3.1tn in official currency reserves, an "unprecedented amount for any country" The Financial Times reported earlier this year. With a trade surplus of $160bn in 2011, the country has money to spend.
Previously, this money had been invested in US treasury bonds - buying US government debt - but Chinese officials have repeatedly warned that increasing US debt levels and political paralysis in Washington are making debt investments less appealing.
But China cannot sell its investments in US Treasury Bonds without causing the value to drop. As the biggest holder of the asset, any moves away from US debt would hurt China, which would be left holding a bag of worthless paper. "Just a few words from China that they wished to divest or even to stop purcashing T-Bills would hurt them [both China and the US] very much," Houlden said. For the time being, China is likely to keep buying US debt, while attempting to slowly shift reserves into other properties.
Trying to convert investments in treasury bills into hard assets in western countries hasn't always been easy. Canadian officials blocked a takeover attempt by an Australian firm on mining giant Potash Co last year, saying it would not be beneficial to Canadians. In 2005, CNOOC attempted to buy the US oil company Unocal for $18.5bn, but regulators blocked it on national security grounds.
State and corporate power
CNOOC's operating structure is considered murky by some analysts. Its divisions are traded on international stock markets and the company has pledged to keep Nexen listed on the Toronto Stock Exchange (TSX). The firm traded on the TSX is apparently a subsidiary of a bigger corporation which is owned largely by China's government, allowing the company to secure financing with low interest rates often unavailable to its competitors.
With Chinese state firms, it is often unclear where national interests end and corporate interests begin, worrying some western capitalists.
"In the past 10-15 years we have seen these companies emerge as increasingly powerful actors vis-à-vis the Chinese government," Downs said. "There has been a devolution of power away from the state to these powerful firms," she said, adding that top executives in major companies are still appointed by the Chinese state.
The majority of the world's oil and gas reserves, some 75 per cent of total global production, are controlled by state owned companies. The big names of the oil game: Shell, Exxon, BP and Total are small players compared with Saudi Aramco, Russia's Gazprom and Petroleos de Venezuela. Canada and the US are some of the only places where foreign firms can directly buy upstream petroleum access.
"There are lots of state owned companies operating in the tar sands," Laxer said. "None of them are Canadian." If anything, the power of Chinese state capitalism should give Canadian policy makers pause in how they govern their own oil sector, where critics say finite and highly polluting resources are not managed for the public good.
Welcome to our New Political Community