For a sustainable economy, without excluding the oil sands

As I’m watching the media reactions regarding Tom Mulcair’s comments about the development of oil sands, I think this debate has been grossly simplified by the media. Even though I don’t necessarily agree that Canada is suffering from the Dutch disease, I do think that there needs to be changes regarding the implementation of environmental laws.

It’s not fair that taxpayers should bear the costs of the damage done on the environment by petroleum companies. Our current laws certainly don’t support a sustainable economy and oil companies are barely liable if big oil spills do occur, like the one in the Gulf of Mexico that was associated with British Petroleum.

Even though that story is still fresh in our memories, the story behind who paid the bill for one of the biggest spills in history is still a mystery to a vast majority of the population. The Oil Spill Liability Trust Fund states that operators of offshore rigs face no more than 75 millons $in liability for damages that could be claimed either by the government, individuals or companies. There is also a $1.6 billion fund that has been set up but it hasn’t been financed until the 1990s and the cap of liability has been set up in exchange of an 8 cents tax on every barrel produced. But the damage done by British Petroleum has far exceeded these amounts at $40 billions.

In Canada, the situation is even worse regarding those regulations. The Canada Oil and Gas Operations Act (COGOA), the Canada-Newfoundland Atlantic Accord Implementation Act and the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, who regulates offshore oil activities, set the liability cap from $30 millions to $40 millions, sometimes even less. That means that if a disaster strikes Canada, legally, it’s the taxpayers that foot the bill for these huge expenses!

Meanwhile, some Democrats have tried, unsuccessfully, to raise the liability cap of oil companies from $75 million to $10 billion. On the other side, JP Morgan Chase has even claimed that oil spills lift up the GDP of the country since cleanups require the development of a strong labour force. While this argument is true since more than 4000 people were hired and that these contracts were estimated to be worth more than 4 to $6 billion, I think this argument is a total misunderstanding of macroeconomic principles since industries like fisheries and tourism were deeply affected. On top of that, the economy is used as a mean to justify harming our environment. (You can see the link to that article that was published in the Wall Street Journal at http://blogs.wsj.com/economics/2010/06/15/oil-spill-may-end-up-lifting-gdp-slightly/)

And I’ve only touch the subject of oil spills and its link to the economy, without even talking still about the daily harm the development of bitumen do to our environment. Commercial damages can include the reduction of agricultural profits and the fluctuation of the price, as well as harming important fish populations. With the amendments included in the budget omnibus bill, it will be even easier for companies to escape their environmental responsibilities. Leslie Shiell and Suzanne Loney, two graduates students from the University of Ottawa, found out during their research that if Suncor Energy was to pay for the damages caused by greenhouse gases, their profit would go down 27 cents per barrel. On top of that, they didn’t even consider the extraction of water used by oil companies, which is becoming a big concern in Alberta.

While there is much criticism to be made about the oil extraction, there is some efforts that are being made to ensure the respect of the environment. For example, after the publication of this research, Suncor is considering using a technology that would allow capturing carbon dioxide and use it to recompress older oil wells, which could mean that they would have a longer potential for extraction. Research in environmental sciences is the key to a sustainable economy and I’m very glad to see a Canadian company going the right way.

On the other hand, I don’t want to be misunderstood as criticizing the oil extraction itself but it’s the methodology that I think needs to be reviewed. I do think oil extraction is an essential part of our economy and that it allows a province such as Alberta to now hold significant economic power in our country. Contrary to Mr. Mulcair, I do not think Canada is suffering from a grave case of Dutch Disease. I think economic globalization and the availability of cheaper labour, such as in the southern states and China, are responsible for the decline of that economic sector. But I do not think it is right that criticism of the way oil is extracted is perceived as an attempt to divide the country in order to gain political attention.

For the sake of our future generation, I think it’s time that not only Canada but all the countries in the world find an alternative to the current state of liability, on one hand, and the method that oil is extracted.

The Globe and Mail, June 1st 2012