Boomtowns and bitumen

2007-12-08

in Canada, Economics, Politics, The environment

Haida sculpture

Since 1999, the population of Fort McMurray has nearly doubled. Primarily, this is on account of the oil sands: unconventional petroleum reserves whose exploitation is being driven by high prices and geopolitics. The demand for labour is dramatically increasing its price, both directly and indirectly. Apparently, inexperienced truck drivers can expect to make $100,000 per year. Shell has also just opened a 2,500 unit housing complex for its oil sands employees, part of their $12 billion in local infrastructure spending.

With oil around $90 a barrel and the atmosphere still being treated as a carbon dump, this is not terribly surprising. That said, such projects are certain to develop increasing momentum of their own. Once they bring enough jobs and money, they are hard for a provincial government to not support – especially if many of the environmental costs are being borne by people outside the province or by future generations. Internalizing environmental externalities through taxation or regulation becomes progressively more difficult as the incentive of certain parties to preserve the status quo increases. Such asymmetries are likely to give oil sands development a harmful legacy in terms of general policy development, in addition to its climate change effect and local environmental impacts.

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{ 11 comments… read them below or add one }

tristan December 8, 2007 at 10:23 am

You’re absolutely right. The lack of will to internalize carbon costs now produces more and more difficulty in doing it through the establishment of institutions which have public support which would be destroyed or change by the proper internalization of costs.

I actually believe that the slogan of “cost internalization” is the one the state should use when/if they choose to internalize carbon costs in taxation. It’s simply a notion of fairness, that should hook up to peoples everyday logic, don’t you think?

Milan December 8, 2007 at 2:07 pm

Everyday notions of fairness are tricky things.

A lot of people seem to think it is fair to provide governmental support to fishers while the fishery where they are working is being depleted. That helps maintain their standard of living, but actually exacerbates externalities.

That said, the “polluter pays” concept is a broadly understood and meaningful one.

Sarah December 10, 2007 at 11:54 pm

The expansion in Albertan tar sands extraction even made the UK news yesterday, as a stark example of governments’ utter failure to address climate change (& other environmental harms).
Depresingly, it is difficult to see how any federal politician would have a real incentive to address this, given the direct and indirect economic benefits to voters (ie. jobs in Alberta, but also booming Canadian economy), obvious and severe provincial opposition from Alberta, & that the likely negative effects will be dispersed and occur after the politician leaves office.

Milan December 11, 2007 at 6:05 pm

Depresingly, it is difficult to see how any federal politician would have a real incentive to address this, given the direct and indirect economic benefits to voters (ie. jobs in Alberta, but also booming Canadian economy), obvious and severe provincial opposition from Alberta, & that the likely negative effects will be dispersed and occur after the politician leaves office.

All valid points, though curbing oil sands expansion will be necessary if this government is going to even approach the emission reduction targets it has set for itself.

Milan January 11, 2008 at 10:49 am

See also:

Oil sands report card
* January 15th, 2008

Anon January 28, 2008 at 12:04 pm

The Globe and Mail has a website devoted to the oil sands.

. April 10, 2008 at 7:52 pm

“There are a lot of great investments that you can make. If you are investing in tar sands or shale oil then you have a portfolio that is crammed with subprime carbon assets.

And it is based on an old model.

Junkies find veins in their toes when the ones in their arms and their legs collapse.”

Al Gore

. August 13, 2008 at 2:55 pm

The Dominian: News From the Grassroots

The Tar Sands Issue (#48) (PDF)

. August 25, 2008 at 11:23 am

Green.view
The politics of sand

Aug 25th 2008
From Economist.com
What constitutes sustainability?

IT’S official: extracting oil from Canada’s vast deposits of bitumenous sand is unsustainable. So, at any rate, Britain’s Advertising Standards Authority (ASA) implicitly concluded when it ruled that Royal Dutch Shell was misleading the public by describing its tar-sands operation as “sustainable”.

WWF, the environmental NGO that lodged the complaint with the ASA, dislikes the tar sands (or oil sands, as Shell prefers to call them) because turning them into fuel consumes much more energy than refining crude oil does. If that energy is made by burning natural gas—as it is in all tar-sands projects at the moment—and so involves extra emissions of greenhouse gases, then the resulting fuel is two or three times as bad for the atmosphere as normal petrol or diesel. That is no good for the world’s climate, and so, in WWF’s view, unsustainable.

Milan July 29, 2010 at 1:20 pm

Apparently, steel pipes and tubes destined for the oil sands are now one of the largest components of Canada’s break bulk cargo imports.

It all comes in via Houston.

. July 27, 2017 at 10:05 pm

<a href="https://www.theglobeandmail.com/news/british-columbia/fort-mcmurray-rebuild-happening-too-quickly-and-cheaply-review-finds/article35825730/""Fort McMurray rebuild happening too quickly and cheaply, review finds

As part of that process, local lawmakers rolled out policies designed to “build back better.” This strategy, however, has been trumped by a push to contain costs and speed up the recovery, the report said. Further, the review suggested the rural municipality of Wood Buffalo, which includes Fort McMurray, should consider tax rebates so folks rebuilding can afford to build more resilient structures.

For example, the report highlights what happened in Waterways, a riverside neighbourhood hit hard by the wildfire.

After the fire, Fort McMurray passed a bylaw to buy out some properties on a high-risk slope, yet allowed four properties within the zone to rebuild, the report said. Further, council approved a bylaw allowing reconstruction in a flood area in Waterways without implementing flood mitigation measures.

“This is an example of where the need for timely recovery may have been prioritized over the principle of building back better,” the report said.

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