When nature gives you tar sands, make carbon fibres

Oil sands crude prices have hit rock bottom. The future could be in the tar -the bitumen. The original name for the deposits, tar sands, should be restored because that’s where their potential value exists.

Image: Mining.com

Extracting oil from tar sands is done at great cost. Huge tracts of land are stripped and the tar sands are dug up or injecting with steam. Once it’s dug up, the thick goo has to be diluted just to get it through pipelines. To turn into useable petroleum, it has to be sent to refineries thousands of kilometres away. Because there aren’t enough pipelines to get it to refineries, and because convention oil is relatively cheap, the extraction of oil from tar sands is not profitable.

Beyond the cost of extracting oil from tar sands, there is the cost to the environment. Because extraction is so energy intensive, more greenhouse gases are produced than from conventional sources. Canada is the fifth largest producer of crude oil in the world but we produce 70 per cent more greenhouse gases per barrel than global averages according to Corporate Knight magazine (Fall, 2018). That higher average is because of the tar sands.

Then there are investment pressures that are moving away from fossil fuels. Europe’s largest asset manager is increasing its “decarbonized portfolios” and so is Canada’s second largest pension fund, Caisse of Québec.

Instead of burning the stuff as fuel, a better plan would be to extract the valuable byproducts of bitumen. An Alberta government agency, Alberta Innovates, is looking to producing derivatives of tar. In their report “Bitumen Beyond Combustion,” they suggest three possibilities.

The most obvious is asphalt for roads. The global market for asphalt is currently at $65 billion and is expected to grow. The tar sands now produce asphalt but the current method of transportation requires that the product be kept very hot for transport. A better way of moving asphalt to market is to turn it into pellets and ship it to markets. An engineer for Stantec engineering who worked on the report says:

“The infrastructure, the rail cars, are out there, the global pull, the pricing mechanisms – people are building roads all over the world everyday.”

Less obvious is the production of carbon fibres. Like any organic compound, bitumen is right for making carbon fibres. The fibres have a wide variety of applications including strong lightweight composite materials used in aircraft, aerospace, and wind industries. They strengthen cement and steel.

When used on their own, they can replace steel in automotive manufacture. If carbon fibres took just one per cent of the global steel market by 2030, that would require 3 million barrels of bitumen a day, one study found.

Another surprising component of tar sands is vanadium used in making batteries and high temperature metals. While one a barrel of bitumen contains only 30 millilitres of vanadium, millions of barrels would produce a lot of the metal.

At the current value of crude oil, it’s not worth mining the tar sands for petroleum. The bitumen, once regarded as a troublesome byproduct, may be the future of the tar sands.

 

Stop calling royalties a tax

In raising royalties, Rachel Notley’s NDP government is simply returning Alberta to its roots. Former premier Peter Lougheed urged a sensible development of the tar sands and fair royalties. After flying over the tar sands in 2006, he remarked:

Bust

“I was just up there on a trip, just helicoptering around, and it is just a moonscape. It is wrong in my judgment, a major wrong, and I keep trying to see who the beneficiaries are. It is not the people of the province, because they are not getting the royalty return that they should be getting.”

Corporations like to confuse royalties and taxes because they would rather not pay anything to government, regardless of merit or ownership. Royalties are “rents” says Gordon Laxter, economist and founder of the Parkland Institute of the University of Alberta.

“Many think of royalties as taxes. Any government fee must be a tax. Wrong. Private woodlot owners and musicians collect royalties. No one calls them taxes. When governments collect royalties they aren’t taxes either. Royalties are one way to capture economic rents. Leases, ecological charges and corporate taxes are other ways. Government ownership of resource companies is the only way to collect all the rents,” he says in the Monitor magazine.

By rents, Laxter means the profit from a piece of land or real estate. A tax is not that, it’s a levy on income. Royalties are rents, compensation for the use of public land.

When Lougheed flew over the tar sands moonscape, he was being rhetorical when wondering who the beneficiaries were. As former premier, he knew that the beneficiaries were Big Oil and not primarily those who owned the land.

Despite Lougheed’s pleading for Albertan’s to “think like an owner,” successive Alberta governments fell sway to the push from Big Oil who threatened to leave Alberta if royalties were increased. It was an idle threat, of course. Other governments, like Norway’s, impose higher royalties and Big Oil still continues to profit.

Western provinces tend to think small when it comes to their economies.  Like a young adult, no longer a teenager, provinces fail to think in grown-up ways. Western provinces have trouble seeing beyond living their parent’s basement and working at the equivalent of a fast-food restaurant – quick and easy natural resource extraction.

Mel Watkins, one of Canada’s foremost political economists, foresaw adult economies in his 1963 “staple theory of economic growth.” Simply put, his three pronged maturation involved the export of resources only after they had been processed; then on to the production of finished products instead of importing them; and finally, mature economies which become self-supporting and not dependent on resource extraction.

It hasn’t dawned on Western Canadians that we are there, at the third stage. We have cities with populations over a million; we are large enough to be self-supporting. Unfortunately, the quick-and-easy resource extraction mentality is hard to shake. B.C. Premier Clark imagines our future as the exportation of LNG and has lowered rents to please investors.

The reality is that B.C. and Alberta have the population, the talent and ingenuity to complete the last prong of Watkins’ vision. We need to think like grown-ups.