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  #21  
Old Posted Jan 29, 2008, 12:05 AM
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Ontario gets much of its refined products from Chemical Valley in Sarnia. More importantly with oil at 90$ its unprofitable to start up a refinery...
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  #22  
Old Posted Jan 29, 2008, 12:42 AM
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umm, wouldn't you be making the same profits as you would if oil were 10-20 dollars a barrel? you just mark up the cost for the refined products you output. Thats why when oil goes up that gas, diesel, and other oil products prices soon follow.
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  #23  
Old Posted Jan 29, 2008, 1:47 AM
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Why the hell aren't we developing th infastructure to refine our own oil? Maybe Alberta doesn't need the jobs, but Im certain Saskatchewan, Manitoba, and Northern Ontario would be more than happy to get the work.
Because we like Texans more than y'all!
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  #24  
Old Posted Jan 29, 2008, 2:29 AM
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umm, wouldn't you be making the same profits as you would if oil were 10-20 dollars a barrel? you just mark up the cost for the refined products you output. Thats why when oil goes up that gas, diesel, and other oil products prices soon follow.
this might happen in a textbook, but dont u buy gas dude....what markups? there hasnt been anything significant to keep those profit margins the same.... gas is 3$ a gallon in the US...its virtually stayed the same for over 2 years. the price of oil has increased almost 100% from its low in 2007 when it hit 100$. right now, refineries are losing money, just look at refineries stock prices vs price of oil in 2007....
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  #25  
Old Posted Jan 29, 2008, 3:01 AM
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Sucks to be American refineries, prices are fairly high here.
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  #26  
Old Posted Jan 29, 2008, 3:17 AM
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Sending oil to be refined south of the border has been a big issue here recently. Some people have accused the Government of scraping Alberta's 'topsoil' off for a quick buck, without any kind of plan for long-term stability or investment. Frankly, if companies want our oil badly enough they can refine it in Alberta or else keep steppin' to Nigeria.
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  #27  
Old Posted Jan 29, 2008, 4:57 AM
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put the refineries down south so you can ship all the fuel to california and the northeast? just doesn't make sense to me. putting oil refineries in saks, man, and Ontario would basically mean the oil flows more directly. much less shipping costs, and more work for us.
Because its completely uneconomical. Alberta is one of the most expensive jurisdictions in the world for oil and gas related development. Its much cheaper to build facilities in the US and export bitumen there for upgrading.

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umm, wouldn't you be making the same profits as you would if oil were 10-20 dollars a barrel? you just mark up the cost for the refined products you output. Thats why when oil goes up that gas, diesel, and other oil products prices soon follow.
Wow, with your in depth knowledge of refining margins you should get some of your buddies together and invest a few billion dollars. Sounds like you can't lose.

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Sucks to be American refineries, prices are fairly high here.
Gasoline prices are only higher here because the fuel tax is much higher. Canadian refineries are no more profitable than American refineries. In fact they are probably less profitable because of our higher corporate tax rates and labour costs.
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  #28  
Old Posted Jan 29, 2008, 5:09 AM
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Gasoline prices are only higher here because the fuel tax is much higher. Canadian refineries are no more profitable than American refineries. In fact they are probably less profitable because of our higher corporate tax rates and labour costs.
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  #29  
Old Posted Jan 30, 2008, 5:48 PM
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If you thought this was over, think again...

Shifting Sands: Part III
Why Cape Breton shakes in the echo of this distant boom
As young adults from the East race to high-paying jobs in the West, they leave behind hollowed-out towns worried for the future.


SINCLAIR STEWART
From Tuesday's Globe and Mail
E-mail Sinclair Stewart | Read Bio | Latest Columns
January 29, 2008 at 12:00 AM EST


NEW WATERFORD, N.S. — When Frankie Morrison wanted to remodel his kitchen, he didn't take out a loan, or dip into his retirement savings. Instead, the 53-year-old father of three followed in the footsteps of his son, his eldest daughter, his brother-in-law and just about every other working-age man in this former coal-mining town: He headed west for a spell, to take part in the Great Economic Miracle known as the oil sands.

“I came home with $9,200 in my pocket after six weeks,” he explained, flashing a $200 watch his employer gave him for avoiding accidents on the job. “My buddy just came back and he made $43,000. He bought a four-wheel drive, put new cupboards in his home, a new kitchen and new flooring. As a fella says, you make hay while the sun shines.”

The problem is, Mr. Morrison was making hay in Alberta while he was employed as the town councillor for New Waterford, a small community perched on the eastern tip of Cape Breton Island, near the mouth of Sydney Harbour. The local media discovered his side-act and pointed out he was still receiving a weekly travel stipend from the government (he paid the money back, saying it was an oversight).

Mr. Morrison was scarred enough by the experience that he doesn't plan to return to Alberta any time soon, but his constituents are showing no such reluctance – in fact, they're heading out in swarms.

New Waterford, population 6,500 and falling, embodies one of the less remarked-upon implications of the oil sands bonanza: a profound social and demographic shift in the small communities that furnish so much of the project's labour force during its massive construction phase.

So many of New Waterford's men are working out of town that the fire department can't recruit volunteers and the dart leagues are foundering. The local high school is having a difficult time finding coaches. A great number of children are being raised by their mothers. And finding a plumber or electrician is next to impossible.

Meanwhile, some of the youth heading west in search of jobs are staying there, exacerbating the town's attrition and raising questions about the future sustainability of basic services.

“There's hardly a household you can go by without running into someone working in the oil sands,” Mr. Morrison says. “There's a lot less men around. It's unbelievable. They're either getting ready to go or they just came back. In the 40 to 50 group, they're all out there.”


GROWTH AND CONTRACTION

It wasn't so long ago that New Waterford was a thriving coal-mining town of more than 12,000 people. In the 1970s, the town built a state-of-the-art high school, Breton Educational Centre, that served 2,300 students. There were four elementary schools, as many gas stations, and more than a dozen convenience stores dotting what was, for the town's size, a vibrant downtown strip.

Today, the population has been sliced in half, and the high school's enrolment has dwindled to 813. Only one elementary school remains, and the corner stores have either been sold or boarded up, replaced by a Needs chain. There is even talk that some of the area's six Catholic churches will be shuttered in the coming months.

Unemployment has remained stubbornly high since the last mine closed in 2001 and, despite the introduction of a large call centre, the town is struggling to adopt to a new economic reality.

Fort McMurray has stepped into this benighted breach, single-handedly keeping hundreds of families off the welfare rolls and pumping millions of dollars into New Waterford. At the same time, the migration of workers – some seasonal, some permanent – has dramatically changed the face of the town.

Nowhere is this more evident than in the pubs. Rosco's, a local watering hole, recently shut its doors for lack of business. At the New Waterford Army & Navy Club, where time is measured in pint glasses and hands of tarbish, a local card game, things are little better.

The card tables sit empty, and the cavernous bingo hall of a tavern is deserted, save for four older men huddled in a corner and feeding coins into a video lottery terminal.

A few of the regulars have apparently been siphoned off by the Knot, a neighbourhood bootlegger with a kindly disposition toward smokers and early birds – it opens at 7 o'clock in the morning.

But that isn't the real reason business has been faltering, confides Tony MacKinnon, a 57-year-old ironworker who has commuted to Alberta for work over the past several years.

“It's the oil sands – that's why this place is so dead,” he explains. Mr. MacKinnon is open about his dislike for Alberta (“I hate the place,” he grouses), but the money is too good. “My wife, she don't mind,” he says, pausing to rub his thumbs and fingers together. “As long as the bacon is coming.”

This dislocation is nothing new for families in Cape Breton, where the vicissitudes of an industrialized economy have always meant leaving home in search of work. In the 1950s, gardeners and housekeepers streamed to New England. In the 1960s and 1970s, the destination was Ontario's manufacturing sector. Intermittent booms in Alberta have also attracted workers from the island over the past few decades.

The impact of the oil sands, however, promises to be much more pronounced, not just because of the breadth and longevity of the labour demand but also because of the type of people it's attracting.

“Young people are going out and not coming back,” lamented Frank Corbett, the MLA for the region for the past decade, a span in which his riding has lost about 2,000 voters, or 20 per cent. “We're seeing highly skilled people leaving on an education we paid for. Alberta is getting a great deal here.”

So expansive is this exodus that Mr. Corbett is dispatching a ward captain to Fort McMurray before the next provincial election to make sure the men are registered to vote.

Whereas the number of people living in Canada swelled 10 per cent between 1996 and 2006, the number living in Cape Breton Regional Municipality decreased by more than 10 per cent – the largest drop of any census division. The municipality includes Sydney, Glace Bay, New Waterford and a handful of smaller villages.

While declining birth rates have abetted this slide, the bigger issue is what demographers call out-migration: people leaving and not coming back.


THE EXODUS OF YOUTH

One benefactor of this trend has been the city that locals have dubbed Fort McMoney, or “the Shrine” – a glib reference to how an oil sands job can “heal” people collecting disability.

No one has exact figures but anecdotal evidence suggests well over 1,000 New Waterford residents have been lured west. Some are unionized employees working the “21/7” (out for three weeks, and back for one); others, like Mr. Morrison, the councillor, go out sporadically. And then there are those, like Joe Hanes, who left several years ago and have yet to return.

Mr. Hanes, a 30-year-old pipefitter who makes $110,000 a year, has helped friends get work in Alberta and reckons approximately 60 per cent of his graduating high-school class is now making a living there.

“It's the same old song,” he said, between sips of a Coors Light during a brief visit home. “The younger guys are a little spoiled [by the salaries]. There's a lot of people out there who won't move back.”

According to recent figures based on tax filings, the net migration of Nova Scotia taxpayers to Alberta has more than tripled, from 1,074 in 2004 to 3,686 in 2006. More than 13 times the number of Nova Scotians left for Alberta than for the No. 2 destination, British Columbia.

And for those who moved to Alberta, more than half came from either Halifax County or the much smaller Cape Breton County, where New Waterford is located. These numbers don't reflect the larger number of Cape Bretoners who are commuting to Fort McMurray, often via chartered planes that ferry them directly to the Sydney airport.

“When I was there I'd run into people from New Waterford a lot easier than I would in Sydney,” said Jill Williams, a local businessman who began going to the oil sands in 2006. Mr. Williams, whose family owns JT'S Pub and Steak Room, said he made enough in nine weeks to send one daughter to university for the year and to pay for a Mexican vacation.

“The money out there is intoxicating,” he said.

JT's customers on this day are a fitting proxy for the town: a table of 14 has gathered for lunch, yet all of them are retired – and the vast majority are women.

“Our town is about 60 per cent seniors,” said Ed O'Quinn, who recently retired after selling the Community Press, a local newspaper. “We've lost our youth.”

Many residents argue the social costs – which include well-documented drug problems among the town's youth – could be much dearer if the men here didn't have the oil sands and were instead forced to rely on social assistance.

But economists like John Whalley, economic development manager for the Cape Breton Regional Municipality, believe the project is a temporary fix and are worried about the long-term viability of many small towns on the island that aren't economically self-sufficient.

“The outflow of people is an enormous drain on our region,” Mr. Whalley said, noting that the shrinking tax base is being forced to fund a rapidly aging community, which in turn requires higher health-care spending.

Xstrata, the global mining giant, is preparing to open a coal mine in nearby Donkin, but that would require only between 250 and 300 workers. Other business leaders argue that the call centres have created a solid base of computer-literate employees, and that Cape Breton is in a good position to lure more technological employers.

Until that happens, there is little evidence the population will stop ebbing and greying, especially with the lure of steady work and handsome pay in the oil sands.

Mr. Morrison has already watched two of his children move to Alberta. His youngest daughter, meanwhile, spent last summer there to save money for school, but he insisted she return to Cape Breton to undertake her degree.

“I won't let her go,” he said. “I told her, ‘You're going to be gone soon enough.'”
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  #30  
Old Posted Jan 30, 2008, 5:50 PM
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Shifting Sands, Part IV
Life on the cold side of the country's hottest economy
The oil sands dominate Alberta's wealth and growth, but not all parts of the province are taking part – including, surprisingly, the conventional oil industry

GORDON PITTS
From Wednesday's Globe and Mail
January 30, 2008 at 12:00 AM EST


In the rolling farmland around Derwent, Alta., the fields are littered with what look like oversized pop cans. These stubby storage tanks contain heavy oil that has been pumped from the ground and is waiting to be trucked away – much of it to the big Husky Oil upgrader in Lloydminster.

The tanks are not a pretty sight – they lack even the stark imagery of the classic oil well – but they are money in the bank for the farmers who till this undulating Alberta ground.

For a farmer, the extra few thousand dollars a year from a single well might buy a piece of equipment, some groceries, or maybe pay off a bit of the debt from a hard life on the land.

“It all goes back into the farm,” says Peter Harasiuk, 71, who collects about $20,000 a year from eight small oil leases to backstop a beef operation that has been depressed by years of low prices and the fallout from the BSE scare.

Even now, as high wheat prices buoy the fortunes of some of their neighbours, he and his son stagger under rising feed costs and steep, volatile energy prices. The small transfusion of oil money is no panacea for the family, which has farmed this same land since 1912 when Mr. Harasiuk's father fled Ukraine. “The livestock sector is in very big trouble,” he says.

Derwent, about two hours east of Edmonton, is where the two Albertas forcefully collide. The energy wealth flowing from the Athabasca oil sands, as well as from other unconventional sources such as Derwent's heavy oil, meets a farm economy that is not sharing in the province's massive accumulation of capital and income.

“There is a great standard of living in Alberta and tremendous wealth but that doesn't mean everyone's wealthy,” says Tim Harvie, a landowner and grain farmer from Cochrane, just west of Calgary, and a member of one of the province's most prominent ranching families. “Times are good but not for everyone.”

Or as Bernie Lesage, the owner of a small factory in Calgary, puts it, “We don't participate in the oil sands – all we do is pay the costs.”

These tensions reflect an Alberta that is far more diverse economically and politically than the image Eastern Canadians hold of a monolithically wealthy province. There are, in fact, increasingly deep divisions between urban and rural, north and south, environmentalists and growth advocates, and, as always, Calgary and Edmonton.

“What concerns me is the growing polarization between rural and urban Alberta, between landowners and energy companies,” says D'Arcy Levesque, vice-president of public and governmental affairs for pipeline giant Enbridge Inc.

Even the energy industry is, in fact, two industries – the roaring industrial machine of the oil sands, with its massive capital spending, and a sputtering conventional industry, particularly in natural gas, now an eroding pillar of Alberta's prosperity. Drilling and exploration companies are laying off many of the people they picked up in the boom of the past decade.

“Right now, if your livelihood is dependent on oil drilling, you're left behind,” says Todd Hirsch, the Calgary-based senior economist for ATB Financial.

In Derwent, farmers complain about oil trucks tearing up their roads and fields, but everyone would love a well or two on their property just to make ends meet. Still, this income is a pittance compared with the spectacular nouveau wealth evident in Calgary, or in its recreational outposts such as Canmore, Alta., and Palm Springs, Calif.

In fact, the Alberta boom follows a narrow jagged line that starts around Invermere, B.C., a lakeside mountain retreat full of retired and semi-retired Alberta oil people, then pushes east to Calgary, the head-office base of the energy industry, and up the bustling Highway 2 corridor to Red Deer, a petrochemical hot spot.

The line touches Nisku, the massive industrial park south of Edmonton that generates much of the equipment and technology for the oil sands. It snakes northward through Edmonton, the government and refinery centre, before heading up the perilous highway to overheated Fort McMurray, the production home of the oil sands.

When you stray off that line, the economic picture becomes more mixed. There are prosperous pockets, such as Grand Prairie and Lloydminster, but many rural communities have been marginalized by high costs and tight labour markets, as farm and service workers head off to better-paying jobs in Edmonton, Calgary or Fort McMurray.

Drive around Derwent and, despite the oil tanks, there are more symbols of decline than triumph. The population of 110 people has been stagnant for years. Many homes in the area are shabbier than in the past, because the new energy-based work force is so transient. Where once there were four grain elevators, now there are none. The local school has closed and is now occupied by a window-blind factory.

This area east of Edmonton is the home turf of the province's new premier. The rural-urban polarization, combined with the north-south split, were major factors in the 2006 Conservative leadership victory of Ed Stelmach – “Premier Ed,” as Mr. Harasiuk likes to call his fellow Ukrainian-Canadian farmer. It is also reflected in Mr. Stelmach's royalty proposals designed to extract more revenue from energy companies – measures hotly disputed in downtown Calgary but more popular in the rural north and Edmonton.


A question of conservation

One Albertan whose scuffed work boots straddle this urban-rural split is Tim Harvie, whose Cochrane ranch is under siege as million-dollar houses spill over the foothills not far from his home.

Mr. Harvie is caught in the paradox of an economy going several different directions at once. As a grain farmer, he is revelling in the highest wheat prices of his lifetime. But as a cow-calf operator, he has coped with the cycle of low beef-prices and, as part owner of a feedlot, he has seen workers leave the industry in droves, attracted by the energy industry's high wages.

And as a conservationist, he is appalled by the excesses of the rapidly urbanizing countryside. “We're living like the Romans and we're doomed like the Romans,” says Mr. Harvie, a lean, compact man with watchful eyes. “We've got to respect where we've come from, not rape and pillage the land.”

Mr. Harvie, sitting in Cochrane's Smitty's pancake house in checked shirt and blue jeans, looks every inch the cowboy, but he is what amounts to landed gentry in Alberta. His grandfather was Eric Harvie, a Calgary lawyer who, in the first half of the 20th century, bought a lot of land, including ranch country around Cochrane and moose pasture south of Edmonton.

When the Leduc gusher blew in 1947, Eric Harvie was holding rights to thousands of acres of land around the oil strike that transformed once-destitute Alberta into a “have” province. It made him and his family rich.

He became a great collector, creating an eccentric trove of art and artifacts that became the basis of the Glenbow Museum in Calgary. As for the ranchland, much of it was handed down to his children and now his grandchildren; Tim and his three sisters are major owners.

From his boyhood, Tim Harvie has been passionate about farming but now he finds himself sitting in front of an onrushing Calgary. He has never sold any land for development but knows he can't stand, Canute-like, in the way of waves of new housing.

If he can't stop it, he figures he can at least help guide it. For $40-million – half the market rate – he and his siblings sold 1,300 hectares of land to the province for a park along the Bow River and set up a $6-million fund to support its conversion to parkland. With other land acquisitions, the park will enable future generations to walk the more than 20 kilometres along the Bow River from Calgary to Cochrane.

To outsiders, Mr. Harvie might seem hypocritical to criticize other folks who are simply trying to match his family's wealth. But he says his family is no longer remarkable in Alberta for its net worth.

What he sees is outrageously conspicuous consumption, a society of BMWs and multimillion-dollar McMansions – without the willingness to give back and conserve that was epitomized by his grandfather.

“We're a me-first society, and preserving doesn't come naturally,” he says. “It just blows me away to see the growth in every community around Calgary. Who is buying all these houses?”

He worries that consumer debt is at staggering levels, and any pronounced slowdown would be hard for many overstretched Calgarians. Yet a moderate easing of the overheated economy would spell some relief for Bernie Lesage, the president of Global Thermoelectric Inc., whose Calgary factory makes power systems for projects like pipelines and gas wells in remote locations.

“From the aspect of pure economics, this is a lousy place to manufacture,” he says.

More than 80 per cent of Mr. Lesage's production is exported – much of it to China and India – while he struggles at home with spiralling costs, higher-than-normal labour turnover and, most recently, a Canadian dollar turbocharged by the oil sands.

Yet he has no intention of moving to a lower-cost region. After all, Calgary is a magnet for engineers and other professionals attracted by the work and the lifestyle – the ability to combine urban amenities with the big outdoors.

So Mr. Lesage, an Ontario-born engineer who moved to Calgary 15 years ago, speaks for many people coping with life in Alberta just outside the oil sands bubble: “For now, we just suck it up.”
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  #31  
Old Posted Jan 30, 2008, 5:58 PM
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Fort McMurray could very well resemble the hollowed out urban areas of Cape Breton in the future.
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  #32  
Old Posted Jan 31, 2008, 4:33 AM
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If it wasn't for conspicious consumption by the nouveau riche, no one would have any reason to be anything but poor and lazy. Sure is trendy to bash people like that though.
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  #33  
Old Posted Feb 1, 2008, 4:07 AM
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Yeah right, Scott. We would all be poor bums if it weren't for those ever so generous rich people buying BMW's and boats.



The world's largest natural gas platform, Aasgard-B, was partly assembled near Stavanger at a cost of $1.4 billion, then towed into the North Sea. (File)


Shifting sands, Part V
Frugal Norway saves for life after the boom

DOUG SAUNDERS
From Thursday's Globe and Mail
E-mail Doug Saunders | Read Bio | Latest Columns
January 31, 2008 at 12:00 AM EST


STAVANGER, NORWAY — To stroll along the harbour of this pretty town on Norway's North Sea Coast is to follow the history of an economic explosion. To the south, the old wooden canneries are still processing herring and cod, the commodities that until a few decades ago were the mainstays of Norway's poor, austere economy.

Across the harbour, the constant movement of enormous cranes and construction ships is evidence of the great North Sea oil boom that has turned Stavanger into a high-rent boomtown and Norway into one of the world's wealthiest nations. The streets of this fishing town are now lined with luxury-goods shops and packed with highly paid foreign workers.

But further from shore, you will find a third economy, a more surprising one that has nothing to do with oil or fish. In one big building just outside of town, a local firm called HighComp is turning out 10-metre-wide housings for huge wind-turbine generators.

“We're doing our best business in parts of the economy that have nothing to do with oil or fish being pulled from the sea,” said owner Helge Rasmussen, 34. His plastics firm's wind-power division built $4-million worth of housings last year and has completed deals across Scandinavia and northern Europe.

Closer to the harbour is Laerdal Medical, which makes life-saving devices such as defibrillators and medical simulators for export to 22 countries. Its profits grew by 10 per cent last year, even though Norway's currency has a high exchange rate. “We had our best year ever last year, and it was 97-per-cent exports, including difficult markets like China,” said Tor Morten Osmundsen, the company's chief executive.

These companies are no exception. Across Norway, the oil boom is being paralleled by record growth in the non-petroleum, export-driven economy. In November, Norway's non-oil private-sector economy reported quarterly growth of 1.9 per cent, the equivalent of a 7.6-per-cent annual growth – an astonishing economic performance, beating even the growth of oil and gas exports.

And that is the real surprise here. While it isn't hard for nations and provinces to get rich from oil, it is exceptionally hard – almost impossible, by conventional economic reasoning – for them to make money off anything else while the oil boom is taking place.

Everywhere else in the world – including Canada – a boom in oil has led to a decline, if not a complete devastation, of conventional businesses. It's a phenomenon known to economists as “Dutch disease,” after the tragic experience of the Netherlands, which discovered oil in the 1970s. As oil exports boomed, the flood of money into the domestic economy inflated the currency, provoked price increases and destroyed exports, leading to a decade of joblessness and rising inequality.

The same thing happened, on an even larger scale, in Britain in the 1980s. After North Sea oil was discovered, the British industrial economy was virtually obliterated, leaving four million people jobless. Poor countries, from Nigeria to Venezuela, have also discovered the economy-smothering nature of oil windfalls.

Among oil economies, Norway – the world's third-largest exporter and 10th-largest producer in 2006 – is almost alone in having avoided this fate. As oil has boomed, so has everything else, and it has boomed in areas that will continue to generate economic growth when the oil revenues are gone. This is no accident: For Norwegians, this is a story of planning, self-discipline and a long learning process.

While other countries have become apathetic and uncompetitive during petroleum booms, Norway appears near the top of every international index of competitiveness and entrepreneurship.

The “Norwegian model” has become a topic widely studied, but rarely imitated, among other oil nations. The hotels of Oslo these days are populated with Kuwaitis, Saudis, Kazakhs and Brazilians who have come here to examine the Nordic way.

Their first port of call is an office deep inside the high-security headquarters of the national bank. There, a soft-spoken man with a bald pate and a neatly trimmed beard sits atop one of the world's largest piles of money. Yngve Slyngstad, 47, is the newly appointed manager of the Government Pension Fund – Global, better known as “the oil fund.”

An adjoining room contains computer desks staffed by his 11 traders, who invest the $1-billion in oil money his office receives every week. Norway's oil is drilled from beneath the North Sea by dozens of companies, including Norway's state-owned Statoil and Canadian firms such as Talisman and Petro-Canada. In exchange for the right to drill, they must hand 78 per cent of their profit over to Mr. Slyngstad's fund.

This is Norway's long-term savings account, and in the 17 years since it was launched it has become one of the four largest investment funds in the world. It currently holds $368.2-billion, or $78,351 for each Norwegian citizen. By the end of next year, even with an oil-price decline, it is projected to hold almost $500-billion, or $117,000 for each citizen.

For one of the world's most powerful investment bankers, Mr. Slyngstad is surprisingly humble. Aside from his Norwegian reserve, that's because his job is strictly limited by a Norwegian law – which is regarded by most people here as something akin to the 10 Commandments – known as the Management Rule.

The Management Rule is the heart of Norway's economic miracle. It is a profound act of self-discipline: All but 4 per cent of Norway's oil earnings must be placed in the fund for savings; nothing can be withdrawn from the fund until the oil is gone, decades from now; and – most crucially – absolutely none of the money can be invested inside Norway. Mr. Slyngstad and his traders spend their days funnelling the oil wealth into foreign stocks and bonds, so none of it will touch the Norwegian economy.

Mr. Slyngstad explained that by investing all this money in non-Norwegian companies, the fund acts as a shock absorber for the entire Norwegian economy. Even as oil has soared, Norway has avoided high inflation and its non-oil companies have grown more competitive.

“Our politicians and voters have placed a bind on themselves, refusing to touch more than 4 per cent of the oil money, so what that means is their economy actually gets a stabilizing mechanism, which is built into the fact that the oil revenue doesn't go into the economy, it flows out,” he explained. “So for the Norwegian people, the oil revenue is not revenue at all, it's just wealth being moved into a more diversified portfolio for the future.

(By comparison, Alberta's Heritage Fund currently receives about one-eighth of the province's oil money; the rest goes into provincial coffers or is paid directly to Alberta citizens. In its 31-year history, it has accumulated $16.1-billion, or $4,588 per Albertan. Two-thirds of it is invested inside Canada.) On the face of it, Norwegians seem to be paying a price for their frugality: Only about 10 per cent of Norway's $70-billion government budget comes from oil money. In order to finance their generous state services and social benefits, Norwegians' income taxes are among the highest in the world, and their gas stations charge $2.30 for a litre of unleaded – the highest price in the world, in a country that is the world's third-largest exporter of the stuff.

But it's hard to find Norwegians who consider this a burden. They have among the highest disposable incomes in the world (and the fairest distribution of income: Even the poor are comparatively rich). In every quality-of-life index, Norway ranks at or near the very top, above Canada. Their unemployment rate is currently 2 per cent. And in the 2005 election, Norwegians re-elected the social democratic coalition government that has shunted their earnings overseas.

“Voters here know that there is no country in the world that has managed its oil resources and wealth so well as Norway,” says Auke Lont, an Oslo economist who specializes in oil economies. “So even if oil prices dropped and the economy started getting worse, Norwegians would not want to ruin that record and embark on something that is uncertain. It's a system based on consensus, and it's a pretty wide consensus.”

There are signs of potential weakness in Norway's current economy. Mr. Rasmussen, the wind-turbine entrepreneur, points out that the extreme labour shortages caused by the low jobless rate have made it hard to find workers at any reasonable price. And there is a danger of inflation: Mr. Osmundsen, the medical-supplies executive, notes that his company's 10-per-cent growth last year was just enough to keep up with the increasingly expensive currency.

Within the Norwegian government, there's a realization that many more immigrants are needed to fill the work force and that much more needs to be done to make small, non-oil businesses prosper. Norway has one of the most flexible labour-law systems in the world, so it is extremely easy to hire and fire workers (making the creation of small businesses easier). And the government has a system of research grants that encourages people to move out of oil and into the future economy.

The attention Norway pays to planning its after-oil economy and promoting economic diversity must strike a chord with many Canadians. But the Canadian who has the most control over the use of the country's oil money is not listening. Mel Knight, Alberta's Energy Minister, said in an interview during a recent visit to London that he does not believe his province has any lessons to take from Norway.

“First of all, Norway is a country that is a federal jurisdiction. And if we were to turn over all of our resources in Canada back to the federal government, perhaps they would operate the thing differently.

“But our Constitution in Canada dictates that the province of Alberta has the mandate to deal with our own natural resources. We feel that wealth generation in the province of Alberta is worth something, and that to put that money back in the hands of Albertans, and let those people do what they do best with their money, is a better opportunity for us.”
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Old Posted Feb 1, 2008, 4:52 AM
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^ Wow. Norway seems to have it figured out. What is the new schedule for investment into the Alberta Heritage fund now that the province has increased the royalties?
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Old Posted Feb 1, 2008, 5:21 AM
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^ Wow. Norway seems to have it figured out. What is the new schedule for investment into the Alberta Heritage fund now that the province has increased the royalties?
Good question. Unfortunately for us, the Alberta PC's are all shortsighted fools who would sell out our future for short term gains (and for the sake of political expedience).
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Old Posted Feb 1, 2008, 4:20 PM
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Yeah right, Scott. We would all be poor bums if it weren't for those ever so generous rich people buying BMW's and boats.



The world's largest natural gas platform, Aasgard-B, was partly assembled near Stavanger at a cost of $1.4 billion, then towed into the North Sea. (File)


Shifting sands, Part V
Frugal Norway saves for life after the boom

DOUG SAUNDERS
From Thursday's Globe and Mail
E-mail Doug Saunders | Read Bio | Latest Columns
January 31, 2008 at 12:00 AM EST


...........

This is Norway's long-term savings account, and in the 17 years since it was launched it has become one of the four largest investment funds in the world. It currently holds $368.2-billion, or $78,351 for each Norwegian citizen. By the end of next year, even with an oil-price decline, it is projected to hold almost $500-billion, or $117,000 for each citizen.

For one of the world's most powerful investment bankers, Mr. Slyngstad is surprisingly humble. Aside from his Norwegian reserve, that's because his job is strictly limited by a Norwegian law – which is regarded by most people here as something akin to the 10 Commandments – known as the Management Rule.

The Management Rule is the heart of Norway's economic miracle. It is a profound act of self-discipline: All but 4 per cent of Norway's oil earnings must be placed in the fund for savings; nothing can be withdrawn from the fund until the oil is gone, decades from now; and – most crucially – absolutely none of the money can be invested inside Norway. Mr. Slyngstad and his traders spend their days funnelling the oil wealth into foreign stocks and bonds, so none of it will touch the Norwegian economy.

Mr. Slyngstad explained that by investing all this money in non-Norwegian companies, the fund acts as a shock absorber for the entire Norwegian economy. Even as oil has soared, Norway has avoided high inflation and its non-oil companies have grown more competitive.

“Our politicians and voters have placed a bind on themselves, refusing to touch more than 4 per cent of the oil money, so what that means is their economy actually gets a stabilizing mechanism, which is built into the fact that the oil revenue doesn't go into the economy, it flows out,” he explained. “So for the Norwegian people, the oil revenue is not revenue at all, it's just wealth being moved into a more diversified portfolio for the future.

(By comparison, Alberta's Heritage Fund currently receives about one-eighth of the province's oil money; the rest goes into provincial coffers or is paid directly to Alberta citizens. In its 31-year history, it has accumulated $16.1-billion, or $4,588 per Albertan. Two-thirds of it is invested inside Canada.) On the face of it, Norwegians seem to be paying a price for their frugality: Only about 10 per cent of Norway's $70-billion government budget comes from oil money. In order to finance their generous state services and social benefits, Norwegians' income taxes are among the highest in the world, and their gas stations charge $2.30 for a litre of unleaded – the highest price in the world, in a country that is the world's third-largest exporter of the stuff.

But it's hard to find Norwegians who consider this a burden. They have among the highest disposable incomes in the world (and the fairest distribution of income: Even the poor are comparatively rich). In every quality-of-life index, Norway ranks at or near the very top, above Canada. Their unemployment rate is currently 2 per cent. And in the 2005 election, Norwegians re-elected the social democratic coalition government that has shunted their earnings overseas.

“Voters here know that there is no country in the world that has managed its oil resources and wealth so well as Norway,” says Auke Lont, an Oslo economist who specializes in oil economies. “So even if oil prices dropped and the economy started getting worse, Norwegians would not want to ruin that record and embark on something that is uncertain. It's a system based on consensus, and it's a pretty wide consensus.”
...........................
I had some prior knowledge of the inner workings of Norway's economy (their oil fund, and suggestions of oil rich regions joining the fund, including Canada), but now I am deeply intrigued with the Norwegian model. The article highlights relevant issues and solutions worth consideration for our provincial and national governments.

I wonder how many Saskatchewanians would favor a Norwegian model over an Alberta model? I see a possibility for our province adopting it, but it won't happen for some time (5, maybe 6 years?), if at all.
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Old Posted Feb 1, 2008, 5:47 PM
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And unlike Alberta, Norway didn't dig up 1000s of square miles of land in extracting the oil.
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Old Posted Feb 1, 2008, 5:52 PM
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^ Wow. Norway seems to have it figured out. What is the new schedule for investment into the Alberta Heritage fund now that the province has increased the royalties?
Not sure, but it's quite likely Alberta will collect LESS money under the new royalty regime than they did before they changed it, at least in the short term. At best they can hope for a break even (compared to what they currently collect).
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Old Posted Feb 1, 2008, 6:34 PM
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Greenpeace activists unveil a huge protest sign in Edmonton to coincide with the opening of a session of the Alberta legislature in November.


Shifting sands, Part VI
The climatic costs of rapid growth

ERIN ANDERSSEN
From Friday's Globe and Mail
February 1, 2008 at 12:00 AM EST


Two Fridays ago, a bigwig from the Suncor oil company sat at Wayne Groot's kitchen table, where the window looks out over his cherished potato fields. They chatted about their kids, and Mr. Groot, not being the lawyer-fetching type, served tea.

But it wasn't long before the conversation turned to the true reason for the visit: Suncor wants to buy the Groot land – in particular, the patch upon which the family bungalow sits – to build an upgrader that will take the bitumen travelling from the oil sands up north and turn it into synthetic crude for the thirsty markets down south.

The night before the visit, Mr. Groot, 47, had a restless sleep. But then he's been suffering waking nights for two years now, ever since the land agent first showed up and slipped a big number his way for the acreage he'd always imagined passing on to his kids. He doesn't want to sell; his family has been farming the rich soil northeast of Edmonton for three generations. It pains him to think of smokestacks plopped on some of the finest agricultural fields in the country.

But he knows that everything is headed in that direction, as relentlessly as the bitumen flowing down the pipes from Fort McMurray, where 42,000 hectares of nearby boreal forest have already been hacked so raw and bare that people say they don't like to fly over it any more.

And to think that when he was a boy, on vacation with his parents, he'd once been excited at the sight of Suncor's busy oil sands mine. Back then, Suncor was on its own, pushing out 50,000 barrels on a good day. Now, with daily production at 1.2 million barrels and growing, and 40 companies with a stake in the sands, the problem has drifted into Mr. Groot's backyard: Pending provincial approval, there are plans to build as many as 10 upgraders within a few kilometres of his farm.

“We're exploiting this province way too fast,” says Mr. Groot. “In 50 years, we will know a lot more about what this has done. But then there won't be any more land left.”

This is what angers environmentalists and an increasingly vocal segment of Albertans: The oil sands projects have grown in number and size so suddenly that there hasn't been time to consider the long-term environmental costs. Groups like the Pembina Institute, an Alberta-based environmental think tank, have proposed a moratorium on new projects until technology can catch up. Greenpeace, which opened an Edmonton office last summer, is campaigning for a complete halt to all development.

Mike Hudema, the Medicine Hat native who returned to Canada to run the Greenpeace office, says: “What is the cost of this? Right now, we are in the early stages and already it is completely out of control.”

There's no getting around it: Oil produced from the bitumen lying in the sand under Alberta's boreal forest is one of the dirtiest fuels in the world. Under current conditions, extracting one barrel of synthetic crude from a mine requires roughly two to four barrels of fresh water from the nearby Athabasca River (an amount top water scientists say the river cannot sustain), along with 750 cubic feet of non-renewable natural gas and about four tonnes of tarry sand and “overburden” – the industry term for what Mr. Groot calls soil.

Steaming it out of the ground – a process that will dominate most of the future expansion since the vast majority of bitumen is found too deep to be mined – creates a crisscross of pipes across the wilderness and requires large amounts of energy to boil the necessary water. The impact of so-called “in situ” extraction on groundwater supply and quality, environmentalists say, is uncertain.

What's more, the oil sands are easily cast as a climate-change villain: In 2006, researchers at Simon Fraser University found that the mining and upgrading of oil sands bitumen created five times as many greenhouse-gas emissions as would come from producing oil from a conventional well.

Barring new technology, and if production increases, as predicted, to four million barrels a day by 2020, it will be virtually impossible for Canada to meet its international climate-change commitments.

Mining the Alberta wilderness compounds the problem by stripping the boreal forest, which naturally sucks up carbon dioxide. About 3,000 square kilometres of wilderness is leased for mining; another 35,000 square kilometres could be sliced up for in situ development.

The developed wetlands can't be restored to their original state, and a recent environmental report by the National Energy Board said it's still unclear whether current plans to reclaim the land will create self-sustaining ecosystems in the long term.

A growing network of pipelines will also confine animals in the area, particularly the migratory woodland caribou, already considered a threatened species. More seriously, there is growing concern about health issues, including reports of increased cancer rates among aboriginal residents living downstream from the sands.

The most dramatic visible legacy of mining the oil sands – and an example environmentalists cite of the uncertainty of the long-term impact – are the large, manufactured lakes that store the cloudy waste water left over from the extraction process.

They are called tailings “ponds,” but collectively they cover an area greater than 50 square kilometres. Today, says Randy Mikula, the head of tailings research at Natural Resources Canada who has been studying the problem since the 1980s, there is enough suspended clay floating in the ponds to fill a ditch 20 metres wide and 10 metres deep from Fort McMurray to Edmonton to Ottawa.

They were never supposed to get this large, explains Dr. Mikula. When oil sands mining began in the late 1960s, it was assumed that the clay in the ponds would settle in a few years and the hardened material could be returned to the landscape. But this didn't happen: Many scientists now believe the tailings-pond clay will take 500 to 1,000 years to settle on its own.

The easiest solution currently involves dumping the wet tailings into the pits left over by the mines and topping them with fresh water. But researchers believe this will create a series of dead lakes, on the bottom of which no life can exist. “Most people in the industry see end-pit lakes as a last resort,” says Dr. Mikula.

Oil companies, like Suncor, are investing a lot of energy into figuring how to solidify the tailings. The company has made progress using gypsum, created from the sulphur that is a by-product of the extraction process.

But Dr. Mikula, whose team will begin commercially testing a method that spins the tailings at high speed to remove the water, says no solution is certain at this point. By 2010, Suncor says it will have reclaimed its first tailings pond, a 217-hectare body of waste water that sits next to the Athabasca River, but the company is doing so by moving most of the watery tailings to another, newer, lake.

On the other hand, Gord Lambert, the company's vice-president of sustainable development, points out the industry has made significant progress in reducing its per-barrel energy impacts.

It has reduced carbon emissions by as much as 50 per cent, improved water recycling and, in Suncor's case, is reducing the use of gas-guzzling dump trucks by piping the bitumen in liquid form directly from the mine face.

Mr. Lambert predicts technology is going to solve most of the problems. Given the high price of natural gas and government-imposed limitations on water use, he says, oil companies have an economic interest in improving their environmental footprint. And the oil sands – the first development of its kind of the world – is a work in progress.

“One misconception is that the future is going to be an extension of the past,” Mr. Lambert says. “The pace at which innovation is occurring is underestimated.”

Jay Nagendran, Alberta's assistant deputy minister of oil sands environmental management, also argues that the province is wrongly criticized for being lax on industry regulations. He admits that the province's limits on water use from the Athabasca River stops short of prohibiting it completely during low-flow winter periods – as several experts have argued is necessary to protect the ecosystem. But the restrictions still mean companies will face water shortages requiring them to develop other alternatives.

The province, he says, recently made Syncrude spend $700-million to reduce its sulphur emissions. And companies that fail to reduce their CO2 emissions over a certain amount must pay into a technology fund – though this is long way from applying a tax on all emissions, as many environmentalists propose.

Developing the oil sands, Mr. Nagendran says, can't happen without a tradeoff. “If you want to sustain a pristine environment but you want to dig up the oil sands,” he says, “that's not possible.”

But relying on future technology to take care of a current problem – as industry promises it will – is an optimistic, yet-to-be-proven prediction. One of the most promising ideas for reducing CO2 emissions is to capture the gas and inject it underground for storage, but this technology is very expensive and, according to the National Energy Board, likely decades away from being put into practice.

No matter what solutions come along, says Robert Steedman, the NEB's chief environmental officer, the oil sands will require a huge clean-up project.

“It just reflects the scale and scope of this whole endeavour,” he says. “The resource is there, and we can get it out, and there's going to be a long-term piece of work to tidy up afterwards.”

The concerns about how efficiently that work will get done is expected to be a key issue in the provincial election. And the outcry will only get louder as projects roll steadily across the boreal forest.

Back at his farm outside Edmonton, Wayne Groot ended his conversation with the Suncor representative and the company's land agent by refusing to consider a new dollar figure for his land. “They asked us what we wanted,” he says. “And we said, ‘We really want you to go build somewhere else.'”

But he knows they'll be back. His neighbour has already sold his property to Petro-Canada; in a few years, if the company gets approval, he'll be looking out his kitchen window, across the fields, at the smoke and lights of a new upgrader.

Eventually, he suspects, that for the sake of his family, they'll have no choice but to take the money and leave.

“Some people would probably say, ‘You're lucky. You can sell your land for a lot of money and live the good life.'

“I thought I was living the good life already.”
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Old Posted Feb 2, 2008, 6:23 AM
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Norway got a much better hand than us in terms of natural resources. Sorry if we our wealth didn't come as neat and tidy as theirs. I agree that we look like a bunch of fucking trailer trash compared to them with regards to how we have managed our wealth though.

And Boris, I only wanted to get rich so that I could show off and rub my nouveau riche wealth in everybody's face. So ya, you would be worse off without the tax dollars that I pay for that privilege. Well, financially at least, I don't wanna hear any junk about social blah blah blah.
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