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Seems the Fraser Institute Didn't Quite "Get" My Letter to John Kerry

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The HuffPost blog from the Fraser Institute’s Senior Director, Natural Resource Studies, Kenneth Green, set out to make me look uninformed based on my submission to the U.S. State Department on the proposed Keystone pipeline.

From his first words, “Recently, Green Party leader Elizabeth May orchestrated an open letter to United States Secretary of State John Kerry..,” it was pretty clear he didn’t grasp the concept of writing a letter. “Orchestrated?” “Open letter?”

Not quite. The U.S. State Department had a period for public comment on the Final Environmental Impact Statement (FEIS) on the proposed TransCanada pipeline to take unprocessed bitumen from Alberta to tidewater at the Gulf of Mexico. Having reviewed the submission and visited Washington D.C. in February, it was clear to me that some key points were ignored in the FEIS, while many useful findings of the report were being overwhelmed by popular misconceptions about the nature of the project. I thought it would be potentially helpful to Secretary Kerry to point out a few of these points. The letter was admittedly a bit complex as it assumed a general familiarity with the FEIS.

From reviewing Mr. Green’s piece, it seems he never actually read my letter to U.S. Secretary of State John Kerry. In an effort to draw interest to the letter, a simplified version was circulated by the Green Party as an email message, summarizing some of the points, but including the link to the full submission. Mr. Green seems to have only gotten as far as the short email. 

Now to his critique of my main points.

1. In my letter I asked Kerry to reject the Keystone pipeline in order to assist Canada’s long-term energy security and prosperity: “I urge that you do so as the most helpful decision to assist Canada avoid huge future economic losses when the carbon bubble bursts.”

I wrote this being certain that Secretary Kerry was familiar with the term “carbon bubble.” Mr. Green, apparently unfamiliar with the term, leapt to the conclusion that I was talking about Dutch Disease. He then proceeded to box me about the ears for something I had not claimed.

Canada has suffered from a mild case of Dutch Disease. This was the finding of the OECD report to Canada in 2008. However, in my letter to Secretary Kerry, I wasn’t talking about Dutch Disease at all.

Rather, I was referring to the “Carbon Bubble. This term has gained prominence ever since the International Energy Agency explained that of all known reserves of fossil fuels, the planet’s atmosphere cannot withstand the burning of more than one third of them prior to 2050. In other words, two thirds of all known reserves must stay in the ground till mid-century or we will sail right past the danger levels in the atmosphere and unleash truly catastrophic levels of climatic disruption. Other analysts then began to assess the stated value of many fossil fuel enterprises and realize that their assessed values drop precipitously when two thirds of their reserves are removed from valuation.

The other aspect of the term “carbon bubble” is that, just as in any commodity being over-valued, when the bubble bursts a smart investor hopes to have diversified the portfolio prior to the moment of implosion. This is more the point former CIBC Chief Economist Jeff Rubin makes when he talks about the folly of putting all our eggs in the bitumen basket.

The other key economic point is this: all the proposed pipeline projects on the drawing board right now are about shipping out unprocessed product. In other words, Canada’s current government is putting all its weight behind multinationals that want Canada to lose out on all the “value added” processes. Where upgraders in northern Alberta had been on the drawing board prior to the 2008 financial crisis, when the dust settled and investment began to flow once again to the oil sands, the upgraders -- and the Alberta jobs they would create -- had been replaced by pipelines transporting bitumen to processing in other countries. Shipping out raw bitumen is dumb.

I agree that there is a debate about the economic impact of the current bitumen-based policies.
One would think that given the over-blown claims of Canada as an “energy super-power” we might, as citizens and as Parliamentarians, have expected to see a detailed cost-benefit review of the oil sands project. There is none. There is only a pile of assumptions buttressed by unquestioning repetition by most of our news media, fortified by millions of dollars in taxpayer funded propaganda.

2. The product to be shipped is not “crude” at all, neither is it a 100 per cent Canadian fossil fuel product.

There is a very weak level of understanding of the nature of the product to be shipped in the FEIS, as well as in Washington media. Again, my letter to Secretary Kerry adds the context which is a bit truncated in the email. My primary point was that the FEIS was deficient in describing the product as “crude.”

Here’s the excerpt from my letter:

“The State Department report makes the error of describing the Keystone project as being about the shipment of crude oil.

“There are many kinds of crude. Some will argue that bitumen is a form of crude. I ask you to rule that the whole report is deficient in failing to notice that bitumen is not crude.

“I ask you to find that, no matter how light or heavy crude oil may be, to be called ‘crude,’ it is at least required to be a liquid.

“Bitumen is essentially a solid.

“It will only move through proposed pipelines once it has been mixed 30-70 with ‘diluents.’ Diluent is not a term of science, but of industry usage. It has no precise chemical meaning. It is generally a fossil fuel condensate -- an otherwise valuable product. It is usually naptha, with benzene added, and often butane as well. It is not produced in sufficient quantities in Canada to keep pace with the planned oil sands boom.

“It is imported to Canada. Enbridge stated in its submission to the NEB hearings that it planned to import its diluents from Saudi Arabia. So ‘dilbit’ is not a 100 per cent Canadian product at all; nor does it necessarily unplug the U.S. from Middle East dependency.”

As one of the sales pitches south of the border is that this is a friendly Canadian product, I thought it was worth pointing out that at least some of the diluents will be coming in from OPEC.

3. Rail versus pipeline.

In my February Washington meetings, I found that the multiple recent rail disasters, most tragically Lac Megantic, are being used as a pro-Keystone argument. My letter to Secretary Kerry made a few key points (well buttressed by research) that are relevant to this claim:

  • If you accept our Prime Minister’s stated goal of more than tripling production in the oil sands, then adding up all existing pipeline proposals - Enbridge, Kinder-Morgan, Keystone and Energy East -- still mean the use of rail to get dilbit to market.
  • The FEIS found that higher transportation costs would operate as a limiting factor on oil sands expansion. So saying “no” to Keystone would help limit growth in the oil sands because shipping by other means is more costly.
  • And lastly, both Canada and the U.S. urgently need to regulate for greater rail safety by removing the DOT111 rail cars from our tracks.

4. I pointed out to Secretary Kerry that the Harper administration, having pledged in 2009 to meet the voluntary Copenhagen target also undertaken by the Obama administration, has utterly failed to make any progress towards it. To this Mr Green essentially argues that Canada is so small a contributor to global emissions, who cares if we never keep any promise we make?

The Obama administration itself claims to care. It was the U.S. administration that decided a key criterion in the Keystone decision will be whether approving Keystone would increase GHG emissions.

The larger point is that Canada has no credibility. Having repudiated legally binding commitments under Kyoto, ratified by Parliament, then legally withdrawn from Kyoto (without any debate or vote in Parliament), Stephen Harper took on the Copenhagen target. Obama’s administration will have reached its target while Canada blows right past ours. I really did not need to include this in my letter to Secretary Kerry as the FEIS reports in detail exactly how lamentable is Canada’s performance.

In the 1980s, when Brian Mulroney wanted to get the Reagan administration to stop polluting Canada with acid rain-causing sulphur dioxide, he adopted a Canadian policy of “clean hands.” We came to the U.S. to ask that they cut their sulphur dioxide emissions by 50 per cent once we were already on track to do so ourselves. And the U.S. did, because Canada had taken the moral high ground. We had done what we were asking the U.S. to do, in the interests of our shared environment.

Prime Minister Harper has turned this principle on its head. He has adopted the “dirty hands” policy. Create a record of callous disregard for the fate of the world faced with increasingly dangerous outcomes due to the profligate waste of fossil fuels. And then claim, as part of a sales pitch for oil sands bitumen exports, that we have robust environmental laws and a shared climate goal. This after eviscerating our laws and betraying every promise.

Mr. Harper is a smart man. The only way he could have the chutzpah to try such a tarry hands policy is if he presumes that Mr. Obama is just as disingenuous as himself on climate.

This may prove to be Mr. Harper’s undoing on Keystone. President Obama has disappointed over and over again, but he does appear to grasp the over-whelming significance of the climate crisis.

I am not a bit surprised that the Fraser Institute thinks it is irrelevant that Canada’s emissions are rising, nor that we will be essentially at the same level of emissions in 2020 as we were in 2005. If the Fraser Institute were interested in fact-checking against climate target claims, the place to look for whoppers is not in my letter to Secretary Kerry, but in the daily talking points of Conservative ministers.

In Question Period, they variously claim we are “on track,” “half way to Copenhagen,” or “130 MT less than we’d be under the Liberals. (That last one is really a desperate “hail Mary” pass of a whopper. It falls apart for anyone with a memory that extends to 2005 when there actually was, at long last, a viable Liberal plan that would have gotten us, if not all the way to our Kyoto pledge, at least below 1990 levels by 2012.)

This is how I summarized the issue to Secretary Kerry: 

“In 2005, our emissions were 737 megatons (MT). In 2020, our emissions will be 734 MT. We promised 130 MT in reductions. Despite efforts by several provinces, notably a successful carbon tax in my home province of British Columbia, all progress at the provincial levels has been wiped out by growth in the oil sands.

“The most effective way to send a strong message that Canada must start behaving as a responsible participant in the global challenge to avoid exceeding a 2 degree C global average temperature increase, a pledge to which your administration and ours have committed, is to reject Keystone. It will be helpful to explain that part of the reason is that Canada has negotiated in bad faith at the climate table. There have been no sanctions created globally for neglecting climate obligations. The least that should be done is not to reward bad conduct.”

Lastly, I closed the letter to Secretary Kerry by pointing out that the U.S. has to get its own house in order. I challenged him to stop the State Department’s foot dragging in global summits and start to show leadership. I urged that the U.S. stop burning off flared gas from the Bakken fields, producing high-carbon natural gas from fracking and stop its dependence on coal.

All in all, I am glad I took the time to set out some of the less reported issues around Keystone. And in that spirit, I thank the Fraser Institute for ignoring my detailed letter so that I would have a chance to explain the range of concerns it contained.

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