Urban Renaissance Institute

Lawrence Solomon
Toronto Star
July 3, 1983

Despite the brave front put on by Energy Minister Jean Chretien and the embattled oil and electrical industries, the collapse of Canada’s megaprojects — projects valued at $100 million or more each — is continuing at a steady clip.

Since 1981, when the federal government’s Major Projects Task Force concluded that a potential half-trillion dollars in megaproject investments — 90 per cent of it energy-related — would fuel the Canadian economy to the year 2000, 186 megaprojects valued at over $278 billion have been shelved.

$42 billion

And although $42 billion in new megaproject proposals have surfaced, many of the $160 billion worth of surviving megaprojects are threatening to go the way of Alsands and Cold Lake:

• The $2.4 billion Arctic Pilot Project continues to suffer setbacks. The National Energy Board stopped hearings into the liquefied natural gas export scheme after APP’s sponsors, led by Petro-Canada, changed their marketing plans in mid-stream and decided to go after European customers instead of the soft U.S. market.
• The potential of Gulf Canada’s $5 billion Tarsuit field in the Beaufort Sea has been downgraded, according to R. H. Carlyle, a Gulf senior vice-president. Latest projections for the once-heralded field indicate only 350 million barrels of oil, well short of the 500 million to one billion needed to justify commercial development.
• Mobil Oil’s $2.5 billion Venture field off Nova Scotia’s Sable Island — touted by the oil giant as “the first off-shore gas field in Canada” — has yet to be confirmed as commercial in scale. Worse still for this project, whose history dates back to 1959, when Mobil was granted Canada’s first east coast offshore exploration permit, its viability depends on exports to the U.S. market, which is awash in surpluses of natural gas.
• Manitoba’s Limestone Hydroelectric generating station — the third jewel in a crown of six large plants to be built along the 410-mile Nelson River — becomes a more distant dream with each passing year. First postponed in 1977, Limestone could have been resurrected this year had any one of three other megaprojects proceeded — a $500 million aluminum smelter, a $500 million potash mine, or a $3.5 billion western power grid. Instead, the earliest that construction could start is 1986, and because of falling demand forecasts, construction could be deferred into the next century.
• Ontario Hydro’s Darlington Nuclear Power Station — one of the country’s largest remaining energy projects and until recently thought immune from cancellation — is showing chinks in its armor, despite the $1 billion already spent. Last November, construction at two of Darlington’s four units was postponed two ears, and some members of Ontario Hydro’s board now admit the giant project is “under continual review.”

Officially, however, Ontario Hydro is keeping a stiff upper lip, with Hydro president Milan Nastich insisting that Darlington will be completed — a brave front emulated by his counterparts in the petroleum industry and by government officials. Energy Minister Jean Chretien, pointing to one of the few megaprojects to proceed — the relatively small $200 million Wolf Lake oil sands project in Northern Alberta — hailed the project for providing a much needed economic stimulus. And oil industry chiefs like John Lynn, president of Syncrude, argue that Canadians should stick to what we know best by restoring megaprojects to their proper role as “a fundamental part of Canada’s economic development strategy for the rest of the century.”

When pressed, however, many of the champions of these projects admit that the fate of the megaprojects depends less on political factors — such as the Ottawa-Newfoundland wrangling over control of the Hibernia field located, off the East Coast — than on the dictates of the marketplace.

Despite the widely predicted economic recovery, Canada’s oil industry continues to face declining sales for their products. Since 1980, sales have plummeted 20 per cent with consumers moving in droves to more stability by opting for conservation and fuels that are less volatile in price. In 1983, oil’s market share is dropping further — refined products such as gasoline, heating oil, and jet fuel could be down another five per cent — and more declines are expected in 1984.

Because of this falling demand, the amount of recoverable oil in Canada — thought four per cent smaller at the start of 1983 than the previous year — will last far longer than expected, forcing the oil companies to carry their inventories longer.

Dismal outlook

The result is a “pretty dismal outlook for our industry,” according to Gerald Coaker, Shell’s manager of energy economics. “We’ve never been in a situation like this before.”

The outlook for the electrical industry — whose investment potential at $200 billion surpassed that of the oil and gas industries, according to the 1981 Task Force Report — is even worse, with virtually all future megaprojects effectively shelved, many in-progress megaprojects threatened and even some completed megaprojects slated for mothballing.

Atomic Energy of Canada Limited’s two heavy water facilities in Cape Breton, Nova Scotia, have been spared to date for the sake of the jobs that would be lost in the economically depressed Maritimes, despite a total lack of demand for their output. Similarly, during the Ontario Energy Board hearings currently underway, Ontario Hydro conceded it plans to shut down one of the two massive heavy water facilities at its Bruce Peninsula complex by mid-1984.

These facilities, designed exclusively to provide, heavy water for new Candu nuclear reactors, became redundant when Canada’s nuclear industry took a nosedive. The only reactor beyond the ones at Darlington being considered to the end of this century — a second reactor at Point Lepreau, New Brunswick — is on indefinite hold. Although Jean Chretien, at the recent ribbon-cutting ceremonies for Point Lepreau No. 1, told his New Brunswick audience that he looked forward to authorizing a second reactor, he made it clear that “we must have assured markets first” for the power.

If he stays true to his word, and waits for Point Lepreau No. 2 to pass the test of the marketplace like Canada’s other megaprojects it may never see the light of day.

Lawrence Solomon
London Free Press
February 28, 1983

Special to the Free Press

Three years ago, Canada’s government was displeased with OPEC for raising oil prices, and furious with the western provinces for their intention to raise the price of oil by more than $2 a barrel.  In January of this year, International Trade Minister Gerald Regan went to the United Arab Emirates to plead for OPEC to keep the world price of oil high.  Two years ago, when the National Energy Program was being negotiated, the federal government promised to keep Canadian oil prices from rising above 75 per cent of the world price. This year, faced with a $26 billion deficit, the government is wavering on its commitment to shield Canadians from full world prices for oil and Petro-Canada Chairman” William Hopper is openly calling for Canadian consumers to pay 100 per cent of the world oil price.

These dramatic reversals in policy are not examples of government inconsistency: they are examples of the impossibility of accurately predicting the future. In 19SO, almost everyone was predicting rapidly increasing oil prices, and it was on this basis that government planners laid out their long-term plans for the petroleum industry, and for the revenues that would flow to the government from it.

The $13 billion Alsands project, which would have produced 137,000 barrels of oil a day, was going to be the first of A series of tar sands plants built in the 1980s and 1990s.  Other megaprojects, such as Cold Lake and the Alaska Highway Gas Pipeline, were also being counted on as part of Canada’s energy strategy.  Revenues from those projects and others would keep the federal government in gravy in the 1990s, when the cost of a barrel of oil was expected to top $80.  Until the megaprojects were built, revenues from the conventional oil and gas industry were expected to escalate rapidly along with the price of oil. For the 1981-1986 period alone the federal government was expecting a whopping $6l billion in revenues from the oil and gas industry.

Unfortunately, the universe did not unfold for the federal government as the government’s planners had supposed. The anticipated $61 billion in revenue plummeted by $23 billion to an anticipated $36 billion within a year, when the planners’ long-term forecasts of how much fuel we would need failed them. Revised forecasts in 1982 again proved wrong, arid expected revenue has dropped further.

And now, as it is becoming apparent that the Arabs are not going to keep the price of oil high for us, the federal government is forced to look for other ways of keeping oil prices high or risk seeing its expected revenues drop further still.

The government’s quandary is exacerbated by two other factors. Its energy planners were so sure that the price of oil would continue to rise that. They persuaded the government to in vest heavily in the petroleum industry. As a result, we have sunk billions into Dome and Petro-Can, buying out Petrofina and BP in the process.  At the same time that we were tying cur future so closely to the fortunes of the petroleum sector, the government unleashed a flurry of programs designed to get Canadians off oil, robbing itself of customers. According to government plans, 90 per cent of the homes, offices, and industries that ran on oil in 1980 would be converted to some other fuel by 1990.

It was a colossal gamble. The long-term planners thought they could afford to get most of us off oil because increasing oil prices would keep the government’s investment sound, and its revenues intact But they miscalculated both in their ability to control the price of oil and in their ability to control the rate at which Canadians went off oil.

As a result, the government has been left by its planners in an almost impossible trap. It is locked into:

• Heavy investments in the petroleum industry, whose oil stocks have been halved in value since the National Energy Program was unveiled in 1980.
• Continuing programs designed to get still more Canadians off oil.
• Dependence on taxes from an industry that has ever fewer customers.
• Declining revenue expectations because, unless the 75-percent ceiling in oil is removed, Canadian consumers will be paying less than expected for the oil.

Abolishing the 75-percent ceiling may not help generate government revenue either, since the higher cost to consumers will only drive them away from oil at a faster rate.

The government, it is becoming painfully clear, has been led astray by crystal-ball gazers attempting to do the impossible – predict what the world would look like years away. The cost of that mistake will have to borne by us all.  But there is a glimmer of hope that the lessons learned from this experience with long-term planning will prevent similar mistakes in future. The government’s strategy of putting all of its eggs into one basket – megaprojects with long lead times – is being widely questioned, even by the minister who oversaw it.

Bud Olson, federal minister of economic development, has concluded that, instead of megaprojects, “we need shorter-term, smaller projects that can be built in two or three years” to reduce the massive risks involved. Alsands’ collapse, he believes, was a jarring reminder to government that big, flashy resource projects inject a huge element of risk into a country’s economic development strategy. Instead, the idea should be to “think smaller” and stay more flexible.  His views are echoed by Petro-Can’s Hopper, who says it is fine to have long-term goals, as long as the policies stay short-term and adaptable, and by Alberta Energy Minister Mervin Leitch, who wants to minimize the need for long-term planning by tapping the tar sands, but in smaller, less risky projects that can be expanded in stages.

Many in industry would concur, since so many success stories were written using this very formula. Canadian Hunter’s discovery in the mid-1970s of the Elmworth-Deep Basin gas field, for example, was developed one step at a time – a well here, a mile of pipe there, a plant here. Yet despite the gradual pace of the expansion, the field is today capable of producing as much energy as an entire Alsands’ plant and without the benefit of a single long-term planner.

Long-term planning does, of course, have a role, such as in forecasting how many high schools will need to be built for particular communities, or in predicting the future revenues required to keep, say, the Canadian Pension Plan viable.  But we are all learning the hard way that planners should be called in only after options with shorter lead times have been rejected. And even then, we must all remember that, like the advice that comes from any seer, a planner’s advice should be taken with a grain of salt.

Lawrence Solomon
Globe and Mail
November 20, 1980

“What can I give my husband for Christmas that’s sexier than insulation but still saves energy,” a reader asked me over the telephone. “This year I’m determined to buy Christmas gifts that are in keeping with Christmas values.”

“How about an electric razor,” I suggested. “Electric razors are more efficient than safety razors because they save relatively large amounts of energy needed to heat water.

“No good,” was the reply. “He already has an electric razor and besides, I’m looking for something that’s truly non-commercial. My parents are getting a down-filled comforter and my 26-year-old daughter has agreed to use the bicycle I’m buying her. My family think I’m crazy, but I want to start practicing some of the things I’ve believed in for a long time.”

Although the caller did not know it, she is not alone in being conservation-conscious. According to the Stanford Research Institute in the United States, the fastest-growing sector of the market is made up of people who are guided by energy and environmental concerns in making their purchases. This market, which is already estimated at more than 20 million adults in the United States, has convinced several U.S. retailers to merchandise their wares on the basis of energy efficiency.

In Canada, Eaton’s is the leader in the field, being both good corporate citizens and shrewd marketers by identifying about 75 products in their stores as energy savers – a respectable beginning in a field Eaton’s expects to increase in the next few years. Thomas Gladney, the company’s executive responsible for the energy-saving promotion, looks forward to the day that energy departments are set up in department stores, predicting that “consumers will choose products because of their energy characteristics – energy will tip the balance.”

The energy-saving products Eaton’s has tagged – items like thermally lined drapes that prevent heat loss through windows and electric kettles that switch off automatically when they reach a boil – need not limit Christmas shoppers out to fill their gift list while still husbanding nature’s resources. Energy-saving gifts can be easily recognized even if untagged, and they do more than register a vote for nature. They also provide skilled jobs for Canadians since, one way or another, the excess use of energy replaces some form of human talent.

Handcrafted and custom-designed products should be sought not only because the levels of workmanship are usually higher but also because less energy (and more labour) is employed when mass production machinery isn’t substituted for human skills. Whether jewellery, fashions or furniture, the more human attention a product receives, the less energy it generally consumes. Another way of looking at it is that every dollar that’s spent on human “energy” is a dollar that isn’t spent on coal, oil or electricity.

Not surprisingly, gifts that use even less energy than, hand-made goods are those that are primarily composed of human services. These gifts also tend to be the most innovative, and the most personal, since the services must be cleverly tailored to the people on the receiving end.

Friends of mine who recently moved into a new house were especially delighted with one of the house-warming gifts they received – a sketch of their own home. The couple that gave it unknowingly got great energy mileage out of that gift – about the only energy consumed was in the artist’s transportation to her perch opposite the house. Those same friends one year earlier had given their housekeeper a Christmas gift that meant much more to her than others she might have received – a telephone call to her children in Jamaica, whom she hadn’t seen in two years.

One of the most heart-warming gifts I remember receiving was a “Season’s Greeting” card from CARE, announcing that a friend had made a gift in my name to help the needy overseas. Other charities have similar services, and an advantage to the giver is a tax-deductible receipt, which reduces the cost of the gift by up to half.

Possibly the most energy-conserving gift of all is Energy Probe’s version and it’s the one I best like to give over the Christmas holidays – cards made of 100 per cent recycled paper announcing donations made toward a safe energy future.

There is only one way to do better than buying an energy-efficient gift, and that’s to make it yourself. It’s hard to beat a hand-knitted sweater for energy efficiency or for thoughtfulness.

The material a product is made of is also a major factor in selecting conserving products. It takes less energy to produce glass than iron and steel, something to keep in mind if you’re stuck in selecting between glass and metal bakeware.

But these materials are a conserver’s dream when compared to plastic products. Per pound, plastics require five to six times as much manufacturing energy as glass or iron and steel, ruling out many of the trendy plastics now used in everything from furniture to golf bags. Even plastics, though, look good next to aluminium, which uses 20 times as much manufacturing energy as glass.

Although the selection of energy-efficient goods and services is huge, it is unnecessarily limited by manufacturers’ persistent over packaging – a practice that is both insulting to the 1 purchaser’s intelligence and harmful to the environment. Steering clear of over packaged goods has another advantage as well – more value for your gift dollars as you avoid paying for merchandise that serves no useful purpose.

Where does all this leave the energy-conscious shopper? After you’ve eliminated over packaged products and those made of plastics, and those that are mass-produced, what do you have left to select from?

The answer is just about everything that requires a little extra care in the making, or a little extra thought in the giving.

And that’s a pretty good place to start for anyone who’s concerned about keeping Christmas values during the holiday season.

Mr. Solomon is a writer with Energy Probe.