Government, big oil, others engaged in ‘fraud’ at consumers’ expense, B.C. economist argues
OTTAWA – A B.C. economist who has been a thorn on the side of the Harper government and Canada’s oilpatch has launched her most scathing critique yet at the proponents of Enbridge Inc.’s proposed Northern Gateway pipeline.
Robyn Allan alleges that governments, industry, Enbridge, a major bank, a prominent western Canadian think-tank and the media are engaged in a “fraud” that is promoting “Big Oil’s” interests while masking industry pricing methods that “gouge” Canadian consumers.
Allan, who is portrayed as a conspiracy theorist by one of her critics, is taking on Canada’s business and political elite. They have argued it is in the national interest for Canada to approve two proposed pipeline megaprojects to the B.C. coast to ship oil, especially diluted bitumen, to Asian markets.
The lack of pipeline capacity, industry advocates argue, forces the landlocked industry to rely on the U.S. market, where a supply glut means Canada is getting a discounted price for its oil. That is costing the Canadian economy anywhere from $30 million to $100 million a day, according to various reports and speeches.
Allan specifically goes after the assertion that Canada’s oil suffers a “double discount” in that it is priced more cheaply than West Texas Intermediate, the U.S. benchmark grade of light sweet crude, and even lower than Brent, the international benchmark grade of light sweet crude.
“The double discount is a fraud,” Allan, who has testified against the $6.5 billion Enbridge project at National Energy Board hearings, writes her latest essay posted on her website.
“Oil interests encourage sympathetic elected leaders, bankers, and media to pick up their cause and make it their own. Some of the bitumen export pipeline pushers know better and are engaging in deliberate misrepresentation, some of them don’t, and are played like pawns in big oil’s game.”
Few critics of pipeline projects have had as much influence as Allan. Last year she testified before the federal government’s Joint Review Panel to argue that Enbridge’s insurance coverage was inadequate, and called for a dedicated $1 billion insurance fund to deal with potential environmental disasters. Last week the National Energy Board, in its lengthy set of conditions it is imposing on Enbridge before the project is approved, told the company it needed $950 million in insurance coverage for that purpose.
In addition to appearing at NEB hearings Allan has appeared frequently in the media and speaks regularly at public events about her criticism of oilsands pipelines.
It represents one of many steps into public prominence for a Vancouver-born mother of two adult sons who is now in her late 50s.
In the 1980s, Allan was a frequently-quoted senior economist with the B.C. Central Credit Union, but in 1992 her profile soared after she was named interim chief executive of the Insurance Corp. of B.C. by the NDP government.
It was described at the time as a patronage appointment – a charge she rejects — because the B.C. Central Credit Union was the NDP’s “farm system for talent,” according to the Financial Post.
Allan was portrayed as a protégé of former NDP cabinet minister Bob Williams, a one-time senior official at Vancity Savings Credit Union who under the NDP government was chief of the Crown corporation secretariat, under which the ICBC operated.
The ICBC under Allan’s leadership boasted of a major financial turnaround, and she was named one of the Financial Post’s top 200 CEOs in 1992.
But her brief tenure at the provincial auto insurance corporation was filled with controversy after an employee leaked her dismal driving record. Victoria Times Colonist columnist Les Leyne summarized the record as “12 infractions in five years, seven speeding tickets (two in school and playground zones), 23 penalty points and two accidents for which she was at fault.”
Allan, despite facing scathing and sometimes mocking media and public criticism, was also defended by many employees and by commentators who felt she was the victim of a sexist attack. She was allowed to compete for the permanent job, but lost in 1993 to former B.C. Tel executive Bill McCourt.
She later emerged in the public eye in 2000-2001 when two national newspapers ran profiles looking at her work as a dancer with the company she founded and funded, the Vancouver Dance Theatre.
Allan, who says she receives no fees from anyone for her work studying the Northern Gateway project, said she became involved when one of her sons asked what she thought of the project.
“I told him I would look into the economic case and get back to him,” said Allan, 57. “What I found required extensive research and analysis because I could not believe, as a professional, the narrative we were being sold.”
In her latest critique Allan makes several points:
• Bitumen is a “junk” crude which, because it requires upgrading and complex refining as well as considerable transportation costs, “has always sold at a discount” that has “not changed significantly” and the change “isn’t related to pipeline capacity.”
• While major oil companies and their supporters complain they are suffering greatly due to the price discount, they are mostly integrated companies involved in upgrading and refining, and are boasting to their shareholders that their profit margins from processing operations have soared due to the cheaper Canadian crude they process.
• Western Canadian consumers were gouged to the tune of roughly 14 cents a litre in 2012 because these discount prices are not passed on at the gasoline pumps.
• The “supply glut” at the U.S. industry hub of Cushing, Okla., was “largely industry induced” and will be sorted out within the next “year or so” – long before the proposed Keystone XL pipeline to the U.S. Gulf Coast, and the Enbridge and Kinder Morgan projects to Canada’s West Coast, could ever be completed.
Enbridge issued a statement last year challenging a previous Allan critique suggesting Northern Gateway would harm the Canadian economy.
The company, in addition to challenging her “flawed” conclusions, noted that she assumed the ICBC chief executive post under Mike Harcourt’s NDP government, and also pointed out that she was challenging economists with doctorate degrees (Allan has a master’s degree in economics from the University of B.C.).
An Enbridge spokesman declined to comment on her latest criticism and referred The Vancouver Sun to a prominent University of Calgary economist, Robert Mansell, academic director at the university’s School of Public Policy and a witness at the NEB hearings.
Mansell said Allan’s analysis wouldn’t pass a typical peer-review process before academic papers are published in journals.
“There are some things she has straight but her big conspiracy theories, that someone is pulling the strings and this will cause the sky to fall — yeah, it really loses credibility there,” he said in an interview.
Mansell said her analysis of the glut in Oklahoma misses the point that even if the current problem is sorted out, rising oil production in Canada and the U.S – combined with declining demand – mean Canadian producers will continue to need access to markets in Asia.
And her argument about refining profits overlooks the fact that the vast majority of companies’ profits come from exporting oil rather than from processing, a business that historically has had tight profit margins. Making money at the refining end doesn’t come close to matching lost opportunity costs in export markets, he said.
“She just pulls these things out of the air,” Mansell said.
Other targets of her criticism rejected the accusations.
CIBC spokesman Tom Wallis said the banker, a prime target for Allan, “firmly stands behind our research, which has been recognized in the industry for its quality and accuracy.”
A Canada West Foundation spokeswoman said the think-tank, which also issued a report on the subject, defended its projections and said it’s “unfortunate” that Allan “would question both our method and integrity without actually talking to an author of the report.”
Natural Resources Minister Joe Oliver, another target in Allan’s essay, was not immediately available for comment.
“We may reply when the report has been reviewed,” a spokesman for Oliver said by email.
Access article here: http://www.calgaryherald.com/Government+others+engaged+fraud+consumers+expense+economist+argues/8241426/story.html#ixzz2QZzz4iKy