Thank you, Mr. Chairman.
Good morning. As Mr. Benoit said, my name is Gil McGowan. I'm president of the Alberta Federation of Labour. The AFL is Alberta's largest union organization. We represent 29 unions in the public and private sector, who, in turn, represent more than 145,000 working Albertans, including more than 25,000 people who work directly in our province's energy sector.
I'm here today because I'm profoundly troubled by the approach to the development of the oil sands that's being championed by the federal government. It's an approach some analysts have described as “an unmitigated growth strategy”. I call it a wild west “rip it and ship it” strategy for development.
Since winning his long-sought-after majority a year ago, Prime Minister Harper has made this new approach to development in the oil sands a central pillar in his government's plan for the future. It's an approach that's characterized by a commitment to quick regulatory approvals for resource extraction projects, quick approvals for pipelines to export raw bitumen, and quick approvals for employers who want to access to cheap temporary foreign workers to work those projects and pipelines.
The government's new approach is also characterized by efforts to demonize and denigrate anyone who raises concerns about the oil sands or how it's being developed. Critics are labelled as radical, as opponents of progress, and as enemies of Alberta. In a nutshell, the Prime Minister has put his government at the disposal of the energy industry. The government is no longer a watchdog looking after the broader public interest; it is now a cheerleader and facilitator for the narrow goals of industry. The tools and mechanisms of government have become the tools and mechanisms of industry, and anyone who gets in the way will either be ignored or run over.
As a labour leader on the front lines of development of the oil sands, I am both angry and alarmed by our country's evolving approach to growth in the resource sector. As a proud Albertan, I'm deeply offended by senior members of the Harper government who try to characterize people like me as hostile to the interests of Alberta and hostile to the interests of our key industry. It is not un-Albertan or un-Canadian to raise questions about what's going on in the oil sands. On the contrary, as someone who cares deeply about my province, I feel I have a duty and obligation to raise my voice in opposition to what I see in front of me. It is also not divisive or an unwarranted attack on the west to engage in a mature discussion about the future of the oil sands. In fact, if anyone is playing politics with this issue, it's the Harper Conservatives, who are deliberately trying to put any and all discussions of the oil sands as an us-against-them fight.
For our purposes this morning, I'll leave it to others to address the very legitimate environmental concerns related to development in the oil sands. Instead, in the brief time available to me I want to outline four reasons why I think the current industry-driven wild west approach to development of the oil sands is not in the long-term best interests of either Alberta or Canada. Then I would like to wrap up quickly by sketching an alternative vision for development, one that puts the interests of ordinary Canadians ahead of the interests of foreign-dominated oil companies.
The first reason why we're opposed to the current approach to the development of the oil sands is because of the negative effects it's been having on the labour market here in Alberta. The Alberta and federal governments have essentially approved every proposal for development that has come across their desks, to the point where there are now more than 65 multi-billion-dollar oil sands projects either approved or already under construction.
Employment in Alberta's energy and construction sectors has already exceeded the peaks of the last boom, and projected demand for labour is expected to continue growing rapidly. On the surface this may sound like a good thing, but all of this rapid development has a big downside. What happens when dozens of big energy and construction companies go looking for skilled workers at the same time? Labour shortages, that's what. These shortages lead to delays, the delays to cost overruns. The shortages also lead employers to scramble for more workers, starting with less experienced workers, and increasingly they're turning to temporary foreign workers, who are often poorly trained, unfamiliar with the language, and uncomfortable working in Canadian conditions. The result of this mad scramble to throw warm bodies on work sites is lower productivity, more mistakes, and an increased need to go back and fix things that weren't built properly, all of which, in turn, leads to higher costs.
One of the real perversities of the current situation is that this is actually making the labour shortage worse in the long run. That's because the rapid pace of growth and development means that employers are reluctant to let apprentices take time off to complete their classroom training, so they remain apprentices for far too many years.
Even more importantly, by making it easier and easier for employers to access temporary foreign workers, the Harper government has made the temporary foreign worker a first choice for employers instead of a tool of last resort.
The result is that employers are choosing temporary foreign workers over apprentice training, and in the process we're not doing enough to train the next generation of Canadian tradespeople, guaranteeing continued, ongoing labour shortages in the future. Needless to say, without training the next generation of tradespeople, we're locking ourselves into a future of skilled labour shortages and an ongoing reliance on migrant labour.
The second reason we're opposed to the current approach to development in the oil sands is that it discourages upgrading and refining, which we believe are the key to long-term job creation and economic growth in Alberta. Albertans have made their feelings clear on this issue. In poll after poll, an overwhelming majority of Albertans have said that they want to move up the value ladder instead of shipping more high-quality jobs in upgrading and refining down the pipeline, to such places as the United States and China.
Currently, about 62% of all bitumen is upgraded in Alberta. This creates thousands of jobs in operations and maintenance and generates billions of dollars in spinoffs. It sustains families and communities. But almost all of the new oil sands projects that are currently under construction are for extraction only, meaning that the proportion of bitumen upgraded in Canada is about to drop precipitously. Government estimates here in Alberta say that within the next five years we will drop below 50% of bitumen upgraded in the province.
Some will say that this is inevitable because the economics of upgrading and refining simply don't add up. But there's nothing inevitable about this situation from our perspective. The key concepts to keep in mind when trying to understand what's happening with upgrading are cost and price differential.
As we've seen, the rapid pace of development is driving up costs, meaning that only the lower-cost “extraction only” projects are attractive to developers. At the same time, by approving more bitumen export pipelines to the U.S. and potentially to China in an effort to chase higher prices, the government is actually killing our upgrading and refining industries. That's because the big competitive advantage that has traditionally been enjoyed by our industries here in Canada, which has allowed our industries to thrive, has been access to relatively inexpensive feedstock.
By focusing, as the Alberta and Canadian governments have, on removing the price differential between bitumen and conventional crude, these governments are effectively undermining our biggest competitive advantage when it comes to upgrading and refining.
So if the “market” is saying that upgrading doesn't make sense, it's because our governments have influenced that market in negative ways. Rapid development has led to cost inflation that discourages value-added construction, and overbuilding of bitumen pipelines shrinks the price differentials that sustain our Canadian-based upgrading and refining industries.
In a nutshell, the reason Albertans and Canadians are not seeing the kind of value-added developments they want is that their governments are stacking the deck against this kind of development by mindlessly following the lead of self-interested industry players.
The third reason that we oppose the current approach to development has to do with royalties. In this regard, we have to keep in mind that royalties collected by the government here in Alberta are tied to cost, and in particular at the front end of oil sands projects. If the costs are high and escalating, as they have been as a result of the unrestricted rapid development, that situation has a negative impact on the amount of money that can be collected in royalties, and of course this has an impact on the money that will be available to spend on things that Albertans and Canadians value, such as health care and education.
Just to wrap up, because I realize that my time is running out, governments in Alberta and Ottawa need to stop seeing themselves merely as cheerleaders for the oil industry. Instead, they have to understand that Canada's natural resources, whether it's the oil sands or other resources, belong to Canadians. They have to understand that there's a difference between the narrow interests of oil companies and the broader interest of the public. Most importantly, we feel that governments need to start following the advice of former Alberta Premier Peter Lougheed, who has said that we need to start thinking like owners.
Responsible owners would set a more reasonable pace for development in the oil sands. Responsible owners would demand long-term job creation and value-added industries. Responsible owners would also negotiate more aggressively for fair royalties for the sale of our collectively owned public resources.
Of course there is a fear that if we got more aggressive in terms of demanding more value-added job creation or more royalties, investment would decline in the industry. But we feel very strongly that this is not a serious concern, simply because only about 22% of available oil reserves in the world are open to investment and development by the kinds of private oil companies that work in Alberta. And fully half of those reserves are in Alberta.
That's what we, in the labour movement, call bargaining power. We can take a lesson from people like Peter Lougheed, people like Danny Williams, and even Sarah Palin, when she was Governor of Alaska. They took an aggressive approach to negotiating the best possible deal with energy companies, and the energy companies did not walk away from the table. In fact, all three of those jurisdictions enjoyed rapid growth and vibrant economies.
At the end of the day, there is an opportunity for us to move up the value ladder to create jobs, to set a more reasonable pace for the oil sands, and to make sure that Canadians benefit from the development of these very important resources in terms of both jobs and royalties. But it's going to take political will and a different direction than the one that has been set by this government to date.