Is there pork in Canadian oil barrels? Mulroney charged with aiding refiners just before election
St. John's, Newfoundland
A Regina Leader-Post cartoon shows a heavy-oil upgrader producing not lighter oil ready for normal refining, but barrels marked ``pork.'' The cartoon refers to the plan of Canada's Progressive Conservative government, announced earlier this month, to join with the provincial governments of Alberta and Saskatchewan to finance nearly three-quarters of the $1.3 billion (Canadian; US$1.06 billion) cost of an oil upgrader in Lloydminster, on the Alberta-Saskatchewan border. An upgrader converts crude oil to lighter oil that can be more easily refined.Skip to next paragraph
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It is just one of a number of what skeptics regard as pork-barrel projects, designed to boost the prospects of the government of Prime Minister Brian Mulroney in a federal election coming up this fall.
In July the government announced a $3.2 billion capital contribution and loan guarantee for the Hibernia offshore oil project. Last week it promised to contribute $150 million toward a proposed natural-gas pipeline between the British Columbia mainland and Vancouver Island.
Other high-cost oil projects have also been lined up for federal aid.
To the governments involved, these are projects that will prove profitable by the time they start producing oil in the early 1990s. They assume that the price of oil will have risen by then from today's US$14 to $15 a barrel to $20 to $25 a barrel. And they will assure Canada, already an oil exporter, of continued self-sufficiency in domestic oil production.
Recently the federal government signed an energy accord with the Northwest Territories to share management responsibilities for onshore energy resources and royalties with the government of that huge swath of land across Canada's north.
With two parliamentary seats at stake in the Northwest Territories, observers see potential political benefits for Mr. Mulroney.
The upgrader project, sponsored by Husky Oil Ltd., is being built in a community that straddles the Alberta Vegreville district, held by Deputy Prime Minister Donald Mazankowski, and the Kindersley-Lloydminister constituency in Saskatchewan of William McKnight, minister of Indian Affairs and Northern Development.
Husky turned to the governments for help when it couldn't attract funds from other private oil companies. The governments will own 73 percent of the equity in this risky enterprise.
One possible partner, Esso Resources Canada Ltd., a major producer of heavy oil in Canada, has instead focused its interest on a $4 billion plan, devised in 1981, to extract 75,000 barrels of crude daily by 1995 from the oil-soaked sands that surround Syncrude Canada Ltd.'s Fort McMurray, Alberta, plant. It would be a major step toward developing northern Alberta's vast oil sands, which contain billions of barrels of oil. Ottawa has also been negotiating with the backers of this project about federal financing to speed its launch.
Other participants include Canadian Occidental Petroleum Ltd., Gulf Canada Resources Ltd., Petro-Canada Inc., PanCanadian Petroleum Ltd., and the Alberta government.
Another expensive oil project is Gulf Canada's famous Amauligak field in the Beaufort Sea. That northern field contains an estimated 700 million to 800 million barrels of oil. But it would require a pipeline and related facilities that could cost as much as $5 billion to bring the oil south to market. Such a development, the experts say, would need oil selling for US$25 a barrel - unless the government decided to financially aid that project, too.
The government has also stepped up spending in non-resource areas. Last week it announced it will make compensation payments totaling about $300 million to redress injustices done to Japanese-Canadians forced to leave their homes on the Pacific coast during World War II.
This week it is pushing through the House of Commons a child-care program with a $6.4 billion price tag over seven years.
Other recent spending announcements include $420 million for 820 all-terrain troop carriers and $750 million for 12 minesweepers, $64 million to help the wind and grape industry adjust to free trade, and $515 million for regional development in Quebec.
The government says these programs, with spending scattered over years, won't derail its plan to gradually reduce a massive budget deficit. When the Conservatives took power four years ago, the deficit was $38 billion. In the last fiscal year, it was $28 billion.