True innovation doesn’t flow from a pipeline – by Konrad Yakabuski (Globe and Mail – February 25, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

In the late 1800s, a group of independent oil producers in Pennsylvania came up with a radical idea to foil their nemesis, John D. Rockefeller. The Standard Oil baron had tied up the railroads, stopping his fledgling rivals from getting their oil to market. So, the landlocked independents teamed up to build the world’s first long-distance oil pipeline.

Although their Tidewater pipeline was an engineering feat, it was ultimately futile as a competitive gambit. Before long, the irrepressible Rockefeller controlled Tidewater and almost every other U.S. pipeline, with a network from the Appalachian Basin to the Gulf of Mexico coast.

That would be the same coast to which Canada’s bitumen-bubbling oil producers are now desperate to pump their product through TransCanada’s proposed Keystone XL pipeline, the much-maligned conduit that threatens to launch a Canada-U.S. Cold War. If the oil companies can’t ship raw Canadian resources using that 150-year-old technology, they will rely on an even older one – rail. And if not rail, they might just float their bitumen on barges down the Mississippi.

Huckleberry Finn might have marvelled at this inventiveness, but it doesn’t quite cut it as a 21st-century national strategy for wealth creation. Yet our frantic obsession with exporting minimally processed bitumen is sucking up all the oxygen in the national conversation.

Getting Alberta’s oil to market is “the most important economic issue” facing the country, says former federal cabinet minister Jim Prentice. There is “no more critical issue facing Canada today,” adds Enbridge chief executive Al Monaco.

In fact, the most critical issue facing Canada today may just be figuring out why we find ourselves in this situation. Raw resources can be a tremendous source of income, but they are volatile, and we’ve always known that overreliance on them is a recipe for economic stuntedness. As Bank of Canada Governor Mark Carney says: “Real wealth is built through innovation.”

Innovation is not wholly absent from Canada’s oil patch. But it’s hardly a first line of business. You’d think it would be a top priority, given the vexatious characteristics of Alberta bitumen, the oil sands’ distressing environmental footprint and the Canadian industry’s growing global image problem. Even in boom times, however, the Canadian oil and gas industry spends a piddling proportion of its revenues on research and development.

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