The Canadian gambling site bodog.com thought it had the whole thing figured out. If you stay in Canada, use Canadian servers, block anyone inside U.S. territory from using the site and make sure that you don’t use any American vendors for anything — stay completely away from anything having to do with the jurisdiction of the United States — you can be free to operate your online business.

Many sites have assumed this. More and more are doing this. Bodog was doing just fine, with hundreds of employees in Canada and Costa Rica. It had just signed a three-year sponsorship deal with the Canadian Football League, according to Michael Geist, whose column alerted me to this remarkable case. All was going well.

If you go to the site right now, you will find that it is a among the growing number of seized domains. Instead of a free gaming site, you will see instead what is quickly becoming known as the Mark of the Beast. It is the Homeland Security seizure notice.

How could this have happened? Officials were somehow able to get the warrant and lean on VeriSign to redirect the URL. The homeland is safe! Whether this is legal is another question. There have been many legal challenges to U.S. takedowns recently, among them the Megaupload case from early 2012, a case that may eventually be decided in favor of the defendant.

Regardless, the chilling effect is real and lasting. Governments are going to be less likely in the future to permit any gaming sites, and large institutions such as the Canadian Football League are less likely to sign deals with any enterprise the U.S. government doesn’t like.

What’s absolutely bizarre is how the U.S. government can presume what is effectively a global jurisdiction over the global Internet. It can use its weapons of mass destruction to smash even the most-developed and popular institutions — developed entirely by a voluntary meeting of minds between producers and consumers — and make them go away with one court order.

This case shows that it is no longer protection enough to put up a wall between U.S. jurisdiction and the website. In any case, it has been obvious enough for some months that the excuse that the enforcers have used was a thin excuse, in any case. No, that excuse seems to be gone, and just as with U.S. military policy, any server located anywhere in the world is fair game.

This whole nationalist approach runs completely contrary to the international ethos of the digital age. Given the ubiquity of instantaneous and universal communication, where you live is less and less important. Consumers and producers can be in all corners of the world and still cooperate. But look what is happening: Dynamic companies are already setting up shop outside the U.S. just to evade what Ronald Reagan called the “evil empire” (except, of course, he was not talking about the U.S.).

This takedown notice seems to indicate that the government isn’t satisfied merely with the digital age outside our borders. It is signaling the desire to crush it wherever it may appear.

And just like the Megaupload case earlier this year, this case is also a rebuke to those who worked so hard to beat back the SOPA legislation that Congress had been considering. A major concern of the opponents of this legislation was that it would dramatically expand the geographic jurisdiction of the U.S. If any dot-com, dot-net or dot-org site were accused of hosting pirated copy, it could be instantly shut down wherever it happened to reside.

Well, once again, we discover that no such legislation is necessary. The government already has that power. The excuses vary. It could be a copyright case. It could be a patent infringement case. Or it could be that the site is said to be doing something, like gambling, that the U.S. wants to see monopolized by some other market player. The rationale can be anything or nothing.

Under these conditions, the whole Internet is threatened every day. You might say that it doesn’t matter, that you don’t host pirated material, you don’t tolerate illicit porn and you will have nothing to do with gamblers. Surely, you are safe. The truth is that no one is safe when the government has this much power.

First, they came for the pirates, but I was not a pirate…

In the 1985 film Brazil, the government would routinely drop through the roofs of citizens and throw people in body bags and take them away. If it turned out that a mistake was made, a bureaucrat would show up with a receipt and express regret. That’s it. It’s been this way in U.S. foreign policy, with the military killing innocent people and then reluctantly admitting that mistakes might have been made.

Internet enforcement seems to be going the same direction. A body bag is thrown over any website, and the details are worked out later. The business dies and hundreds lose their jobs and files. If mistakes were made, here’s your receipt.

Regards,

Jeffrey Tucker

Is There No Escape From The U.S. Government? was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

But sometimes unintended consequences are nothing short of delightful. Consider the prospect of Iceland abandoning the krona and adopting the dollar as its currency. No, no, not the U.S. Greenback but the Canadian “loonie,” so named for the water fowl imprinted on the flipside of its

one dollar coin.

[Disclaimer: the author admits to being a Canadian who wishes to vacation in Iceland and, so, she may be biased in deciding what is delightful.]

Since the 2008 financial crisis in which its top three banks collapsed, Iceland has eyed other currencies with the goal of establishing both stability and liquidity even at the cost of losing control of its own monetary policies.

Why is the possibility of adopting the loonie “an unintended consequence”? Because up until now, the currency overwhelmingly favored for adoption was the Euro. Iceland applied to join the European Union in 2009 and formal negotiations began in 2011, with the issue of fisheries being particularly sensitive. Iceland has exclusive fishing rights to the 200 nautical miles surrounding its shores and fish constitute its largest export by far. There is understandable reluctance to entering an agreement that would open up Iceland’s fishing zone to competitors.

Moreover, the recent rockiness of the Eurozone and the euro itself cannot be encouraging to Icelanders. Indeed, given that Iceland rebounded from its fiscal crisis by defaulting on debts and not bailing out banks, it is unlikely to sympathize with the hysteria surrounding a Greek default. A recent Capacent Gallup poll found that 60 percent of Icelanders now oppose union with the Eurozone. The Finance Minister is among them. Who knew that strict fishing policies and the coddling of Greece would make the loonie glimmer in Icelandic eyes?

And, so, prominent Icelandic businessmen, opposition politicians and much of the public are favoring a move toward the loonie; the Canadian Ambassador Alan Bones had been scheduled to address the possibility of currency sharing at a political conference in Reykjavik in over the weekend. But the Canadian government apparently reconsidered the appropriateness of the venue for such a discussion; the conference had been sponsored by a specific political faction within Iceland. Instead, last Friday, the Canadian Ambassador announced on the Icelandic national broadcaster RUV that Ottawa was quite open to holding talks on the subject. The Icelandic Foreign Minister Ossur Skarphedinsson stated “I’m all in favor of discussing the alternatives we may have to the krona.”

On the street level, the Canadian public seems tickled. Indeed, in a recent column entitled “Five reasons why Iceland should adopt the Canadian dollar,” Michael Babad offered as the concluding reason:

“5. Our glowing hearts. For Iceland, do not underestimate friendship in this post-crisis era of currency manipulation and mounting trade tensions. We’re a wonderful people, they’re a wonderful people. We’ve got a beautiful country, they’ve got a beautiful country. True, it gets cold in Canada in the winter, but remember we’re talking about Iceland.

And surely we can forgive them for Björk.” [Björk Guðmundsdóttir is an Icelandic singer-songwriter.]

Icelanders seem receptive as well. According to the Globe and Mail, “In a recent Gallup poll, seven out of 10 Icelanders said they would happily dump their volatile and fragile krona for another currency. Their favoured alternative is the Canadian dollar, easily outscoring the U.S. dollar, the euro and the Norwegian krone.”
There are no reports of the Icelandic government opening discussions, however.

There are several reasons for the Canadian dollar – usually viewed as the Greenback’s poor cousin – to be preferred over the Euro. The loonie has a AAA sovereign debt rating and Canada has very little debt compared to every other Western nations. The Globe and Mail provides other reasons:

“It [the loonie] offers the tantalizing prospect of a stable, liquid currency that roughly tracks global commodity prices, nicely matching Iceland’s own economy, which is dependent on fish and aluminum exports, and in the future, energy.

There’s also a more sentimental reason. They’re both cold, Arctic countries. “The average person looks at it this way: Canada is a younger version of the U.S. Canada has more natural resources than the U.S., it’s less developed, has more land, lots of water,” explained Heidar Gudjonsson, an economist and chairman of the Research Centre for Social and Economic Studies, Iceland’s largest think tank. “And Canada thinks about the Arctic.”

Economic commentator ZeroHedge (Tyler Durden) ends his report on Iceland’s longing look at the loonie with a warning, “So be careful Canada: with great power, comes great a desire to distribute wealth. And we have all seen what happens next.”

Will currency imperialism go to Canada’s head? Fear not, ZeroHedge. I still remember the contest run by Canada’s national magazine Macleans years ago. It wanted to come up with a phrase that captured what was quintessially Canadian, similar to the down-under phrase “As American as apple pie.” And, so, Macleans invited readers to fill in the blank: “As Canadian as _________.” The challenge was distinguishing Canada from its neighbor who was louder, flashier, (then) richer, sexier and, well, add “er” onto almost any adjective.

The winner? “As Canadian as possible under the circumstances.” Arrogance is not a problem.

Regards,

Wendy McElroy

First We Conquer Iceland was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

We’d only been trying to help. We were passing through Houston on our way from Acapulco to the Agora Financial Symposium in Vancouver.

We’d opted out of the Rapiscan irradiation machine and so had to be felt up by an agent. We meant to call attention to how absurd the entire security theory was by playing the part of compliant victim with scorn in his eyes. So we slowly stripped until we were told to stop. We only got as far as unbottoning our shirt.

Our host in Acapulco had been Jeff Berwick of The Dollar Vigilante. Jeff had been to something like 140 countries in the past few years. He’d sailed his own boat to quite a few of those and only used a plane after the shipwreck. He had found the closest thing to freedom in agreeable surroundings in Acapulco.

“The U.S. is toast, amigo,” he’d told us, “You need to take advantage of your status as a mobile, contract internet writer and get out while the getting’s good…

“And Canada is even worse, by the way.”

Jeff wasn’t kidding, especially about that last part as I would discover upon entering Canada today. (More on that later).

We could tell things had gotten a lot worse with the border patrols this year from the very start of our international travels several days ago. The TSA thug who checked our passport on the way from Las Vegas to Acapulco was a hatchet-faced twentysomething with a buzzcut. His eyes bulged slightly but he kept them hooded as he looked back and forth with suspicion between our passport photo and us. He reminded us of a lizard: predatory and untroubled by higher thought.

After twenty seconds of the back and forth reptilian gazing, we inclined ourselves slightly toward him and slowly raised an eyebrow. He waved us through.

“Welcome to freedom,” Jeff had told us on our first day in Mexico. He was spot on there too. If there was something you couldn’t do in Mexico–as long as you didn’t molest anyone else–we certainly didn’t discover it. Relevant to this part of the story is how spoiled Mexico had gotten us. In only a week we’d gotten used to not having to worry terribly much about the state’s goons telling us how to behave.

Then we made the mistake of reading some quotes from Albert Jay Nock among others in Jeffery Tucker’s Bourbon For Breakfast en route between Houston and Vancouver.

The personal freedom experienced in Acapulco…reading hours of anti-state musings…and then being faced with state thugs at a couple of borders. It was a dangerous mix. By the time we landed in Canada, we were fairly seething. Good thing we hadn’t been drinking too.

After telling us to button our shirt back up the Houston TSA agent asked if we wouldn’t rather have him feel us up in private.

“No, no…right out here is fine,” we said.

He instructed us to hold our arms out to the side with palms up and then he began. We tried our best to maintain eye contact the entire time. Some people stopped to watch.

But that’s nothing compared to what happened when we actually got into Canada. If the U.S. is bad, Canada is worse.

At least in the U.S. they pretend to care about things like personal sovereignty. There remains outrage over things like the TSA and more nationalization of medical services.

Mexico seems to have real liberty where it counts. (If it weren’t for the U.S.-led Prohibition-style war on drugs, Mexico’s cartels would be no more powerful or violent than Rite Aid and Mexico itself could be a paradise.) The U.S. pays liberty some lip service.

In Canada we find no such sentiment about liberty. It seems things just get worse the farther north you go, as if freedom can’t stomach the cold.

Canadians have gleefully committed their lives to the care and direction of the state as far back as anyone cares to remember. Perhaps that long-nurtured nationally socialist spirit is why Canada’s border guards are the scariest we’ve yet encountered.

They were to a one young, wearing bullet-proof vests over their crisp uniforms and serious as heart attacks. If the USA’s thugs seem a little bumbling as they do their government’s dirty work, the Canadian versions make up for it. Those young men and women processing passengers gave us the impression that they’d just as efficiently process undesirables into concentration camps.

It was 1 am local time when we had our turn with an unsmiling Canadian border guard. Perhaps we didn’t answer snappily enough. Perhaps we were a bit surly after having read those selections from Nock. Whatever the reason, we were marked for further processing, something we didn’t find out till after waiting another 45 minutes to get our luggage. At that point we were not in the right frame of mind to deal with state agents docilely.

And sure enough there was trouble.

“Sir, you seem to have a problem with me,” said the not un-pretty customs lady in the backroom after she’d asked us the same questions the first customs agent had asked us an hour ago.  We were having tremendous trouble hiding the anger in our voice even though we’d managed to speak slowly and quietly so far. We probably looked pretty wound up too, like someone ready to swing at a square off in a bar.

“I don’t like being treated like this,” we answered, “Don’t you think I should be bothered by it? Doesn’t it bother you? The way the state is bringing down the hammer lately?” Stupid questions, especially the last one.

We had already long ago resigned ourselves to going to jail and being sent back to the U.S. So we continued, “I am going to the same conference in the same hotel I’ve been coming to for the past three years. Why treat me like this now? Why treat anyone like this? I mean, here I am trying to go about my business and now anything I say wrong can land me in jail.”

“Sir, I don’t know you. You don’t know me. There’s no reason to be upset with me,” she said.

Ah, but there was. While we rant about the state, it all really comes down to individuals. It’s individuals who have rights, not groups. It is individuals who are are responsible for their actions. She was enforcing the bad laws, imposing the duty, the fines, the forced detention. She was the low-level muscle helping run a protection racket for the state.

She took our passport and U.S. resident alien card and disappeared into a secured office with a couple of her cronies. She returned about five minutes later and told us that we were free to go.

“So why did this happen?” we asked. “What did I do to call attention to myself and make you guys want to detain me? Is there a way to avoid this and go about my business (without molestation) in the future?”

“No, nothing,” she said, “This was random and we have the power to stop anyone we wish upon their entry into this country.”

We couldn’t stop hearing Jeff’s words in our head:

“Give up the green card. Go live for cheap in Asia or Latin America and live your life as free from government interference as you can. Stay the hell away from the U.S…Canada too. And Western Europe. What’s going on in New Hampshire with the Free State Project is exciting, but I don’t know if it’s worth sticking around when you have the opportunity to get out entirely.”

We’ve been entertaining the same thoughts on expatriation for years, with the same sorts of destinations in mind. We’re not under the delusion that any of these places are perfect. But the little bit we’ve seen tells us that they are…different…And in the ways that matter to us better.

Albert Jay Nock wrote in Memoirs of a Superfluous Man:

“As a general principle, I should put it that a man’s country is where the things he loves are most respected. Circumstances may have prevented his ever setting foot there, but it remains his country.”

Too true. And what a shame it would be for circumstances to allow a man to live where it suits him and for him to remain instead where it doesn’t.

Fun with Customs and Border Guards in the U.S. and Canada was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The trip was sponsored by the American Petroleum Institute (API), which paid for the airfare and accommodations. Managers at both Syncrude and ConocoPhillips granted me access to any parts of their operations I wanted to see (within allowances for safety). And everyone answered any and all questions I asked.

Post-trip, I have complete editorial freedom to write about what I saw and learned. And I learned a lot. So this is Part I of a two-part series. Watch for Part II.

The Past and Future of Oil and Oil Sands

The first thing that struck me about visiting the oil sands of Alberta was how much geological and social similarity there is to the oil patch of Pennsylvania.

Geologic similarity? Yes, because the reason that the hydrocarbons are so near the surface in both areas — Pennsylvania and Alberta — is that the Pleistocene glaciers scraped off much of the overlying rock. When the glaciers retreated about 10,000 years ago, they left hydrocarbon-bearing rock formations exposed near the surface, or buried not too deep. This led to oil seeps, which led to people being curious about the black, gooey stuff.

To be sure, the hydrocarbon resource is quite different between the two places. That is, in Pennsylvania, you have light, sweet crude oil that flows easily and is soft and smooth to the touch. Indeed, Pennsylvania crude feels like hand lotion. (It’s the origin of Vaseline, for example. And some people use it as the basis for a shampoo.)

While in Alberta, the “bitumen” from the oil sands is as thick as cold molasses, and very sticky. It’s got some sulfur in it as well.

On a warm day in August, oil sands have the consistency of really stiff, dry oatmeal. Bitumen is a far cry from hand lotion.

And as for social similarities? Well, the Indians of old used to skim the oil from streams near Titusville, Pa. So did people of the “First Nations” of Alberta, who used to recover the tarry bitumen from the rocks along the Athabaska River of northern Alberta. Thus both oil and oil sands have been around for a long, long time.

Early white explorers in both Pennsylvania and Alberta noted the oil seeps. They wrote in journals and logs that eventually somebody could do something with the substance.

Eventually, both Pennsylvania and Alberta had their oil booms. In fact, we’re soon coming up on the 150th anniversary of Col. Drake’s oil discovery at Titusville, Pa, on Aug. 27, 1859. Pennsylvania’s oil boom is colorful history at this point (although Marcellus Shale development will soon change that).

Whereas Alberta is still in the midst of its oil sands boom. It’s a boom that’s going to last for quite some time, I believe.

“Easy” Oil Versus Heavy Oil and Bitumen

There’s a reason Col. Drake started an oil boom in Pennsylvania more than a century before Alberta enjoyed the same thing. Col. Drake found some of that so-called “easy” oil. No, it’s not easy to find. It’s that Col. Drake’s oil flows easily from a well.

That is, for all the oil that mankind has pumped out of the ground in the past 15 decades, almost all of it has been the light, sweet stuff that flows easily. Generally, when people looked for oil they bypassed the heavy oil and bitumen. Until lately, of course.

When we think about the concept of “Peak Oil” today, we need to keep in mind what we’re talking about. The curves show oil output peaking in so many parts of the world. This phenomenon is quite real, as long as you understand that it’s the “old fashioned” kind of oil deposit that Col. Drake was drilling. The light, sweet, easy-flowing oil is getting harder and harder to find, certainly in significant quantity.

But there are a lot of other hydrocarbon molecules out there. Most of those molecules are not light, sweet crude oil. Indeed, most of the hydrocarbon molecules that the world will use in the future will be “heavy,” with lots of carbon atoms and not so many hydrogen atoms.

Here’s a graph from oil services giant Schlumberger that estimates the world’s heavy oil and bitumen resources. Canada’s 400 billion cubic meters of bitumen translates into something like 1.4 trillion barrels of oil equivalent. How much is that? Well, it’s about SEVEN times the total oil reserves of Saudi Arabia.

It just so happens that most of that Canadian bitumen is located in Alberta (with some is in Saskatchewan). And Fort McMurray, about 250 miles north of Edmonton, is the heart of the development process.

Oil Sands — Surface Mining

Large-scale oil sands development began in the 1970s. It took gigantic levels of capital investment, like tens of billions of dollars. That’s not pocket change. So a group of lease-owners got together and pooled their capital to form privately held Syncrude Canada, a joint venture. First mining started in 1978.

The way Syncrude operates, it’s not really “mining.” It’s landscape architecture. Under Alberta law, Syncrude could not turn over its first shovel of rock without a master plan for remediation and restoration at the end of the cycle. It’s quite a farsighted model for long-range resource development.

Thus for much of the 1970s, Syncrude performed baseline environmental studies and data gathering. It started digging in 1978. At first, the pit looked like a moonscape of open-pit mining. See the photo below. It looks like a mess, right? Well, there’s more to the story.

The mining process is fairly straightforward. Big shovels (really big) scoop large volumes (really large) of oil-laden sand (API number 8, the “bitumen”) into gigantic loaders (and I mean gigantic.

The loaders haul the rock to a crusher. The crushed rock goes to a washing bin, kind of like your washing machine at home except it’s the size of a high-rise office building. The Syncrude operation washes the bitumen off the sand using naphtha. Then it separates the bitumen, recovers the naphtha for reuse and takes the clean sand (and it’s clean) and replaces it in a previously mined pit.

The process uses a lot of water, but not as much as the horror stories you might hear about “draining the rivers” of northern Canada. Each barrel of water is recycled about 18 times.

The process uses a large amount of natural gas, but not as much as you may have heard (like “all the natural gas of northern Canada”). Pretty much everything about the operation is built with cogeneration in mind, so the company continuously recovers the heat at each stage. That natural gas goes a long way, from what I saw.

If it takes, say, five years to dig a pit, and then it may take five or more years to fill it back up with sand during the restoration process. Syncrude’s goal is to handle the rock as little as possible.

Eventually, Syncrude returns the land to original grade, although the company has some artistic license with the contours. It covers the land with the original topsoil, which has been in cold storage (northern Alberta… it’s cold up here for 10 months of the year). Then it replants trees, and that’s saying something, because the growing season is under two months. It takes 80 years for your basic spruce tree to reach maturity.

There’s even a new water table, despite the disturbance of the land.

Where Things Now Stand

So at this stage, after 30 years or so of mining (with about 80 years to go, at current rates of extraction), Syncrude has come to a point of delivering 350,000 barrels of synthetic crude oil per day. It takes the 8-API bitumen and upgrades it to oil that’s competitive with West Texas Light. Then it delivers it to the JV members, for whatever use the owners want to make of it.

Along the way, the Syncrude process removes the sulfur, so it’s sulfur free (refiners like that). In fact, there’s a mass of sulfur up at Syncrude that’s about the size of the step pyramid at Saqqara, Egypt. And along the way, Syncrude sells the sulfur to the chemical industry.

The former Syncrude mine that I visited is about 3.5 miles square, and formerly about 200 feet deep. Now it’s restored to grade, with trees growing and a herd of 300 wood bison grazing.

For the cynics out there, I’d say that it’s not some environmental Potemkin village, because you can’t fake a replanted forest of 25-year-old trees. You can’t fake a 300-bison herd. Not on a former mine site 3.5 miles square.

Sure, there are still issues about land disturbance, settling ponds, water usage, gas usage and myriad of other things that come up when you’re spending billions of dollars on a major mining effort. But Syncrude has built its business model around dealing with the “other” issues, and not just moving oil sands and recovering oil products. Don’t underestimate the ability of the Alberta government to regulate its energy producers. This is a long way from Appalachia.

Meanwhile, we’re talking about literally billions of barrels of bitumen (or oil equivalent) that the process makes available to the North American marketplace. And if the U.S. wants to get onto its environmental high horse about the source of the hydrocarbons from the oil sands — and tax or ban their importation — there are other buyers in the world. Like the Chinese, who have racked up many frequent flyer miles on their treks to Fort McMurray.

That’s all for now. In Part II, I’ll discuss the in situ process that I saw at the ConocoPhillips Surmont site.

Until we meet again,
Byron King

August 24, 2009

Update on Canada Oil Sands, Part I was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.