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Now is a good time to begin a managed decline of Canadian fossil fuel production

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Image: Mark locchelli/Flickr

With Alberta's heavy crude oil now trading at US$3.82 a barrel, this might be a good time for the federal government to offer Jason Kenney a deal: a secure reasonable price for Alberta's oil until 2030, in return for Alberta's participation in a new Energy Transition Canada program, an agency that would oversee the transition from fossil fuels to renewable energies.

And with gasoline at around $0.62 a litre, Alberta's premier is already asking Ottawa for cash and credit to support province's economic driver, the oil and gas industry. Most outside observers blame the steep drop in fuel demand on a Saudi Arabian attempt to force Russia to lower its oil prices, as well as the cancellation of all non-essential businesses and travel in North America, locked down to control the COVID-19 pandemic.

Instead, in a recent speech, Kenney warned of "unfriendly dictatorships," disrupting the oil market, says The Globe and Mail. Kenney said he had already approached the U.S., seeking their co-operation on a possible joint tariff on Saudi Arabian oil, as the Saudi-Russian price war drives down international crude oil prices. Some of Kenney's words echoed U.S. shale billionaire Harold Hamm, who said on Fox Business that the Russians and Saudis were flooding the world oil market in a "direct attack" on the North American oil industry. 

Whatever the cause, the steep plunge in oil prices left Kenney practically speechless. The province is in "uncharted territory," he said recently. Indeed, the price has dived even deeper than usual in Alberta's perennial boom-and-bust economy. Diversification might stabilize the economy, but of course the UCP ended most of the preceding NDP government's many diversification programs.

Another way to end the boom-and-bust cycle would be for Canada to declare an end to oil exploration and development within the country's borders, and for the federal and provincial governments to concentrate on managing the declining fossil fuel stock to its fullest advantage, while hastening the transition to zero-carbon energy sources.

"U.S. Oil and Gas Expansion Is Incompatible With Climate Limits," concludes the January 2019 Oil Change International "Drilling Towards Disaster" report, written in collaboration with 17 other environmental organizations such as 350.org, Greenpeace USA, Rainforest Action Network and Sierra Club. As co-author Kelly Trout notes:

"Existing oil and gas fields and coal mines around the world already contain enough carbon to push the world beyond the goals of the Paris Agreement -- and well beyond 1.5 degrees Celsius of temperature rise ... There is already no room for new fossil fuel development anywhere in the world. Meeting the Paris Agreement goals requires stopping new exploration and extraction projects and managing the decline of the fossil fuel industry over the next few decades."   

While oil companies are eager to continue exploring and expanding -- that is their business model, after all -- major lenders have become reluctant to advance the usual billions of dollars for major projects. They question whether any new discoveries will come into production, or whether the properties will become stranded assets, for which the fossil-fuel companies will want compensation.

"Drilling Towards Disaster" offers five key recommendations for real U.S. leadership:

  • Ban new leases or permits for new fossil fuel exploration, production, and infrastructure;
  • Plan for the phase-out of existing fossil fuel projects in a way that prioritizes environmental justice;
  • End subsidies and other public finance for the fossil fuel industry;
  • Champion a Green New Deal that ensures a just transition to 100 per cent renewable energy; and
  • Reject the influence of fossil fuel money over U.S. energy policy.

Of course, none of that is likely to happen under the 45th president's administration. Perhaps Canada could lead the way.

"Supply-side regulation," as B.C. naturalist Bill Henderson says, offers the world's "last hope" of keeping the planet cool. Despite token decreases per site, increased numbers of sites mean that total carbon emissions have actually doubled since 2018. Therefore, Henderson calls on government to control the supply, and restrict how much fossil fuel is burnt each year.

"Our last hope is a regulated, managed decline of fossil fuel production and use initiated by those national producers wealthy and stable enough to lead," he wrote in Richochet. "We don't need 100 per cent emission reduction by 2050, we need 10 per cent per year starting immediately, as soon as possible."

He continued:

"Russia, the U.S. and the Saudis are not going to lead. What is needed is leadership from Australia and Canada, who are major producers, who are both beginning to experience increased damage and loss from warming, and whose governments, though hobbled by neoliberalism, still have the capacity to choose reasonable, responsible mitigation opportunities ... "

Justin Trudeau actually mentioned managed transition back in 2017, when seven major oil companies pulled out of the oilsands. The prime minister defended the federal two-prong policy (both pipeline and carbon tax) at an Ontario town hall by saying, "We can't shut down the oil sands tomorrow. We need to phase them out. We need to manage the transition off our dependence on fossil fuels."

Premier Kenney would balk at the very idea of government management, of course. However, as world oil prices sink, and unemployment soars, the idea of an assured income stream may become more appealing to the oil and gas industry. Alberta's budget is based on oil prices at US$58 a barrel this coming year, the pandemic is going to be a long siege and Kenney started his term by giving corporations an estimated $4.5 billion in tax cuts. Making a deal with the federal government might be more bearable than bringing in a sales tax. 

Managed decline only makes sense. If your town knew that you were going to run out of water in 10 years, don't you think you'd be constantly measuring the remaining supply, and hunting for ways to use it more efficiently? Well, we have an existing supply of oil which we can use sparingly until 2030, and only in emergencies after that.

Otherwise, we can expect wildfires and superstorms regularly. Under a publicly administered and managed decline program, we could measure out the energy and emissions in the fossil fuels we have left. Managed decline may well be our last, best hope to adapt to zero-carbon energy relatively smoothly.

Award-winning author and journalist Penney Kome has published six non-fiction books and hundreds of periodical articles, as well as writing a national column for 12 years and a local (Calgary) column for four years. She was editor of Straightgoods.com from 2004-2013.

Image: Mark locchelli/Flickr

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