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My guess is that not many partisans of any of Alberta’s NDP government, the federal Liberals or their right-wing opposition will be all that enthusiastic about the Parkland Institute report published yesterday — Can Canada Expand Oil and Gas Production, Build Pipelines and Keep its Climate Change Commitments?
On the question asked in the study’s title, here’s the spoiler: The answer is nope!
For that knowledge we should value the Parkland all the more — unlike those right-wing, corporate-financed “think tanks” named after rivers and imagined pioneer values, it doesn’t always just write what you want it to.
For the media, the big news from yesterday’s report was that the new study by well-known earth scientist David Hughes shows Canada can’t meet its global climate commitments if it keeps ramping up oil and gas extraction and building new export pipelines.
The study suggests if Canada were to try, non-oil-and-gas sectors would have to cut back so much it would batter the economy. “The rest of the economy’s emissions would have to shrink by 52 per cent below 2014 levels.”
In other words, achieving these contradictory goals short of an economic collapse is, if you’ll pardon the expression, a pipedream. No wonder advocates of continued expansion of Bitumen extraction, especially those on the right who don’t want to match it with any carbon-reduction measures, are tempted to deny climate change is, like, a thing.
Accordingly, nobody much in Alberta and not very many people in Ottawa want to hear this kind of talk just now.
But the part of the study that’s really interesting — because the narrative that we must, simply must, have a pipeline to tidewater doesn’t seem to take into account worldwide supply and demand — was the study’s conclusion that those pipelines we just have to have aren’t going to help very much.
Ever since the days of Alison Redford’s “Bitumen Bubble” justification for austerity — which might have been more accurately called the “Baloney Bubble,” although in Redford’s defence, there really was a price differential back in 2011 — we’ve been told that if only we can get our Bitumen Sands oil to a seacoast, it will fetch a much higher price.
So the really big news from the Parkland study — which nobody around here presumably wants to hear — should be that “new pipelines with tidewater access will not significantly increase the price Canada receives for its oil.”
“Canada’s primary oil export, ‘Western Canada Select,’ is a lower quality grade of oil that requires more effort to refine and comes with higher transportation costs than the (West Texas Intermediate) benchmark, and therefore commands a lower price,” the report concludes. “This discount will occur regardless of whether the oil is sold in the U.S., or to international markets in Europe or Asia.”
In other words, when politicians say ocean access to overseas markets will magically result in a significant price jump for high-cost oil derived from Alberta’s Bitumen Sands, they are mostly feeding you a line of hooey. It’s still hooey even if they sincerely believe it themselves.
Naturally, there will be cries of, “T’ain’t so!” So it’s worth noting that others are reaching similar conclusions. A recent secret report by Ottawa’s Finance Department, the existence of which was revealed by Bloomberg News after an access-to-information filing, also concluded that the end of the U.S. ban on exporting crude last year means the reduction of the famous differential to not much.
So why are the Alberta New Democrats led by Premier Rachel Notley and even Prime Minister Justin Trudeau’s federal Liberals fighting for the approval of pipelines that didn’t even make economic sense back in the dying days of the Harper government? If you ask me, it’s all politics.
Previous Progressive Conservative governments have persuaded us that we simply had to have the pipelines — although not that long ago, as recently as when Ed Stelmach was premier, the debate in the province was more about whether we should refine more oil and not ship jobs “down the pipeline.”
At this point, for any Alberta political party to say anything different would be tantamount to committing immediate political seppuku.
The NDP has to know all this — the civil service has most certainly run all the numbers. The conservative Opposition parties have to know it too — so it is particularly unsavoury for them to pretend the pipelines are an economic necessity to the government’s disadvantage. Nobody dares say that the emperor of oil has no clothes.
So for the time being, getting approval for a pipeline will remain a political necessity for any Alberta political party that hopes to survive. Getting it sooner than later will do a lot to level the playing field among political parties of all stripes in this province by 2019, especially if the economy edges back into balance.
But getting the politically necessary approval and putting the pipe in the ground are not necessarily the same thing.
This may take a while, but if you want to know if the Parkland report is right, watch what eventually happens regardless of which party is in power in Edmonton or Ottawa now or in a decade or two.
Pipelines to tidewater may never even be built if the arithmetic doesn’t add up to a profit at the end of the line to the energy industry. That, I suspect, was President Barack Obama’s long game when he stalled the Keystone XL Pipeline into near oblivion.
It could happen to Canada’s other pipeline dreams too, no matter what the country’s political classes hope for right now.
Then again, there will be some fluctuations between now and 2020 because fluctuate is what the price of oil does. If one of those is big and long enough to get the pipeline built, well, it’s safe to say we can say goodbye to Canada’s recent commitment in Paris.
That’s why it’s useful to have an institution like the Parkland around to spell out the hard truths, whether anyone likes it or not.
This post also appears on David Climenhaga’s blog, AlbertaPolitics.ca.
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