Saturday, July 9, 2016

We Can't Have It Both Ways

Despite Justin Trudeau's sunny assurances that meeting greenhouse gas emission reduction goals and pipeline expansion are not mutually exclusive, most people, if they think about it at all, will see such a position as both risible and impossible.

That is certainly the assessment of J. David Hughes, who writes that we can't have it both ways:
In 2014 (the most recent year for which we have data), Canada’s emissions were 28 per cent above the 2030 target. Meaning, even with existing levels of oil and gas production, we have our work cut out for us.

But Alberta’s new Climate Leadership Plan allows for a 47 per cent increase in oilsands emissions from 2014 levels (up to a maximum cap of 100 million tonnes per year). And B.C. plans to develop a liquefied natural gas (LNG) export industry, aiming for five large LNG terminals to export fracked gas from province’s northeast. This means a large ramp up of emissions from natural gas production as well.

Under a scenario where Alberta’s oilsands emissions grow to its cap, and B.C.’s LNG industry is developed to the level planned, economic sectors outside of oil and gas would have to shrink emissions by more than half (55 per cent) in order for Canada to meet the Paris commitment. This is simply not feasible, barring an economic collapse.
Hughes, an earth scientist who recently authored a report on the issue, says, in fact, that no new pipelines are needed, as the existing infrastructure is more than capable of moving our fossil fuels.
Detractors of rail should note that bitumen in its undiluted form is highly viscous and much less volatile than the light oil “Bakken bombs” that resulted in conflagrations at Lac Mégantic and in Oregon recently and therefore is unlikely to have such serious consequences in the event of an accident.
Furthermore, the economics of constructing more pipelines make no sense, despite the arguments that getting oil to tidewater will net a price premium on international markets:
Although oil is a globally priced commodity, between 2011 and 2014 the international price (“Brent”) was considerably higher than the North American price (“WTI”). In September 2011 the differential reached $25.26 per barrel. However, the average differential in the six months ending May 2016 was 88 cents per barrel and recently Brent has been trading below WTI.

Not only has the international price advantage evaporated, but Canada’s primary oil export, Western Canada Select, sells at a discount to WTI. That’s because it is a lower grade heavy oil and will sell at a discount whether sold internationally or to North American markets.
There are some very compelling reasons to dampen enthusiasm for new pipelines. However, in the world of high-stakes politics, reason often has but a peripheral role to play in decision-making. Only very strong and principled leadership can promote wise choices.

To say the least, I am not especially optimistic that will play a role here.


  1. The only reason our emissions numbers aren't far worse is that the non-energy sector, including our provincial governments, have done an impressive job at cutting emissions. That's reflected in how Alberta's numbers have swelled in comparison to other jurisdictions.

    As for BC's LNG fantasy, we're a long way from realizing Christy Clark's delusional energy utopia. World prices just aren't there. I think Victoria is gambling on a market turnaround that, so far, has not been evident.

    Trudeau could put an end to this madness fairly easily. All that would be needed was for the federal government to stop all hydrocarbon subsidies. The IMF pegs those direct and indirect benefits at $34 billion a year. Eliminate the tax exemptions and deferrals, stop the grants, and properly price natural capital (i.e. fresh water, carbon emissions, other forms of pollution such as tailing ponds) and that would probably solve the problem.

    1. The article does say that to meet the goals would require a huge reduction in emissions from economic sectors outside of oil and gas (55%), Mound. In some ways Ontario is largely responsible for the fact that the numbers are not much worse, as we closed our coal-fired power plants some time ago. And I understand that B.C.'s carbon tax has also reduced emissions significantly.

  2. Some have been arguing for awhile now that oil is not the fuel of the future, Lorne. Green enery and renewable energy are making it obsolete. Still, others insist that the world is flat.

    1. I always read about the great advances and the cost effectiveness of green energy, Owen, but only in alternative news sources. The MSM seem to be reluctant to rock the corporate boat.