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Alberta

Pipe Dreams: Why Canada’s proposed pipelines don’t fit in a low carbon world

By Axel Dalman and Andrew Grant - Carbon Tracker - July 2020

Carbon Tracker’s modelling shows no new oil sands are needed in a low carbon world.

Prospective pipeline projects represent a significant expansion of capacity, with taxpayer support. However, new pipelines are surplus to requirements under Paris Agreement demand levels.

Canadian authorities face the challenge of trying to reconcile their natural resources development plans with their positioning on climate. Canada has previously having shown leadership on climate change issues, but its government support for pipelines – which are reliant on the failure of the Paris Agreement – risks damaging its credibility.

Key Findings:

Our research has previously shown that no new oil sands projects are needed in a low carbon world. All unsanctioned oil sands projects are uncompetitive under both the International Energy Agency’s 1.7-1.8°C Sustainable Development Scenario (SDS) and c.1.6°C Beyond 2 Degrees Scenario (B2DS).

All proposed new pipelines from Western Canada, in particular Keystone XL and Trans Mountain expansion, are surplus to requirements in a Paris-compliant world. Pipeline capacity may have proved a constraint in recent years, but under SDS, all future oil supplies from Western Canada can be accommodated by upgrades and replacements to existing pipelines, local refining and limited rail freight.

Even if discounts for Canadian crude narrow, new oil sands projects remain uneconomic. Western Canadian heavy oil trades at a steep discount to international benchmarks due to quality and transport challenges, averaging $25 below Brent over the last decade. Even if greater pipeline capacity reduces this to $10 in the future, in line with levels seen during previous periods of unconstrained supply, new projects still remain uneconomic under the SDS. Indeed, even if Canadian heavy oil were to trade at parity with Brent, which is extremely unlikely due to its lower quality, there would still be no new oil sands production under the B2DS and just 120,000 bbl/d would enter the market in the SDS – a level which would be covered by existing rail capacity.

Investors in oil sands face depressed cash flows in a low carbon world of falling oil demand and weak pricing, but will be forced to produce or pay the price due to inflexible “take-or-pay” transport fees for excess new pipeline capacity.

While take-or-pay contracts spread the impacts, pipeline investors still face financial risks as upstream production weakens. Uncontracted capacity will probably remain unused by producers, and contracts may cannibalise tariffs from other pipelines. Even take-or-pay commitments are subject to counterparty risk in a falling oil market.

The Canadian government’s stakes in Keystone XL and Trans Mountain could well prove to be a drain on the public purse. Under the SDS, government tax revenues and the value of the assets are unlikely to reach the levels anticipated at the time of sanction.

Canada’s leadership position on climate change may be undermined by its support for projects reliant on the failure of the Paris Agreement.

Read the report (Link).

Oil politicians only care about fantasy jobs, not real jobs

By Doug Nesbitt - Rank and File, February 27, 2020

Across the country, the right-wingers are outraged once again about the loss of thousands of potential jobs in the Alberta oil sands. Teck Resources, the Vancouver-based energy company, pulled its proposal to develop a new massive oil sands mine north of Fort McMurray. Jason Kenney wasn’t the only politician choking for air after getting the news.

Teck claimed their “Frontier” mine would produce 7,000 short-term construction jobs, 2,500 operating jobs, and generate tens of billions in government revenues. Naturally, these figures are highly suspect coming from an industry known to bury the truth as often as it buries bodies.

Whatever the case, we know a lot of jobs would have been created and we also know the costs to the global environment would have been immensely bad. Teck’s decision to pull the application reflects a trend of oil sands divestment by financial powers and energy corporations. They’re even beginning to invest in renewables.

Meanwhile, over the decades, oil companies have saddled Alberta with 100,000 orphan wells, countless toxic tailings ponds, and a whopping $70 billion clean-up bill for the public. With Teck’s decision to run away from their big Alberta mine, Big Oil and the banks are spelling big trouble for Kenney and the countless politicians who have staked their lucrative careers on the oil sands.

And so Kenney loudly proclaims his incredible concern for jobs – as he axes real jobs. Kenney is overseeing devastating cuts to healthcare and government services, and his party estimates between 6,400 and 7,400 public sector jobs will be eliminated. Ah right, the public sector is the big problem, not the decades of low royalties allowing huge oil wealth to flood out of the province.

Winding Down BC's Fossil Fuel Industries: Planning for Climate Justice in a Zero-Carbon Economy

By Marc Lee and Seth Klein - Corporate Mapping Project, March 2020

IMAGINE IT’S 2025 AND BECAUSE OF THE ESCALATING CLIMATE CRISIS, governments in Asia have declared ambitious new climate action plans, including the elimination of metallurgical coal for steel manufacturing within five years, to be replaced by state-of-the-art hydrogen-powered furnaces; and an aggressive transition off of natural gas and toward renewables within a dec-ade. After a short period of time, BC’s fossil fuel exports dry up, workers are laid off and local communities get hit with declines in both public- and private-sector jobs due to falling incomes.

It is this type of scenario that needs to inform planning for BC’s fossil fuel industries (coal, oil and gas). This report’s framework for a managed wind-down aspires to thoughtfully and strategic-ally phase out the extraction and production of fossil fuels in BC, most of which are exported and burned elsewhere.

The BC government’s continued interest in expanding production and export of its fossil fuels suggests little willingness to contemplate a managed wind-down so long as there are external buyers for BC resources. However, there is a risk that market conditions could change abruptly as other jurisdictions implement more aggressive climate policies and importers cut their con-sumption of fossil fuels. Fully phasing out BC’s fossil fuel industries over the next 20 to 30 years may be — for now at least — politically unthinkable. Nonetheless, this report aims to start a necessary conversation in BC. The managed wind-down framework is built on four pillars:

  1. Establish carbon budgets and fossil fuel production limits;
  2. Invest in the domestic transition from fossil fuels and develop a green industrial strategy;
  3. Ensure a just transition for workers and communities;
  4. Reform the royalty regime for fossil fuel extraction.

More than half of BC’s gas production is exported to Alberta for oil sands processing, with additional exports to the United States. Only 9 per cent of production is consumed within BC. Virtually all of the province’s coal is exported, with little domestic consumption. The bulk of production is higher-quality metallurgical coal used in steelmaking as opposed to thermal coal used to generate electricity.

Read the report (PDF).

The Future of Alberta's Oil Sands Industry: More Production, Less Capital, Fewer Jobs

By Ian Hussey - Parkland Institute, March 2020

Major restructuring and consolidation of the Alberta-dominated Canadian oil and gas industry has been taking place since 2014 (Hussey et al. 2018), when the lower-for-longer oil price scenario in which the province still finds itself began.

This report explores the employment, capital spending, and operational spending implications of the ongoing restructuring and consolidation of the industry. More specifically, the report explains that oil sands industry maturation—which was significantly advanced over the latest commodity cycle—means there has been a recent shift in the industry from its growth phase (2000–2018) to its mature phase (2019 onward).

Read the report (Link).

Alberta’s Coal Phase-out: A Just Transition?

By Ian Hussey and Emma Jacksonn - Parkland Institute, November 2019

This report explains that Alberta will have little coal-fired electricity left by the end of 2023, six years ahead of the federally mandated coal phaseout deadline of December 31, 2029. This relatively rapid transition away from coal power is the result of numerous decisions made since 2007 by various provincial and federal governments, a few arms-length agencies of the Alberta government, and several large publicly traded corporations that produce electricity for the Alberta market. Our report aims to evaluate Alberta’s electricity transition to date against principles and lessons gleaned from the just transition literature.

Following the introduction, the report proceeds as follows. In Section 2, we provide an overview of Alberta’s coal power industry, communities, and workforce. In Section 3, we delineate key principles and lessons from the just transition literature. In Section 4, we present case studies on the three companies affected by the Notley government’s accelerated coal phase-out (TransAlta, ATCO, and Capital Power). We examine the Notley government’s transition programs for coal workers in Section 5 and for coal communities in Section 6. Section 6 also includes a case study of Parkland County, which is the municipal district in Alberta perhaps most affected by the phase-out of coal-fired electricity. In Section 7, we provide an analytic discussion of our research results by evaluating the government’s transition programs against the key principles and lessons drawn from the just transition literature. In Section 8, we outline our conclusions based on the research results.

Read the report (Link).

Who is Included in a Just Transition?: Considering social equity in Canada’s shift to a zero-carbon economy

By Hadrian Mertins-Kirkwood and Zaee Deshpande - Adapting Canadian Work and Workplaces to Respond to Climate Change, August 2019

As the international community moves to act on the climate crisis, governments are increasingly being forced to reckon with the social and economic costs of climate policies. The production and consumption of fossil fuels is the primary driver of global heating, so shifting to cleaner alternatives is necessary for long-term environmental and economic sustainability. However, the global economy is highly dependent on fossil fuels, so declines in the production and consumption of coal, oil and natural gas have the potential to negatively impact large numbers of workers and their communities in the short to medium term. In Canada alone, the fossil fuel industry accounts for hundreds of thousands of jobs and more than $100 billion dollars worth of economic output.

Efforts to reduce emissions from the fossil fuel sector have provoked calls for governments to ensure the transition to a cleaner economy is a just transition for affected workers and communities. The concept of a “just transition” for fossil fuel workers has long existed within the North American labour movement, but only in the past few years has it gained mainstream international attention. The 2015 Paris Agreement acknowledged the “imperatives of a just transition of the workforce.” And in 2018, more than 50 countries signed the Solidarity and Just Transition Silesia Declaration, which highlights the essential role of a just transition in the broader fight against climate change.

In Canada, the phrase “just transition” only began appearing in official policy documents around the time of the Paris Agreement, but it is now a formal priority for several governments across the country. Canada’s recent adoption of just transition principles has emerged almost exclusively in the context of the government-mandated phaseout of coal-fired electricity generation. Under a patchwork of provincial and federal policies, nearly all coal power plants and their associated coal mines will be shuttered by 2030.3 To mitigate the costs of the phaseout to coal workers and coal towns, the provincial government of Alberta — home to the largest share of the coal industry — together with the federal government have implemented or announced a variety of just transition policies since 2016. Targeted programs include income support and skills retraining for coal workers as well as infrastructure investments in affected communities. These governments continue to explore initiatives to provide support to coal communities as they undergo the transition to a cleaner economy.

Read the report (PDF).

Realizing a Just and Equitable Transition Away From Fossil Fuels

By Georgia Piggot, Michael Boyland, Adrian Down, and Andreea Raluca Torre - Stockholm Environment Institute, January 2019

Meeting agreed climate goals requires a rapid decarbonization of the global energy system, which in turn necessitates a reduction in fossil fuel production. While limiting fossil fuel use will likely bring a multitude of societal benefits — related to reduced climate risks, sustainable economic growth, air quality and human health — it is important to recognize that not everyone will benefit equally from a transition to a low-carbon economy. In particular, those who rely on fossil fuel production for their livelihood, or who were anticipating using fossil-fuelled energy to meet development needs, may carry a disproportionate share of the burdens of an energy transition.

The need for a “just transition” to a low-carbon economy — namely, a transition that minimizes disruption for workers and communities reliant on unsustainable industries and energy sources — is gaining traction in climate policy and political discourse. A call for “a just transition of the workforce” was included in the preamble to the Paris Agreement, and the United Nations Framework Convention on Climate Change (UNFCCC) secretariat has prepared a technical paper on transition planning.10 In addition, several national and regional governments have recently announced new transition planning processes, including Canada, Germany, Spain, Scotland, New Zealand, and the European Union.

A central concern of just transition efforts is to ensure that low-carbon transitions address social and economic inequality. The UNFCCC calls for a transition that “contribute(s) to the goals of decent work for all, social inclusion and the eradication of poverty.” Likewise, the European Commission aims to “boost the clean energy transition by bringing more focus on social fairness.” And the Scottish Government is seeking a transition that “promotes inclusive growth, cohesion and equality.”

Key messages:

  • Governments are introducing new “just transitions” policies to help workers and communities move away from fossil fuels.
  • Most policies assume that justice goals will be achieved by helping those dependent on coal, oil and gas move into new roles; however, there is little critical reflection on what justice means in the context of an energy transition away from fossil fuels.
  • There are a number of gaps in current just transition policies when viewed through a justice lens. For example, no policies contain measures to improve the lives of people currently marginalized in the energy system.
  • Creating just and equitable transition policies requires collecting data on the current distribution of the harms and benefits of the energy system, and mapping out how this will change as fossil fuels become a less-prominent part of the energy mix.
  • By taking justice considerations into account, transition policies are more likely to limit social and political resistance, win a broad consensus, and achieve effective implementation.

Read the text (PDF).

The Case for Phasing out Alberta’s Tar Sands

By Gordon Laxer - Resillience, May 23, 2017

Proponents call them oil sands while opponents call them tar sands. Whatever they’re called, Alberta’s bitumen reserves are so massive, James Hansen warns that it could be game over for the world’s climate if all are extracted and burned.[i] We can’t do that and possibly keep the world below the Paris target of a two degrees Celsius rise above pre-industrial levels.

What to do about Alberta Sands oil is an issue for Americans as well as Canadians. The US imports over 3 million barrels of oil a day from Canada, accounting for 38% of US oil imports, outpacing the combined imports from the four next largest sources – Saudi Arabia, Venezuela, Mexico and Columbia. Sands oil comprise the majority of US oil imports from Canada.

The future of Sands oil imports became an American issue after more than 1,200 people were arrested in 2011 in front of the White House protesting the proposed Keystone XL pipeline. Shortly after, President Obama blocked and then banned the XL line to take mainly Sands oil to the Gulf coast. President Trump overturned that decision in March, allowing the Keystone XL line to be built, a move applauded by Canadian prime minister Justin Trudeau.

Big Oil faces huge obstacles getting Sands oil to major markets. In the context of today’s low international oil price, the Sands are among the costliest to produce on the planet. They emit massive amounts of extra greenhouse gases because they are heated by huge amounts of natural gas to separate oil from sand. To get from remote, landlocked northern Alberta to tidewater, Sands oil must cross political barriers – through one or more Canadian provinces or cross the border to the US. That means they need a social license – public and government support – to get to market. The future viability of the Sands then greatly depends on politics.

Act or Be Acted Upon: The Case for Phasing out Alberta's Sands

Dr. Gordon Laxer - Alberta Institute of Agrologists, March 16, 2017

The Alberta bitumen Sands are Canada’s fastest growing and largest single source of greenhouse gases (GHGs). This paper investigates the questions: Can Canada reach its Paris and G8 climate targets if it allows Sands output and emissions to grow substantially? Should the Sands be phased out? What can we learn from other energy phaseouts, specifically the ending of coal-fired electricity in Ontario and Alberta’s plans to do the same by 2030? The paper concludes with the steps of a planned Sands phase-out and principles for a just transition for Sands workers.

Read More - Download PDF.

Reclaiming Alberta’s Future Today

By Regan Boychuk and Brent O’Neil - Reclaiming Alberta’s Future Today, November 3, 2016

As the first step towards reducing Alberta’s dependence on fossil fuels as our primary source of income we must embrace our current environmental deficit. We must admit that climate change is real and that man-made contributions to global warming can be reduced.

After 100 years of exploration we must acknowledge that our provinces conventional oil and gas resources have been depleted. Technically speaking our low hanging fruit has been plucked and what is left is 444,000 oil and gas wells, 430,000 km of pipe lines (the distance to the moon is 384,000 km), 30,000 oil and gas facilities, 900 km of oil sands development, 220 km of tailing ponds, and a 11.2 million ton sulfur pile that dwarfs the great pyramids of Egypt.

Tackling this shameful legacy will be the biggest environmental cleanup project undertaken to date. It will take 1000 rigs 50 years and every willing Canadian to clean up our mess. This change in industry requires a paradigm shift in thinking. Our province no longer see the economic benefit from drilling new conventional oil wells as it once did. The real opportunity for Albertans will come from cleaning up our mess.

No longer can we tackle climate change with taxes and levy’s. We need to start making a real reduction in man-made emissions so our future generations have the same opportunities we once did.

Read the report (PDF).

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