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Opinion: Selling off oil fast as we can isn't an energy plan

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Like it or not, we need to plan for a major transition over the coming decades from our reliance on fossil fuels to renewable energy.

Fossil fuels are the major source of energy for Canadians and people around the world (providing 85 per cent of global primary energy in 2017). But hydrocarbons — oil, gas and coal — unfortunately also have major environmental impacts from both extraction and combustion.

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Given this reality, Canada’s policy of selling off its remaining non-renewable energy assets as fast as possible makes little sense.

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Canada’s production of conventional oil peaked in 1973 and natural gas peaked in 2001, meaning the only hope for significant growth is from oilsands and fracked oil and gas, both of which have high environmental impacts.

Although Canadians will likely need oil and gas at some level for the foreseeable future, more than half of our current production is exported, however, meaning we are selling off the highest-quality portion of our remaining resources at rock-bottom prices.

Even with the Alberta government’s Climate Leadership Plan, which caps oilsands emissions at 43 per cent above 2015 levels, forecast growth means Canada’s economy outside of oil and gas production will have to reduce emissions 49 per cent by 2030 and 84 per cent by 2040 to meet the Paris targets — an unlikely prospect barring economic collapse.

We are told that any effort to curb oil and gas production will have disastrous effects because the industry generates the revenues that provide government services. But the facts show that returns to Canadians from royalties on oil and gas have plummeted.

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Data from the Canadian Association of Petroleum Producers show that royalties paid by industry fell 44 per cent between 2000 and 2017 — from $11.9 billion to $6.6 billion — a period in which hydrocarbon liquids production increased by 77 per cent. The effective Canadian royalty rate decreased from 18.3 per cent on $65.1 billion of sales revenue in 2000 to 6.2 per cent on $107.1 billion in 2017.

The situation in Alberta is even worse, where the effective royalty rate decreased from 19.5 per cent to 5.1 per cent over this period.

The federal government also tells us that its purchase of the Trans Mountain pipeline (TMX) is in the “national interest” based on false claims that exporting Alberta bitumen to Asian markets will provide higher prices. But the U.S. Gulf coast has the world’s largest concentration of the complex refineries needed to optimally refine heavy oil.

Two new pipelines to the U.S. with double the capacity of TMX are under development, which will eliminate pipeline-capacity constraints well before the earliest TMX completion date of 2022.

Transport costs to the U.S. Gulf coast are lower than sending oil to Asia via TMX and tankers. Together, these factors mean Alberta’s heavy oil will sell in the U.S. for $2-$5 per barrel more compared to Asian deliveries.

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The bottom line: Canada has no energy plan beyond pedal-to-the-metal export of its non-renewable energy assets. The rhetoric from Premier Rachel Notley’s government that the sky will fall without TMX and the federal government’s “national interest” justification for buying it have no merit.

It’s time to look at the big picture and develop a viable energy plan that will meet Canada’s long-term energy needs and emissions reduction targets.

David Hughes is an earth scientist and research associate with the Canadian Centre for Policy Alternatives. He has studied the energy resources of Canada and the U.S. for more than four decades, and is the author of the 2018 study Canada’s Energy Outlook: Current realities and implications for a carbon-constrained future, co-published by Alberta’s Parkland Institute.

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