Alberta needs to prepare. Winter is coming.
I wrote the following in October of 2014. I have left the first 3 paragraphs virtually untouched other than some grammatical corrections. Six years later, the remaining paragraphs are extensively new opinion.
Canada, and Alberta are neglecting to see the big picture when it comes to energy and energy development. A lengthy decline in the price of oil could see all new oil-based projects cancelled and systematic layoffs would ensue. Think it can’t happen?
It did. And still on a precarious perch.
As we have learned over the past several years, the oilsands “dirty oil” is an extremely easy target for environmentalists. Rightfully so — Its heavy reliance on water and natural gas make each barrel almost energy neutral-it takes almost as much energy to produce a barrel of oil as can be extracted from the barrel of oil. And environmentally it is a disaster. No plans to clean it up, just keep polluting the environment. The Canadian and Alberta governments need to answer the citizens of Canada for their failures and increasingly the global world.
The number of inactive wells at over 100,000 and abandoned wells in Alberta are numbered at over 65,000. As of March 2020, almost 170,000 wells that require remediation. They need to be sealed to prevent methane escaping into the atmosphere. This has nothing to do with the environmental damage surrounding the oilsands.
No one in the political arena has raised the issues openly about the problems that Fort McMurray faces in its future. It is for the most part a one industry city of approximately 70,000. When oil demand decreases worldwide as renewable energy increases production each year what will become of the oilsands? Since it is politically a landmine, and since it is the most expensive oil to produce it may just be that demand for its products will crash as cheaper and alternate supplies are readily available. It could be a disaster for the working people of Fort McMurray. First the layoffs as demand declines, then the migration away from the city as people leave in search of other work. A housing industry that gets crushed by lack of demand and oversupply. It could become a virtual ghost town like Uranium City.
In comparison Uranium City was a much smaller population, around 5000 people in the 1980’s and only about 75 people today. All tied of course to a one industry town that went bust when the demand for uranium crashed.
As a Canadian and as an Albertan, I would like to see a plan in place that minimizes the impact on the people of Fort McMurray and on the province. We have had years to develop a viable plan to manage through the remaining years of the oilsands and its cleanup. I say remaining, because like many natural resources we have a finite supply. I am not in favour of over development, preferring that we maintain a slow and steady approach to its eventual phase out of our energy requirement mix. We have a responsibility to the citizens of Alberta first and foremost in the wise use of our resources. Over development at this point will only drive the price down. That is not the proper goal. Discounting is a bottom less pit.
We need to move towards renewable sources of energy to replace the oilsands as quickly as possible. Some progress has been made, but we still lag the rest of the world significantly. Canadians should recognize that our economy has rested on natural resources for decades. And in many instances, we have been out maneuvered by competition from around the world. This is another of those examples-and when it goes bust how will we respond? Will our leaders say, “we didn’t see it coming”? How short sighted they are. It will happen and it may happen faster than we expect. Climate change is real and countries around the world are taking big steps to change how they generate power.
In the meantime, oil remains a boom or bust cycle in Alberta. The number of abandoned and inactive wells shows we cannot rely on private oil companies to do the right thing. Strong regulations need to be put to them and enforced. For the people of Alberta and Canada the sooner we put a proper plan in place the better. It starts with revenue to the province. The royalty rate must increase significantly as our finite resource may never be tapped out in full due to climate change and new sources of energy. We must make hay while the sun is still shining, but not in the form of overproduction. Overproduction results in job losses because of the boom and bust cycle. A steady but reliable production has greater value. Not only to the citizens of Alberta, but also to the producers. The short sightedness of previous Conservative governments destroyed our own revenue stream from the oilsands. That is why we are facing the problems we are in Alberta.
“Time for Canada to forget Keystone and get to work on the future of energy, not the past”.
The last statement was in the original article from 2014. It still rings true. One of the dumbest things I’ve seen this spring came from our Premier in Alberta. He made a 7-billion-dollar commitment to trying to resurrect Keystone in the US. A huge gamble and will likely see court challenge after court challenge (it saw one the first day they put a shovel in the ground, and it has been on hold ever since). That will go on for years. By the time we run out of oil in Alberta it still won’t be built. My last word is on jobs. We have already lost jobs in the oil sector that will never return. Some will argue that we will lose jobs if we increase or enforce the royalty payments. That is a totally weak argument with no merit. Demand for oil products locally remains high. People still need the products, and they will buy them. If I build a house, I do not get the lumber for free. The royalty in the simplest form is a cost of goods. All businesses that sell products must first make them or buy them. Making them they must acquire raw materials. It is that simple. The safest bet for us is to manage our current resource more effectively and keep the remaining workers active while we determine how to retrain, how and where to move them (Fort McMurray will have a population decline. A plan will give us the number of years it will take to make these adjustments).
