The debate over this country’s oilsands may be headed toward an expensive and borderline inexplicable conclusion.
Canadians could pay billions for a carbon-capture megaproject that Alberta’s oil giants don’t want.
In return, those companies might get a new pipeline to the west coast, which they may not want badly either.
And to get the pipeline built, Canadians might ultimately have to pay most of the cost of that, too.
Apologies if that’s all a bit confusing. But such is the knot into which this country has recently tied itself.
Blame good intentions.
Mark Carney came into the Prime Minister’s Office determined to improve relations with Alberta while diversifying exports, so he expressed enthusiasm for getting more oil to Pacific markets. But he didn’t want to signal a total retreat on climate change. So he tied the would-be pipeline to the revival of a series of oil-sands carbon capture investments known as Pathways, which Justin Trudeau had basically given up on.
There’s since been no serious progress toward Pathways. Nor has a proponent stepped forward to build the pipeline.
Hence the mounting impression, among people in the energy sector’s orbit, that we’re headed toward both projects being funded by some combination of the federal and Alberta governments.
The pressure to have taxpayers across the country pick up the tab is only going to intensify in the next few months. As Albertans consider whether to cast a vote toward separatism in their October referendum, Carney will want to show that he’s making his grand bargain with Alberta Premier Danielle Smith work.
Untying the knot entirely may be impossible at this point, but there are a couple of steps Ottawa could take to loosen it.
The first would be to drop Pathways as a pipeline prerequisite.
For years, the handful of companies that dominated the oilsands strung Canadians along. They claimed they were eager to go big on carbon capture, then moved the goalposts every time Trudeau delivered whatever financial incentive they’d been demanding.
It’s now pretty clear, from public comments by their representatives and allies, that they’re actively opposed to the project unless government takes on all the costs and financial risks.
Even most environmentalists don’t want that. Many see carbon capture as a form of oil-industry greenwashing, since the bulk of emissions take place when oil is combusted by its consumers rather than at the oilsands. There are also questions about its viability, since it’s untested at this scale.
That doesn’t mean Carney should back down on all environmental expectations for the oilsands. Relatively stringent industrial carbon pricing, the big concession he got from Smith in return for rollbacks of other climate policies, has to stay.
But there are other ways for companies to respond to pricing. That can include other emissions-reducing technologies on their sites and paying into clean-tech funds. Pathways needn’t be the be all and end all, especially if it requires the government to either pay a fortune or be blamed for imposing an unmovable obstacle.
The second way to loosen the knot is to set some limits to what pipeline costs Ottawa might pick up.
Maybe there’s no way to avoid mild “de-risking” (a euphemism for subsidies) if Carney is serious about giving a pipeline a chance. One factor dissuading would-be proponents from stepping forward is the danger of sunk costs if the project were halted by regulatory processes, Indigenous opposition or the courts. So there’s a case for some government help with upfront costs, like feasibility studies.
The risk that Canadian taxpayers absolutely should not be taking on is around long-term demand.
Pipelines are slow to build and take decades to pay back their costs. You don’t have to be a climate hawk to recognize that there’s at least some uncertainty about the size of the market from about 2040 onward, considering that much of the world is now accelerating a shift away from fossil fuels.
That currently seems to be contributing to oilsands giants focusing mostly on maximizing their existing assets. They’re not advancing new mines that would supply a pipeline with anywhere near the additional million barrels per day it might need to be profitable.
Perhaps that calculus changes for the private sector, with a prime minister prepared to lift environmental laws, speed approvals and champion the industry on the international stage.
If not, Ottawa should take the hint. Otherwise, Canadians could wind up owning another pipeline with a greater danger of becoming a white elephant than the one we bought last decade.
At seemingly every public appearance, Carney makes some reference to taking the world as it is, not as we wish it to be.
That should mean setting reasonably favourable conditions and then letting the market decide whether a new pipeline is really needed — not further complicating matters by putting his thumb all over the scale.
