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As the Energy East Pipeline dominates ever more headlines, editorials, ads and press conferences in my home province of New Brunswick and elsewhere, I’m reminded of an interview given by Calgary Mayor Naheed Nenshi on the CBC Radio’s The House in February 2013.
Mayor Nenshi said:
We’ve got a resource that is valuable to us and to our kids and to our grandkids, and we know that someday it’s not going to be that valuable; someday we’ll have a low carbon world. And I think it would be deeply irresponsible for us to leave that resource in the ground so that it will be worthless for future generations.
Ponder that statement and you get to the heart of the current lust for pipelines out of Alberta, whether south, west, north or east. You get to the heart of why the Energy East Pipeline, a project barely contemplated just a year ago, has quickly received nearly universal adulations and blessings, and seems on an ultrafast track to reality.
But before we place our chips on the pipeline, perhaps the costs and benefits are worth closer scrutiny.
Almost every assessment of the pipeline stresses the economic gains it will provide to New Brunswick. A recent report by Deloitte and Touche (commissioned, interestingly, by TransCanada, the company building the pipeline) suggests our province will earn about $700 million in tax revenues over 40 years. That sounds like a lot, but, in context, it’s roughly $20 million per year in a province with an annual budget of about $8,000 million, or about 0.25 per cent of our budget. Not exactly a windfall.
The same report suggests NB would see about 1550 direct jobs as a result of the pipeline. That sounds tempting too. But over 90 per cent would be temporary, lasting three years at most. In context, NB’s construction industry presently provides 27,000 jobs, or nearly 20 times as many.
Finally, because Alberta oil is landlocked and therefore traditionally sold below world prices, it’s been suggested that bringing it east will lower energy prices for us. As rosy as it might be to imagine that world oil prices will suddenly drop because Alberta crude has arrived in Atlantic Canada, it’s probably more realistic to expect that Alberta crude will get more expensive as soon as a pipeline links it to us, and the world market.
So — economic glitter perhaps, but not necessarily economic gold.
It’s interesting, and perhaps telling, that the Deloitte and Touche study specifically excluded any assessment of the environmental aspects of the pipeline project. So has much of the official conversation. That’s like ignoring elephants in the room.
First, there’s the issue of pipeline integrity and the potential for spills. Pipelines have a long and mostly successful history, so it’s probably fair to assume that if they are well engineered, constructed, maintained and operated, the risk of ruptures is small. A spill is possible, but it’s probably the baby elephant in the room.
The jumbo elephant, quietly ignored in most of the conversation so far, is climate change. No matter what any of us may wish to believe, burning oil produces greenhouse gases, and greenhouse gases are warming our planet and disrupting our weather. The Energy East Pipeline, the Keystone XL Pipeline, the Northern Gateway Pipeline and the hinted Beaufort Sea option – all are big, new drinking straws stuck into that bituminous milkshake called the oil sands, serving it up to an addicted world that needs to break its addiction.
The International Energy Agency, a leading global authority, has stated that if we are to put the brakes on climate change, most of our known global fossil fuel reserves must remain untouched in the ground. Kudos to Mayor Nenshi for implicitly acknowledging that; but shame on those who interpret it as a signal to get as much oil to market as quickly as possible while it’s still worth something. Hence the pipeline bonanza in which we are being asked to partake.
Jobs come and go but climate change is permanent. Years from now, our grandkids will look back on the decision we are facing today. I can’t imagine them being very sympathetic or understanding if we choose to trade away their long term climate stability for our short term prosperity. But that’s the very trade we’re contemplating as we consider the Energy East pipeline.
It’s up to the U.S. President to decide whether the cross-border leg of the Keystone XL pipeline is in the national interest of his country. Ultimately, his criteria are less scientific than political. Does he stand to lose more by alienating those who support or oppose the project?
With midterm elections coming up in November, Obama doesn’t have time to worry about Canada’s hurt feelings. Our economy, environment and opinion are very low on his list of priorities.
But the strongest pro-Keystone arguments on the American side raise an uncomfortable question: if the pipeline is approved, who benefits a little bit — and who benefits a lot? In other words, who gets the short end of the stick?
Houston-based Forbes contributor Loren Steffy lays out the business logic behind Keystone XLwith a clarity you’d be hard-pressed to find on our side of the border:
“[In 2011], for the first time in six decades, the U.S. exported more gasoline and diesel than it imported. The bulk of the exports went to Mexico, Canada and Brazil. Mexico and Canada, even without Keystone, are two of our biggest suppliers of crude (Canada is No. 1; Mexico is No. 4 behind Saudi Arabia and Venezuela). Gasoline, of course, is more expensive than crude, so we are in effect importing raw materials, adding value, and selling it back at a higher price – and maintaining U.S. jobs in the process.”
Catch that? It sounds a lot like the old story about exporting logs and buying back the furniture. Our domestic politicians tell us we’re an “energy superpower,” but to hear U.S. analysts describe it, we’re more of a convenient resource colony.
Canada is a rare duck indeed: a developed nation that is also a net exporter of crude oil. But the U.S. is catching up, thanks to a different kind of oil. The crude coming out of North Dakota’s Bakken shale is light and sweet. Canada’s is higher in sulphur and carbon content, while lower in energy and therefore value.
We produce light crude too, but not enough to match domestic consumption. And we don’t have the refineries to handle our own heavy oil. So we import light crude and gasoline to make up the difference, and send our low-grade stuff to the U.S.
We’re producing so much oil sands crude that we’ve overwhelmed cross-border pipeline capacity. Now the industry is stuck in a Catch-22. Profit margins have dropped dramatically. To reassure investors, bitumen miners talk about dramatically expanding production. But the more we produce, the more we exacerbate the supply glut.
The industry’s best hope right now lies in pipelines like the Keystone XL.
Back to Barack Obama. He doesn’t care about the woes of Canadian oil sands producers. His job is to calculate the U.S. national interest — or at least a version he can sell to voters. Last week’s State Department environmental impact report gave him more political cover on the question of increased carbon emissions.
Yes, operating the pipeline would be like adding 300,000 cars to the road. Yes, Canadian crude is worse for the atmosphere than the other heavy grades it would displace. But, the reportargues, without Keystone much of the same oil would find its way to the same refineries by rail — creating even more emissions than the pipeline, and significantly increasing the risk of accidents.
Rejecting Keystone, the report finds, won’t stop Canadian producers from digging up oil. The question is how they get it to customers.
“Keystone is important to the U.S. because it amounts to an energy insurance policy,” wrote Loren Steffy in Forbes. “Keystone gives us improved access to Canadian crude, which, with or without Keystone, is likely to remain some of the cheapest in the world.”
Is it smart for the president to lock in a stable supply of cheap oil from an eager neighbour? Yes. Is it smart to provide short-term jobs for U.S. construction and refinery workers? Yes. Will the political benefits outweigh the backlash? It’s a good bet Obama will decide yes.
The voters who will be most upset are probably the Nebraska ranchers whose lands will be expropriated. But they’re already Republicans.
Many backs will be slapped and victory cigars chomped in Calgary and Ottawa, the day Keystone XL is approved. Stephen Harper and his cabinet ministers will, no doubt, claim full credit.
Who will be the real winners? Oil companies, certainly. The Government of Alberta, which badly needs the royalties.
On a more modest level, perhaps the Canadian treasury. More than half the federal government’s revenue now comes from personal income tax. So the bean counters will be happy at the prospect of higher wages in the oil patch, so long as wages don’t drop in other parts of the economy.
But remember, oil and gas together make up less than 7% of Canada’s GDP. The entire sector pays 4.2% of total corporate taxes. And it provides only 3% of the jobs in the country. What’s good for oil sands companies is not necessarily the same as what’s good for the nation.
How about ordinary Canadians? Perhaps we’ll feel a fleeting sense of pride that our low-grade crude has found a loving home in the big Gulf Coast refineries. Then we’ll go fill up our gas tanks.
Image credit: www.keystone-xl.com
President Obama delivered the annualState of the Union address last night. And while we usually keep our attention north of the border, there are a few key reasons that we tuned in. As climate impacts hit harder and closer to home with floods, forest fires, heat waves and cold snaps, the time for ambitious climate action has never been clearer.
Last night the President reaffirmed his commitment to climate action through emissions reductions, clean energy, cuts to fossil fuel subsidies, and efficiency. But a ramping up of the ‘all of the above’ energy strategy, with increased natural gas and oil, threatens to hold the U.S. back as a climate leader. Nonetheless, the President’s determination to protect future generations from climate change stands in sharp contrast to what’s happening here in Canada, where the reckless expansion of the tar sands is making it impossible to do our share to prevent the worst of climate change.
Here are the key reasons we watched the speech:
- A tale of two countries and climate changeThe Canadian government claims, when it comes to action on climate change, we are harmonizing with the U.S., our largest trading partner. So when President Obama stepped up earlier this year (in the President’s June climate speech) by committing to tackle the U.S.’s biggest source of pollution (coal), it put pressure on Canada to finally take action to regulate the tar sands, our fastest growing source of climate change pollution.Rather than being harmonized, it seems our leaders are singing different tunes. Recently, Prime Minister Harper suggested that any rules to deal with tar sands emissions are still a couple of years away. In contrast, as we heard last night, the President remains dedicated to working to tackle carbon pollution and invest in clean energy and efficiency – commitments that are lacking in Canada.
We’d welcome real cross-border collaboration on climate action, clean energy and efficiency. The U.S. is committed to taking advantage of the growing clean energy economy (solar got a shout out last night). If we don’t get on board soon with clean energy, Canada will miss out on the jobs and benefits of this growing sector.
- The Keystone XL tar sands pipelinePresident Obama holds the key to significant tar sands expansion (and climate pollution) through the Keystone XL tar sands pipeline. While he wasn’t expected to – and didn’t – mention the pipeline in last night’s speech, the heat was still on the President with over 100 people gathered in the cold outside of the White House,demanding a rejection of this massive pipeline that would enable major industry expansion and significant climate pollution.The pipeline is in the midst of a final environmental impact assessment, which the State Department is expected to release in the coming weeks or months. The impact assessment follows the President’s June climate speech, where he was clear that the pipeline would not be approved if it significantly exacerbatesclimate pollution. Industry and governments have been lobbying heavily for the Keystone pipeline, precisely because it would open up export routes and allow for tar sands expansion.
After the assessment is presented, the pipeline will go through a National Interest Determination process where the public can weigh in. But the final decision rests with the President. The Keystone XL tar sands pipeline is an example of the infrastructure we should not build if we’re serious about stabilizing our climate, which requires us to move away from polluting fossil fuels. Rejecting the pipeline would be yet another signal for investors who are coming to terms with the risks of investing in dirty fuels. And it would be very good news for the climate, which would be saved tens of millions of tonnes of carbon pollution.
- Our shared atmosphereBecause we share an atmosphere with the U.S, we care about what our southern neighbour does on climate change, pipelines, fracking, clean energy and energy efficiency. While we work hard every day to push for climate and clean energy policy in Canada, it isn’t just our pollution that matters. The U.S. is one of the world’s largest polluters and what it does or doesn’t do to tackle global warming pollution will impact us in Canada.Every country must try to do its fair share to reduce greenhouse gas emissions. Here at home we will work even harder, because we have further to go. Some important change is happening in Canada, led by cities and provinces. Look at Ontario’s move to shut its last coal plant down for good or Nova Scotia’s impressive success at cutting energy waste. But as a country we need to grapple with the fact that expanding fossil fuel production is incompatible with action on climate change. If the tar sands are allowed to expand, pollution from them will cancel out every other effort in the country to reduce greenhouse gas emissions.
The good news is that on both sides of the border there a diverse, powerful and growing movement of committed individuals, organizations and communities standing up for a safer future for our shared environment and climate. This movement has made the tar sands the defining energy conversation on the continent, with many voices calling for an end to expanding the tar sands. As the impacts of climate change continue to hit close to home, this movement is only going to get stronger.
Andrew Nikiforuk: Canada’s Petrostate Has “Dramatically Diminished Our International Reputation” | DeSmog Canada
“Alberta is very much a petrostate,” says journalist and author Andrew Nikiforuk. “It gets about 30 per cent of its income from the oil and gas industry. So as a consequence, the government over time has tended more to represent this resource and the industry that produces it, than its citizens. This is very typical of a petrostate.”
The flow of money, he says, is at the heart of the issue. “When governments run on petro dollars or petro revenue instead of taxes then they kind of sever the link between taxation and representation, and if you’re not being taxed then you’re not being represented. And that’s what happens in petrostates and as a consequence they come to represent the oil and gas industry. Albert is a classic example of this kind of relationship.”
In this interview with DeSmog, Nikiforuk explains the basics of his petrostate thesis and asks why Canada, unlike any other democratic nation, hasn’t had a meaningful public debate about the Alberta oilsands and how they’ve come to shape the Canadian landscape, physically as much as politically.
Neil Young’s comparison of Fort McMurray and the oilsands to Hiroshima has stirred up plenty of criticism. But is it accurate?
Judge for yourself.
TransCanada Begins Injecting Oil Into Keystone XL Southern Half; Exact Start Date A Mystery | DeSmogBlog
Keystone XL’s southern half is one step closer to opening for business. TransCanada announced that “on Saturday, December 7, 2013, the company began to inject oil into the Gulf Coast Project pipeline as it moves closer to the start of commercial service.”
The Sierra Club’s legal challenge to stop the pipeline was recently denied by the U.S. Court of Appeals for the Tenth Circuit, so the southern half, battled over for years between the industry and environmentalists, will soon become a reality.
According to a statement provided to DeSmog by TransCanada, “Over the coming weeks, TransCanada will inject about three million of [sic] barrels of oil into the system, beginning in Cushing, Oklahoma and moving down to the company’s facilities in the Houston refining area.”
In mid-January, up to 700,000 barrels per day of Alberta’s tar sands diluted bitumen (dilbit) could begin flowing through the 485-mile southern half of TransCanada’s pipeline, known as the Gulf Coast Project. Running from Cushing, Oklahoma to Port Arthur, Texas, the southern half of the pipeline was approved by both a U.S. Army Corps of Engineers Nationwide Permit 12 and an Executive Order from President Barack Obama in March 2012.
Bloomberg, The Canadian Press and The Oklahoman each reported that the Gulf Coast Project pipeline is now being injected with oil. Line fill is the last key step before a pipeline can begin operations.
“There are many moving parts to this process — completion of construction, testing, regulatory approvals, line fill and then the transition to operations,” TransCanada spokesman Shawn Howard told DeSmog. “Line fill has to take place first, then once final testing and certifications are completed, the line can then go into commercial service.”
Residents living along the length of the southern half will have no clue about the rest of the start-up process, as TransCanada says it won’t provide any more information until the line is already running. “For commercial and contractual reasons, the next update we will provide will be after the line has gone into commercial service,” the company announced.
When DeSmog asked whether the company is currently injecting conventional oil or diluted bitumen sourced from the Canadian tar sands, TransCanada’s Howard replied:
“Many people like to try and categorize the blend, etc., however we are injecting oil into the pipeline. As you’ve likely seen me quoted before, oil is oil and this pipeline is designed to handle both light and heavy blends of oil, in accordance with all U.S. regulatory standards.
I am not able to provide you the specific blend or breakdown as we are not permitted (by our customers) from disclosing that information to the media. There are very strict confidentiality clauses in the commercial contracts we enter into with our customers, and that precludes us from providing that. The reason is that if we are providing information about a specific blend, when it is in our system, etc. – that has the potential to identify who our customers may be or allow others to take financial positions in the market and profit from that information when others do not have access to the same information. This has much farther reaching impacts for the financial markets (and ultimately all of us).”
Riddled with Anomalies
The Keystone XL line fill comes just weeks after Public Citizen released an investigation revealing potentially dangerous anomalies such as dents, faulty welding and exterior damage that the group suggests could lead to pipeline ruptures, tears and spills.
“[Public Citizen] and its citizen sources uncovered over 125 anomalies in that half of the line alone,” DeSmogBlog reported on November 12. “These findings moved Public Citizen to conclude the southern half of the pipeline shouldn’t begin service until the anomalies are taken care of, and ponders if the issues can ever be resolved sufficiently.”
Public Citizen posted these photos on Flickr:
Pinholes in the applied coating can lead to exposing underlying pipe damage to leakage.
Multiple coating patches over new pipe about to be placed into the trench during initial construction.
Close up of section of Keystone XL southern half’s pipe marked “junk” by TransCanada.
Front of a cut out section of pipe on citizen David Whatley’s land marked “Dent Cut Out.”
A dent anomaly on the exterior cut out section of pipe. The dent was about the size of a brick.
Precedent of Spills
“The government should investigate, and shouldn’t let crude flow until that is done,” Tom Smith, Director of Public Citizen’s Texas office said in a press statement accompanying the report. “Given the stakes – the potential for a catastrophic spill of hazardous crude along a pipeline that traverses hundreds of streams and rivers and comes within a few miles of some towns and cities – it would be irresponsible to allow the pipeline to start operating.
“TransCanada’s history with pipeline problems speaks for itself and I fear we could be looking at another pipeline whose integrity may be in question.”
Despite this precedent of spills, Keystone XL’s southern half is about to become a reality, with the fate of the border-crossing northern half of Keystone XL still resting in the hands of President Obama and Secretary of State John Kerry.
Photo Credit: Wikimedia Commons
Long Live Peak Oil!
Among the big energy stories of 2013, “peak oil” — the once-popular notion that worldwide oil production would soon reach a maximum level and begin an irreversible decline — was thoroughly discredited. The explosive development of shale oil and other unconventional fuels in the United States helped put it in its grave.
As the year went on, the eulogies came in fast and furious. “Today, it is probably safe to say we have slayed ‘peak oil’ once and for all, thanks to the combination of new shale oil and gas production techniques,” declared Rob Wile, an energy and economics reporter for Business Insider. Similar comments from energy experts were commonplace, prompting an R.I.P. headline at Time.com announcing, “Peak Oil is Dead.”
Not so fast, though. The present round of eulogies brings to mind the Mark Twain’s famous line: “The reports of my death have been greatly exaggerated.” Before obits for peak oil theory pile up too high, let’s take a careful look at these assertions. Fortunately, theInternational Energy Agency (IEA), the Paris-based research arm of the major industrialized powers, recently did just that — and the results were unexpected. While not exactly reinstalling peak oil on its throne, it did make clear that much of the talk of a perpetual gusher of American shale oil is greatly exaggerated. The exploitation of those shale reserves may delay the onset of peak oil for a year or so, the agency’s experts noted, but the long-term picture “has not changed much with the arrival of [shale oil].”
The IEA’s take on this subject is especially noteworthy because its assertion only a year earlier that the U.S. would overtake Saudi Arabia as the world’s number one oil producer sparked the “peak oil is dead” deluge in the first place. Writing in the 2012 edition of itsWorld Energy Outlook, the agency claimed not only that “the United States is projected to become the largest global oil producer” by around 2020, but also that with U.S. shale production and Canadian tar sands coming online, “North America becomes a net oil exporter around 2030.”
That November 2012 report highlighted the use of advanced production technologies — notably horizontal drilling and hydraulic fracturing (“fracking”) — to extract oil and natural gas from once inaccessible rock, especially shale. It also covered the accelerating exploitation of Canada’s bitumen (tar sands or oil sands), another resource previously considered too forbidding to be economical to develop. With the output of these and other“unconventional” fuels set to explode in the years ahead, the report then suggested, the long awaited peak of world oil production could be pushed far into the future.
The release of the 2012 edition of World Energy Outlook triggered a global frenzy of speculative reporting, much of it announcing a new era of American energy abundance. “Saudi America” was the headline over one such hosanna in the Wall Street Journal. Citing the new IEA study, that paper heralded a coming “U.S. energy boom” driven by “technological innovation and risk-taking funded by private capital.” From then on, American energy analysts spoke rapturously of the capabilities of a set of new extractive technologies, especially fracking, to unlock oil and natural gas from hitherto inaccessible shale formations. “This is a real energy revolution,” the Journal crowed.
But that was then. The most recent edition of World Energy Outlook, published this past November, was a lot more circumspect. Yes, shale oil, tar sands, and other unconventional fuels will add to global supplies in the years ahead, and, yes, technology will help prolong the life of petroleum. Nonetheless, it’s easy to forget that we are also witnessing the wholesale depletion of the world’s existing oil fields and so all these increases in shale output must be balanced against declines in conventional production. Under ideal circumstances — high levels of investment, continuing technological progress, adequate demand and prices — it might be possible to avert an imminent peak in worldwide production, but as the latest IEA report makes clear, there is no guarantee whatsoever that this will occur.
Inching Toward the Peak
Before plunging deeper into the IEA’s assessment, let’s take a quick look at peak oil theory itself.
As developed in the 1950s by petroleum geologist M. King Hubbert, peak oil theory holdsthat any individual oil field (or oil-producing country) will experience a high rate of production growth during initial development, when drills are first inserted into a oil-bearing reservoir. Later, growth will slow, as the most readily accessible resources have been drained and a greater reliance has to be placed on less productive deposits. At this point — usually when about half the resources in the reservoir (or country) have been extracted — daily output reaches a maximum, or “peak,” level and then begins to subside. Of course, the field or fields will continue to produce even after peaking, but ever more effort and expense will be required to extract what remains. Eventually, the cost of production will exceed the proceeds from sales, and extraction will be terminated.
For Hubbert and his followers, the rise and decline of oil fields is an inevitable consequence of natural forces: oil exists in pressurized underground reservoirs and so will be forced up to the surface when a drill is inserted into the ground. However, once a significant share of the resources in that reservoir has been extracted, the field’s pressure will drop and artificial means — water, gas, or chemical insertion — will be needed to restore pressure and sustain production. Sooner or later, such means become prohibitively expensive.
Peak oil theory also holds that what is true of an individual field or set of fields is true of the world as a whole. Until about 2005, it did indeed appear that the globe was edging ever closer to a peak in daily oil output, as Hubbert’s followers had long predicted. (He died in 1989.) Several recent developments have, however, raised questions about the accuracy of the theory. In particular, major private oil companies have taken to employing advanced technologies to increase the output of the reservoirs under their control, extending the lifetime of existing fields through the use of what’s called “enhanced oil recovery,” or EOR. They’ve also used new methods to exploit fields once considered inaccessible in places like the Arctic and deep oceanic waters, thereby opening up the possibility of a most un-Hubbertian future.
In developing these new technologies, the privately owned “international oil companies” (IOCs) were seeking to overcome their principal handicap: most of the world’s “easy oil” — the stuff Hubbert focused on that comes gushing out of the ground whenever a drill is inserted — has already been consumed or is controlled by state-owned “national oil companies” (NOCs), including Saudi Aramco, the National Iranian Oil Company, and the Kuwait National Petroleum Company, among others. According to the IEA, such state companies control about 80 percent of the world’s known petroleum reserves, leaving relatively little for the IOCs to exploit.
To increase output from the limited reserves still under their control — mostly located in North America, the Arctic, and adjacent waters — the private firms have been working hard to develop techniques to exploit “tough oil.” In this, they have largely succeeded: they are now bringing new petroleum streams into the marketplace and, in doing so, have shaken the foundations of peak oil theory.
Those who say that “peak oil is dead” cite just this combination of factors. By extending the lifetime of existing fields through EOR and adding entire new sources of oil, the global supply can be expanded indefinitely. As a result, they claim, the world possesses a “relatively boundless supply” of oil (and natural gas). This, for instance, was the way Barry Smitherman of the Texas Railroad Commission (which regulates that state’s oil industry)described the global situation at a recent meeting of the Society of Exploration Geophysicists.
In place of peak oil, then, we have a new theory that as yet has no name but might be called techno-dynamism. There is, this theory holds, no physical limit to the global supply of oil so long as the energy industry is prepared to, and allowed to, apply its technological wizardry to the task of finding and producing more of it. Daniel Yergin, author of the industry classics, The Prize and The Quest, is a key proponent of this theory. He recently summed upthe situation this way: “Advances in technology take resources that were not physically accessible and turn them into recoverable reserves.” As a result, he added, “estimates of the total global stock of oil keep growing.”
From this perspective, the world supply of petroleum is essentially boundless. In addition to “conventional” oil — the sort that comes gushing out of the ground — the IEA identifies six other potential streams of petroleum liquids: natural gas liquids; tar sands and extra-heavy oil; kerogen oil (petroleum solids derived from shale that must be melted to become usable); shale oil; coal-to-liquids (CTL); and gas-to-liquids (GTL). Together, these “unconventional” streams could theoretically add several trillion barrels of potentially recoverable petroleum to the global supply, conceivably extending the Oil Age hundreds of years into the future (and in the process, via climate change, turning the planet into an uninhabitable desert).
But just as peak oil had serious limitations, so, too, does techno-dynamism. At its core is a belief that rising world oil demand will continue to drive the increasingly costly investments in new technologies required to exploit the remaining hard-to-get petroleum resources. As suggested in the 2013 edition of the IEA’s World Energy Outlook, however, this belief should be treated with considerable skepticism.
Among the principal challenges to the theory are these:
1. Increasing Technology Costs: While the costs of developing a resource normally decline over time as industry gains experience with the technologies involved, Hubbert’s law of depletion doesn’t go away. In other words, oil firms invariably develop the easiest “tough oil” resources first, leaving the toughest (and most costly) for later. For example, the exploitation of Canada’s tar sands began with the strip-mining of deposits close to the surface. Because those are becoming exhausted, however, energy firms are now going after deep-underground reserves using far costlier technologies. Likewise, many of the most abundant shale oil deposits in North Dakota have now been depleted, requiring anincreasing pace of drilling to maintain production levels. As a result, the IEA reports, the cost of developing new petroleum resources will continually increase: up to $80 per barrel for oil obtained using advanced EOR techniques, $90 per barrel for tar sands and extra-heavy oil, $100 or more for kerogen and Arctic oil, and $110 for CTL and GTL. The market may not, however, be able to sustain levels this high, putting such investments in doubt.
2. Growing Political and Environmental Risk: By definition, tough oil reserves are located in problematic areas. For example, an estimated 13 percent of the world’s undiscovered oil lies in the Arctic, along with 30 percent of its untapped natural gas. The environmental risks associated with their exploitation under the worst of weather conditions imaginable will quickly become more evident — and so, faced with the rising potential for catastrophic spills in a melting Arctic, expect a commensurate increase in political opposition to such drilling. In fact, a recent increase has sparked protests in both Alaska and Russia, including the much-publicized September 2013 attempt by activists from Greenpeace toscale a Russian offshore oil platform — an action that led to their seizure and arrest by Russian commandos. Similarly, expanded fracking operations have provoked a steady increase in anti-fracking activism. In response to such protests and other factors, oil firms are being forced to adopt increasingly stringent environmental protections, pumping up the cost of production further.
3. Climate-Related Demand Reduction: The techno-optimist outlook assumes that oil demand will keep rising, prompting investors to provide the added funds needed to develop the technologies required. However, as the effects of rampant climate change accelerate, more and more polities are likely to try to impose curbs of one sort or another on oil consumption, suppressing demand — and so discouraging investment. This is already happening in the United States, where mandated increases in vehicle fuel-efficiency standards are expected to significantly reduce oil consumption. Future “demand destruction” of this sort is bound to impose a downward pressure on oil prices, diminishing the inclination of investors to finance costly new development projects.
Combine these three factors, and it is possible to conceive of a “technology peak” not unlike the peak in oil output originally envisioned by M. King Hubbert. Such a techno-peak is likely to occur when the “easy” sources of “tough” oil have been depleted, opponents of fracking and other objectionable forms of production have imposed strict (and costly) environmental regulations on drilling operations, and global demand has dropped below a level sufficient to justify investment in costly extractive operations. At that point, global oil production will decline even if supplies are “boundless” and technology is still capable of unlocking more oil every year.
Peak Oil Reconsidered
Peak oil theory, as originally conceived by Hubbert and his followers, was largely governed by natural forces. As we have seen, however, these can be overpowered by the application of increasingly sophisticated technology. Reservoirs of energy once considered inaccessible can be brought into production, and others once deemed exhausted can be returned to production; rather than being finite, the world’s petroleum base now appears virtually inexhaustible.
Does this mean that global oil output will continue rising, year after year, without ever reaching a peak? That appears unlikely. What seems far more probable is that we will see a slow tapering of output over the next decade or two as costs of production rise and climate change — along with opposition to the path chosen by the energy giants — gains momentum. Eventually, the forces tending to reduce supply will overpower those favoring higher output, and a peak in production will indeed result, even if not due to natural forces alone.
Such an outcome is, in fact, envisioned in one of three possible energy scenarios the IEA’s mainstream experts lay out in the latest edition of World Energy Outlook. The first assumes no change in government policies over the next 25 years and sees world oil supply rising from 87 to 110 million barrels per day by 2035; the second assumes some effort to curb carbon emissions and so projects output reaching “only” 101 million barrels per day by the end of the survey period.
It’s the third trajectory, the “450 Scenario,” that should raise eyebrows. It assumes that momentum develops for a global drive to keep greenhouse gas emissions below 450 parts per million — the maximum level at which it might be possible to prevent global average temperatures from rising above 2 degrees Celsius (and so cause catastrophic climate effects). As a result, it foresees a peak in global oil output occurring around 2020 at about 91 million barrels per day, with a decline to 78 million barrels by 2035.
It would be premature to suggest that the “450 Scenario” will be the immediate roadmap for humanity, since it’s clear enough that, for the moment, we are on a highway to hell that combines the IEA’s first two scenarios. Bear in mind, moreover, that many scientists believea global temperature increase of even 2 degrees Celsius would be enough to produce catastrophic climate effects. But as the effects of climate change become more pronounced in our lives, count on one thing: the clamor for government action will grow more intense, and so eventually we’re likely to see some variation of the 450 Scenario take shape. In the process, the world’s demand for oil will be sharply constricted, eliminating the incentive to invest in costly new production schemes.
The bottom line: Global peak oil remains in our future, even if not purely for the reasons given by Hubbert and his followers. With the gradual disappearance of “easy” oil, the major private firms are being forced to exploit increasingly tough, hard-to-reach reserves, thereby driving up the cost of production and potentially discouraging new investment at a time when climate change and environmental activism are on the rise.
Peak oil is dead! Long live peak oil!
Michael T. Klare, a TomDispatch regular, is a professor of peace and world security studies at Hampshire College and the author, most recently, of The Race for What’s Left. A documentary movie version of his book Blood and Oil is available from the Media Education Foundation.
Canada has a problem. Our greenhouse gas pollution is soaring. With climate impacts hitting harder and closer to home (ice storms, polar vortexes, floods…), our country is recklessly racking up a huge carbon bill that will saddle future generations with a debt impossible to pay off.
In a new report prepared for the United Nations, for the first time Environment Canada did the number crunching all the way to 2030. We’ve known for awhile that our 2020 target has become a mission impossible. But this report also paints a sorry picture of 2030, where Canada still doesn’t have its act together and climate pollution, specifically from the tar sands, continues to skyrocket (check out this detailed analysis by the Pembina Institute).
The report reaffirms that the growth in pollution from the tar sands – if the tar sands are allowed to continue expanding as projected – will wipe out any progress made to reduce emissions in any other sector, including Ontario’s coal phase-out, B.C.’s carbon tax, or other provinces’ energy efficiency and carbon reduction measures.
The result is while some pull up their bootstraps and clean up their acts, soaring pollution from the tar sands will cancel out everyone else’s hard work. And this means if Canada is to meet a national goal to cut emissions, some regions and sectors will need to do more than their fair share because one sector – oil – is getting off scott-free.
We hear a lot of talk these days about pipelines as “nation building projects” and being in the “national interest.” But if tar sands expansion is allowed, made possible by big new pipelines, this is a recipe for dividing our country, not uniting it.
Here’s why: At some point, Canada will need to get serious about reducing emissions, and how the carbon pie is divided between regions will become important. We can expect regions to speak up loudly if they’re asked to do more than their fare share to reduce carbon emissions because the oil industry is being irresponsible.
All provinces have a stake in major pipeline proposals like Enbridge’s Northern Gateway and TransCanada’s Energy East. There’s the tangible danger that these pipelines could spill tar sands oil into forests, farmland and drinking water sources. And then there’s the less tangible – but critical – impact they would have on the amount of carbon the country is pumping into the atmosphere and the impacts of climate change.
Will Ontario, British Columbia or Quebec be keen to do more than their fair share to cut carbon to make up for the impact of these pipelines? Doubtful. And they should not be asked to. All sectors and regions will need to reduce emissions. For the oil sector, that means keeping production at current levels and cleaning up existing operations – not expanding. It also means seeing the government put in place robust regulations on the oil sector that will see emissions go down, rather than up. Even the weak regulationsunder discussion now have just been punted ‘a couple of years’ further down the road by the Prime Minister.
The idea that Canada may fail to rein in soaring emissions by 2030 may not seem like the brightest news to kick off the New Year, but there is an important caveat to this story. It can only come true if industry and government get their way when it comes to rapid and reckless tar sands expansion.
The good news is that new pipelines and oil projects aren’t getting a free ride these days. With ever-growing public concern about moving oil (by tanker, rail, or pipeline), a world feeling the early impacts (and paying the price) of a changing climate, and new conversations in the financial sector about the risks of investing in high-carbon fuels, the tar sands are facing a serious uphill battle.
The world is waking up to climate change and the environmental devastation of projects like the tar sands, and while our current government chooses to leave their head in the sand, Canadians are also standing up to demand the safe, smart, clean energy future we deserve.
Canada’s pipeline projects have been the focus of a series of mass demonstrations [Reuters]
|Two decades ago, deep within British Columbia’s coastal old-growth forests, a fierce battle was waged and won to preserve Clayoquot Sound from large-scale clearcutting.
The legendary clash between environmentalists and industry in Canada’s westernmost province sparked a new kind of eco-activism – and the biggest fight since is poised to play out in the months ahead, as the country moves closer towards approving a controversial oil pipeline to the Pacific coast.
Last month, project proponent Enbridge Inc received a substantial boost through a federally commissioned report, which recommended approval of the Northern Gateway pipeline – subject to a host of environmental and administrative conditions. Advocates say the pipeline, which would whisk more than 500,000 barrels of oil daily from the Albertan tar sands to supertankers in Kitimat, BC, would benefit the country by opening Canada’s oil industry to growing Asian and Pacific Rim markets. But environmental and aboriginal groups, whose lands the pipeline would cross, maintain it would threaten some of the country’s most precious natural resources.
While the federal Conservatives – who have vowed no project will be approved unless it is “safe for Canadians and safe for the environment” – have until July to consider the report and come to a final decision, it is widely expected the government will green-light the Northern Gateway. And once that happens, Chief Martin Louie of the Nadleh Whut’en First Nation says aboriginal groups will swiftly launch court action.
“That’s the only avenue that we have to try to protect our rights,” Louie told Al Jazeera, speaking on behalf of a group of aboriginal bands known as the Yinka Dene Alliance, who have banned Enbridge’s pipeline from their territories under indigenous law. “Beautiful British Columbia – that’s what it should be for our kids too. The way I grew up enjoying the land and everything, I want my children and grandchildren to do too.”
Stamp of approval
The Northern Gateway twin pipeline would stretch 1,177km between Bruderheim in northern Alberta and the deep-water port of Kitimat, BC. The westward line would have the capacity to transport 525,000 barrels per day of oil for export, while the eastward line would carry up to 193,000 barrels per day of condensate, a product used to thin oil for pipeline transport.
The $8bn project has been years in the making; in 2009, Enbridge announced it was seeking regulatory approval, setting off a public and governmental review process that will culminate with this summer’s final decision.
A major part of that process was the independent joint review panel, mandated by the Environment Ministry and the National Energy Board, which delivered its final report last month.
Tasked with assessing the environmental, social and economic impacts of the pipeline, along with the effects of tanker traffic within Canadian territorial waters, the panel ultimately recommended approval of the project subject to 209 separate conditions. “We have concluded that the project would be in the public interest,” the panel noted in its final report. “We find that the project’s potential benefits for Canada and Canadians outweigh the potential burdens and risks.”
Enbridge has said it will work to meet all of the panel’s 209 conditions – which range from developing a marine mammal protection plan to researching the behaviour and cleanup of heavy oils – along with a broader set of five criteria, including addressing aboriginal land rights, for heavy oil pipeline development set out by the BC government.
“We remain hopeful that we can work to address all concerns that our opponents have in a mutual spirit of cooperation and collaboration,” Enbridge spokesperson Ivan Giesbrecht told Al Jazeera, calling the December report “just one important step in a long process”.
The company contends the Northern Gateway will deliver more than $270bn in GDP to Canada over 30 years, along with $300m in employment and contracts for aboriginal communities and billions more in tax revenue and labour-related income during construction. Enbridge and other advocates, including the Alberta government, have described the pipeline as key to diversifying Canadian crude oil exports to markets beyond the United States.
“Access to ocean ports for Alberta’s abundant resources is important to not just Alberta’s but Canada’s economic future,” Alberta Energy Minister Diana McQueen said, noting resource developers get a lower price in the North American market than they could globally. The situation is compounded by the stalled Canada-US Keystone XL pipeline proposal, which has been awaiting US government approval amid years of debate over its route and environmental impacts.
Opponents, meanwhile, question Enbridge’s employment numbers and suggest the pipeline’s economic benefits have been overstated. The Northern Gateway has generated a wall of opposition from aboriginals and environmental activists who cite the risk of an Exxon-Valdez-level oil spill in BC’s pristine coastal waters. Dozens of aboriginal bands have signed a declaration against the project, pledging to refuse Enbridge access to their lands and watersheds, including the salmon-stocked Fraser River.
In addition to the risk of spillage from the pipeline itself, Greenpeace Canada – which has criticised Enbridge’s history of spills and leaks – points out that the oil-loaded, Asia-bound supertankers would have to navigate “one of the trickiest marine routes in Canada”, passing by a series of small islands in the Douglas Channel. More than a year ago, Enbridge came under fire for releasing promotional materials in which the islands had apparently been erased from a rendering of the channel, in what critics called an effort to downplay the risks.
“Enbridge’s Northern Gateway pipeline would stream the world’s dirtiest oil from northern Alberta to the BC coast and would be the catalyst for unbridled exploitation and potentially calamitous disturbance of our land, air, freshwater and marine environment,” said Chris Genovali, executive director of the Raincoast Conservation Foundation in Sidney, BC. Industrial activities accompanying the transportation of oil could destroy habitats for caribou, wolves, whales and wild salmon, he added.
Opposition House Leader Nathan Cullen, the federal New Democratic MP for BC’s Skeena-Bulkley Valley, believes a major spill from either the pipeline or tankers over the 50-plus-year lifespan of the project is a certainty. “The ability to clean up bitumen in the water is virtually nil,” Cullen told Al Jazeera.
The Northern Gateway proposal faces an additional hurdle from BC’s provincial government, which has refused to lend support to the pipeline until Enbridge proves it will employ “world-leading practices” on oil-spill prevention and response, respect aboriginal rights and ensure the province gets a fair slice of the economic pie. “Enbridge hasn’t met any of the conditions yet,” government spokesperson Sam Oliphant said.
Legal fight ahead
Enbridge points out that it has already incorporated input from British Columbians and aboriginal communities, resulting in almost two dozen changes to the pipeline route and other alterations, such as thicker-walled pipes and an increased capability to respond to marine spills. In addition, the federal panel found Enbridge had taken steps to minimise the chances of a large spill “through its precautionary design approach and its commitments to use innovative and redundant safety systems”.
None of this is enough for the project’s opponents, who maintain the Northern Gateway will be a pivotal issue in the 2015 federal election – and set the stage for a landmark court fight.
The expected avalanche of legal cases upon the pipeline’s approval will tie it up for years, said Keith Stewart, climate and energy coordinator for Greenpeace Canada. And if the government tries to proceed regardless, he said, thousands of people have pledged to engage in peaceful civil disobedience, just as protesters did decades ago in Clayoquot Sound – using blockades and peaceful demonstrations to achieve their environmental goals.
The question of land ownership, meanwhile, is a complex one. Aboriginal rights are protected under section 35 of Canada’s constitution, but proving aboriginal title requires proof of use and occupation, said lawyer Drew Mildon, who works for a BC-based firm planning to represent aboriginals in the anticipated Northern Gateway court battle. While many aboriginal groups living along the pipeline route assert title and rights, they have not yet gone to court to prove them, Mildon told Al Jazeera.
“I have no doubt the governments will try to ram through the pipeline regardless of First Nations objections,” he said. “As a lawyer working for First Nations in BC, and given the overwhelming First Nations and public opposition here, I believe the pipeline will likely never happen.”
Stewart agreed, citing a failure on the part of Enbridge and the federal government to shore up public support for the pipeline.
“Without that support,” he said, “it won’t be built.”