It Could Be The Beginning Of The End For Alberta’s Oil Sands

In All, Business, International by Tola Brennan

One hundred and fifty kilometers north of Edmonton, Alberta is the little town of Athabasca, hugging the river of the same name. “The road through our town used to be like the road to Baghdad in the middle of the war,” recalled Bruce Jackson, a retired minister and local. “People don’t realize this is actually a warzone.”

Athabasca is on the journey another 300 kilometers down the river and north to Fort McMurray, the boomtown staging ground for the whole oil sands industry. Jackson calls it a war zone since the industry has developed “the biggest trucks in the world” that have rumbled past his perch to mine what environmentalists say is “the world’s dirtiest oil.”

But recently, it’s also been compared to hell. A massive wildfire swept through Fort McMurray a few weeks ago forcing the evacuation of all 88,000 residents and making international headlines. After the raging inferno passed through the town, numerous publications drew links between the fire and climate change, pointing to a dramatic increase in the length of the dry season.

These loaded connections are provoking mixed reactions, but for the oil sands, controversy is nothing new. For years, Alberta’s biggest development has pitted the power of industry against environmentalists, many First Nations groups and now a government increasingly wanting to prove its commitment to tackling climate change. And after decades of seeming invincibility, the tables are turning fast. Indeed, they probably already have.

A perfect storm of obstacles from oil prices to politics, and most recently the fire, have chipped into the appeal of an already costly investment. Sagging momentum coupled with increased opposition have turned what seemed like an easy hurdle into a likely gamechanger: pipelines. In about a year, there won’t be enough pipeline capacity to accommodate any more growth. And more pipelines may not be on the table. If and when industry hits that ceiling, it may have nowhere to go but down.

“The tar sands have lost their sense of inevitability,” said Keith Stewart, head of the energy and climate campaign for Greenpeace Canada. “Things were moving really quick all of the time and now we can think about something else.”

The oil sands are a mixture of sand, water, clay and bitumen. This bitumen is a thick heavy oil that drives the whole business. Canada has the world’s third largest oil reserve, after Saudi Arabia and Venezuela, and almost all of that is bitumen in the Athabasca deposit. While estimated to hold 1.8 trillion barrels, only 168 billion barrels are accessible with today’s technology.

Of that portion, only about 20 percent is close enough to the surface to be mined, and that entire area is directly north of Fort McMurray. As this portion has become developed, newer projects use a method called “in situ” where a line is drilled and injected steam eventually brings the bitumen to the surface. An increasing majority of projects are in situ and can be drilled anywhere in the massive oil sands region.

After extraction, the bitumen is as thick as molasses and must be mixed with diluent before entering the pipeline network that brings it to the west coast and into the United States. About half of the bitumen is processed onsite to create what’s called synthetic crude which then enters the same pipeline network.

That process makes the tar sands some of the most expensive oil in the world to produce. But when oil prices topped $100 a barrel for much of 2008 to 2014, cost hardly mattered. Tar sands production boomed. The industry drew around $201 billion in investments between 1999 and 2013.

But then oil prices fell. What began in 2014 started ripping through the industry in 2015. Most companies operated at a loss, and new projects were cancelled. So far the downturn has resulted in the loss of 60,000 jobs.

Meanwhile, politics in Alberta changed as well. After 44 years of conservative leadership, the New Democratic party swept into power in May of 2015 under premier Rachel Notley. After extended talks with industry and environmental groups, Notley enacted a major “climate leadership plan” in November 2015 that puts a cap on total emissions at 100 megatonnes of carbon per year. The plan was timed to bolster Canada’s position at the Paris Agreement, the climate change policy plan which was signed by Prime Minister Justin Trudeau in late April.

While it’s certainly a major shift, critics suggest there’s not much bite in the plan. “The government and industry want to have to have a productive relationship,” said Ian Hussey, research manager at Parkland Institute, a research center at the University of Alberta. He said Notley hadn’t increased royalties from the oil sands companies, the main direct benefit for the province and said the current government expects the industry to be around for decades. Notley’s administration was unavailable to comment.

But even if these gestures towards a clean energy future aren’t making a dent now, they’ve opened up a chink in the armor that activists are using to their advantage to hold the Canadian government accountable, now that they’ve claimed to be listening. Trudeau’s endorsement of the Paris Agreement needs to be reconciled with recent research concluding that most of the oil sands must stay in the ground to avert catastrophic climate change.

In order for the oil sands industry to continue to grow, it needs to avert a fast approaching bottleneck. Already, 89 percent of pipeline capacity is being used, according to a report from Oil Change International, an advocacy think tank outlining the cost of fossil fuels. This bottleneck will hit in 2017 at the soonest and 2019 at the latest, depending on whether small expansions of the Enbridge network of pipeline are implemented or blocked.

To keep momentum, the industry needs at least one of the three proposed pipelines to be pushed through. The Trans-Mountain or the Northern Gateway to the coast of British Columbia or the Energy East pipeline across Canada to New Brunswick.

A global wave of protests over two weeks in May called “Break Free” have demanded divestment from fossil fuels. They organized actions in dozens of cities, and on May 14th, hundreds of activists gathered in Vancouver voicing opposition to the proposed Kinder Morgan Trans-Mountain pipeline.

“The time that we live in is our one and only opportunity to begin this transition to renewable energy,” said Amina Moustaqim-Barrette, one of the protest organizers. She said she wants Trudeau to hear this message and take meaningful action.

This wave of protest follows what activists see as a successful pipeline blockade. After years of friction, Obama vetoed the Keystone XL pipeline on November 6th, 2015 and sent a strong symbolic message that grassroots organizing could be effective.

The pipeline projects also face another key obstacle: They all must pass through First Nations land which span the entire B.C. coast and swaths of Ontario and Quebec. All of the communities on the West coast have said an unequivocal no to any pipeline. The Gitga’at and other coastal First Nations have challenged Northern Gateway successfully in court, and many tribal representatives attended the recent Vancouver protest. On the other side, 75 First Nations in the pathway of Energy East have already declared opposition.

For decades, First Nations resistance has often been disregarded, but Trudeau has vowed to grapple more deeply with Canada’s dark colonial history. After years of being one of the few countries refusing to join on, Canada decided to fully support the United Nations Declaration on the Rights of Indigenous Peoples on May 11th. Articles in the declaration unambiguously provide protections for stewardship of sovereignty of ancestral lands, so honoring this commitment gives even more weight to mounting pipeline opposition from First Nations.

All of these factors finally weigh into the financial attractiveness of the oil sands in the long term. “The financial community has long ignored it, but they’re starting to wake up to the fact that there are huge risks that they haven’t factored in to their investments,” said Adam Scott at Oil Change International, an advocacy think tank. “If you’re investing billions of dollars into tar sands projects and the world actually acts on climate change you could be stranding billions.”

That action also means a move towards renewables. “You’re betting that people aren’t going to switch away from oil,” said Scott. He argues that Albertans have wanted to diversify in every boom and bust cycle of oil, and the will to change is growing each time there’s a bust. He points to the meteoric rise of Tesla electric cars as a sign that people are demanding and leaning towards alternatives.

This leads to a context that makes the oil sands seriously unpopular. But the industry also has many defenders, especially in Alberta. “The Environmental NGOs have done a very good job of getting their message out there,” said John Bayko, a spokesperson for the Canadian Association of Oilwell Drilling Contractors. He said the scale of oil sands emissions are simply blown out of proportion. Estimates put emissions from the oil sands at less than one percent of global emissions.

And it’s also a huge source of jobs and vital to Alberta’s economy. “The energy industry puts in $17 billion dollars a year into provincial treasuries which pays for things like hospitals and schools,” said Bayko. The drop in oil has hit revenues hard and the Albertan government made big cuts in fiscal year 2015. Bayko also argues that Canadian oil is cleaner and more responsible than in many countries and that it should be Canadians seeing the jobs and income.

But where both Adam Scott and John Bayko agree is that they want to see cleaner energy in the future. The pace of that shift will be decided in the next few years, and the longer term viability of the oil sands industry as it currently exists hangs in the balance.