Jim Warren is a recovering academic as retired adjunct professor and lecturer in environmental sociology at the University of Regina.
Some credible analysts have given up on ever seeing an Alberta to Prince Rupert pipeline completed
Enbridge’s Line 3 replacement project near Vibank in 2018. Photo by Brian Zinchuk
Take Dan McTeague, for example. The popular energy commentator and president of Canadians for Affordable Energy makes no bones about it—conditions laid down in the MOU ensure Northern Gateway 2.0 will never happen. In a January interview McTeague explained the MOU requires investors to put $50-$60 billion at risk to build the pipeline and another $16.5 billion, at least, to construct the massive Pathways Alliance carbon capture and storage project, which has to be under construction at the same time as the pipeline.
Where is all that capital to come from? Since Justin Trudeau became prime minister, Canada has seen half a trillion in investment dollars flee the country. Why would already spooked investors suddenly decide to invest in the bad deal offered in the MOU?
Making matters worse, the MOU imposes a $130 per ton carbon tax on oil sands producers. Conventional energy industry investors will be trying to raise as much as $75 billion in capital to produce and export oil for US $5.75-$14.00 per barrel (pb) less than the $52 pb they received for Western Canadian Select this past week. The tax is applied to the CO2 emissions generated due to the extraction and processing of diluted bitumen prior to exporting the oil.
The following table shows the kilograms of CO2 emissions produced by the three major crude oil production models employed in the oil sands.
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CO2 equivalent emissions released to produce 1.0 kg for various oil sands products and the cost it adds per barrel at $130 per ton
| Product category | Kg CO2e emissions per barrel to produce | Cost of carbon tax
per barrel |
| Synthetic crude oil | 86 kg pb | $11.21 pb |
| Mined dilbit | 44 kg pb | $5.73 pb |
| SAGD dilbit/heavy oil | 61 kg pb | $7.90 pb |
| CCSS (without utilization) | 108 kg pb | $14.00 pb |
Sources: Hwang, C.& Brin, K. (2023, August 8). Canadian oil sands continue their trend of GHG intensity reductions in 2022—down 23% since 2009.
https://www.spglobal.com/energy/en/research-analytics/canadian-oil-sands-continue-their-trend-of-ghg-intensity
Oil Sands Magazine (2021, March18). Oil sands emissions by extraction method: busting myths on GHG intensity
One of the fantasies dreamed up by the Net Zero advocates who control the federal government is that the cost of big investments and higher carbon taxes will be recovered because international oil buyers will be prepared to pay a premium over global benchmark prices for Canadian crude. Why? Because producing Canadian crude generates lower levels of greenhouse gas than oil produced by our international competitors.
No credible oil industry analyst believes this.
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Asian oil importers like China, India, South Korea, Japan and Indonesia don’t make buying decisions based on how green the oil is. What they care about is price and availability.
However, there are mechanisms alluded to in the MOU which have some potential to compensate for higher carbon taxes and the huge investment required for the Pathways carbon capture and storage project. The MOU will allow CO2 captured by the Pathways project to be used for enhanced oil recovery without losing its reduced emissions status. This will increase crude production and should provide a revenue stream for the Pathway’s project. Similarly Alberta’s TIER system, which manages its industrial carbon tax, does provide tax relief to firms which are able to reduce their emissions or purchase emissions credits from businesses who achieve emissions reductions.
There is nevertheless a troubling lack of publicly available information confirming whether or not the potential for compensatory benefits has actually been studied by Alberta, the federal government or the oil companies. There is inkling about how the conflicting objectives identified in the MOU can be resolved. Several of the objectives involve expensive emissions reduction requirements while at the same time other objectives purport to support the construction of a commercially viable pipeline and production system.
The currently high levels of cynicism and frustration could be reduced if the governments involved provided explanations as to how the component parts of the MOU can be combined without jeopardizing the business case for the pipeline and Pathways projects. True, we can’t expect the parties to the MOU to provide detailed reporting on the state of negotiations or their negotiating strategies. That simply doesn’t happen when governments are negotiating complex agreements about controversial issues. But without some additional explanation MOU skepticism is likely to grow. It can be expected to affect the outcome of Alberta’s independence referendum.
No less frustrating is the fact the MOU fails to address political and regulatory issues which have frustrated pipeline projects in the past. The Byzantine environmental approval process and excessively onerous regulatory hurdles imposed by the Implementation Act (Bill C-69) will remain in place. But, no worries the development process will be magically fast-tracked and made less disruptive once construction is under way.
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And let’s not forget anti-oil environmental groups backed by wealthy foreign foundations and groups claiming to represent Indigenous organizations will be launching protests and lawsuits to get the pipeline blocked. Given the past behavior of woke judges, especially in B.C., there is a high likelihood of disruption and delay.
Who needs the political headaches and financial risk? Little wonder Enbridge announced last week that is not interested in making a proposal to build the pipeline. That is the same Enbridge that previously got burned on Northern Gateway.
Despite the foregoing assessment, there are armchair industry analysts, creative thinkers and conspiracy theorists who claim the pipeline will indeed be built. The pipeline proponent will be closely linked to the government of China. The Chinese will receive assurances of minimal disruption and delay and have a guaranteed claim on any oil exported via the pipeline (at a guaranteed price differential rate). Chinese investors will tell Ottawa to get stuffed and refuse to cover the cost of the Pathways project and pay carbon taxes. The Chinese proponent will have just enough First Nations and Canadian investor participation, perhaps a Brookfield subsidiary—a splash of maple syrup to create a façade of legitimacy.
The Carney government’s motivation for supporting a Chinese proponent is presumably its strong desire to develop non-US trading relationships. For China’s part, it gets to substitute Canadian oil for the million barrels per day it was getting from Venezuela.
Let’s just hope the Chinese allow Canadians to work on the pipeline.
But what do I know? We are living in geopolitically volatile times. Nobody knows what to expect.
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