Alberta Finance Minister Ted Morton visited The Globe and Mail editorial board on Thursday, October 14. The following are some excerpts from that conversation, which touched on the environment and energy, health care, Alberta's finances, and provincial and federal politics.
On the environment, and Alberta's oil sands
17 per cent of the imported oil that comes in from the U.S. today comes from Alberta; about half of that from the oil sands. That's projected to rise to 36 per cent by 2030. While we ... support a transition away from an economy that's overly-carbon dependent, I think the romanticism of the Kyoto era has passed. People are in a new reality of environmental strategy ... a bridging strategy ... carbon reduction that doesn't destroy jobs in the process. And in that transition, there's going to be a continued need for oil, also of course natural gas.
The natural gas connection between western Canada and the U.S. that looked so large and growing only five or six years ago has shrunk tremendously, with the explosion of shale gas supplies in the U.S. Gas exports to the U.S. are way down and are going to stay down ... Having said that, natural gas is going to be an important part of this bridging strategy ... Gas produces half the CO2 that coal or oil does.
On the environmental side, we ran through everything we do in terms of ... successful examples of land reclamation ... We just reclaimed the first tailing ponds, which are the sort of poster-child for the anti-oil sands campaign. Are they ugly? Yeah, they're ugly. [But]they all have to be reclaimed.
On emissions, the anti-oil sands campaigners put a big emphasis that because the extraction of bitumen is energy intensive, it produces a lot of CO2, compared to so-called light Texas crude. Looked at just from production, that's true. But if you look at the full life cycle of how oil is used, from production to refining to transportation and to final use, what's called wells-to-wheel lifetime cycle, the oil from the oil sands ends up being about 5-6 per cent more CO2 than the average of the rest of the oils used in the U.S. market ... So oil sands oil from Western Canada is not a major new contributor to CO2.
If you take a barrel of oil, doesn't matter where it comes from, the total CO2 that is produced of that barrel: 80 per cent of it is going to come out of the tailpipe of a car or truck. If you're concerned that the number one issue facing humanity today is man-made global warming caused by CO2 ... the biggest threat is the automobile or truck, the internal combustion engine.
In the Fort McMurray area, the amount of CO2 produced is one-tenth of one per cent of global CO2 emissions per day ...
Alberta is the only jurisdiction in North America that has not only put a cap on CO2 intensity, but has penalties that are applied if that cap is missed. To day, $180-million in penalties have been assessed, and that goes into a new technology fund ...
I think people thought there was a quick and easy fix to CO2, and that if we set a target of reduction of 6 per cent, that somehow there was no economic pain associated with that ... This is a longer, slower, more difficult transition ... the term I've heard is bridging, from where we are today to where we want to be ... It's a little uncertain whether that period is 30-year, 60-year, or 90-year. Alberta has an important role to play, and oil and gas, including oil sands oil, will be an important part of the energy mix.
But the net CO2 trajectory out of the oil sands is still going to be going up.
And yet nationally, we still have this 15 per cent target reduction by 2020. So, how is Alberta part of that solution?
The majority of our CO2 reduction is from coal-fired power plants, not from the oil sands. I think we fit more or less comfortably ... within [Environment]Minister [Jim]Prentice's phasing out of coal plants over the economic life of the plant, and replacing that with natural gas ... You achieve an immediate 50 per cent in CO2 from coal to gas.
On Alberta's finances
I had the dubious distinction of tabling the budget with the largest deficit in the history of the province. That's the bad news. The good news it's part of a three-year plan to get us back to a balanced budget by 2012. We're on target for that and committed to that. I would say that the two days I spent in New York discussing the U.S. economic situation and the recovery there has made me a little more pessimistic about the shape of the U.S. economic recovery. We may not have the double-dip, but we may have a prolonged U-shaped recovery ... When I return to Edmonton, I'm going to back with a message that ... we will not and cannot repeat the mistakes of Alberta made in the 1980s of hoping the recovery will come and solve our problems - we have to have a realistic view of the depth of the recession that hit the world and particularly the United States, and the slowness with which the recovery from is going to happen.