Keith Brooks is the programs director of Environmental Defence.
Conventional wisdom in Canada is that the oil and gas sector is a boon to the economy. But in this case, the conventional wisdom is wrong.
The exploitation of oil and gas has always created massive liabilities and, even in the best of times, there were questions about whether abandoned wells would be cleaned up. But now, as the world confronts climate change, demand for oil and gas will likely plunge, and prices have, too. More than ever, companies are looking for ways to evade their liabilities.
We’ve long known, for instance, about the risks of sour gas leakage, the damage caused by oil spills and the sector’s out-sized contributions to Canada’s carbon footprint. But recent reporting reveals yet another facet to all this: Western Canada is pockmarked by more than 600,000 oil and gas wells. As The Globe and Mail reported, more than 100,000 of these wells are inactive and, rather than cleaning them up, major companies are walking away, pawning them off on smaller companies that can’t carry the liability and often go bankrupt.
These wells are just the canary in the coal mine that is Canada’s oil and gas industry. The oil sands themselves are leaving a massive liability as well. There are more than a trillion litres of toxic tailings ponds north of Fort McMurray, Alta. The toxins are leaching into the Athabasca River and poisoning downstream communities. And there is no known way to clean up these tailings ponds. The best idea the industry has been able to come up with is to pour water on them and wish the toxicity away. All told, the liabilities are estimated at up to $260-billion – almost six times Alberta’s current debt, 300 times what Alberta received in oil and gas royalties in 2016 and more than 160 times the amount that the industry has set aside for cleaning it up.
In all likelihood, the cleanup of these wells will ultimately become the public’s problem, at a hefty price tag. So rather than fuelling our way to a low-carbon economy, further expansion of the oil and gas sector is setting up Canadians in general and Albertans specifically to be left holding the bag. Instead of propping up the industry though massive subsidies and tax breaks, we need to talk about how we can prevent that – and that means winding it down.
The scientific consensus is that the world needs to achieve net-zero greenhouse gas emissions by mid-century to avoid the most devastating impacts of climate change. This leaves no choice but to wind down Canada’s oil and gas industry. And unless we start planning for this now, workers and communities will be left out of the transition to a low-carbon future. Instead, Canada is so beholden to the oil and gas sector that rather than making these companies actually set aside money for cleanup, or even draft credible plans for how they could clean up the mess, they are urging them onward.
The Alberta Energy Regulator drafts weak regulations that fail to deal with the pollution these firms cause, and then turns a blind eye to bad deals that contravene even these weak rules. The provincial government reduces royalty payments, so the resource is practically given away. The federal government extends tax breaks and subsidies, and by spending billions promoting the industry around the world, it has become an arm of the industry. Ottawa has even bought a pipeline, Kinder Morgan’s Trans Mountain.
The industry pushes for more expansion: more mines, more pipelines, more wells. And the government backs it because expansion is the mantra. Expansion is where they claim jobs are, and where new investment comes from.
And yet, even while production has grown over the past decade, employment has not. Corporate taxes paid by oil companies are down more than 60 per cent since 2006. Royalty revenue has declined 63 per cent since 2000, putting government balances in the red. Benefits from expansion prove fleeting, too: Permanent jobs for the Trans Mountain pipeline expansion, for example, amount to 50 in British Columbia and 40 in Alberta, and not the shiny numbers of temporary construction jobs politicians crow about.
Further expanding Canada’s fossil fuel sector and building more infrastructure only puts the economy at greater risk. As the world responds to climate change, there is a push to move away from fossil fuels, and to do so aggressively. While we won’t stop using oil and gas today, it is economically illogical to increase production of fuels and bankroll expensive long-term assets, such as pipelines and mines, if the future doesn’t include them.
If the oil and gas sector continues to grow, so, too will its liability. If we fail to police the industry, the risks will increase. If governments keep propping up these companies, Canadians will have more to lose when they fail. And, ultimately, for humanity to succeed, oil and gas companies must fail. It’s time to acknowledge this – and start talking about an exit strategy.
Editor’s note: (Nov 29, 2018) Due to an editing error, an earlier version of this article incorrectly said demand for oil and gas has plunged. In fact, the author was arguing that trends and government promises will likely cause oil and gas demand to fall in the future, not that it has. This version has been corrected.