Thursday, May 7, 2015

DOWN WITH THE TAR SANDS: BOMBSHELL IN CANADA AS THE TAR SANDS DOWNTURN TOOK THE GOVERNMENT DOWN, REALLY DOWN




The fortunes of Canadian tar sands oil changed overnight this week. After almost 50 years in power, the Progressive Conservative Party in Alberta lost big. As in losing 60 seats. Out of 87 total.  I guess people had enough with this party.  Canadians deserve more, much more than they have been getting.  We do not blame them for revolting.

On the other side, the social-democrats of the New Democratic Party gained 49 seats to take the majority. Liberals lost 4 seats and the reform-minded conservative Wildrose party gained 16.

It was as hard to imagine as Democrats taking over the Texas Statehouse and the Governors Mansion.

The new Alberta Premier is New Democratic Party’s Rachel Notley. She has a different view of tar sands oil and climate change than the previous Progressive Conservative’s Premier, and certainly different from Canada’s Prime Minister. 

Premier Notley has vowed to negotiate new climate policies, increase oil and gas royalties, and quit lobbying President Obama about approving the Keystone XL pipeline.

The economic base of Alberta, and its PC Party, was always tar sands oil. But over the years, the PC government slashed corporate taxes, cut government jobs and found itself severely in the red. Its economic future was tied irrevocably with development of tar sands oil and continued high global oil prices.

Prime Minister Stephen Harper congratulated Premier Notley, but must be seething at the results. His conservative power base has always been Alberta, and his vision for Canada, since becoming Prime Minister in 2006, has been to develop tar sands oil to the fullest, to see Canada pass China in oil production, and to have Canada enter the top tier producers along with Saudi Arabia, Russia and the United States.

Which seemed to be a good idea at the time with oilmen Bush and Cheney to the south and high oil prices globally. Harper bowed Canada out of the Kyoto Protocol, and buried the country’s targets for cutting carbon emissions. His vision included a huge invasion of tar sands crude into the United States via several routes – pipelines, rail and boat (see figure below from the NRDC).

Then President Obama took office, the Keystone hit a political wall, the United States became the largest oil-producing nation on Earth, and oil prices plummeted.

Now Alberta has gone democrat and Harper’s economy is on shaky ground.
The problem for the new government in Alberta, however, is that tar sands are integral to the Province’s economy. Alberta produces about 80% of the oil in Canada, and Canada is the fifth largest producer of oil in the world:

United States –  12.4 million barrels/day
Saudi Arabia –   11.6  million barrels/day
Russia  –              10.6  million barrels/day
China –                  4.4  million barrels/day
Canada –               4.3 million barrels/day

So any serious reduction of tar sands production would hit the economy quite hard. Even so, increasing petroleum royalties and corporate tax rates a bit, as suggested by the new government, could increase revenue while slowing any new tar sands operations.


This week’s election in Alberta, Canada replaced the conservative majority with a social-democratic majority, dealing a major blow to tar sands oil production and its planned invasion into the United States. Reprinted with permission from the Natural Resources Defense Council.

But it might be easier for Notley to aggressively pursue phasing out coal-fired power plants as her initial climate policy change since coal produces almost half of the Province’s electricity and produces even more carbon emissions than tar sands oil. She would need to replace coal with a combination of natural gas, nuclear and renewables, but that would fit in with Canada’s overall energy goals.

These election results are abuzz in the United States because of the Keystone Pipeline debate, but they may have little real impact on it. As described in Vox, Canada’s political pressure has meant little to the U.S. in this debate and the new Premier is not actually against pipelines in general.

Notley supports the proposed TransMountain pipeline from Alberta to British Columbia as well as the proposed Energy East pipeline to the Atlantic coast. Both avoid U.S. approval, but still have the oil end up at U.S. refineries. The Energy East line would be even bigger than the Keystone.

But both projects face fierce opposition by First Nations tribes to the west, and liberal Quebecers to the east. It is not certain at all that Alberta tars sands oil can ever expand to the levels envisioned by the previous government, so the new one may be better in line with the future.

In the end, however, the biggest hit to tar sands oil in Alberta comes from the huge increase in U.S. oil production and the low price of oil globally.

Elections won’t change that at all.

As the old saying goes, never put all your eggs in one basket.  That was the big mistake of the prior government, along of course with corruption, misguided tax cuts, lack of diversification, and so on.  People spoke, but if the new government does not deliver, they will speak again.
Source: http://www.forbes.com