Which position is “anti-oil”? Defending the Alberta status quo, which could lead to industry-wide failure, or advocating for a pivot to non-combustion uses, which could extend a cleaned-up industry’s life into the 21st century?
Yesterday I published a Note criticizing the University of Alberta energy transition course. The crux of my argument is that Alberta’s oil and gas leadership thinks the current energy transition is commodity-led like all past transitions when, in fact, this one is technology-led. The UofA course ignored that difference, hence my criticism. My Note was the target of some nasty ad hominem. Meh, to be expected. What annoyed me, though, was the baseless accusation that I am anti-oil. Not true.
What I am against is combusting hydrocarbons when we should be using them, instead, as feedstock for Alberta advanced materials manufacturing industries. Imagine a future where Alberta-based factories turn oil sands bitumen into carbon fibre rather than shipping it to American refineries in Illinois or Texas to be made into gasoline or diesel.
This hypothetical isn’t an idle exercise. Change is coming and much sooner than most Albertans , especially my critics, are prepared to admit.
In addition to a rapidly accelerating energy transition, there is a global materials transition underway. At least that’s what Saudi Aramco VP Dr. Ibrahim Abba and chemist Dr. Paolo Bomben of Alberta Innovates told me.
Starting with the assumption that Alberta hydrocarbons can be used for non-combustion purposes, at significant scale, follow my argument.
Here’s what I wrote in yesterday’s Note about the nature of this energy transition: “this energy transition is technology-led, unlike every other historical energy transition, which has been commodity-led. When your energy is made in a factory instead of extracted from the ground and combusted, different rules apply, the transition moves at a much faster pace, and the outcomes are different.”
In a nutshell, wind and solar energy, batteries, electric vehicles, heat pumps, and plenty of other clean energy technologies have passed the inflection point on their S-curves and are now competitive with oil and gas-based technologies like the internal combustion engine. In the words of Dr. Doyne Farmer, the triumph of clean energy is now inevitable.
But when are they likely to triumph? Plenty of forecasters have modelled the energy future. The International Energy Agency, which is well respected outside Alberta if not within, thinks peak demand for all fossil fuels will arrive by 2030, followed by decline within a few years.
Assume the IEA is correct
Is disaster ahead for the Alberta oil and gas sector? The Canadian Energy Regulator’s modelling shows oil sands production declining next decade if the industry has to pay even some of the compliance costs of lowering its extremely high greenhouse gas emissions. The efficient projects with an excellent resource will last longer than less efficient ones, but none of the producers will enjoy anything like the current boom.
Industry players have a more optimistic view of a demand destruction scenario, but it doesn’t hurt to worry about the worst case during a period of intense structural change. Fortunately, the oil sands, which comprise about 75 per cent of Alberta’s oil production, have a pivot: the aforementioned advanced materials manufacturing.
I argue that the threat of a worst case is significant enough that Alberta should begin planning now to build a domestic non-combustion market for bitumen. This has a number of major benefits.
One, extends the life of the oil sands for decades. Instead of facing potential consumption decline combined with a marginal existence, or perhaps even widespread corporate failures, producers could profitably supply local non-combustion demand for decades. Perhaps even into the next century or two, given the huge size of Alberta bitumen reserves.
Two, a new market would provide new sources of revenue to pay for the clean up of Alberta’s unfunded oil and gas environmental liabilities, which likely top $300 billion and counting. Then there’s another $75 billion just to decarbonize the oil sands. Who knows what the bill for the rest of the industry will be? Keeping the industry financially healthy ensures that taxpayers won’t be on the hook for corporate liabilities.
Three, building an advanced materials industry and the necessary supply chains in Alberta will create tens of thousands of new jobs while generating more government revenue to support public services.
How in the world can that argument be construed as anti-oil?
The real energy conversation Alberta should be having
Let me be clear: I am not anti-oil, I am anti-Alberta oil and gas status quo.
My journalism over the past decade has convinced me that the “Future is Electric” worldview is far more likely than the “Oil and Gas Forever” worldview that dominates in the University of Alberta course. If I’m right, then the Alberta industry is staring down the barrel of an existential threat unlike any other it has encountered, including the reviled National Energy Program.
If I’m right, then Alberta should begin a pivot today away from the combustion of its hydrocarbons and toward non-combustion uses, like materials manufacturing. This is a perfectly legitimate argument, which makes my criticism of the University of Alberta’s course entirely legitimate, regardless of whose noses may be out of joint.
However, as energy economist David Gray is fond of saying about Alberta’s oil and gas hacks, “if it’s not combustion, it’s communism.” That’s about the quality of criticism levelled at my Note. Unfortunately, it’s also the quality of the Alberta conversation about the global energy transition.
Ask yourself this question: is it anti-oil to defend the Alberta oil and gas status quo, whose existence is threatened by the energy transition, or to argue for a pivot to a different market that has the potential to prolong the Alberta industry’s life while providing the revenue to clean up its liabilities?
Another question: whose interests are my critics serving? The giant oil companies or the people of Alberta, who actually own the hydrocarbon resource according to the Constitution of Canada?
It’s time for a new conversation about the future of oil and gas in Alberta. Thank you to the critics of yesterday’s Note for opening the door. If they have the courage of their convictions, they’ll agree to public debates where their Oil and Gas Forever narrative can be properly tested.
If I was a betting man, my money would be on them to avoid that spotlight, mostly because their analysis can’t stand up to close scrutiny.
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