Alberta and the energy transition in 2024: last chance to choose a different path?

Alberta requires bold leaders. Instead, it’s run by caretakers

This past year, Energi Media’s energy journalism really came into focus: extensive expert interviews and reporting about global trends in the energy transitions, then more of the same explaining what those trends mean for Canada, especially Alberta. Viewed through that lens, 2023 was an inflection point for this country, the year that everything changed. Buckle up. The ride gets faster and bumpier in 2024.

The year’s most consequential energy transition story happened only late last week. Sinopec, the biggest refiner in the world’s second largest oil market, and often a voice for the national government, released its latest long-term energy forecast. 

The bombshell: peak oil demand will arrive in China as early as 2026 and no later than 2030. 

This is the beginning of the end for oil. Melodramatic, perhaps? 

Maybe, but the evidence keeps piling up that the International Energy Agency’s forecast of peak fossil fuels demand by 2030 is accurate and OPEC’s prediction of peak oil demand by 2045 is unlikely (OPEC has China’s demand growing by four million barrels per day over its reporting period). Sinopec’s announcement is just one more data point, albeit a big one, that the energy transition has hit warp speed.

The decline of hydrocarbon consumption is one side of the energy transition coin. China utterly dominates the other side, which is manufacturing and adoption of the five key clean energy technologies: solar, wind, batteries, EVs, heat pumps. The rest of the world, including the Americans and Europeans, is scrambling to not be left behind in China’s dust. 

This matters a great deal for Canada

Remember former Prime Minister Stephen Harper’s 2006 comment that Canada is an “emerging energy superpower”? He was wrong. Canada is an energy superpower, the world’s fourth biggest oil producer and fifth largest natural gas producer. Oil and gas lead national exports at $120 billion per year, twice as much as the auto sector. Hydrocarbon extraction attracts tens of billions of capital investment and employs 177,000 workers across the country. Finally, last year alone the industry paid over $20 billion in royalties to the Alberta government; other provinces benefit from tax revenue. 

China emerged in 2023 as THE clean energy superpower, the 800-pound gorilla of the international energy system. What China does and when China does it matters a great deal. 

Yet, somehow, Canadian news media missed the story. It didn’t even pick up the Reuters wire copy. My column Saturday was one of the few mentions, generating plenty of social media interest, including the usual razzberries from Alberta oil bros quick to defend the pro-hydrocarbon narrative. One even called me a “Chinese asset,” which made me laugh. 

Smith beloved by CEOs for championing oil and gas

This leads me to another important 2023 energy story: the emergence of Alberta Premier Danielle Smith as principal Canadian promoter of OPEC’s “slow energy transition” narrative. 

I’ve known Smith a long time, interviewing her as far back as 2009 when she worked for the Canadian Federation of Independent Business. Our previous online media business, Beacon News, covered her days as Wildrose Party leader, including the 2012 election that she was expected to win, but ultimately lost because of gaffes (Lake of Fire, anyone?) that today wouldn’t raise an eyebrow. She interviewed me a few times for her talk radio show and I moderated an online discussion about energy issues that included her on the panel. 

Over those 15 years, my opinion of her grasp of energy issues hasn’t changed: a mile wide but only an inch deep. Glib. Picks up the buzzwords, strings them into sound bites, but ultimately lacks depth and context.

But Premier Danielle Smith is a very different animal. Now middle-aged, with nearly a decade of conservative talk radio under her belt, she has perfected the aw shucks delivery of the populist. Facts are silly putty, kneaded into whatever shape is required. Sometimes, like her farcical justifications for the 7-month wind and solar moratorium, she lies like a sidewalk. Smith is a storyteller, dishing up anecdotes and fabulism with just the right amount of plausibility to sway her audience, which prefers a simple, easy to understand fib over a complex, brain-twisting truth.

Modern Alberta politics feel like an episode of her QR770 show, all wild conspiracy theories and faux outrage. 

Every pro wrestling “face” (the good guy) needs a “heel” (the bad guy) and Smith has found her’s in Environment Minister Steven Guilbeault, who she accused of “treachery” that will “never be forgotten” after he announced oil and gas emissions cap regulations at COP28 a few weeks ago. That sort of language is outrageous coming from a premier. Pre-Donald Trump (that is, before 2015), she wouldn’t have dared. Today, it’s standard operating procedure in Alberta’s hothouse political culture.

All of which to say that Danielle Smith has emerged as the undisputed champion of the Canadian oil and gas industry. These days, one rarely hears from the industry’s usual suspects like the Pathways Alliance or the Canadian Association of Petroleum Producers. Why bother when the Premier is holding a presser or opining on Twitter/X?

A key responsibility for the Premier is to protect the energy sector from the forces of change. For Alberta energy CEOs, that force is Prime Minister Justin Trudeau, he of the overly aggressive climate policies. They understand the need to decarbonize, but want to do it on their own schedule, preferably after 2035 when they think cheap new technologies like small modular reactors will make lowering emissions efficient and cheap. Technology, not policy, has been their rallying cry since at least the 2000s. 

This is a fundamental conflict that partly defines Energi Media’s journalism: the wrenching and ever more rapid transformation of the global energy system versus Alberta’s desperate attempt to keep change at bay as long as possible. 

Unethical Oil: Alberta’s shameful secret

Which brings us to one of Energi Media’s most important journalism projects of the last year, the Unethical Oil investigative series. For years, I’ve interviewed experts like Regan Boychuk, Mark Dorin, Professor Martin Olszynski, and lawyer Drew Yewchuk about the unholy mess that is the Alberta Energy Regulator. But only enough to get a peek behind the curtain. Then came the early 2023 spill of 5.3 million litres of industrial wastewater at Imperial Oil’s Kearl oil sands plant, which led to the revelation that the company and the regulator had not disclosed a significant tailings pond leak discovered in the spring of 2022.

The outrage from Indigenous communities, environmental groups, and the few technical experts brave enough to speak up about an industry that punishes whistleblowers, finally convinced me to dive into the rabbit hole that is Alberta oil and gas regulation. I shouldn’t have been shocked by what I found, but I was.

Over the course of almost 100 years, Alberta has amassed $300 billion of unfunded oil and gas environmental liabilities. Oil wells, pipelines, facilities, tailings ponds, oil sands plants and infrastructure – there is no money set aside to reclaim these assets at the end of their productive lives or, far more importantly given the circumstances, if they become stranded because the energy transition makes them uneconomic.

This is a financial and environmental disaster waiting to happen. 

No wonder Alberta’s blue-eyed sheikhs are so hostile to the IEA’s “fast energy transition” narrative. If the energy world changes dramatically after 2030, their companies are in deep, deep trouble. Their nightmare scenario looks something like this: being required to pay for an accelerated clean up of dirty assets by an increasingly panicked provincial government while revenue shrinks (and profits disappear) because oil and gas markets are disrupted by falling demand.

The oil companies need Smith to keep Trudeau and Guilbeault off their backs, to the extent possible, while they drive down production costs in anticipation of dark days ahead. A Liberal defeat and a Canadian Conservative Party (CPC) victory in the 2025 federal election would be ideal for the denizens of the Calgary Petroleum Club. CPC leader Pierre Poilievre is Calgary-raised, cozy with Alberta conservatives (especially those with deep pockets to fund campaigns), and no fan of climate policies that pose a threat to oil and gas.

Smith vs. the world

To sum up, Smith has three jobs: pass oil and gas industry-friendly policies, fight Ottawa tooth and nail on energy and climate policy, and create an industry-friendly political culture outside Alberta by promoting the OPEC-led narrative that hydrocarbons will be with us for many decades to come.

There are three forces that threaten to upset her apple cart: peak oil and gas demand arriving on the IEA’s schedule or even earlier, a new Liberal government in 2025 and progressively more stringent federal climate regulations, and the spectre of Alberta’s $300 billion of oil and gas unfunded liabilities (that the companies have no intention to reclaim unless forced to by regulation, in my opinion).

Alberta stands at a crossroads. 

The epicentre of Canada’s oil and gas sector can take the road that accepts a fast energy transition is inevitable and begin rapidly re-engineering its business model to thrive in a low-carbon, post-combustion world. As I have argued for years, transitioning from using oil and gas as feedstocks for American refineries to using them as feedstocks for domestic advanced materials manufacturing could prolong Alberta hydrocarbon extraction well into the 22nd century.

Or Alberta can choose the other road, the status quo, where change is slight and slow, and oil companies ride declines curves to eventual failure. Unfortunately for Albertans, failure doesn’t arrive when the last barrel is refined. Long before then, disruption will almost certainly cause price volatility, more job losses, and declining (perhaps non-existent) royalty revenue for the provincial government. 

Premier Smith and the oil and gas CEOs have chosen the latter road. Albertans need to remember former premier Peter Lougheed’s great lesson that they, not the oil companies, own the resource. And the resource should primarily work for their benefit, not that of foreign shareholders. 

Alberta requires bold leaders. Instead, it is run by caretakers. The opportunity to change course is fast slipping away. The year before us may be one of the last chances to choose a different road.

Thank you to all those who read our work, watch our video interviews, and listen to our podcasts. The best way to access Energi Media journalism is through the Energi Media app, available for iPhone and Android.

All the best in 2024 from Jo Ann, Troy, and I.

 

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