Would pipelines even solve any of Alberta’s problems?

Image description: Alberta Premier Rachel Notley speaks at a podium, with an Alberta flag and a picture of mountains and a lake in the background. Notley recently advocated for the use of pipeline revenues to fund Canada's transition away from fossil fuels. (Image credit: Premier of Alberta/Flickr)

Image description: Alberta Premier Rachel Notley speaks at a podium, with an Alberta flag and a picture of mountains and a lake in the background. Notley recently advocated for the use of pipeline revenues to fund Canada’s transition away from fossil fuels. (Image credit: Premier of Alberta/Flickr)

It’s early days yet, but already it looks as though the great debate over pipelines will be one of the defining issues of Prime Minister Justin Trudeau’s time in office.

The pipeline issue is hot right now. Opposition to pipelines from the pro-Leap Manifesto faction of the NDP played a significant role in unseating leader Thomas Mulcair earlier this month and may yet lead to a splitting of the party. Enbridge’s Northern Gateway, long presumed dead, is poised for a potential last-minute revival thanks to the campaign-promise-breaking support and behind-the-scenes machinations of several prominent politicians. And pipeline fever won’t be going anywhere soon; with the NEB due to deliver its recommendations on Kinder Morgan’s TransMountain in just under a month, the issue will be widely discussed and debated this summer. Meanwhile, the NEB’s final report on TransCanada’s Energy East isn’t expected until March 2018, with a cabinet decision due three months later, guaranteeing that pipeline politics will feature as prominently in the run-up to the next election as they did in the last one.

This is also an issue on which our Boy Wonder PM just can’t catch a break. He finds himself attacked on all sides for his opaquely unsatisfying position. Pipeline proponents like Saskatchewan Premier Brad Wall, Alberta Premier Rachel Notley, and Conservative Party interim leader Rona Ambrose have slammed Trudeau for being insufficiently enthusiastic about pushing the issue, despite the seemingly unending litany of statements from senior cabinet ministers that this government is “committed” to “getting Canada’s resources to market” – indeed, that this is “one of the fundamental responsibilities of any Canadian Prime Minister”. Meanwhile, although the government has taken steps to make the pipeline review process at least appear more impartial and thorough, activists and environmentalists have slammed the piecemeal reforms as woefully insufficient, with some charging that they amount to little more than a fig leaf designed to provide cover for pipeline approval.

Pipelines occupy the precise intersection between economic issues and environmental concerns. The issues is therefore a kind of proxy war, a struggle over what kind of future we want to work towards. Concerns about catastrophic climate change clash with worries for the plight of the suddenly impoverished workforce of Alberta and Saskatchewan, who are facing a once-in-a-century economic calamity.

And this really does need to be stressed – things are BAD out west. 

Housing prices are collapsing:

Debt loads are through the roof, and defaults are soaring:

Unemployment is at a twenty-year high and rising:

All of the indicators point to economic calamity. Usage of food banks is soaring across the province. Analysts are predicting terrible first-quarter numbers from oilpatch companies, with potentially worse on the horizon. Suicide rates have increased by 30%. Some economists are now saying that “recession” doesn’t adequately capture what’s happening in Alberta, and suggest that “depression” may be a better term.

A lot of suggestions have been proffered for this still-growing crisis – expanded employment insurance benefits for laid-off Albertans, heavy investments in job-creating renewable energy, even the introduction of a (*shudder*) provincial sales tax – but by far the most commonly cited solution is the construction of one or more pipelines to get Alberta’s tar sands bitumen to national and international markets at a lower discount.

Alberta’s premier in particular has pushed a program of pipeline construction as a solution to most of the problems currently ailing Canada, including climate change. To hear Rachel Notley telling it, building Energy East and TransMountain will promote national unity, employ Albertans, enrich federal coffers, and help fund the transition away from fossil fuels:

“All the things we need to do to get to a de-carbonized economy…that doesn’t happen for free,” Notley told Terry Milewski in an interview on CBC Radio’s The House.

“We have a revenue source that will help fund that, but we’re giving it away at a discount because we’re acting like a bunch of villages as opposed to a nation.”

Notley said getting Alberta’s oil to tidewater is critical for both economic and environmental reasons.

“Our product is being discounted by almost a third, because we’re not able to function as an effective economic unit as a nation to get our product to points that allow us to diversify our markets,” she said.

“That’s something that hurts not only Albertans, but workers across the country, investors across the country, and quite frankly, it hurts environmentalists.”

Notley added that the more product Alberta can move through pipelines, the “more we can use the revenue from that to fund a transition” to a lower carbon and ultimately de-carbonized economy.

There can be no doubt that the collapse in oil prices and the resultant hit on Alberta’s oil and gas sector has severely curtailed the abilities of Notley’s government to act on, well, anything. Provincial revenues from the oil industry plunged 90% this year, and in a province that pretty much refuses to tax anybody else, that’s a big deal. It’s understandable, therefore, that Notley’s government is desperate to do something – anything! – to boost oil revenues.

But, setting aside all other objections one might have to pipeline construction (including any logical objections to using oil in order to use less oil), would Energy East or TransMountain really have the transformative economic impact that their advocates claim they would?

There are many reasons to doubt that they would. For one thing, the timeline is all wrong. Alberta’s struggling workers are in need of relief now; the earliest a tar-sands-to-tidewater pipeline could become fully operational is December 2019, which assumes a smooth approval process for the controversial TransMountain (by contrast, Northern Gateway’s approval in 2014 was contingent on Enbridge meeting 209 conditions, a goal towards which the company is apparently still working) and no major delays in construction due to blockades and protests along the highly contested route. Realistically, it could be five years or more before a major pipeline could become fully operational. Which is to say that a pipeline – or a dozen pipelines – wouldn’t provide the shot in the arm that Alberta needs right now.

Furthermore, it’s doubtful that pipelines are even necessary to allow for expanded tar sands extraction. The National Energy Board itself projects that Alberta’s crude oil production could continue growing for the next quarter-century without the construction of a single additional pipeline, almost regardless of what the global oil price is going forward. The degree of that expansion obviously depends on the degree to which global oil prices recover from their current lows, one of two major factors which could determine the success or failure of any pipeline which are entirely out of the hands of any level of government in Canada.

The other such factor is the degree to which the world transitions away from the use of fossil fuels in the decades to come. And while the price of oil in five years is anybody’s guess, it seems pretty clear at this point that global demand for oil ought to be on a steady decline going forward. The Wall Street Journal is projecting a 33% drop in the growth of demand for oil this year, the harbinger of a trend that’s underscored by the growing global movement for divestment from fossil fuels. Global renewable energy capacity grew at a record pace in 2015. Technological advances are bringing the cost of electric cars down rapidly, and a proof-of-concept trans-Pacific flight in a solar plane last week was widely celebrated as an imaginative gesture towards a less emissive future.

Meanwhile, as the pace of climate-related disasters increases in the coming years, pressure is sure to increase on governments, businesses, and individuals to rapidly transition away from the use of fossil fuels. This year is projected to be the first in which we could cross the threshold of 1.5°C in warming, long highlighted by scientists as a critical “tipping point” level of warming, thanks in part to the (climate-change-fuelled) Super El Niño which is driving historic droughts in sub-Saharan Africa. The idea the tar sands consist mostly of unburnable “stranded assets”, long derided as a crackpot activist theory, is now being taken seriously by bankers and oil companies (PDF), and even by the Bank of England’s central banker, Mark Carney.

In short, pipelines will not be able to offer Albertans the short-term economic relief they desperately need right now, and are increasingly unlikely to boost their revenues in a more oil-averse future world. That is to say, setting aside all of the arguments that pipeline resisters and environmental advocates make about First Nations sovereignty, about the risk of spills, about the dishonesty of excluding downstream emissions from the calculations of environmental impact, and even about the very existence of climate change itself, pipeline proponents are still left without a solid case in their favour. Pipelines won’t be able to move more tar sands to international markets soon enough to make the needed impact on Alberta’s struggling economy, and if constructed, they would be at risk of becoming failed investments if/when the international market for crude bitumen dries up.

This is not to say that Alberta’s workers must therefore be left to suffer. But rather than investing in last century’s infrastructure, they should be helped in a way that will make their economy more stable going forward. Saying “no” to pipelines does not mean saying “no” to good, quality, well-paying jobs.

Alberta must be helped – that can’t be contested. But pipelines unequivocally won’t cure what ails them.

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