Pipelines must be paid for by oil companies

As much of the northern hemisphere bakes in searing heat and a monster El Niño picks up steam in the tropical Pacific, both the signature of human-caused climate change, Canada’s political leaders declare they want more.

Prime Minister Carney has abandoned Canada’s climate ambitions. Those Paris Accord targets to reduce carbon emissions? Yeah, we didn’t really mean it. He’s announced a new taxpayer-funded oil pipeline to the west coast. That memorandum of understanding with Alberta from just last November stating that any new pipeline would have to be privately financed? Yeah, we didn’t really mean it. And linking any tar sands expansion to carbon capture? Yeah, we didn’t really mean it.

You might think we would have learned from our last taxpayer-funded pipeline, the TMX. Originally estimated to cost taxpayers just $5 billion, that price tag soared to over $34 billion. The new pipeline is estimated to cost $35-43 billion. A real cost of $80 to 100 billion seems more likely.

Our energy minister, former Goldman Sachs banker Tim Hodgson, assures us it will be a good deal for taxpayers. He can’t give us an exact cost and he can’t assure us of any private funding, just expressions of interest. But trust us, he says, we can’t possibly lose.

Why then, won’t private pipeline companies step up? Because of the insane financial risk.

It’s based on wildly optimistic projections of growing oil demand through mid-century. Even the International Energy Agency forecast of oil demand just holding steady until 2050 assumes no further climate action. What that really means is even more rapid global heating creating an unlivable planet. That seems unlikely.

OPEC, of course, projects rising demand (in public) but in private they’re getting ready to dump their oil onto the market as fast as possible before oil demand quickly dries up.

The world faces an oil glut as soon as next year and, with that, rapidly falling prices. Alberta oil won’t be competitive on overseas markets for reasons of transport economics, higher processing costs for heavy oil, and demand destruction from the shift to renewables in China, South Korea and elsewhere.

With falling Chinese demand, Carney and Hodgson wax poetic about India’s big oil market. But give your head a shake.

First, there is the cost of long-distance transport by tankers (with their obscene carbon emissions), adding roughly US$3 to US$4 to each barrel. Then there are the pipeline tolls needed to pay the capital costs of the TMX pipeline ($11 per barrel) and any new TMX pipeline (much more than $11 per barrel). After that, take a look at a map.

Canada is on the opposite side of the planet from India. But India is a short trip across the Arabian Sea (meaning low transport costs) from Saudi Arabia, Kuwait, Oman, Iran and the U.A.E. Might they have oil India could use? India also sits next to Russia. They have oil, too.

The other potential southeast Asian markets are also closer to the Gulf than to Canada. Expect OPEC to undercut our prices if Canada tries to muscle in on their markets.

Tom Gunton, director of the resource and environmental planning program at Simon Fraser University argued in a recent Globe and Mail piece that this is a pipeline no one needs: he noted that expansion of the existing pipelines can easily meet any needed future export capacity. A new pipeline, especially one with almost certain cost overruns, won’t pay for itself.

The prime minister and Albert Premier Danielle Smith want Canadians, not industry, to pay for soon-to-be stranded assets.

Canadians should ask the question: cui bono (who benefits)?

Big Oil doesn’t want you to know that Canadians are only minority owners in the tar sands. Foreign companies, mostly American, own nearly three-quarters of the Big Four oil companies in the tar sands: Cenovus, Canadian Natural Resources, Suncor and Imperial Oil (a.k.a. Exxon). Canadians? Just 27 per cent. When profits from the tar sands soar, they go mostly to American shareholders.

And let’s not forget the ticking time bomb from the cleanup of the enormous mess the oil and gas industry leaves behind — abandoned wells, mines, pipelines, and tailings ponds. The Alberta Energy Regulator estimated the cost of cleanup at over a quarter-trillion dollars. Taxpayers will be on the hook for that too.

So why should Canadian taxpayers continue to subsidize an obscenely profitable industry that generates those profits by making our planet less and less livable?

Why indeed.

Scott Forbes is an ecologist at the University of Winnipeg.