Category Archives: oilsands

Oilsands not a good candidate for carbon capture

Turns out that carbon-capture is not the panacea for Canada’s oilsands that certain politicians have been saying, according to a briefing note (marked “secret”) obtained by the CBC:

Little of the oilsands’ carbon dioxide can be captured because most emissions aren’t concentrated enough, the notes say. For efficient capture, there must be a high concentration of CO2 coming out of a smoke stack.

“Only a small percentage of emitted CO2 is ‘capturable’ since most emissions aren’t pure enough,” the notes say. “Only limited near-term opportunities exist in the oilsands and they largely relate to upgrader facilities.”

The Canadian and Alberta governments are spending about $2.5 billion on developing carbon capture and storage, and the oilsands generally come up as the first reason for spending the money.

This doesn’t mean that carbon-capture and storage is a useless technological innovation, just that it’s of negligible use in the oilsands, which are extremely energy-intensive. CCS can be of some help in reducing emissions from upgraders — where sandy tar mined from the ground gets turned into flowing oil — but that’s only part of the production process. The upgraders on the drawing board now, which are likely to get built eventually even if they’re on hold till the economy recovers, are planned to meet pretty high standards, which is a mixed blessing. It’s good that they’re efficient and relatively low-pollution, but they’re not going to be low-hanging fruit in the hunt for emissions reductions.

The oilsands are an environmental nightmare. No getting around it.

Dept. of the Bleeding Obvious: Subsidies are not capitalist

Photo credit: “smokestacks,” Flickr/curran.kelleher

I don’t have a Ph.D., so maybe that’s why I have a difficult time following the mental gymnastics needed for Thomas Homer-Dixon and David Keith (Ph.D.s) to spin massive government subsidies for carbon-capture as a free-market measure:

Environmental groups are wrong to argue that we shouldn’t use government funds to support promising technologies before the mess is straightened out. We don’t have the time to wait, because Earth’s climate is changing fast, now. Without carbon prices or regulation, public funding is the only way to ensure that CCS technology gets going quickly. …

CCS will be a big-industry technology: major implementation will require huge outlays of capital and armies of scientists, engineers and construction workers. It will also generate huge profits. So when environmental groups saw that industry representatives dominated the blue-ribbon panel, they assumed that the energy industry was once again positioning itself to line its pockets, and attacked its recommendations. As Dave Martin of Greenpeace Canada put it, “Carbon capture is a public relations smokescreen for the tar sands and coal-fired electricity generation.”

It’s time that Canada’s environmental groups freed themselves of this ideological straitjacket. They need to acknowledge that modern capitalism is the most dynamic, innovative and adaptive economic system human beings have ever invented. It’s true that capitalism has fuelled our climate problem, and that many big businesses have lobbied hard to block serious action, but we’re not going to solve the problem without capitalism’s help.

I don’t want to be snide. These are serious guys, and there’s a lot of truth in much of their Globe essay. There is a lot of unhelpful anti-capitalism built into a lot of environmentalism, advanced by people for whom saving the planet really is a stalking horse for disapproving of other people’s lifestyles on non-environmental principles (“a deep suspicion of big business and big industry that’s a residue of the leftism of the original environmental movement”).

Carbon-capture is almost certainly a necessary immediate response to an immediate crisis, and objecting to it because its not good enough in itself is imprudent. Sure, it’s not enough. And giving four years’ warning, as Environment Minister John Baird did today of his plans to require all oilsands projects to use the technology by 2012, is asking for a rush of dirty plants between now and then.

It’s a fair concern — that carbon-capture will be a stopgap that distracts us enough that we won’t solve the actual underlying problem — but that’s making better the enemy of the good. A world with extensive use of carbon-capture technology is a lot better than a world without it, whatever else is going on.

But spinning government subsidies for the technology as a capitalistic measure is, frankly, bollocks. Subsidies are, in the most generous possible assessment, a necessary evil. They will interfere with the construction of wind and tidal and solar power, unless such projects are subsidized even more to compensate. They will put off pricing of carbon emissions, if only because the federal policy apparatus can only handle so many massive innovations at a time. They will take money that taxpayers would have spent on something else and commit it to helping large corporations that — even if Homer-Dixon and Keith dismiss the significance of this fact — are mostly very profitable.

If you think the subsidies are necessary, by all means say so. But let’s not pretend they’re something they aren’t.

Alberta’s climate-change “plan”

I guess it’s officially a “strategy,” but it comes across as more of a “wish list,” not unlike the federal government’s.

The promise is to cut greenhouse-gas emissions by 14 per cent from 2005 levels by 2050. That’s a relatively mild target, compared to what climate scientists say we need to do, but even so there’s no obvious mechanism to make sure this actually happens. The newly released strategy from the Progressive Conservative government of Premier Ed Stelmach talks a great deal about investing in carbon-sequestration (capturing and burying carbon-dioxide emissions, that is), but doesn’t describe a means of making major emitters adopt the practice.

Here’s the news release and here’s the document itself (PDF), complete with lovely full-colour images of wheat waving in the wind, close-ups of leaves and images of … chopped-down timber, it looks like, on page 22. (Somebody send down to the stock-photo library for a substitute, would you?)

Alberta’s in an exquisitely difficult position, having a roaring economy that’s almost totally dependent on extracting carbon-producing fossil fuels in an energy-intense (and therefore highly carbon-emitting) way. Alternative sources of power are a long way off and won’t easily displace the cheap natural gas that’s used to fire the boilers that separate oil from sand in the oilsands.

Here’s a generous way to look at Alberta’s position, if you want one. The province’s oil reserves are only worth exploiting if prices are high, and prices are high because supplies are getting tighter while demand is expanding. If Alberta’s oil economy is to continue growing, it’ll be because other oil-exporters are running low, which will mean less overall pumping and refining and burning in the world, even if more of the supply comes from Alberta in particular. Therefore, if Alberta makes its oil economy more ecologically friendly and takes over an increasing share of the world’s production, its own emissions can rise while at the same time representing a net global decline.

One likely flaw in this reasoning is that whatever their other problems, conventional oil producers like Saudia Arabia and Nigeria are probably less environmentally damaging than Alberta is, so maybe we’ll keep doing the same amount of damage, globally speaking, to extract less oil. The truth is, oilsands oil is bad news for everybody except Albertans.Deep cuts to emissions would certainly mean deep economic damage, and Alberta voters wouldn’t likely stand for it. So there’s only so much an Alberta government can realistically do and expect to not get crushed at the polls.

Nevertheless, I’d think it would be more than this.

While Alberta’s latest greenhouse-gas plan talks about an emissions cut of 14 per cent below 2005 levels, most of its graphs and whatnot use a “business-as-usual” baseline for 2050 emissions to make the province’s projected cuts look more impressive. Taking them at their word, Stelmach’s government promises to cut 24 megatonnes of emissions through conservation in regular old power use, 37 megatonnes through greener energy sources, and 139 megatonnes through carbon sequestration by major emitters.

What’s missing, as I say, is the mechanism. How are major emitters to be made to capture all that carbon? The strategy is silent. No dollar figure for government spending is included in the plan, no discussion of carbon taxes or a cap-and-trade scheme. Alberta already charges major emitters $15 per tonne of carbon emissions beyond a  high ceiling, but there’s no way that’s going to produce the kind of changes the government purports to be planning. The last page of the strategy promises implementation plans in the coming months, although it also declares that “Most importantly, this plan is about actions not words.”

Just, uh, stay tuned for the actions.

Latest column, on the NRDC campaign against the tarsands

(Photo credit: “Air Canada Airbus A319-114 C-GBHN“, Flickr/Cubbie_n_Vegas)


My latest column for the Ottawa Citizen is here. It’s on this Natural Resources Defense Council campaign to get North American airlines to swear off fuel that comes from Alberta’s tarsands and from liquefied coal.

In Canada, we still have generous federal tax treatment for new oilsands projects, which amounts to a subsidy. Alberta’s Premier Ed Stelmach has decided to increase his province’s share of the profits from projects that extract publicly owned oil, but his province is still an impressively easy place to make oil money, for companies with the capital to put up to get started. Alberta is the only province to put a real price on greenhouse-gas emissions, although the price is low — $15 per tonne of carbon dioxide beyond a set limit, far below the $50 or so for every tonne that’s at the low end of expert estimates of what we should have to rein in climate change.

In the United States, politicians from coal-mining states are delirious over the prospect of a massive new market for their dusty black gold, and they’re pushing subsidy programs to develop coal-liquefication technology like there’s no tomorrow.

So we do make environmental degradation more appealing than it needs to be, and the Natural Resources Defense Council is doing its job by pointing that out. Asking airlines to join in the fight, however, is a bit like asking golf-course operators to fight for more restrictions on water use, or for high-rise dwellers to call for an elevator tax. It’s not just difficult, it’s diametrically opposed to their interests. At heart, flying planes is a fuel-burning business and jet fuel is the airlines’ lifeblood.

A point I already wish I’d made more strongly is that airlines already have every economic incentive in the world to make their planes as efficient as possible, even if there are limits to how far that can go. It’s also spawned me an interesting e-mail debate on whether flying or driving is a more efficient way to cover a moderate distance.

Ed Stelmach de Bolívar

The Globe and Mail‘s David Ebner has an occasionally wordy but comprehensive survey of Alberta’s oil patch, which is holding its breath waiting for an announcement from the provincial government on whether and how it’ll change the royalty scheme whereby oil and gas companies pay the government to exploit an officially public resource.

In a nutshell, this is how it works: Alberta’s oil and gas, like that of other Canadian provinces, are owned by the provincial government. Oil companies lease the rights to explore and exploit those resources, and pay the government a percentage on what they find, extract and sell. And Premier Ed Stelmach is to make up his mind by the end of the month on how much that percentage will increase.

Stelmach, responding to a sense among Albertans that they were being taken for a ride by low royalty rates set when the industry was practically dormant, asked a review panel to make a recommendation on new rates. Simplistically put, the panel recommended jacking up the royalties on mature projects from 20 per cent of profits to 33 per cent, on the grounds that, indeed, Albertans weren’t getting a “fair share” of the profits from their publicly owned natural resources.

Aaaiiiiiiieeee!, the oil industry responded, including in an instant-classic analyst’s note from Deutsche Bank comparing Alberta to Venezuela (PDF). Behind that overblown rhetoric from the kind of Wall Street analyst who gives Wall Street analysts their superior reputation for probity and manners, there’s a fair point: Alberta’s oil reserves are exceptionally expensive to extract. Many projects are borderline even with oil costing $80 a barrel, and if Alberta wants to increase its royalty rates, maybe riskier but higher-profit projects in places like Saudi Arabia and Angola make more corporate sense.

Partway into Ebner’s story is this reminder that for all the talk of the economic riches and environmental perils of the oil sands, work on “unconventional” reserves in Alberta is really just getting started:

The critical and most controversial issue – natural gas – has underpinned Alberta’s economic success and its overflowing treasury. The so-called Calgary oil patch is in fact a gas capital, with a shift only now beginning to swing to the oil sands. Canadian Natural Resources Ltd., the country’s second-largest producer, is the embodiment of this evolution, beginning life in the deep recession of the late 1980s as a scrappy gas producer and growing into a giant gas producer – and now making a big, long-term bet on the oil sands.

But the oil sands remains a tomorrow story, a key source of the province’s long-term revenues.

And the key to that key source of long-term revenue is just how much Alberta wants to extract from the oil companies. This is not a simple question, as Ebner explains.

It’s Stelmach’s job to try to set a royalty rate that maximizes the oilsands’ value to his taxpayers and voters. His trouble is that it’s an impossible task, requiring him not only to set one provincewide rate where rates for individual projects would be more appropriate, and to “balance,” somehow, the reasonable arguments made in Deutsche Bank’s note with a vague “feeling” among Stelmach’s voters that they’re being hard-done-by. Not only that, but we’re talking not only about maximizing the price the province gets from the oil, but maximizing the oil’s long-term value — which means factoring in the other economic activity the oilsands support.

The Star‘s David Olive points out that in the long term, the vastness of Alberta’s reserves likely matters more than the cost of extracting them:

Global oil firms are desperate for reserves, and Alberta’s oil sands represent more than 50 per cent of the world’s reserves available for non-state investment. Threats to move to other jurisdictions are almost laughable. Where will the producers go in search of a similarly giant reserve base that also boasts a politically stable regime – Russia, Kazakhstan, Iraq, Venezuela, Sudan?

In other words, whatever the royalty rate Alberta sets, there will eventually come a world oil price where digging all that oily muck is worth the effort. Indeed, the longer Alberta makes the oil companies wait, the more the oil will be worth. But all the jobs in pipefitting and trucking and fabrication and engineering are worth an awful lot, too, in 2007 prosperity that could set the stage for an oil-independent economy by, say, 2050.

You’d almost think that this problem of trying to maximize the oilsands long-term value would be one better set by, well, a market, rather than this system, reminiscent of the Klondike era, of staking claims and paying arbitrary percentages and having provincewide policy decisions made by one guy.

What’s a particular project worth to an oil company? Why not make them put their cards on the table and bid? Let the companies do all the exploring they like (and no leasing exclusive exploration rights that are little more than lottery tickets with multibillion-dollar payouts) but before they can put a steamshovel in the ground, they’d have to tell the government what they’re willing to pay for the oil they get out. A flat amount, a percentage, whatever the company thought would be fair. Let anyone else bid, too, and take the best, maybe with some automatic payout to the finder if that company doesn’t win the bidding.

Whatever form it took, it’d almost inevitably be superior than leaving Alberta’s whole economic future to one farmer from just northeast of Edmonton, no matter how clever a fellow Stelmach is.

Alberta needs nukes

The closest thing Alberta’s likely to see to a mushroom cloud
is an unusual cloud formation like this one.
Photo credit: Flickr/Nicholas_T

Alberta’s being all coy about whether it’ll give permission for a nuclear-power plant to be built to power a major chunk of the energy-sucking oilsands operations. According to the Financial Post, a private consortium wants to build one and has a major customer (pretty definitely a global oil company) ready to sign up for most of the electricity it generates. But the provincial government is squeamish about whether to allow it.

Alberta Premier Ed Stelmach says the jury is still out on whether a proposed $6.2-billion nuclear plant will be built in oil-rich northwestern Alberta.

“We first have to decide whether we’re open to nuclear energy,” he said Tuesday in Edmonton.

“You don’t build nuclear reactors over an evening. These are important decisions . . . beyond one person, and we’ll structure soon the kind of public discussion that will occur in the province.”

Alberta uses about 9,000 megawatts of power now, but getting usable oil out of the oilsands is an energy-intensive activity, and forecasts are that demand will double in the next decade and a bit. The biggest energy demand is to produce steam, which separates sticky tar from the sand it’s mixed with in the ground.

I can understand having serious reservations about the technology — Ontario’s nuclear “fleet,” as it’s grandly called, has been an utter nightmare of billion-dollar repairs and slipped schedules as the reactors enter middle age — but that’s a management decision, not one of deep principle.

What baffles me, while principle is on the table, is that the Alberta government would have no problem with powering the oil-sands operations by burning natural gas and spewing carbon dioxide into the air — would indeed warn other provinces not even to whisper about the possibility that might be bad — but will go all twittery about a technology that’s been used successfully the world over, with the only significant problem (albeit a doozy) having been a consequence of gross mismanagement in one of the most corrupt and half-assed industrial regimes ever to befoul the earth when it was embarking on its final collapse.

Certainly, more, lots more, needs to be done to reduce the oilsands’ extractors’ voracious appetite for energy. But if we take as a given in the discussion that more power is needed, nuclear plants seem the only remotely sensible option.

Canada will miss greenhouse-gas targets by a mile: environmental economist Mark Jaccard

Mark JaccardThe Canadian government’s policies on greenhouse gases will more or less freeze the country’s emissions at 2007 levels over time, according to experts at Simon Fraser University in British Columbia (PDF). Not bad, except that the governing Conservatives say their goal is to get emissions down 20 per cent by 2020 and 65 per cent by 2050.

In a paper written for the C.D. Howe Institute, a centre-right think tank, SFU professor Mark Jaccard — about as serious an environmental economist as Canada has — and grad student Nic Rivers run the numbers. Even using some assumptions that tend to nudge the numbers in the Conservatives’ favour, they find the government’s policies don’t come anywhere close to its stated goals, let alone to the dramatic cuts in emissions that the Intergovernmental Panel on Climate Change’s constellations of scientists say are needed to stave off the worst effects of climate change.

Something really significant was missing from the Conservatives’ big climate-change document (PDF) when it was released April 26: exactly what the Tories’ models said their proposed emissions-cutting measures would do. There were policies, and there were targets that Environment Minister John Baird swore up and down Canada would meet, and there was no material bridging the gap between them.

The policies came in for a lot of criticism from environmentalists, including me. The major problem is that while they set limits on how much greenhouse gas heavy industry could emit, the limits are intensity-based, not absolute. As long as you’re growing, in other words, you can keep emitting more, as long as you’re getting more efficient in each unit of production (one barrel of oil or one pair of shoes or a truckload of cement or whatever). That dramatically reduces the pressure to make significant changes, particularly since the fastest-growing source of greenhouse gases in Canada are the western oilsands, which are growing at a phenomenal rate and are expected to triple or quadruple production in the next 10 years or so.

Well, Jaccard and Rivers are figuring out what that weakness really means.

For context, remember that Canada’s current emissions today are about 750 megatonnes of carbon dioxide and its equivalents.

Current policies are likely  to reduce emissions substantially compared to their business-as-usual evolution. By 2020, emissions would  be 120 megatonnes below projected levels and by 2050 the reduction would be almost 400 megatonnes below the business-as-usual projection. However, the results also indicate that overall emissions in Canada are unlikely to fall below current levels. The government is likely to miss its 2020 emissions target by  almost 200 megatonnes. Moreover, because of this gap in 2020 between target and reality, it is unlikely that  a future government would be able to achieve the ambitious 2050 target.

So not only is the Conservatives’ plan not enough, it’ll be bad enough to tie the hands of future governments trying to clean up the mess they leave. Ironically, this is exactly the explanation the Tories use for why their targets, the ones they’re going to miss according to Jaccard and Rivers, are comparatively mild.

The assumptions the writers make that benefit the Tories are twofold. First, they assume that the Conservatives — if they stayed in power — would extend the policies that they’ve plotted out to 2020 for 30 years after that, ordering an annual cut in industrial emissions intensity of two per cent a year until 2050. Second, they assume the Conservatives will adopt California’s tough emissions standards for cars, which they’ve made vague noises about but not actually done. Between them, these assumptions account for about 330 megatonnes of the 388-megatonne emissions cut that Jaccard and Rivers forecast by 2050, compared to the business-as-usual projections.

(By the way, whenever you’re assessing anything Environment Minister John Baird says about emissions cuts, make sure he’s being clear about what his baseline is. A 400-megatonne cut in emissions from today’s levels would be very significant; a 400-megatonne cut from the levels projected for 2050 if we did nothing at all is good but far from enough.)

The rest of the menu of Tory regulations and subsidies and whatnot, the long list they like to trot out when people say they’re doing nothing, the EcoENERGY and EcoTRANSPORT and EcoAGRICULTURE and EcoTRUST plans — all together, a cut of 30 megatonnes by 2050. Effectively squat, Jaccard and Rivers say.

Now, projecting anything 43 years out is a pretty foolish thing to do. Weird things happen. Technological breakthroughs burst upon the scene, a Krakatoa erupts and obscures the sun, the nature of the economy shifts, aliens descend from space. God only knows what will throw your forecasts off.

The point here, though, is that Jaccard and Rivers are using the same assumptions the government is, and they’re saying the government’s full of it.

(Photo of Mark Jaccard cribbed from a Simon Fraser University PR page.)