Canada’s National Energy Board (NEB) may have sealed its reputation for magical thinking this week, telling a Senate committee that oil-by-rail shipments will grow tenfold over the next 25 years unless new pipelines are built to bring western Canadian crude to market.
Despite an oil price crash now entering its third year and expected to continue into 2019, the NEB still believes “the country’s oil production as a whole is set to grow to 6.1 million barrels a day by 2040,” the Globe and Mail reports, “from current production levels of about 3.8 million barrels a day.” And “at least 1.2 million barrels of that daily 2040 production will need to travel by rail—more than 10 times what was transported by rail per day in the first three months of this year,” according to the Board’s “constrained case” scenario.
- The climate news you need. Subscribe now to our engaging new weekly digest.
- You’ll receive exclusive, never-before-seen-content, distilled and delivered to your inbox every weekend.
- The Weekender: Succinct, solutions-focused, and designed with the discerning reader in mind.
The Board made its projection in the week when Oil Change International calculated severe limits on the “atmospheric space” for future carbon emissions and the Paris Agreement passed a crucial milestone, exceeding the minimum 55 countries that had to ratify the deal to bring it into force. Oil Change is urging governments to freeze development of new fossil extraction or transportation infrastructure that would become stranded assets in a low-carbon future.
NEB Chief Economist Shelley Milutinovic warned the Senate Committee on Transport and Communications that “rail is more costly. And so from a producer perspective, the netbacks are lower.” But Dale Marshall of Environmental Defence countered that “you have to have pretty significant increases in production beyond 2020 for there to be [pipeline] constraints,” the Globe reports.
Ex-fossil executive Ross Belot added to the discussion in an iPolitics opinion piece earlier this week, citing more than a half-dozen arguments the industry puts forward for new pipeline development. “Some of these arguments…make sense politically. Not one of them is justifiable on its own economic merits,” he writes. Ultimately, “the evidence—data, logic, the rules of economics and basic math—doesn’t support new pipeline projects.”
That view was reinforced earlier this month when Alberta Chief Energy Economist Matthew Foss addressed the World Heavy Oil Congress in Calgary. While he described the province’s tar sands/oil sands resource as “exciting”, Foss said a major shift will be needed to make that resource competitive in global markets.
“Unfortunately, Alberta stacks up kind of middle of the road. We’ve got great resource potential and opportunities but we remain a jurisdiction that is reasonably high cost [and] suffers from all of the inflation pressures that we experience,” he said. “The combination of that and being a far distance from market leaves us challenged to compete, and perhaps not the first destination for the incremental dollar of investment.”
Which, Belot argues, that “the big question here is not whether the industry needs new pipeline capacity. It’s whether the Trudeau government can justify building it in the absence of any economic justification. Hand-waving won’t be enough. Justin Trudeau came to power promising that Canadian government policy would be based on facts from here on out. It seems a little early for him to be abandoning that principle.
