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Alberta’s $200 Billion Oil & Gas Clean-Up Bill Will Be Footed By The Rest Of Canada

Alberta and its primary industry are going to leave Canadians from outside of Alberta with a quarter trillion dollar liability to clean up. And Canada and Canadian citizens will, for decades.

Imagine, if you will, sharing a really nice AirBNB with a group of friends. You all met in and just after university, and now, in your forties, you’re reconnecting for a month in a beautiful part of the world. You’ve all agreed in advance to pay your share of the fees and to doing your bit to keep the place liveable, including setting aside some money for extras and cleanup. There are about a dozen of you, but it’s a big place with a beautiful pool and nice landscaping.

A couple of weeks pass, and it’s pretty clear that there’s a problem. One of the guys did okay on Wall Street in a hedge fund, but the fund he was with is sinking fast. He’s spent the past 20 years snorting and drinking and eating his bonuses, and not growing up. His expensive house is mortgaged. He has expensive leases on his expensive cars. He’s angry a lot of the time, he yells at the rest of you and, privately, you are all wishing you hadn’t invited him along.

But it’s more than that. He’s been channeling the worst rock star excesses of his binge and purge lifestyle and the AirBNB is bearing the brunt of it. His room is trashed. He threw the blinds in the pool. He took an axe to the bed frame and now the mattress is on the floor. He used the wood from it and other furniture to build a bonfire on the patio that smoked the place out, so now it stinks too. He flushed a towel down the toilet and now the plumbing is backed up in the bathrooms. The owners of the AirBNB are talking about damages and increased costs.

The vacation has turned into a full-time discussion about what can be done to manage the man-child’s outbursts and damages. There are meetings and discussions, and hallway chats. There is pleading and voting and some gentle arm-twisting. He has a hanger-on, an enabler who encourages him. The group has already ponied up extra money to pay the owner for the pool table that hedge fund bro pushed off the cliff. The vacation is certainly ruined, and you’re all aware that you’re going to have to chip in to cover more costs. What you’re trying to do is save your friend from himself and prevent additional damages. You all remember the times he was there with a good word, or a little cash, or just up for a fun ski trip. You want him to get through this transition in his life intact.

But he’s refusing to accept that any of this has anything to do with him. He’s decided that you are all ungrateful former friends who just aren’t there for him. He constantly brings up the minor kindnesses he’s shown in the past as if they have a lot to do with him driving a rental jeep through the garage doors, ripping them completely off. He thinks you all should be supporting and enabling his debauchery instead of being adults.

And here’s the worst part. He’s spent the time when he’s not actively destroying the property trying to talk you all into investing in an obvious Ponzi scheme.

Now he’s talking about just leaving at the three-week mark, and taking what remains of his cash with him. While you are all sick and tired of him, you are all also aware that he would be leaving behind a massive cleanup bill and you also want the best for him. He’s still your friend, even as he has poured lighter fluid on the relationship and is flicking lit matches at it.

That’s where we are in Canada right now. The provinces and territories are the long-time group of friends. Canada is the AirBNB, a beautiful country that we have the use of and need to pass on to our descendants in good environmental and fiscal shape. Alberta is the destructive hedge-fund bro who is acting out because the world isn’t giving him a lifetime of limousines, champagne and Ibiza, and he has to grow up and learn to manage his money finally. Alberta is the person who burned through all their cash and doesn’t have enough set aside to cover damages, and now they want to skip town.

We just went through a federal election. Unsurprisingly, a major conflict was between the adult, climate-change focused carbon tax and the oil sands province that hates it. Alberta thinks that anything that isn’t 100% full-throated and uncritical support for its oil and gas industry is a betrayal of the industry and the province. Actual climate action? That’s not going to work for the hedge-fund bro of Canada’s provinces.

Albertans ignored the reality that the Liberals under Trudeau had approved twinning the Trans Mountain pipeline immediately after gaining power in 2015, gave the pipeline significant social license in Canada and globally with the carbon tax and environmental regulation, and then bought it outright for $4.5 billion when it appeared that the owners were realizing that Alberta’s oil was going to be first off the market regardless. Albertans ignored the reality that the Liberals under Trudeau have driven more movement on the pipeline than Alberta boys Harper and Kenney did in more than a decade in Ottawa. Instead, they are believing the disinformation flowing from Kenney and his new propaganda arm, the $30 million energy war room that they’ve rebranded the Canadian Energy Centre, as if it’s there for Canada instead of just Alberta.

Map of Canada showing Alberta covered in pollution registry sites

National Pollutant Release Inventory (NPRI)

But Canada has Alberta’s back in a big and ugly way: cleaning up the mess Alberta has allowed the oil patch to make of it over the past 40 years. Rob Wadsworth, vice president of closure and liability for the Alberta Energy Regulator, is on record that the public record and the private record are very much at odds.

“Cleaning up Alberta’s fossil fuel industry could cost an estimated $260 billion, internal regulatory documents warn.”

A quarter of a trillion dollars. Sure that’s only about $200 billion USD, but still.

That’s not the only report on the on-the-ground reality instead of the in-the-propaganda rags reality.

“A report from the C.D. Howe Institute estimates that there are roughly 450,000 wells in the province — a well for every 1.4 square kilometres in Alberta. It’s estimated that at least a third, 155,000, of those wells are no longer producing, but have not been reclaimed, representing a financial liability for the company that owns them.”

The C.D. Howe Institute isn’t exactly a leftist, PR mill for aging post-modernist Marxists. It’s a conservative institute, empirically oriented, non-partisan and its reports are cited regularly in Canada’s Parliament by Conservative, Liberal and NDP politicians. It’s been instrumental to Canada’s policies on free trade, fiscal resilience and lower corporate tax rates. Dismissing its findings would be like reading Donald Trump’s tweets instead of Brookings Institute reports for factual information.

How much is in Alberta’s industry funded cleanup fund for orphaned wells? $30 million. How much is in Alberta’s industry funded cleanup fund for overall liabilities? $1.6 billion.

What are the liabilities again? $100-$260 billion.

The saved clean up funds are orders of magnitude off of the scale of the problem. That’s part of the reason oil companies intentionally shuffle older wells into abandon-able corporate shells. It’s cheaper still to just never do anything with a played out well and just let it sit there as if it’s productive while paying the minimal annual leasing fees.

It’s not like the Ponzi scheme of increasing oil revenues is going to pay for this. International capital is fleeing the oil sands. Alberta’s product will be first to see the taps turned off as global demand flattens and disappears. It’s too heavy, too high in carbon for extraction and too far from water, with or without a pipeline. That was always the premise, that they would clean it up tomorrow out of oil profits. But tomorrow is never coming, and that’s been clear for years.

So the oil industry isn’t going to have the money to clean this up. All they’ll have the money for is continued lobbying for far too limited cleanup funding so that the problem eventually gets dumped in the Alberta government’s lap to pay for. And successive waves of Alberta politicians will let them, because it’s really hard to get elected if every single oil executive sees you as a threat, aka someone who isn’t going to accept their bullshit.

And then there’s Alberta’s Heritage Fund, similar to Norway’s sovereign wealth fund. Surely the trillion dollars that they’ve socked away will pay for the cleanup, right? Oh, wait, there’s only $18 billion in that fund, a tiny fraction of the cost of the cleanup. The liability is 15 times bigger than the available savings, and growing. And that money was supposed to be for diversification and a post-oil economy, not cleaning up the mess that is left behind. What it went to instead is successive Conservative governments buying elections.

Alberta’s theoretically a rich province. They should be able to just pay for it out of government revenue from taxes and the like, right? Well, no, the Alberta government has been sucking at the teat of oil royalties for decades instead of developing a sensible fiscal policy. They spend more per capita on services than any other province, but revenues are crushed every time the global oil price tanks. They’ve cut oil royalties instead of increasing them. And they continue to treat a refusal to put a sensible sales tax in place as an advantage as opposed to the deeply unwise fiscal policy it is.

Of course, a bunch of Albertans look at the train wreck of Brexit and think to themselves, “Yeah, that’s the ticket!” The Brits are kicking all those foreigners out and bravely going their own way, and so can we in land-locked, surrounded by Canada Alberta! Then we’ll magically have more power to get more pipelines to water built. And we can stop sending any taxes to Ottawa! Ignore the reality that there are 40 First Nations bands with 100 reserves covering 3,500 square kilometers who aren’t particularly interested in tagging along with Alberta. Yeah, after trashing the joint, Albertans want to leave early. The only part the analogy falls apart is that they want to take their trashed room with them, including the people who lived there before them. There are, understandably, minor Constitutional challenges to Wexit too.

Meanwhile, the Premier, like a broke hedge fund bro, is asking Canada to invest billions in the Ponzi scheme that will save his bacon. Yes, Jason Kenney was in Ottawa recently asking the federal government to throw more money at the oil and gas industry.

Alberta and its primary industry are going to leave Canadians from outside of Alberta with a quarter trillion dollar liability to clean up. And Canada and Canadian citizens will, for decades. And, of course, the industry is contributing to the world’s climate change hangover, which will be felt for centuries. No wonder Albertans are mad at Canadians. If you were that fading hedge fund pauper, desperately trying to con your friends into a Ponzi scheme to keep the party going, wouldn’t you hate yourself, be in denial about it and lash out at everyone else?

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Written By

is Board Observer and Strategist for Agora Energy Technologies a CO2-based redox flow startup, a member of the Advisory Board of ELECTRON Aviation an electric aviation startup, Chief Strategist at TFIE Strategy and co-founder of distnc technologies. He spends his time projecting scenarios for decarbonization 40-80 years into the future, and assisting executives, Boards and investors to pick wisely today. Whether it's refueling aviation, grid storage, vehicle-to-grid, or hydrogen demand, his work is based on fundamentals of physics, economics and human nature, and informed by the decarbonization requirements and innovations of multiple domains. His leadership positions in North America, Asia and Latin America enhanced his global point of view. He publishes regularly in multiple outlets on innovation, business, technology and policy. He is available for Board, strategy advisor and speaking engagements.


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