It's way too early to start thinking the tar sands is in permanent decline.
In late October, Shell Canada scuttled an 80,000 barrel/day tar sands project in Alberta's Peace River region. Some conservative activists, most notably Ezra Levant and his cubs, blamed the decision on the release of the Alberta NDP government's budget.
That was indisputably unaccurate.
"The biggest impediment right now to growth in oil production in the oilsands, or anywhere else for that matter, is just the price," says Allan Fogwill, president and CEO of the Canadian Energy Research Institute (CERI). Shell even sent the NDP a letter directly countering Levant's claim.
But anti-pipeline organizations also hopped on the bandwagon. However, this one was heading in the ideologically opposite direction. Greenpeace, for instance, trumpeted out the news with Naomi Klein-like elation: "People power beat Big Oil again this week." Which is obviously not to equate environmental groups with Levant's delusionally far-right agitprop blog.
Yet some experts warn that trying to connect the dots between anti-pipeline activism and slowed growth in the tar sands—which we've also witnessed in the aftermath of TransCanada's denied request to the US for a delay on its Keystone XL project—is borderline erroneous. For while greenhouse gas (GHG) emissions are unquestionably a clear and present danger, it's considerably less obvious that anti-pipeline activism is actually impacting the situation.
But let's backtrack a little bit.
A single day before news about the Shell project broke, the Washington DC-based organization Oil Change International published a 40-page report (grandly titled "Lockdown: The End of Growth in the Tar Sands") that argued protests against projects like the Keystone XL and Enbridge's Northern Gateway had "successfully stopped and/or delayed tar sands pipeline infrastructure." It was quite the timing.
The pantheon of environmental NGOs—350.com, Sierra Club, Environment Defence, the Natural Resources Defense Council—collaborated on the report, granting it even more clout.
Which all makes sense: Canada's latest GHG emissions projections, published long before the price crash, predicted that tar sands growth would come close to nullifying all emissions reductions achieved in other sectors by 2020. Oil Change International calculated that almost 35 billion tons of carbon dioxide, which seems like quite a fucking lot, would be left in the ground if the four major Canadian pipeline projects—Keystone, Northern Gateway, Energy East, and the twinning of Kinder Morgan's Trans Mountain—were scrapped.
The North American pipeline network is, on average, 89 percent full and future tar sands expansion plans (from 2.29 million barrels/day in 2015 to 3.95 million barrel/day in 2030) may run up against the problem of a full pipeline system as soon as 2017, according to "Lockdown."
"The oil price is having a major impact on the profitability of these expansion projects," says Adam Scott, who serves as the climate and energy program manager at the Environmental Defence and helped review the report. "But the lack of export infrastructure is the thing that tips it over the edge. In many cases, it takes many projects from an expected 12 percent [return on investment, or ROI] to a seven percent ROI, and that's enough for them to walk away from a project entirely."
Others aren't quite as convinced.
Take Mark Jaccard, professor of environmental economics in the School of Resource and Environmental Management at Simon Fraser University, someone who's by no means a booster for new pipelines: "To go and expand—to double [the pipeline system], to triple that, to quadruple that—makes no sense on a planet that's trying to reduce emissions globally," he said.
Jaccard agrees that public opposition has slowed pipeline expansion, but he's very wary of assigning too much responsibility to activists in the absence of a "semi-controlled experiment," which is a dorky way of describing a situation in which oil prices would crash without public opposition and vice versa.
"People should be careful of sounding like George Bush: 'Mission Accomplished,'" he cautions. "If a revolution breaks out tomorrow in Saudi Arabia and knocks ten million barrels/day out of production, then all bets are off."
To be sure, Shell did cite a "lack of infrastructure to move Canadian crude oil to global commodity markets" as a factor in its decision to cancel its Carmon Creek project. But as any long-time Alberta resident can tell you, the price of oil's extremely volatile and impacted by a many variables.
On one hand, Scott says the diluted bitumen, referred to as "dilbit" in the industry, has to be sold for a significant discount due to bottlenecks in the pipeline system. Conversely, Jennifer Winter—associate director of energy and environmental policy at the University of Calgary's School of Public Policy—suggests a factor that has far more of an impact on projects than pipeline woes is cost overrun: projects constructed in a high price-per-barrel context will often outpace available labour, costing companies far more to hire out-of-province workers to build and operate the project.
From Winter's perspective, the problem isn't so much pipeline capacity as it is that pipelines are "essentially flowing in the wrong direction." The United States has experienced an incredible boom in shale oil production over the last few years, resulting in a domestic supply glut due to refineries not being able to handle the quantity.
"Some of the pipelines need to be reversed, and that's happening slowly over time," she says. "But there's a lot of stranded light crude oil in the US as well and that has a further dampening impact on prices for Canadian oil."
Fogwill says transporting crude by rail currently fills much of that gap: the CERI has calculated that using such a method only costs about 10 percent more than by pipeline—partly because costly diluent isn't required with rail—and that "one could argue that there's enough market access right now to manage any new production increase" (Scott disputes this assertion, arguing "the shipping of oil by rail at these prices is not at all economical").
New pipelines would be preferred by energy companies, of course. But Fogwill says companies are taking the opportunity to fine-tune future plans, something explicitly mentioned by Shell in its press release about the cancellation—"the project would be re-phased to take advantage of the market downturn to optimise design and retender certain contracts"—but oddly ignored in most articles. Which might be the crux of the problem.
The regulatory process that governs pipeline approvals is fucking boring. Each round requires years of consultations. Winter says the information used by the National Energy Board is submitted by proponents, neutral parties and opponents, with the agency's mandate of assessing public interest fulfilled solely via documentation.
As a result, Winter dubs the idea that anti-pipeline activists are changing the game as a "red herring," given that regulators wouldn't exactly be doing their job if they were making decisions based on polling data instead of evidence (the same way that judges and juries are supposed to ignore public pressures and focus on arguments made in a highly controlled context). Fogwill adds that he hasn't seen any instances where regulators have "in any particular way done anything but business-as-usual in Canada" on account of protests.
Which might tie back to the broader concept of narrative. Back in 2013, Winter wrote a blog post for the School of Public Policy titled "Why don't environmentalists protest auto plants?"
It's a pretty fascinating query that still hasn't been resolved for her: "I think the environmental groups have been very successful at narrating a story where 'if we just stop the producers, if we just stop the pipelines, then we're going to save the world, essentially,'" she says. "But what many people fail to realize is that the oilsands are being produced because there's demand: in Canada, in the US, around the world. It's the demand for gasoline and iPhones and computers that is driving our production of oil and natural gas. But it's far easier to blame someone else than look at one's own behaviour."
Jaccard remains sympathetic to the concerns of anti-pipeline activists: he notes that for the entirety of the Stephen Harper epoch, blockading pipelines was really the best environmentalists could do given "you knew he wasn't going to put in any kind of decent policy to reduce our domestic emissions" and that pipelines represent "discrete units that you can rally people around."
But now's potentially the time, he says, for those same activists to push hard for a legitimate Canadian vehicle emissions standard in the same vein as California's, integrating a cross-subsidization of electric cars by mandating higher costs for fuel-intensive vehicles like Ford F-150s.
Jaccard notes there are so many commercial technologies out there that would help reduce gasoline consumption but just require a little more financial incentives to propagate. While campaigning for something like that—or an economy-wide carbon pricing system, or a feed-in tariff for promoting investment in renewables—is bound to be far less exhilarating than slamming the evil oil companies, it could likely do far more for the cause or cutting GHG emissions.
"That's a way of saying to Alberta: 'Look, we're not going to let you expand oilsands production," Jaccard says. "'We're not telling you that you should stop producing from oilsands. We're saying the responsibility for reducing emissions falls with all of us.' It isn't just let's go attack Alberta oil producers."
Endnote: Shortly after this story was published Friday, U.S. President Barack Obama issued a presidential veto of the Keystone XL pipeline, which would allowed the export of an additional capacity of 830,000 barrels/day from the tarsands. The decision could be challenged in court. A Republican president would likely have much more sympathetic views of the pipeline and could invite TransCanada, which initially applied for permits in 2008, to re-apply. "This pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others," Obama said in a press conference at the White House. In May, U.S. domestic oil production reached a 43-year high. The Keystone XL expansion would have contributed 27.4 million metric tons per year if constructed. In 2011, domestic oil and gas production in the U.S. contributed 225 million metric tons of carbon to the atmosphere. Refineries pumped out another 182 million metric tons.
Follow James Wilt on Twitter.