Could Canada Really Phase Out Oil Sands Production?

Never a Dull Moment with the Oil Sands

Oil sands production has been in the news lately.

Justin Trudeau in front of a Canadian flag
Prime Minister Justin Trudeau speaks during a news conference in Peterborough, Ont. Friday January 13, 2017. THE CANADIAN PRESS/Adrian Wyld

Prime Minister Trudeau caused quite a stir in Alberta when he told a January 13 town hall meeting in Peterborough, Ontario, that “We can’t shut down the oil sands tomorrow. We need to phase them out.”

The remark drew criticism from Alberta Premier Rachel Notley, who was quick to post a video message in response to PM Trudeau and reassure her province that the oil sands industry isn’t going anywhere. For his part, the PM later back tracked on his comments and by saying he “misspoke”, but that message doesn’t fly with Interim Conservative Leader Rona Ambrose, who told reporters she believes the remarks are part of the PM’s “anti-energy” ideology.

Rona Ambrose, Denis Lebel talk about oil sands production
Interim Conservative Leader Rona Ambrose, flanked by caucus member Denis Lebel, responds to reporters questions at a news conference on the eve of a national caucus meeting, Wednesday, January 25, 2017 in Quebec City. THE CANADIAN PRESS/Jacques Boissinot
Rona Ambrose says PM Trudeau is 'anti-energy'. Click To Tweet

Oil Sands Production

Canada’s oil sands are the third largest reserves of crude oil in the world and have been used for the commercial production of oil for almost five decades. The oil sands industry has evolved with improving technology and the sector is continuously looking for new ways to exceed regulatory and stakeholder expectations.

The Canadian Association of Petroleum Producers (CAPP) lists oil sands production levels at 2.4MM barrels-per-day (2015 mining and in situ levels). That’s a lot of oil and billions of dollars in industrial infrastructure investment.

So, PM Trudeau’s comments aside, could Canada really phase out oil sands production?

Different Views

The answer to this question interestingly depends on whom you ask. The oil sands are a centuries-old resource that won’t just disappear. The idea of phasing out the oil sands would really mean decommissioning all the infrastructure and halting exports.

You have to look at the economic concerns as well as the Paris climate objectives Canada has agreed to fulfill and new policy put in place to achieve those emissions targets. Some people believe that phasing out oil sands production would be a productive long-term decision for Canada, but others recognize that the oil sands industry’s contribution to the global GHG emissions is negligible.

Any argument for phasing out oil sands production would more about symbolism than real environmental impact. But climate change has now become an important global issue, especially with President Trump’s stance on the environment.

Martin King, the director of institutional research at GMP FirstEnergy, a leader in global energy sector believes that phasing out oil sands production cannot happen in short time. His statement described how oil sands are immensely valuable for Alberta’s economy as well as the whole country: “There’s a lot of Canadian technology and a lot of steel,” King said. “It’s a huge revenue and economic generator.”

Martin King also described how phasing out oil sands production would damage Canada’s reputation as one of the best regions for investment.

A Lot of Money in Northern Alberta

During the past two decades, almost $200 billion was spent in Northern Alberta. With the majority of the oil sands production exported to the United States and President Trump just new approval to the Keystone XL Pipeline, industry players are not about to walk away from decades of future opportunity.

Oil sands producers were willing to invest billions in oil sands development because their projects are designed for a decades-long life cycle, which means the facilities may only really start to generate a return after several years. If the rug is to be pulled out from these companies, Canada’s reputation as a safe place to invest would be destroyed.

In Alberta and Canada in general, phasing out oil sands production would depend on a number of factors like global oil trends, technology improvements and environmental regulations. Indeed, the oil sands industry is complex and volatile. And the idea of phasing out production seems far fetched and complicated.

It might be easier to take the PM’s word on this one and acknowledge he misspoke.

Related Posts

See all posts →
Scroll to top