Danielle Smith’s nearly two years as Alberta’s premier have been a chaotic whirlwind of conspiracy theories, gaslighting, and pandering to the worst elements of society. For anyone who complained about Jason Kenney’s shoddy leadership, it’s a useful reminder that no matter how bad things may seem, they can always get worse. We’re about to get another example of that, it seems, as her UCP government greases the skids for a massive bailout of the oil and gas industry and its growing inventory of unreclaimed and orphaned wells.
The bailout is bad enough, mind you. It will apparently be put into legislation next fall — without any consultation with the broader public, of course —- and will almost certainly involve incentivizing companies to clean up the messes left behind by other operators. This is the so-called “RStar” program that Smith lobbied for before she rejoined politics in 2022 and was included in Energy Minister Brian Jean’s mandate letter last year. It’s a textbook example of socialism for the rich and a mockery of the “polluter pay” principle that Alberta is theoretically committed to upholding. “I don’t like sticks,” Jean told The Canadian Press in a recent interview. “I like carrots.”
Jean claimed, rather preposterously, that “we are more aggressive on this cleanup file than anybody else in the world,” which is an odd thing to say when you’ve just admitted you don’t like sticks. It’s also demonstrably and flagrantly false. The province’s aversion to said sticks has created an inventory of unreclaimed wells that will cost anywhere from $55 to $130 billion to clean up, and that’s before we even broach the subject of the oil sands and their massive tailings ponds.
Many of the carrots in question, meanwhile, have actually come from the gardens of rural municipalities where oil and gas companies operate (and abandon) these wells. They’ve already been shorted $252 million in unpaid taxes by oil and gas companies and deprived of more than $9 billion in reduced assessments and mandated tax holidays by the province.
The biggest stick still to come will be wielded by a force the UCP government can’t control. The global oil market is in the midst of a rebalancing that may soon see demand rolling over right as supplies start to surge, a combination that spells certain doom for places like Alberta. It will mean more unreclaimed wells dumped onto the public’s balance sheet right as tax revenues from the oil and gas industry crater. And unlike previous oil busts, which have always been cyclical, this one might be permanent.
Right now, the only thing keeping the market afloat is the willingness of Saudi Arabia and the rest of the OPEC cartel to continue withholding production — nearly six million barrels per day worth of it — in the name of higher prices. Most of that restraint is being exercised by Saudi Arabia and the United Arab Emirates, which are both among the lowest-cost producers of oil on the planet. They always have the option of choosing to maximize their market share rather than the price they get, as they did in 2014 when they crashed global oil prices and helped send Alberta’s oil and gas industry into a years-long tailspin.
A recent working paper from Alberto Behar, an economist at the International Monetary Fund’s Middle East and Central Asia department, lays out a set of conditions in which the OPEC cartel would be more likely to flood the market. They include slower global oil demand, rising U.S. shale production, reduced cohesiveness within the cartel, and growing output in non-OPEC countries. Well, guess what? We’re rapidly approaching the point where current circumstances meet all four criteria.
In its September monthly oil market update, the International Energy Agency noted that Chinese oil demand growth is slowing to a crawl, as the country’s rapid adoption of electric vehicles continues to pay dividends. “Surging EV sales are reducing road fuel demand while the development of a vast national high-speed rail network is restricting growth in domestic air travel,” it said. China, which has long been touted as the biggest source of global oil demand growth, will only see its consumption rise by 180,000 barrels per day in 2024. Next year, it might even start to decline — and with it, oil prices.
The rest of the developing world is sure to follow. Like China, it’s in their best interest to wean their economies off fossil fuel imports as quickly as possible. And it just so happens that it’s in China’s best interest to keep selling low-cost EVs, scooters, and other popular forms of zero-carbon transportation. It’s only a matter of time, and maybe not that much, before their oil demand curves start pointing downward, as well.
Now, then, is the time to get Alberta’s oil and gas companies to pay for the mess they seem determined to leave behind — and get ahead of the new messes they may well leave in the future. If Alberta had a provincial government that put its people ahead of the province’s petroleum industry, it would force companies large and small to increase spending on reclamation. It would require oil sands giants to fund their outstanding environmental liabilities, as it seems determined to do for wind and solar projects, rather than collecting 71 cents — cents! — from them between 2010 and 2023. And it certainly wouldn’t have left $137 million in federal funding for oil well cleanup activities on the table just to create another source of grievance with Ottawa.
Alas, Alberta doesn’t have one of those governments. It has one led by a former oil and gas lobbyist that seems determined to shovel as many carrots down the industry’s throat as it can stomach. It has one that ignores global trends, denies measurable realities, and finds new ways to subsidize an industry that right now doesn’t need any help. And it has one that seems more than happy to stick future generations with tens — and maybe hundreds — of billions of dollars in environmental debt. For a government that pretends it doesn’t like sticks, it seems more than willing to poke the public in the eye with one here.
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