Justin Trudeau isn’t phasing out Alberta’s oil industry — but the world might

There was an earthquake in Alberta on Tuesday, albeit one most people couldn’t see or feel. A new report from the Canadian Energy Regulator and the future it describes could soon upend lives and livelihoods, along with most of the province’s political conversations, for decades to come. The question now is whether the province and its conservative government will actually acknowledge its existence, much less do anything to stop it.

The report from the Canadian Energy Regulator modelled, for the first time, what demand for oil and gas would look like if either Canada or its global trading partners met their stated goal of reaching net-zero emissions by 2050.

It’s not pretty.

If both Canada and the world stay on their current course in terms of climate policy, one that would lead to disastrous levels of warming, demand for Alberta’s oil would increase moderately and peak around 2035. That’s the best-case scenario for Alberta’s oil and gas industry, if you can even call it that.

In the Canada Net-zero Scenario, oil demand peaks by the end of the decade and falls to 3.9 million barrels per day by 2050. Fossil gas production follows a similar trajectory, rising modestly into 2030 before declining by almost 40 per cent over the next two decades. For an industry, and a province, that seems to still believe demand will rise indefinitely, this would be a major shock to the system.

But it’s the Global Net-zero Scenario that should have every policymaker in Alberta awake at night. It envisions a world where oil prices sit at $35 a barrel in 2030 and just $24 per barrel two decades later, resulting in a 76 per cent decline in Canadian oil production by 2050 from 2022 levels. “In our analysis, shortly after the total operating costs of a facility exceeds its revenue, it shuts down for the remainder of the projection period,” the report concludes. “Oilsands facilities that have the highest operating costs begin shutting down early in the 2030s. As oil prices continue to drop, more and more facilities shut down production, and only the lowest-cost projects are still producing in 2050.”

Fossil gas doesn’t fare much better, with 2050’s production expected to fall by two-thirds compared to 2022 levels. LNG exports aren’t about to save the day for Alberta here, either. After plateauing at two billion cubic feet per day in 2029, the Canadian Energy Regulator expects them to fall off dramatically beginning in 2045. By 2050, they could be as low as 0.3 bcf/day.

The UCP and its allies in the Postmedia pundit class will continue to pretend the world achieving net-zero emissions by 2050 isn’t realistic, even as they’ve committed to the same net-zero timeline. They will continue to insist they can reach their emissions reduction targets by exporting more LNG, a fantasy that the federal government is apparently now willing to at least humour. “Credit for LNG deals with other countries is essential to Alberta’s emerging policy to go net zero by 2050,” the Calgary Herald’s Don Braid wrote. “Without that agreement, the province would have to radically reduce oil and gas production.”

But if Braid had actually read the full report, he’d understand that federal policy isn’t the real threat here. Instead, this is a verdict being rendered by the thing conservatives are supposed to worship: the market. “This analysis underscores that Canada’s economic prospects will be profoundly affected by global forces outside our control, especially as market demand shifts in response to accelerating technological change and other countries’ policy ambitions,” the Canadian Climate Institute’s Dale Beugin says. “The global transition toward net zero will have big implications for Canada’s new and existing export markets — even if the world acts too slowly to stabilize warming at 1.5 C.”

And make no mistake: while Alberta’s leaders aren’t willing to get serious about the energy transition, other parts of the world are. China remains focused on cornering this huge new market, with ever-more massive investments in electric vehicle production, battery technology, wind turbines and solar panels. The United States threw nearly $400 billion at carving out its own piece of this multitrillion-dollar pie last year with its Inflation Reduction Act. And Europe continues to aggressively wean itself off both oil (through electric vehicle mandates) and Russian gas imports (through energy conservation and the rapid deployment of renewables).

The biggest risk here to Alberta, then, is clearly to the downside — and that’s before even contemplating the inevitable shift in OPEC’s market management strategy away from cutting production to drive up prices. Once they decide to start pumping as much as they can before the fossil fuel era comes to a close, there’s no telling how low prices might get.

In other words, Alberta has a few years to get its house in order when it comes to both its finances and environmental liabilities before things get really, really real. What it needs right now is a sophisticated conversation about the opportunities associated with the energy transition and how best to balance their pursuit against the need to help impacted communities adapt and evolve. What it’s probably going to get is yet another exercise in petulant navel-gazing and scapegoating, one that begins and ends in Ottawa.

If the Alberta NDP wants to chart a course back to power in 2027, it has to take on the leadership role here that the UCP will almost certainly abdicate. It needs to explain what’s really at stake here for Albertans and their kids, which policies can help them manage the growing uncertainty around the future, and why addressing the province’s huge inventory of unreclaimed wells and oilsands tailings ponds can’t wait until the companies responsible for them go bankrupt or walk away.

That won’t be easy. Many people would rather ignore the truth here than confront its long-term implications. The UCP, for its part, will continue to pretend this is the federal government’s fault. And the mainstream media in Alberta, or what’s left of it, will struggle to put this issue in its proper context, leaving many people stuck in low-information silos where this issue will be written off as either a globalist conspiracy or the legacy of two prime ministers named Trudeau.

The days of fighting over pipelines, at least, are finally over. But an even bigger fight is now on our collective hands: the battle between an uncomfortable truth and some convenient fictions. Albertans had better choose wisely.

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