In situ oil sands project in northern Alberta. Photo courtesy MEG Energy

From the Canadian Energy Centre

By Deborah Jaremko

‘The oil sands are Canada’s winning lottery ticket’

As Alberta’s oil sands sector reaches a major economic milestone, a new report shows that emissions growth continues to slow.

There is a clear “structural break” for the industry where production growth is beginning to rise faster than emissions growth, according to S&P Global Commodity Insights. While last year’s oil sands production was nine per cent higher than in 2019, total emissions rose by just three per cent.

“It’s not driven solely by slower production growth because production growth has continued. This is a notable, significant change in oil sands emissions,” said Kevin Birn, head of S&P Global’s Centre for Emissions Excellence.

Birn said that in many cases oil sands growth is coming from optimization, where for example instead of companies building new equipment to generate more steam to inject underground, they have found ways to produce more oil with the steam they already have.

Emissions per barrel, or so-called “emissions intensity” is now 28 per cent lower than it was in 2009.

Earlier this year, S&P Global raised its oil sands production outlook, now projecting the sector will reach 3.8 million barrels per day by 2030, compared to 3.2 million barrels per day in 2023.

Analysts continue to expect total oil sands emissions to peak in the next couple of years, absent the federal government’s proposed oil and gas emissions cap.

“Certainly, there’s potential for that to occur later if there’s more volume than we anticipate, but it’s also the time when we start to see the potential for large-scale decarbonizations to emerge towards the end of this decade,” Birn said.

Meanwhile, before the end of this year the oil sands sector will hit approximately $1 trillion of cumulative spending over the last 25 years, according to a joint report by the Macdonald-Laurier Institute and Pathways Alliance.

That is, not profits or dividends, but investment in operations, building new facilities, and government payments including taxes and royalties.

“The oilsands are Canada’s winning lottery ticket,” wrote MLI’s Heather Exner-Pirot and Pathways’ Bryan Remillard.

They noted that oil sands producers have paid more than $186 billion in royalties and taxes to Canadian governments, representing more than the last five years of Canadian defense spending.

“Far from just an Alberta success story, the oilsands are a quintessentially Canadian sector. More than 2,300 companies outside of Alberta have had direct business with the oilsands, including over 1,300 in Ontario and almost 600 in Quebec,” wrote Exner-Pirot and Remillard.

“That juggernaut could keep Canada’s economy prosperous for many more decades, providing the feedstock for chemicals and carbon-based materials whenever global fuel consumption starts to decline.”

That is, unless companies are forced to cut production, which credible analysis has found will happen with Ottawa’s emissions cap – well over one million barrels per day by 2030, which Exner-Pirot and Remillard said would have to come almost entirely from Canada’s exports to the United States.

“If companies are forced to cut their production, they won’t be able to afford to aggressively cut emissions. Nor will they be able to make other investments to maximize and sustain the value of this resource.”

Dale Swampy, founder of the National Coalition of Chiefs. Photograph for Canadian Energy Centre

From the Canadian Energy Centre

By Deborah Jaremko

National Coalition of Chiefs founder Dale Swampy says Canada needs a more sustainable strategy for reducing emissions

The head of the National Coalition of Chiefs (NCC) says Ottawa’s proposed oil and gas emissions cap couldn’t come at a worse time for Indigenous communities.

Dale Swampy says the cap threatens the combined prospect of higher costs for fuel and groceries, along with fewer economic opportunities like jobs and revenues from involvement in energy projects.   

“Any small fluctuation in the economy is affected on our communities tenfold because we rely so much on basic necessities. And those are going to be the products that increase in price significantly because of this,” says Swampy, who founded the NCC in 2016 to fight poverty through partnerships with the natural resource sector.

He says that of particular concern is the price of fuel, which will skyrocket under the emissions cap because it will force reduced Canadian oil and gas production.

Analysis by S&P Global found that meeting the cap’s requirements would require a production cut of over one million barrels of oil equivalent per day (boe/d) in 2030, and 2.1 million boe/d in 2035.

“Production gets reduced, and the cost of fuel goes up,” Swampy says.

“Our concern is that everything that has to do with both fuel for transportation and fuel to heat our homes is amplified on First Nation communities because we live in rural Canada. We live in isolated communities, and it costs much more for us to operate our daily lives because we have to travel much further than anybody in a metropolitan area. So, it’s going to impact us greatly.”

Indigenous communities are already stretched financially, he says.

“What you could buy in 2019 terms of meat and produce is almost double now, and even though the inflation rate is trending downwards, we still haven’t gotten over the impact of what it costs for a bag of groceries these days,” Swampy says.

“In our communities, more than half are under the age of 21, so there’s a lot of bigger families out there struggling to just get food on the table.”

The frustrating timing of the cap is that it comes amid a rising tide of Indigenous involvement in Canadian oil and gas. Since 2022, more than 75 Indigenous communities in Alberta and B.C. have agreed to become part owners of energy projects.

Three major projects – the Trans Mountain Pipeline Expansion, Coastal GasLink Pipeline and LNG Canada export terminal – together have spent more than $11 billion with Indigenous and local businesses.

“We’re at a turning point right now. There’s a real drive towards getting us involved in equity opportunities, employment opportunities, and contracting opportunities,” Swampy says.

“Everybody who didn’t talk to us in the past is coming to our front door and saying, ‘Do you want to work with us?’ It couldn’t come at a worse time when we have this opportunity. The emissions cap is going to reduce the amount of activity, and it’s going to reduce the amount of investment,” he says.

“We’re part of that industry now. We’re entrenched in it now, and we have to support it in order to support our people that work in this industry.”

Economic growth, and more time, is needed to fund development of low emissions energy sources without ruining the economy, he says.

“I think we need more consultation. We’d like to see them go back to the table and try to incorporate more of a sustainable strategy for emission reductions,” Swampy says.

“We’re the only country in the world that’s actually incorporating this type of legislation. Do you think the rest of the world is going to do this type of thing? No, they’re going to eat our lunch. They’re going to replace the production that we give up, they’re going to excel in the economy because of it, and they won’t talk about significant emission reduction initiatives.”