Lessons not learned in Canada’s oil sands 2008-2015
The Parliamentary Standing Committee on Environment and Sustainable Development during the past two weeks has been holding hearings that have focused on the government’s plan to use taxpayers’ money to subsidize a $75 billion scheme to support large-scale deployment of Carbon Capture and Storage (CCUS) technology in the oil sands industry. Although this event has been little noticed, the issues at stake lie at the heart of Canada’s climate predicament.
On November 19, 2020, the Trudeau Government announced Canada’s new “Net-Zero emissions by 2050” emissions goal. Less than a week later, on November 24, 2020, the government published Canada’s Energy Future 2020, a report projecting that the level of Canada’s oil production will continue to increase to 2050. The same report, without any detail or analysis, promised that large-scale installations of CCUS technology would allow Canada to increase its oil production for another 30 years while we simultaneously “remove” and sequester the massive volumes of CO2 that are presently released into the atmosphere during the oil sands extraction process.
I testified at the Committee’s hearing on March 31, 2022. I gave evidence about how, between 2008 and 2014, the Province of Alberta had embarked on an ambitious plan to install CCUS in the oil sands industry. The scheme was abandoned in 2014 because it proved to be prohibitively expensive. A member of the Committee requested a further submission in writing about the past failure of CCUS in Canada.
Click the yellow button to get the supplementary submission (opens as a PDF in your browser) which was submitted to the Standing Committee on Environment and Sustainable Development on April 8, 2022.
In the 18 months since its November announcements, the Federal Government has not publicly released any study or data providing costs and projecting the timelines and magnitude of promised reductions in oil sands emissions by 2030, or by 2050, if we rely on CCUS. Since November 2020 all we have had is promotional material published by a group of Canada’s six largest oil sands producers in their Pathways to Net-Zero initiative released in July 2021 claiming that oil sands producers by 2050 will cut their annual emissions by 68 Mt, of which they say 36 Mt will be “captured” by CCUS. The industry’s promise is that this ambitious plan will allow Canada’s oil sands producers to maintain high levels of oil sands production for another 30 years.
CCUS is a prohibitively expensive technology. It has never yet, anywhere in the world, proven to be economically viable for large-scale, industry-wide installation. It would add massive additional costs to Alberta’s already high cost per barrel operations.
One fundamental reason for the failure of CCUS in Alberta and in other jurisdictions is that governments have been consistently unwilling to impose sufficiently stringent carbon prices on producers to create any economic incentive for producers themselves to install this costly technology.
That situation persists today in Canada, given the output-based pricing scheme under Part 2 of the Federal Greenhouse Gas Pollution Pricing Act. It sets a “performance standard” for producers of heavy oil bitumen that allows producers to pay a carbon price only on a very small portion of their actual emissions per barrel – and in many cases to pay no carbon price at all. There is no economic incentive for producers to install costly CCUS. Instead, the oil sands industry wants taxpayers to pay the costs of CCUS by enormous public subsidies.
Even if this envisioned technological and financial re-structuring of the oil sands industry using CCUS over the next 30 years could be economically viable, a further problem, and the fatal flaw, is that CCUS, assuming it is eventually installed at every production site in Alberta, will capture less than 15% of the total life-cycle emissions from every barrel of oil we produce and export. Most of the emissions are released into the atmosphere as tailpipe emissions when our exported oil is burned. The tragedy is that if we follow this fantastical vision, by 2050 Canada will still be producing 4.8 million bpd of oil or more – only 2% less than in 2019 – and we will still be exporting a full 85% of the total life-cycle emissions from our continued high levels of oil sands production.