Last night, I was given a wonderful opportunity by some of our students to present my views on the oil sands in front of an interested and engaged audience here at the University of Alberta as part of the Oil Sands Visionaries speaker series. Given the flack I have taken from some of my colleagues for being labeled as such, I best stop using the title after this post.
My talk last night was based around my view that the key impediment to further oil sands development is the lack of a credible GHG policy in Canada, and that this lack of a policy is the result of the target trap in which Canada has found itself. I argued that Canada’s government, thanks to unsophisticated approaches to climate negotiations, has now for the second time committed to targets which would require the most stringent climate policy in the world. I further faulted ENGOs which have deemed Canada’s targets to be modest and made it clear that they would consider it a failure if Canada were only to implement the equivalent of a $100/ton carbon price because that price would not likely stop the oil sands and would not deliver comparable reductions against a 1990 benchmark to those promised by the EU. I then decided to go for the anger triple-play by faulting industry in general for painting the picture that the oil sands could not compete under a carbon policy, while at the same time pointing to notable exceptions like Suncor’s Rick George. I then made my pitch for a carbon fee-bate policy which would place a carbon price on oil sands and other sources of carbon emissions equivalent to that paid by firms in the EU and which, if implemented worldwide, would allow the world to meet science-based emissions reduction targets.
After my talk, my vision was responded to by Mike Hudema from Greenpeace, Rick Hyndman from CAPP, and Ken Chapman, founder of Cambridge Strategies. Each of them brought points forward which changed the way I would give my talk if given a do-over, and I thought it might be interesting for some of you to hear how their points resonated with me.
Mike Hudema took issue mainly (or at least first) with my near-exclusive focus on GHG emissions, highlighting as I had that many other environmental concerns exist in the oil sands, and that all of these taken together compromise the social license to operate the oil sands. In hindsight, I should have pushed myself out of my GHG comfort zone to put forward a more comprehensive policy approach for the oil sands, including monitoring, reclamation liabilities, and tailings management. Unfortunately, I don’t know if I could do any of these justice which only a portion of a 30 minute talk, but I think I owed those issues more than a glancing look on my first slide.
Ken Chapman took issue mostly with the Alberta government’s management of the oil sands resource on behalf of Albertans who, as we know well, own the resource. Again, I think in hindsight that I could have done this point more justice as well. We tend to look at royalties, environmental regulation, job creation, and other aspects of the oil sands in a vacuum while we should be looking at them in a more integrated way. No question there is more short term financial rent if the resource is extracted at the lowest possible financial cost, but where the cutting of current financial cost implies the creation of significant external costs borne today and into the future, this is a false economy. Again, if given a do-over, I would argue much more clearly that environmental policy should not be seen as a tool for enhancing the so-called Alberta Advantage through a race to the bottom. We should ask ourselves as resource owners what we are prepared to accept in terms of environmental damage from resource extraction, and allow that to define the conditions under which these activities can take place. From there, we can then assess the residual financial value of the resource, and set the royalties to capture our fair share.
Rick Hyndman was mostly in agreement with my carbon policy vision, which did not come as a surprise as we have spoken at length about my ideas and his (which are very similar) in the past. What struck me from Rick’s discussion, and what I expect would surprise many Albertans, were Rick’s frank assertions that “the business-as-usual approach is not an option” in the oil sands, and that he strong favors a carbon pricing approach. I think, if given the chance to give a similar talk again, I would emphasize that the question of whether or not carbon emissions policy needs to be tightened in Canada is largely settled and that industry, governments and environmental groups can all agree on the direction we need to travel. What they cannot agree on yet is how far, how fast, or who the winners and losers from the policy and the implied re-distribution of wealth should be.
Overall, the experience was incredibly valuable for me, and I hope that my presentation and the ensuing discussion provided some new insights for the audience.
Finally, for the benefit of some who mentioned this to me last night, I did send a follow-up to Mike to apologize for interrupting a couple of his opportunities to speak last night. I would have found similar interruptions from him or from the audience very disruptive, and so I should not have imposed those disruptions on him. I hope that Mike and I will have the opportunity to discuss similar issues in the future, as I expect that we both can learn from each other, and I will do a better job in the future of respecting his opportunities to speak in the same way as he respected mine.
Thanks to all who attended.