This column is an opinion from Sara Hastings-Simon, a senior researcher at the Payne Institute for Public Policy at the Colorado School of Mines, and a research fellow at the School of Public Policy at the University of Calgary.
French energy company Total was clear on its reasons for the recently announced writedown of Canadian oilsands assets and the decision to halt all future investments in new capacity.
"Total has reviewed its oil assets that can be qualified as 'stranded,' meaning with reserves beyond 20 years and high production costs, whose overall reserves may therefore not be produced by 2050."
While the decision was framed within Total's broader carbon neutrality goal, the fundamental challenge cited was not the carbon footprint of production from the oilsands, but rather that in a world that is responding to the threat of climate change, oil production will decline, leaving the expansion of higher cost, larger, and longer lifetime Alberta resources uncompetitive.
Total's announcement follows similar moves in recent months by other oil majors, such as BP, which also recently announced plans to reduce oil and gas output by 40 per cent in the next 10 years. These writedowns are an admission of the loss of value of the assets by the company and can't be understood as simply a greenwashing exercise.
But the response from the Government of Alberta sidestepped the core issue raised by Total and instead highlighted the efforts that have been made to improve the environmental performance of the oilsands through technological innovation.
This is an example of a broader trend of late in Alberta — one where decisions being made about the future viability of the growth of the oilsands sector by companies are viewed as reactions to the footprint of production, rather than reflecting the underlying economics of the resource in a world moving to net zero.
As a result, the solutions to the issues facing the sector and the province at large remain focused on addressing the upstream footprint of production, which was the challenge of the previous decades.
Focusing on the previous problems
This laser focus on yesterday's problem is understandable for a few reasons.
First, objectively things are changing quickly. While there has been discussion of stranded assets for some time, the same oil majors were emphatically rejecting the risk of stranded assets just a couple of years ago.
Also, the nature of technological development, cost reduction and exponential growth means long periods of hype around the potential for disruptions from new tech — like electric vehicles — can start to feel like nothing more than talk without impact, even when critical price and performance crossover points are reached.
The human tendency to project historical trends into the future can make it difficult to see change, even when we are in the middle of it.
At the same time, the challenge of reducing emissions from production is the "better problem" to have, as it's one the industry can hope to address.
Even with our substantial engineering prowess here in Alberta, it is a tall order to reduce emissions, but unlike a global shift in demand for the product, or in the fundamentals of the nature of the resource itself, it is one where we can control our destiny.
And finally, there is surely some frustration stemming from the sense of shifting goals, given the timing of it.
Many of the most promising new technologies and innovations for emissions reduction in oilsands production, such as solvents, have been developed over the past decades and are now ready for deployment in greenfield projects that aren't being built.
But no matter how understandable it is, ignoring the reality of today's issue won't make it go away.
It's time to listen to what the companies and capital markets are telling us about the future of the oil industry.
Agreeing on the challenge
The challenge facing Alberta is made harder by the growing polarization around energy issues.
There is no question that we need to find ways to talk and work together to make progress. But calls for depolarization shouldn't be used by those in authority to create false hope and avoid confronting difficult realities.
On the other hand, those tempted to engage in schadenfreude, or an "I told you so" mentality, in the face of this threat should be mindful of who, exactly, is under threat.
Previous experiences, from bankruptcies in the coal industry in the United States, to the recent collapse of a retail giant in Canada, saw executives receiving substantial bonuses while the workers were losing their jobs, fighting for their pensions and watching as their paycheques were clawed back from their bank accounts.
Remember also that the public is often left holding the bag on liabilities.
Looking to the future
Rather than false hope, depolarization can be built on what Canada and Alberta has to offer.
There are real opportunities to build on the skills that come from the existing oil industry, using the revenues that will continue to flow from existing projects.
The approach should be one that recognizes the contributions that have been made by the oil sector, doesn't demonize and looks to build on that foundation, rather than rebuild the past.
There is no shortage of credible ideas being proposed for Alberta in markets that look set to grow into the future, including those in adjacent natural resource and energy sectors, such as hydrogen, lithium and geothermal, as well as areas of historical leadership, such as agriculture, forestry, and food, and other areas where Alberta has demonstrated excellence, such as AI and health innovation.
But time is running out and we must use the revenue from the oil sector wisely — we have one shot to get this right.
There is a glimmer of hope for the province in Total's statement regarding expectations for future prices.
As Wood Mackenzie's Ed Crooks characterizes it, there could be "one last big score," where the recent drop in investments in new capacity will lead to one final price rise for oil in the mid 2020s, before demand peaks.
The nature of such a short-term rise is unlikely to spur significant new development in the oilsands, but it could help boost royalties and provide an infusion of funds to help manage the transition.
At the same time, there is a risk that rising prices will lead to more false hope and further delay necessary action.
Like the "'Lord, Grant Me One More Boom and I Promise Not to Screw it Up" bumper stickers suggest, let's be honest and tackle the real challenges ahead.
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