On the economic and environmental folly of trying to “strangle the oil sands”

I was in a discussion online with Dr. Andrew Weaver, “BC Green Party MLA for Oak Bay Gordon Head. Deputy Leader, BC Green Party. Lansdowne Professor, University of Victoria” and Eric Doherty, “Transportation planner & @TankerFreeBC Transportation Campaigner”, on the topic of pipeline expansion in Canada. The discussion followed a comment by Dr. Weaver about the fact that Tom Mulcair was not coming out against the Trans-Mountain pipeline expansion (ref). What appears to have angered Dr. Weaver is that Mr. Mulcair appears to want to wait until the environmental assessment process has run its course before making a decision on the Trans-Mountain pipeline expansion. While I am not a supporter of the NDP, my position on the topic is very similar to that of Mr. Mulcair. As regular readers of my blog know, I have strong reservations about the Northern Gateway pipeline. They also know I am leaning strongly towards supporting the Trans-Mountain pipeline expansion. The basis of my support is that it is the best of a bad set of alternatives. As I have discussed in a previous post, given the investment already in the ground, none of the current oil sands facilities (or facilities already well into development) are going to disappear, even in a world of $50/barrel oil (ref). Given this reality, the next question lies with how to move the outputs from these facilities in the most environmentally sensitive and least damaging manner.

At the start of the discussion Mr. Doherty emphasized that building new infrastructure to transport oil is not necessary because apparently any moment now a “phase out” is going to start and we will no longer have a need for fossil fuels. This argument falls flat in my mind because it represents wishful thinking. To date, no international plan exists for a global phase-out of fossil fuels, moreover, no reasonable plan is on the books anywhere in the world. To abandon our need to ensure for a safe, clean environment in the near future, based on a hope that a plan will be made in the far future, makes absolutely no sense to me. Maybe a phase-out of fossil fuels may happen, sometime in the future, but it is not happening in the next 10 years. So helping to ensure the environmental integrity of our province, by avoiding the transport of all that oil-by-rail, seems a reasonable choice. To supplement his argument, Dr. Weaver linked to his personal web site where he has a post describing “British Columbia and the Alberta Tar Sands”. The confusing thing about this link is that it fully supports my current understanding of the law. As described in the post, there is no method by which the government can legally stop the transportation of oil-by-rail, as long as the railways meet certain statutory requirements. This reinforces my concerns that lacking a pipeline, bitumen derived from the oil sands will move via rail. So once again, the facilities that currently exist, and are in development, are going to continue to produce bitumen, this bitumen is going to get out. So let’s make sure it moves in the most ecologically and environmentally safe manner possible.

Over the course of our wide-ranging twitter discussion, it became more and more clear that both Dr. Weaver and Mr. Doherty were ultimately ignoring the elephant in the room, specifically the law of supply and demand. In the discussion, and in other conversations, I have heard environmentalists of all stripes talk about “strangling the oil sands” by stopping the building of pipelines. The problem with this argument is twofold: first and foremost, as described above, an alternative to pipelines already exists: the railway system. Since the facilities already exist, all reducing pipeline availability does is force the bitumen to be shipped by rail, which we have already demonstrated is a less environmentally protective way to move the material. The second problem is that even if you did try and strangle the oil sands the demand would be met in some other way. The activists fighting the fossil fuel industry in Canada appear to have forgotten the lessons of the “war on drugs” and the Eighteenth Amendment of the US Constitution (prohibition). Unless you can address the demand side of the supply and demand curve you are not going to make a difference. Let’s try a thought experiment. Imagine, through some magic trick, that the Athabasca Oil Sands were made to disappear tomorrow, what do you suppose would happen? Well the quick answer is that since the demand has not been addressed, the oil would have to come from somewhere else. Instead of Fort MacMurray it will come from Guárico. You see the only way to stop oil from flowing is to price carbon so that alternative technologies become viable and global demand goes down. Anything else is simply a fool’s game. So it is time the activists stop fighting the wrong fights. If they really want to “strangle the oil sands” they have to do it via the free market. Stop risking the Canadian environment by forcing oil to be shipped by rail and deal with the underlying issue, the demand for oil. Everything else is just posturing and posing for the cameras.  

As for the talking point about “protecting the Salish Sea”, well as I have written elsewhere, the Puget Sound has a refinery capacity that requires on the order of 725,000 barrels/day of crude oil. The refineries were built and tuned to use heavy oil from the Alaska North Slope, which has served as their primary source for the last 30 years. This oil has travelled from Alaska to the Puget Sound along the west coast of BC for that entire time. This oil needs to be replaced with a similar blend. A proportion of that is going to be made up with Bakken crude. Infrastructure to transport that Bakken crude by rail is being built. That oil will travel over any number of rivers including the headwaters of the Kootenay River and alongside the Columbia Rivers to the Puget Sound. The route risks both our Canadian and American ecological heritage. Since the Bakken crude is too light for the refineries, it has to be supplemented with heavier crude and that crude is going to come in via tanker. Any argument about protecting the Salish Sea has to address these facts and frankly none of the activists appear to even be aware of these facts. Finally, I hate to go back to this trope but it does ring true, until we can eliminate the demand it is better that our oil comes from an ethical source rather than the alternatives. If I have a choice between sending dollars to Alberta and Ottawa or sending it to Caracas or Moscow I am quite certain that I want those dollars going to help pay for Canadian health care and not some less ethical alternatives.