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It's only 16 pages long and hasn't yet been shared with the public, but Alberta's Integrated Energy Strategy, if adopted as currently drafted, could eventually leave a hefty fossil-fuel footprint on every Canadian business. Given that the federal government has no coherent energy plan of any kind, the province's document could simply fill the bill by default. And just what does Alberta, which supplies Canada with 70% of its oil and 80% of its natural gas, have in store for the rest of the country? Well, the answer is pretty much business as usual.
The blueprint, which was recently sent to "energy stakeholders" for comment, is billed as the vision of Greg Melchin, the politician in charge of Alberta's powerful ministry of energy (which supplies the province with about 33% of its revenue). It calls for "an aggressive pace of development" for oil, gas and coal, and also envisions more exports to China and the United States. Remarkably, the words "energy conservation" or "efficiency" rarely appear, and global warming gets short shift altogether, as though the clouds of carbon dioxide pouring out of the oilsands simply don't exist. Even the term "peak oil" (the point at which extraction begins to decline) fails to get a nod.
The paper's collection of clichés ("an integrated approach to unleashing energy innovation") and glaring omissions have many energy experts dumbfounded, if not worried. "If you have a scarce resource and the whole world wants it, you should have a plan that maximizes the benefits and provides the best opportunities before it's gone," says Bruce Smedley, a Calgary-based global development consultant and former oilpatch engineer. "This strategy doesn't do that. It's a liquidation policy. You could go so far as to say this isn't a plan at all."
In fact, the document calls for a status quo approach in a world where energy prices and supply have become as volatile as the weather. The draft calls for more gas drilling and more oilsands projects on "crowded landscapes." Although it pays lip service to alternative energies, it mostly promotes the full-scale development of energy-intensive, non-conventional resources--such as coal-bed methane and the oilsands--which it proudly calls the "next Alberta." Last but not least, it proposes to subsidize industry with $200 million in royalty breaks in order to develop better technologies to pull more hydrocarbons out of the ground--at a time when oil and gas companies are making record profits.
Julian Darley, founder and director of the Vancouver-based Post Carbon Institute, an energy think-tank, describes the draft plan as "an Alice in Wonderland document that has no basis in reality." He searched the document in vain for any mention of the fact that North American natural gas production peaked in 2001, or that oil prices have reached record highs of $70 a barrel. The implications for Canada, he warns, are dismal. "It's a drill, mine, melt and extraction free-for-all. Depleting non-renewable resources as fast as possible is a bad thing, and the report doesn't even worry about getting the best price." Adds Darley: "Canada should be very concerned."
Many parts of the report don't even accurately reflect current government policy. One admirable section talks about the need for adding value by making the petrochemical sector a high priority. The stripping of ethane from natural gas, for example, increases its value, once it is turned into polyethylene, by a factor of 12 and by a factor of 20 if transformed into plastic-packing products. Yet last year, Edmonton-based Celanese, one of the province's oldest petrochemical plants, announced it was closing its doors due to the price and availability of its feed stock: natural gas.
The government of Ralph Klein has clearly earmarked gas production for export or for fuelling oilsands extraction. "The province's royalty structure and export policies encourage raw export without adding any value," argues Diana Gibson, research director of the Parkland Institute, an Edmonton-based public policy think-tank. "There is nothing in this draft to change that reality. The plan is a real disappointment, but not a surprise."
The report's hydrocarbon liquidation strategy should also be a concern to local and national businesses, says Gibson. "This plan will exacerbate the boom as well as the labour skill shortage, cost overruns and inflationary wage increases." Rob Woronuk, a Calgary-based gas analyst agrees, noting that the proposed plan will "add more TNT to our current energy boom." Given that hydrocarbons will just increase in value due to a growing global energy crisis, Woronuk asks an essential question: "Why not slow down production, and keep more of the province's oil and gas reserves in the ground where they can only increase in value?" Why not, he adds, increase natural gas production when prices hit highs of $10 a gigajoule and cut back when prices hit lows, such as the current $5 a gigajoule? Melissa Blake, the mayor of Fort McMurray, a city that has been overwhelmed by the rate of approval for 48 megaprojects, is also questioning the pace of development. She plans to seek compensation for the oilsands' impact on the local community, including its worsening housing situation.
Although energy prices continue to break global records, the blueprint totally avoids another pertinent subject: are Albertans getting a fair share of the oil wealth under royalty regimes designed for a cheaper energy age? Revenue from the province's oil and gas has only averaged $8 billion a year between 2000 and 2005. (The province still makes less from the oilsands than it does from gambling.) In contrast, Norway has imposed a profit tax in addition to royalties. Yet companies still net an after-tax profit of 30% to 35% in that country, says Amy Taylor, an economist with the Pembina Institute, a Calgary-based industry watchdog.
Albertans clearly want an upgrade. A poll of 500 citizens conducted in April by the Pembina Institute found that a majority don't think their government is maximizing returns on energy development. Fully 84% thought there should be a public review of an oilsands royalty regime that currently charges companies only a 1% fee on production until they've paid up their billion-dollar project costs. Thereafter, a 25% royalty kicks in. Since the introduction of the 1996 program, oilsands revenues per barrel have declined by 39%. The poll also found that 92% of respondents wanted the province to use a portion of oilsands revenues for the development of alternative energies.
Other experts found glaring omissions in the draft plan on the subject of climate change. Mark Jaccard, a professor of resource and environmental management at Simon Fraser University, and the author of Sustainable Fossil Fuels (see "Energy to burn," page 45), was particularly struck by its almost total neglect of the province's exploding carbon emissions. Alberta industry now accounts for fully a third of the nation's CO2 emissions. By 2030, projects in the oilsands alone will produce as much carbon dioxide as all of the world's volcanoes combined. "I was surprised to see that global warming was not more prominent in their policy strategy, given that it's the major challenge of our energy system today," says Jaccard. (For the record, Alberta Environment is working on a separate integrated plan that will mandate undefined reductions in carbon.)
So what might a smart energy plan look like? Dave Hughes, a coal specialist with Natural Resources Canada who has lectured widely on global energy issues, would start with demand management. "It's 80% of the solution," he says. Although Hughes wouldn't comment directly on the Alberta blueprint, he noted that good government planning would curtail consumption by promoting public transit, efficient building designs and the reduction of hydrocarbons in transportation, through the use of more trains and fewer trucks.
On the supply side, Hughes would target rapid reductions in the use of natural gas in the oilsands, which currently consume enough gas to heat three million homes a day. He'd promote new technologies, while supporting renewable energy (everything from solar to geothermal) to the fullest. "We are not going to wean ourselves off hydrocarbons soon," says Hughes. "But it behooves us to realize that they are finite resources and should be reserved for the highest-end uses for society."
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