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Keep oil in the ground? What’s the upside?

Oil pumpjack unit in Saskatchewan, Canada

“My dad volunteers at the food bank in town. And food bank usage had gone to all-time highs in 2014 and 2015 and then fluctuated somewhat and then just continued to climb.  He would never give me any names, but he said Tim, there’s people coming through the food bank now that you know.”

Tim Cameron, a project manager from Drayton Valley, Alberta shared that sad anecdote with SecondStreet.org recently when we spoke with him about how the oil and gas industry slowdown is affecting his community.

He described the town as being a bit like the TV show “The Walking Dead;” many residents are unemployed and struggling to get by – even those who are highly skilled workers.

As our federal election gets underway, energy issues will no doubt be part of the discussion. Canadians may want to reflect on two facts concerning Canada’s oil and gas industry and how families like the one in Tim’s story are affected.

First, environmentalists may not like it, but the world is forecast to continue using oil for many years to come.

On BP’s website (formerly British Petroleum) you’ll find a graph that shows six different forecasts for global oil demand up to the year 2040. Of the six forecasts, only one suggests oil demand will drop before then.

One forecast put forward by the International Energy Agency (based in France), noted something interesting – electric cars may lead to a slowdown in gasoline use, but petrochemicals and jet fuel will still drive overall demand higher. (Petrochemicals are derived from oil and are used to make cell phone parts, bicycle tires, running shoes and many other household and industrial products).

Thus, the question facing our nation is – should Canada provide the world with the oil it wants to purchase or should we let some other country provide it and enjoy the significant economic benefits from that opportunity?

As it stands right now, decisions by the current federal government have led industry representatives to believe it is “highly unlikely” that proponents will want to build new pipelines in Canada; infrastructure that is desperately needed to export our oil.

The second point to consider in this discussion is of course the environment.

If Canada simply kept all of its oil in the ground tomorrow, as some environmentalists would like to see, would that actually help the environment? If Saskatchewan kept a barrel of oil in the ground to “reduce emissions” is it reasonable to assume Saudi Arabia or some other country wouldn’t extract an extra barrel to replace it? Of course not.

In fact, one could argue the environment is actually worse off by shifting production from Canada to countries that have lower environmental standards.

Recently SecondStreet.org spoke with Dennis Giesbrecht about this point. Dennis is from Kamloops, B.C. and has worked on oil and gas projects all over the world. He told us he’s routinely surprised by the weak environmental rules in other countries. For instance, while he was stationed at a worksite in Chile, a diesel truck had a large spill and no one was tasked with cleaning it up. In Canada, such spills are required to be cleaned up and reported immediately. Further, great precautions are taken to ensure they don’t happen in the first place.

Even our federal government, which has mused about phasing out the oil sands, notes Canada’s environmental regime is actually quite stringent. The federal government’s website notes:

“Oil sands development is subject to environmental standards that are among the most stringent in the world.”

The web site also explains that oil sands companies can’t simply walk away when they’re finished, they’re required to return all of the land they use to a natural state that is a “self-sustaining ecosystem with local vegetation and wildlife.”

The strict rules aren’t surprising. Canada ranks 25th in the world in terms of environmental regulations while the world’s other top oil-exporting nations ranked between 27th and 152nd according to the global Environmental Performance Index and calculations by Canada Action.

For Tim Cameron’s family and others in Drayton Valley this issue is simple – as long as the world is going to consume oil and gas products, Canada should get a piece of the action. If we don’t, we would not only miss out on enormous economic benefits, we could actually hurt the environment.

 

Colin Craig is the President of SecondStreet.org, a new think tank that is focussed on how government policies affect Canadians at the grassroots level.


This column was published by the Financial Post on September 24, 2019

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