The federal government ‘sees a long-term future for the oilsands.’ Here’s what you need to know

Should Alberta’s oilsands be phased out? Or will they continue to be a part of the Canadian economy, well into the future?

The response to this question sounds different depending on who you ask — and when.

A newly obtained document from the Government of Canada is shedding light on how the federal government has been thinking about the long-term prospects of the oilsands.

The future of the oilsands has been the subject of much debate. The oilsands provide employment and fund community projects that many rely on, while also indirectly employing many more people. Meanwhile, residents downstream of the oilsands have spoken out about the impacts, carbon pollution is increasing and environmental liabilities are piling up.

Here’s what you need to know about how Ottawa has been thinking about the future of the oilsands — and how that squares with where the party leaders stand during the federal election campaign.

What are the internal docs — and what do they show?

The government documents, prepared for Natural Resources Minister Jonathan Wilkinson in 2024 and obtained by The Narwhal, show how the department viewed the Trans Mountain oil pipeline expansion project as a tool to strengthen and enrich the oilsands.

The documents were prepared ahead of Wilkinson’s trip to Calgary in late June 2024 to attend the Energy and Mines Ministers’ Conference. Natural Resources Canada confirmed that Wilkinson met virtually with Alberta Energy and Minerals Minister Brian Jean, as well as oil and gas industry representatives, as part of his trip.

“The Government of Canada sees a long-term future for the oil sands, which is why we invested in the Trans Mountain Expansion Project — opening new markets and increasing sector profitability,” reads one of the documents, obtained by The Narwhal.

The line is part of a list of suggested responses that Wilkinson could tell Jean if the topic of oilsands companies and decarbonization came up during their conversation. The department did not confirm whether Wilkinson actually delivered the line.

Alberta’s Ministry of Energy and Minerals did not respond to an emailed request for comment.

What has the federal government said about oilsands in the past?

When he was prime minister, Justin Trudeau spoke often about his conviction that supporting Canada’s oil and gas industry today would help to pay for the transition to a low-carbon economy tomorrow.

For example, he told a Vancouver clean tech conference in 2016 that “the choice between pipelines and wind turbines is a false one … we need both to reach our goal.”

Early in his first term, he extended this idea to Alberta’s oilsands, which is where the majority of Canada’s crude oil production is carried out. Speaking at a town hall in Peterborough, Ont., in 2017, Trudeau said he saw the future of the oilsands shrinking in importance.

“You can’t make a choice between what’s good for the environment and what’s good for the economy,” he said. “We can’t shut down the oilsands tomorrow. We need to phase them out. We need to manage the transition off of our dependence on fossil fuels.”

Yet, it also became clear Trudeau had no desire to see the oilsands disappear entirely. He told a crowd at an energy conference in Texas that same year, for example, that Canada couldn’t be blamed if it exploited its vast oilsands reserves, estimated at 173 billion barrels (almost enough to supply all of Canada’s current oil output every day for the next century).

“No country,” he argued, “would find 173 billion barrels of oil in the ground and just leave them there.”

Beyond that, his government dedicated significant time and resources to meeting with CEOs and high-level representatives of large oilsands companies, as they lobbied for financial and regulatory help.

And while oilsands companies lobbied against other Trudeau government proposals, such as an emissions cap on the oil and gas sector (even though such a cap would be basically formalizing commitments the industry itself had already made) they also benefitted from other initiatives.

These include a carbon-capture tax break and the approval of another pipeline carrying petroleum products from the oilpatch, the Line 3 replacement project.

Natural Resources Canada did not respond to questions about whether the briefing notes contradict Trudeau’s past statements about phasing out oilsands production.

What does this have to do with TMX?

Trudeau’s decision in 2018 to purchase the Trans Mountain pipeline and expansion project, and spend $34 billion to finish building it, has certainly helped the industry.

Government backing was key to ensuring the construction project was able to secure enough funding to keep going, by having the public assume the financial risk behind billions of dollars worth of loans.

Since the expanded pipeline began operations in May 2024, crude oil sent from Alberta to British Columbia more than tripled through December compared to the same period in 2023, according to Statistics Canada. The increased room helped the oilsands drive crude oil production to a record high last year.

When he first approved the pipeline’s expansion in 2016, Trudeau did connect it to his expectation that there would be “an increase in the production in oilsands in coming years” and that Canada’s oil pipeline network was nearing capacity.

But he also said it was an “integral part” of meeting Canada’s climate commitments and a political “trade off” for getting Alberta, home to the oilsands and the province with the highest levels of emissions, to sign on to his climate plan.

After a Federal Court quashed his initial approval of the pipeline project, Trudeau would say years later during his second approval that it was needed to fund Canada’s “future clean economy.”

Natural Resources Canada did not respond to questions about whether the briefing notes seen by The Narwhal contradict Trudeau’s past statements about the pipeline funding a clean energy transition.

Trudeau isn’t prime minister anymore. What has Liberal Leader Mark Carney said about the oilsands?

Mark Carney, who won the leadership of the Liberals in March after Trudeau stepped down and was sworn in as prime minister the same month, has said oilsands companies should be focusing on reducing their carbon pollution.

In comments to CBC News three years ago while he was the United Nations special envoy on climate action and finance, Carney spoke positively about oilsands companies banding together to reduce emissions, casting it as an issue of international competitiveness.

The world is producing too much oil, natural gas and coal to be compatible with limiting the Earth’s average temperature warming, he noted — and so, he argued, the fossil fuels that do end up being produced during a low-carbon transition will have to be “low political risk,” “low cost” and “low carbon.”

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Recent impositions of tariffs on Canada and comments from U.S. President Donald Trump that he wants to annex the country have led to a discussion during Canada’s federal election campaign about expanding Canada’s domestic oil and gas industry to diversify exports away from the U.S.

To that effect, Carney has promised to build “pipelines across this country” and roll out a “national trade and economic corridor” that would help link up “energy extraction sites.”

On the campaign trail, he clarified he was still in favour of implementing Trudeau’s proposed emissions cap on oil and gas, while also speeding up government investments in carbon capture and storage technology and in methane reduction technology.

And where does Conservative Leader Pierre Poilievre stand?

Conservative Leader Pierre Poilievre has promised to enact all of the recommendations that Canada’s largest oil and gas companies have made to fast-track fossil fuel development.

That includes nixing the proposed emissions cap on oil and gas, repealing the federal carbon pricing system, repealing the federal environmental assessment law, implementing a six-month deadline for project approvals and incentivizing First Nations investments with loan guarantees.

He has unveiled a list of 10 “priority projects” that he wants to “rapidly approve,” one of which is a proposed expansion project for a large oilsands mine. Poilievre also previously backed a massive $20-billion proposal for a new oilsands mine that ultimately fizzled out.

The Conservative leader criticized Trudeau several times in the House of Commons over his remark about phasing out the oilsands, and he has said “technology not taxes is the best way to fight climate change and protect our environment.” He suggested a Conservative government would provide “incentives” for emissions reductions but not impose any obligations.

The Liberal and Conservative election campaigns did not respond to requests for comment by publication time.

What does political uncertainty mean for the future of the oilsands?

Oilsands production has grown for years, but new oilsands facilities can have high start-up or operating costs and tend to ramp up production slowly.

The last new mine built was in 2018 and there are none under construction. Instead, the industry has been able to squeeze more production out of existing facilities by installing new technologies.

Over the longer term, the Canada Energy Regulator’s most recent forecast from 2023 suggested that, in a world that shifts to low-carbon technologies, oilsands production will steadily decline after 2030, as operating costs begin to overtake revenue.

But Trump has thrown a wild card into the oilsands’ future by moving to eliminate many environmental restrictions on oil and gas development in the U.S., against Canadian products, including energy. All of it could make oilsands products less competitive.

Oilsands exports to U.S. refineries have been key to the region’s growth. Almost all Canadian crude exports wind up in the United States, and U.S. crude oil imports from Canada, mostly from the Alberta oilpatch, have become “increasingly important to U.S. oil refineries” and now make up most U.S. imports, according to U.S. government data.

On the one hand, the large petroleum lobby group, the Canadian Association of Petroleum Producers, has warned that tariffs could disrupt the close Canada-U.S. crude oil relationship.

On the other hand, a group of large oilsands companies added their names to an open letter to federal party leaders last month, saying the country is at a “turning point” and must “defend its sovereignty” by “expanding” the oil and gas sector — even to the point of declaring “emergency powers” to do so.

Wilkinson responded to that letter with his own, suggesting that, while he shared some perspectives about working together to continue Canada’s record oil and gas production, and diversifying fossil fuel markets, addressing emissions is an “economic necessity in a world that will increasingly value low-carbon products.”

“Climate change is real and it continues to represent an existential threat to the future of the human race,” he wrote. “Simply closing your eyes or pointing out that poverty in parts of the world is also a problem, does not and should not let the sector off the hook.”

When it comes to the future of the oilsands, political uncertainty means the specifics remain to be seen.