Governments in Canada have provided at least $23 billion in support for pipeline projects in Canada since 2018, according to a new report from the International Institute for Sustainable Development.

Government support for pipeline projects, the report said, “heavily undermines our ability to achieve our climate goals” and can result in “large increases in carbon emissions that last for decades.”

The report examines support in the form of direct transfers, loans, loan guarantees and other measures to three major pipeline projects: the Trans Mountain expansion, the now-cancelled Keystone XL and Coastal GasLink. 

“It’s critical that we move away from [financing fossil fuel projects] and finance climate positive investments if our country is going to have a fighting chance of meeting our climate targets,” Vanessa Corkal, a policy advisor at the International Institute for Sustainable Development and the lead author of the report, told The Narwhal.

“[Government financial supports for pipelines] have very clearly shaped the market, which is dangerous in the sense that we very arguably should be shaping the market towards a clean energy transition,” Corkal said.

“It also, frankly, puts taxpayer dollars at risk.”

Official Canadian pipeline subsidies difficult to trace

The report raises questions about government transparency regarding financial support for fossil fuel projects.

Though the report attempts to put a dollar value on government support for pipeline projects, it stops short of declaring the $23 billion provided so far as official “subsidies.” Subsidies have been defined by the World Trade Organization as a specific set of financial support mechanisms that can include loans, grants and tax incentives, among others. 

According to the World Trade Organization, a loan or loan guarantee is considered a subsidy if the cost to the company is less when it receives the funds from the government than it would have been had the company gone through the commercial market — if it could obtain a commercial loan or loan guarantee in the first place. 

Without more transparency from governments about the terms of loans and other arrangements, Corkal said, it is very difficult to discern which supports meet the internationally accepted definition of a subsidy. 

The International Institute for Sustainable Development submitted multiple Access to Information requests and received thousands of pages with information it described as “either withheld or heavily redacted, while the pages released contained little to no information addressing the types of support listed in this report.”

“Due to a lack of available data, the full amount of government support provided to the pipelines studied in this report is extremely difficult to quantify,” the report notes.

The Government of Canada has committed to ending “inefficient” fossil fuel subsidies by 2025, and is in the process of completing a ”peer review” of existing subsidies, though that process is reportedly delayed.

Obtaining information about the amount of public money being allocated to pipeline projects is “very difficult,” Corkal said.

Because no database exists to publicly track government spending on fossil fuel projects, Corkal added, “we have to do the legwork to quantify that for them.”

Governments more willing to provide pipeline financing than industry: report

The federal government recently passed Bill C-12, dubbed its “climate accountability” legislation, which requires federal governments to set binding targets to ensure Canada reaches net-zero carbon emissions by 2050.

But the report finds that governments, including the federal government, have not only been providing support for large fossil fuel projects in the meantime — but that the government has in some cases been more eager to finance pipeline projects than industry itself.

“There have been cases where [governments in Canada] have made concessions either through subsidies or they’ve directly invested in projects that the private sector wouldn’t necessarily have done — or the project wouldn’t have gone ahead were it not for subsidies and support,” Corkal said.

“We are seeing this trend,” she added. “The investments that we document in this report illustrate that the private sector is starting to appear unwilling to make these massive financial investments, especially on long-term, large infrastructure.” 

In the absence of industry willingness to provide the necessary funding, she added, governments have increasingly stepped in to provide support.

A spokesperson for the Alberta premier’s office did not respond to a request for comment by publication time. The Prime Minister’s Office referred a request to the office of the deputy prime minister, which did not respond by publication time. A spokesperson for the Minister of Environment and Climate Change referred The Narwhal’s questions to the Department of Finance. A spokesperson for that department said by email “Canada is firmly committed to phasing out inefficient fossil fuel subsidies and has already eliminated eight of out nine tax subsidies,” adding “the government has made unprecedented investments in a clean, green economy.”

The financial support provided to pipeline projects includes $6 billion in loan guarantees from the Alberta government to TC Energy for the now-cancelled Keystone XL project and $11 billion in federal loans and assumption of risk for the Trans Mountain project.

Both projects have been steeped in challenges: Keystone XL was scrapped in June, while Trans Mountain has seen four insurers — Argo Group, Munich Re, Talanx and Zurich Insurance Group — terminate their relationship with the Crown corporation.

In June, a spokesperson for the Argo Group told National Observer by email that “this type of project is not currently within Argo’s risk appetite.”

‘Opportunity cost’ also needs to be considered: report 

There are other, less direct costs to consider when assessing governments’ support of fossil fuel projects like pipelines, Corkal said.

“There are significant opportunity costs when governments directly support fossil fuels over social development and the development of cleaner energy sources,” the report notes.

And investments in pipelines and other fossil fuel infrastructure could be in place for long periods. “Government support to pipelines may place public money at significant financial risk for current and future generations,” the report warns.

“When governments are putting money towards these large projects — and tying up public money in these large projects — that money is not going towards things that it could have,” Corkal explained. “The examples are numerous: from building retrofits to renewable energy production and electrification.”

Updated July 7, 2021, at 10:30 a.m. MT: This article was updated to include a statement from the federal Department of Finance.

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With U.S. president-elect Joe Biden’s inauguration quickly approaching, the stage has been set for the world’s second-largest emitter to take renewed action on climate change that could spill over into Canada.

Biden put forward an ambitious vision for a clean energy transformation of the U.S. economy during the election campaign — pledging to rejoin the Paris Agreement and reach net-zero greenhouse gas emissions by 2050. 

And with Democrats snagging control of the Senate after winning both seats in Georgia’s runoff elections, Biden will be able to count on steady support for his environmental initiatives.

“It’s night and day within the U.S. to go from a president who rejects science and has been rolling back fairly modest measures to one that is promising 100 per cent clean electricity by 2035,” said Kathryn Harrison, a University of British Columbia political science professor who studies climate and energy policy.

Biden will take office in the wake of a sustained effort by his predecessor to undermine key climate and environmental regulations and policies. More than 70 such rules — including vehicle emissions standards and controls on methane emissions from oil and gas — were eroded under the Trump administration, with efforts underway to weaken more than 25 others, according to a New York Times analysis.

U.S. climate action is crucial to global efforts to reduce greenhouse gas emissions: the country was responsible for 15 per cent of global carbon dioxide emissions in 2018, second only to China, according to a Union of Concerned Scientists’ analysis. 

“With or without the U.S., the world is not on track to meet the targets in the Paris climate agreement, but without the U.S. there’s absolutely no chance,” said Simon Donner, a climate scientist and geography professor at the University of British Columbia. 

Renewed commitment to climate action from a Biden administration could reverberate around the world.

“The U.S., for good and bad, is a leader economically around the world and the decisions the U.S. makes influences what other countries are willing to do,” Donner said.

Here’s where the President-elect stands on key climate and environment issues.

Biden pledged to rejoin the Paris Agreement and ramp up climate action

The United States officially withdrew from the Paris Agreement on climate change on Nov. 4, the day after the U.S. election and a year after Trump gave notice to the United Nations. 

Biden, however, has pledged to rejoin the international accord and could do so as early as February.

That would provide “a shot in the arm” for the agreement, said Ravipal Bains, a McMillan LLP corporate lawyer with expertise in corporate governance and environmental and social governance issues.

Donner agreed. Even if passing legislation remains a challenge, it will mean a lot to have the U.S. “as an international champion” for climate action once again, he said.

Biden also campaigned on a $2 trillion plan to combat climate change that includes major investments in clean energy and a commitment to eliminate carbon emissions from the power sector by 2035. 

His platform includes commitments to sign a number of executive orders “on day one” to put the country on track to meet its 2050 target and to push Congress to pass climate legislation with milestone targets and enforcement mechanisms within his first year in office. 

Biden also committed to major investments in clean energy research and innovation, clean infrastructure, including electric vehicle charging stations, and to — one day — ensure 100 per cent of new cars sold are electric. 

“He’s promising a pretty bold transformation of the U.S. economy pretty quickly,” Harrison said of the plan.

And any transformation in the U.S. is likely to spill over to other countries, according to Bains. 

“If the U.S. government takes a stance that they want to accelerate decommissioning of certain types of fuel sources, that will have ramifications in the U.S. economy and the broader global economy because many of the other economies take cues and are suppliers for the U.S.,” he said.

Emissions rise from an industrial facility in Kentucky. The U.S. was the world’s largest greenhouse gas emitter after China in 2018, according to the Union of Concerned Scientists. Photo: Nik Shuliahin

The U.S. Senate, climate legislation and Biden’s options

Even a Democrat-controlled Senate won’t have guaranteed easy passage for effective climate legislation, experts say.

But Biden could have a meaningful impact through spending and regulation.

“The Obama administration, which Biden was a part of, showed that you can do a lot with regulations, even if you can’t pass a bill,” said Donner, pointing to the Clean Power Plan as an example.

“If it had been fully enacted, because of course Trump repealed parts of it, it would have probably reduced emissions about as much as the legislation would have,” he said.

Donner said he would expect to see Biden reverse Trump’s executive orders that weakened environmental regulations, but noted the courts could pose a challenge given the number of appointments Trump made during his presidency.

Several other initiatives, including energy efficiency retrofits, investments in public transit and electric vehicle charging stations, could be pushed forward through spending, Donner said.

Spending on climate adaptation measures may have more bipartisan support, in part because it wouldn’t necessarily have to be framed as a climate measure, he said.

“We shouldn’t discount the fact that with Biden as president, the Democrats have control of who’s appointed to run all the government agencies,” Donner added.

“That absolutely matters,” said Debora VanNijnatten, a Wilfrid Laurier University political science professor who studies transboundary environmental governance.

Under Trump, the U.S. Environmental Protection Agency (EPA) took a marked deregulatory bent and prioritized the needs of the oil and gas industry, VanNijnatten said.

Under a Biden administration she expects “an absolute sea change in terms of what the U.S. EPA is and can do.”

‘Policies of the U.S. administration echo across the world’

Action on climate change in the U.S., Canada’s largest trading partner, should make it easier for Canada to take more ambitious climate action of its own, Harrison said, noting the federal government needs to implement additional measures to meet its 2030 targets.

Biden seems prepared to ensure other countries are pulling their weight. According to his platform, Biden would consider imposing “carbon adjustment fees or quotas on carbon-intensive goods from other countries that are failing to meet their climate and environmental obligations.”

Such climate tariffs could exert pressure on Canada and others to ensure their emissions reductions targets and regulations measure up to those adopted by Biden’s administration, Harrison explained.

A Biden presidency also offers a wide range of potential partners for Prime Minister Justin Trudeau’s Liberals in Ottawa, VanNijnatten said, noting that a number of the initiatives Canada and the U.S. were collaborating on, such as methane emissions and fuel efficiency standards, “ground to a halt” under the Trump administration. 

Bains said Biden’s plan will also create opportunities for Canadian clean tech companies through trade — and send a signal to investors that “green investments will be a key component of America’s growth.”

“As one of the world’s largest economies and as one of the globally leading centres of power, the policies of the U.S. administration echo across the world,” he said.

That could serve as a “wake-up call that Canadian industry has to get their act together because our major trading market could be transforming rapidly and we risk getting left behind,” Harrison said.

Biden promised to scrap Keystone XL

A key concern for Jason Kenney’s United Conservative Party government in Alberta will be the future of the Keystone XL pipeline.  

The province bet $1.5 billion on the project moving forward earlier this year, but Biden has said he would cancel the controversial pipeline. 

The day before the U.S. election, Canada’s Natural Resources Minister Seamus O’Regan reiterated the federal government’s support for the pipeline, which could ship 830,000 barrels of crude a day from Alberta to the U.S.

In an interview with Global News, O’Regan said “there is a very, very strong argument for the Keystone project that continues regardless of who the president of the United States is.”

“We will continue to make that argument strongly,” he added.

Construction of the Alberta section of the Keystone XL pipeline began near the town of Oyen in July 2020. Photo: Government of Alberta / Flickr

Should Biden scrap the project it could make it easier for Canada to meet its climate targets if the cancellation wards off an anticipated increase in oil production, Harrison said.

But it’s likely to increase pressure from the industry to build the Trans Mountain pipeline expansion and Enbridge’s Line 3 pipeline, she added.

Bains, however, said given the scope of Biden’s clean stimulus plans, Keystone XL may not be among the first issues he examines.

“The Canadian government has been in favour of this project so there may be opportunities where they can engage with their American counterparts,” he said.

“Short of having specific guidance from the Biden administration on how they plan to deal with these issues, I think there will be opportunity for cooperation with respect to Alberta as well, because from a U.S. perspective getting oil from Alberta is more cost efficient than from a number of international markets,” he added.

Biden’s climate plans could affect Canada’s oil industry

Other Biden climate measures could impact the oil industry as well, including a commitment to phase out the sale of new gas-powered cars — a step that would significantly reduce U.S. oil consumption, Harrison noted.

Donner said simply shifting U.S. government procurement to electric vehicles could have a significant impact.

Any measures that increase the supply of green energy and reduce U.S. demand for oil are likely to affect the Canadian oil and gas industry and more broadly the transition to a clean economy in Canada, according to VanNijnatten.

“The quicker that transition happens in the U.S., the quicker the transition is happening in Canada,” she said.

The Trudeau government may also encounter less pushback from industry on climate measures if Biden moves forward with similar initiatives, in turn alleviating Canadian concerns of a competitive disadvantage.

Permanent protection for the Arctic National Wildlife Refuge

The Hulahula River flows north to the Beaufort Sea, from the Brooks range mountains in the Arctic National Wildlife Refuge. Photo: Matt Jacques / The Narwhal

Biden’s platform includes a commitment to permanently protect the Arctic National Wildlife Refuge, an area of roughly 8 million hectares in northeastern Alaska that includes the critical calving grounds of the Porcupine caribou herd, from oil and gas development. 

In August, the Trump administration took another step toward allowing oil and gas development in the previously protected area, when the U.S. Secretary of the Interior signed a decision approving the Coastal Plain Oil and Gas Leasing Program. The decision made about 8 per cent of the area available for oil and gas leasing. 

Trump’s efforts to open the area to development have met with major political opposition and lawsuits from the Gwich’in Steering Committee and environmental groups, concerned about the threat to wildlife, food security, and culture. 

Alongside protections for the refuge, Biden said he would push for a global moratorium on offshore drilling in the Arctic.

Biden climate action could ease impacts of U.S. wildfires

While commitments to reduce emissions in the coming years may help avoid the worst effects of climate change, it is already taking a toll in the U.S. and Canada. 

Hotter, drier weather, for instance, has dramatically increased the risk for wildfires each year.

In California alone, wildfires burned more than 1.7 million hectares this year — an area almost three times the size of Prince Edward Island — destroying more than 10,000 structures and killing 31 people.

San Francisco covered in an orange haze during the 2020 wildfires. Photo: Thom Milkovic

While B.C.’s own wildfire season was relatively quiet, smoke from fires along the west coast of the U.S. blanketed southern B.C. for days.

Biden pointed to the fires as evidence of the need for concerted action on climate change.

“If you give a climate arsonist four more years in the White House, why would anyone be surprised if we have more of America ablaze,” Biden said during a September campaign stop in Delaware, USA Today reported. 

“We need a president who respects science, who understands that the damage from climate change is already here and unless we take urgent action, it’ll soon be more catastrophic.”

For those communities already impacted by natural disasters, Biden promised investments in efforts to adapt to climate change, creating new jobs and more resilient communities.

—With files from Julien Gignac

Update Jan. 8, 2021: This article has been updated to reflect the results of Georgia’s runoff elections.

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By Vanessa Corkal, policy analyst, and Aaron Cosbey, senior associate, at the International Institute for Sustainable Development.

In times of unprecedented crisis, government leadership means being bold. But as Canada and its provinces prepare to roll out record-breaking emergency responses to help the newly jobless and throw lifelines to drowning sectors, it’s becoming clear that not all support is created equal.

Alberta Premier Jason Kenney has said unemployment could rise to at least 25 per cent, or upwards of 500,000 workers. To bolster Alberta’s economy, he called for the federal government to commit at least $20 to $30 billion in liquidity for oil and gas producers. This came on the heels of the province’s announcement of almost $8 billion in equity infusion and loan guarantees for the Keystone XL oil pipeline. There have also been calls for the federal government to purchase oil and gas sector accounts receivable at a discount.

There’s no question that people across Alberta need urgent help. In the accommodation and food service sector alone, nearly 100,000 workers have already lost their jobs, and similar numbers seem likely in retail trade. The oil and gas sectors have seen thousands of layoffs and postponed labour as the province’s companies limit production and shelve all plans for expansion, upgrades and maintenance.

But is injecting tens of billions into oil and gas corporations the right kind of help? As well as addressing immediate needs, strategic emergency response should have two critical features:

1. It should address the root causes of the crisis and reduce vulnerability to future crises;
2. It should take advantage of the dynamism that crisis creates to build back better and achieve important public policy goals that may have been harder to reach in more settled times.

Would the proposed assistance address the root causes of the crisis? Alberta’s economic hardship started before COVID-19 and is grounded in over-dependence on those inherently cyclical commodities. But rather than pursue diversification that could shelter Albertans from the pain of future shocks, these sorts of investments double down on the status quo, hitching the wagon firmly to volatility and uncertainty.

There will be future shocks, whether it’s another 2008-style financial crisis, a climate-induced crisis such as the 2016 Fort Mac fires, or — dare we say it — another COVID-19-style pandemic. Placing heavy bets on the oil and gas sector nearly guarantees we will be here again, with similar social and economic pain for people across the province.

Bets like these assume the oil and gas sectors will return to business as usual after COVID-19, that demand will be strong for decades in spite of increasing climate change mitigation efforts, that pipelines will be built despite sustained opposition or political delays, and that Saudi Arabia and Russia will back down and reverse measures designed to do exactly what they are doing — squeeze out high-cost producers like the U.S. and  Canada.

Even if all those assumptions prove right, and the bet pays off, that success doesn’t address the underlying problem of over-dependence — it aggravates it.

Would the proposed assistance take advantage of the opportunity to build Alberta back better? We know that, whether through market forces or government policies, Canada’s oil and gas sector will eventually decline, hopefully to be replaced by more diversified and sustainable economic drivers. As the head of the International Energy Agency, the United Nations Secretary-General and others have recently argued, our response to the current crisis must accelerate this urgently needed transition. If Alberta is to rebuild its damaged house after this unprecedented crisis, why not build a stronger house?

For Alberta and the federal government, this should mean investing tens of billions of dollars in sectors that can bring long-term prosperity for Alberta’s workers and families, such as hydrogen, health sciences, renewable energy, clean transport, sustainable agriculture, innovation in oil and gas well reclamation, and prevention of fugitive methane emissions, building on the province’s world-class institutions and infrastructure, and the strengths of its people.

The coming economic downturn will swallow up the unprecedented torrents of fiscal support we’re assembling, and still call for more. But let’s remember that this spending can be a historic force for positive change to ensure that when we come out the other end, our society is more equitable, sustainable and resilient — ready for whatever the future might throw at us.

10 things you need to know as a barrel of Alberta oil is valued at less than a bottle of maple syrup

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The headlines don’t stop. “Oil crashes to fresh 18-year low.” “Crude-oil prices post the largest quarterly percentage drop on record.” “Canada is first price-war casualty.”

As the COVID-19 pandemic leaves its mark on lives and economies across the globe, Alberta’s already-volatile oil industry is gearing up for another storm as oil prices around the world plummet.

Recently, some types of oil have even traded at negative oil prices.

Negative. Oil. Prices.

It’s what Alberta Premier Jason Kenney called a “triple whammy — the pandemic, the recession and the oil price crash.”

At the same time, Kenney has announced a $1.5-billion investment in a multinational pipeline company to build the controversial Keystone XL pipeline to the U.S. Gulf Coast, and the federal government is reportedly floating plans for a $15-billion bailout of the industry.

Oil and gas producers have asked governments to consider investing public funds into their private companies — not unlike what was done to try to shore up auto companies in the last major recession.

With so much news flying around, we wanted to take a couple steps back and clear up a few basic questions. 

Why are oil prices so low? How can an oil price be negative? And what the heck is “homeless crude?”

Read on.

1. So is this the lowest oil prices have ever been?

When we talk about Alberta’s crude oil — specifically, bitumen from the oilsands — we look at a benchmark price called Western Canadian Select (WCS). And while Western Canadian Select has been low before, it’s never been quite this low. 

Western Canadian Select dipped down to US$3.82 per barrel on Monday. There are 159 litres in a barrel of oil, so that’s just over two cents per litre. 

In the past, Western Canadian Select had been as low as US$5.97 per barrel. That was back in December 2018, according to data from the Government of Alberta.

Western Canadian Select prices. Source: Alberta government. Graph: Carol Linnitt / The Narwhal

2. Is the price of oil so low because of the pandemic? 

The pandemic certainly hasn’t helped oil prices, as demand is plummeting (think fewer flights, less driving, less economic activity in general). 

But the real price crunch is the result of a long-simmering price war. 

The basics tenets of supply and demand make it obvious that prices go up when supply is low. So for years, major oil-producing countries like Saudi Arabia, a member of the Organization of the Petroleum Exporting Countries (OPEC), and Russia, not a member, have been trying to agree to reduce supply (i.e. sell less) to keep prices high.

But in March, that all changed. Saudi Arabia essentially said “to hell with this” and started increasing supply again. Prices plummeted as expected (thanks, econ 101!).

3. But why would Saudi Arabia flood the market with cheap oil? Isn’t it ultimately losing, too?

While Saudi Arabia and Russia have been trying to curtail supply to keep prices higher, the trouble is, not everyone has been on board with that strategy (ahem, the United States).

Crude oil production in the U.S. has doubled in less than 10 years, according to data from the U.S. Energy Information Administration. This meant Saudi Arabia and Russia were trying to curb their production while the U.S. was still “going gangbusters” with production, according to Clark Williams-Derry, a Seattle-based energy finance analyst with the Institute for Energy Economics and Financial Analysis.

That meant the supply was staying high — and the prices were staying low.

As Jeff Rubin, former chief economist of CIBC World Markets, put it, “Saudi Arabia did what is the rational course of action for the lowest-cost producers.”

“[It said,] ‘If we’re going to a price war and I’m the lowest-cost producer, I’m turning open the spigot.’ ”

So that’s what it did. 

It flooded the market, because even at a low oil price, the low cost of its production means it can still make money. According to Rubin, the cost of production in Saudi Arabia is easily a tenth of what it is in Alberta’s oilsands.

So while Saudi Arabia is losing out compared to what it would have made had prices stayed high, it is still making money.

Alberta, on the other hand, is in a different boat. Oil from the oilsands costs more to produce and sells at a lower cost than much of its competition.

4. Why is Alberta’s oil worth so much less?

“We talk about oil as if it’s one thing. But it’s actually a range of things, a mixture of hydrocarbons,” Williams-Derry explained to The Narwhal last month. “Each barrel of oil is its own thing.”

Alberta’s crude is different from oil produced elsewhere. 

Alberta has two main disadvantages: location (we’re landlocked) and the quality of oil produced (thick like cold molasses).

“You’re talking apples and oranges,” Rubin explains. “One is a much lower quality oil.” That’d be Alberta’s.

That creates what’s known as the price differential — the discount Alberta crude is sold at compared to the common North American benchmark, West Texas Intermediate (WTI).

So while West Texas Intermediate trades at around US$20 per barrel, Western Canadian Select can dip much lower — even to under US$4 per barrel.

Work is expected to slow down in the Alberta oilsands, due to a plunge in world oil prices. Photo: Alex MacLean

5. Under US$4 per barrel of oil is less than a bottle of maple syrup. How low can oil prices go?

Very low. 

Oil prices depend on a lot of things — and it’s important to remember that benchmarks like Western Canadian Select are just that: benchmarks. But with so much oil flooding the market right now, prices are being driven down dramatically, to the point that a barrel of oil can be “functionally worthless” once production and transportation costs are factored into the equation.

And in some areas, that could even mean the oil price could be negative.

6. What on earth is a negative oil price?

Last week, Bloomberg reported that some “producers are actually paying consumers to take away the black stuff.”

That was after another benchmark oil price, Wyoming Asphalt Sour, a type of oil blend used to make paving bitumen, was reportedly trading at -19 cents U.S. per barrel.

As CBC pointed out, Wyoming is not unlike Alberta — in that it is landlocked — leaving some to wonder if Western Canadian Select is also going to be pushed close to a valuation of zero … or less.

These fears aren’t just held by oil price analysts — Alberta Premier Jason Kenney has reportedly speculated that the price of Western Canadian Select could drop into the negatives in a matter of weeks.

7. Why are we still paying 60 cents per litre for gas in Alberta if oil is worth basically nothing these days?

Gasoline prices in Alberta have fallen to roughly half of what they were at this time a year ago, with some gas stations in the province reporting prices in the 55-cent range, according to Gasbuddy.com.

But don’t expect gas prices to be negative anytime soon.

The stuff we put in our cars is very different from the thick molasses pulled out of the ground at an oilsands mine. Refinery and transportation costs play a big role in gas prices, as do taxes. And don’t forget the gas station itself wants to make a few bucks, too. 

It’s a bit like buying a loaf of sourdough from the bakery. Yes, we have wheat growing next door, but that doesn’t do most of us a lot of good when we want to make a sandwich.

We can, however, likely expect to see gas prices stay low as the price of crude oil stays down.

8. Can’t companies just store oil until prices go back up?

You’d think companies could just hold on to their oil if the prices they’re fetching aren’t worth it.

But too much oversupply around the world can mean storage options simply run out. 

There are serious concerns right now this might already be happening. As CNN put it, we’re in the midst of “a supply glut so epic that the world will soon run out of room to store all the unneeded barrels of oil.”

And according to reports from The Financial Post, “by June there’ll be no place left to put the unwanted crude.” 

This has led to a new kind of crude: “homeless crude” — oil that has no place to go. 

No one wants to sell it at such low prices, but increasingly they can’t find anywhere to store it, either.

That means companies are thinking of creative ways to store their excess supply, including buying tankers to use as floating storage. One energy analyst has suggested 20 per cent of the global fleet of what are known as “very large crude carriers” could be used as floating storage — but even that wouldn’t offer enough space to store all the unwanted oil. 

And in the meantime, the cost to store oil on a supertanker has skyrocketed.

But with so much excess supply and so little (affordable) storage, the only option for many producers is to sell their oil. That means even lower prices. 

Eventually, producers are forced to stop producing.

9. So can’t Alberta just turn off the taps for a while?

Not really — especially not in the oilsands, where huge mining operations can’t simply be turned off with ease. 

“It’s not nimble,” Rubin said of the oilsands industry, noting that the huge staff and capital investment make it more difficult and expensive to halt production at an oilsands mine than at more conventional wells or U.S. shale production, which can be temporarily suspended at a lower cost.

In other types of oilsands production that involve steam, there are added concerns that turning off production can hinder the ability of a well to produce oil in the future.

Then there are the economic worries.

“Alberta can’t just afford to shut it all down,” Rubin told The Narwhal. “There are consequences for people, not just who work in the oil industry, but who require the spending of people who work in the industry. So let’s try to salvage what we can.”

This is what has governments nervous — figuring out a way to prevent a total economic collapse, while taking into account the long-term challenges the industry already faces, including serious concerns about climate impacts.

10. Will more pipelines solve this problem?

As Rubin put it to The Narwhal last month, he believes completion of the Trans Mountain pipeline expansion project would be a “lifeline,” not a panacea, for the struggling oil and gas industry.

“The notion that Asia is desperately waiting for Canadian bitumen is a fantasy,” he said, adding that he believes while more pipeline capacity would ease some of the pressures on the price for Alberta’s crude, it would by no means make the high-cost product into something high value, especially when compared to what’s available in the rest of the world.

So that leaves the question on the table — what is the future of Alberta’s oilsands industry and the thousands of workers employed within it?

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A letter submitted by the U.S. Environmental Protection Agency (EPA) to the State Department gives new weight to concerns the proposed $8 billion Keystone XL pipeline, destined to carry crude from the Alberta oilsands to export facilities along the Gulf of Mexico, will have significant climate impacts.

The EPA letter suggests existing analyses – which downplay the importance of greenhouse gas emissions associated with the project – are out of date and require revision in light of low global oil prices.

Due to the plummeting of oil prices and related market changes “it is important to revisit [the] conclusions” of previous reports, EPA told the State Department.

“Given recent large declines in oil prices and the uncertainty of oil price projections, the additional low prices scenario in the (State report) should be given additional weight during decision making, due to the potential implications of lower oil prices on project impacts, especially greenhouse gas emissions.”

The State Department is due to release a revised analysis of the Keystone XL project and is currently gathering comments from the EPA and other agencies.

A recent report in the journal Nature singled out the oilsands as one of the world’s carbon deposits that must remain in the ground if global temperatures are to remain within the 2 degrees Celsius warming limit recommended by policy makers and scientists.  

Construction of the Keystone XL pipeline is dependent on a steady flow of oil from the estimated 160 billion barrels in the oilsands. Yet the drop in prices has recently led to abandoned projects and major cuts to the workforce. Suncor, the oilsands’ largest operator, recently announced it will eliminate 1,000 jobs, Shell Canada will cuts its workforce by 10 per cent and Cenovus Energy confirmed its investment in the area will drop by 25 per cent.

A Republican-led Congress is attempting to force approval of the Keystone XL pipeline with new legislation, although President Barack Obama has been clear about his plan to veto any bills that would allow construction to begin.

In 2013, Obama indicated his final decision on the pipeline will come down to the project’s climate impact, saying “our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution.”

In its letter to the State Department this week, the EPA said carbon emissions from the pipeline — which has the capacity to carry 830,000 barrels of oil per day — would add up to the equivalent of 5.7 million new passenger vehicles on the road.

“Over the 50-year lifetime of the pipeline, this could translate into releasing as much as 1.37 billion more tons of greenhouse gases into the atmosphere,” the letter states.

Alberta premier Jim Prentice travelled to Washington, D.C. this week to lobby Congress and the Obama administration to approve the pipeline.

Prentice recently told NPR that Alberta “has the most exacting standards around in terms of carbon emissions, the regulatory framework that surrounds industrial emissions.”

When it comes to the venting and flaring of gasses with high warming potentials like methane, Prentice said, “in all these areas, I think we’re world class.”

Yet the EPA seems to have come to its own conclusion regarding Alberta’s greenhouse gas regulations, stating, “until ongoing efforts to reduce greenhouse gas emissions associated with the production of oil sands are more successful and widespread…development of oil sands crude represents a significant increase in greenhouse gas emissions.”

Canada currently has no regulation to limit emissions from the oil and gas industry, and recently Prime Minister Stephen Harper said it would be “crazy” to introduce such rules.

The EPA letter notes “oil sands crude has significantly higher lifecycle greenhouse gas emissions than other crudes” and that the use of oilsands crude creates emissions 17 per cent greater than the use of crude refined in the U.S. on a well-to-wheels basis.

Premier Prentice argued Canada will continue to move crude to the U.S. with or without the Keystone XL pipeline, suggesting rail will pick up the slack. In its letter the EPA appears to agree with this point, suggesting oilsands producers would likely stomach the high cost of rail transport.

But the letter goes on to point to the additional risks associated with transporting large quantities of bitumen, which “can have different impacts than spills of conventional oil.” A recent government-commissioned study in Canada acknowledges there are large gaps in existing knowledge when it comes to the effects of bitumen spills.

Concerns over the pipeline route, especially in Nebraska, requires greater spill preparedness and a clear commitment from TransCanada that the company will assume responsibility for any spills and remediation should a release occur. Spills remain “a concern for citizens and businesses relying on groundwater resources crossed by the route,” the EPA letter notes.

Bill McKibben, founder of 350.org, called the letter a “damning report” and said with it, “the president’s got every nail he needs to finally close the coffin on this boondoggle.”

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While every year is crucial when it comes to reducing the amount of heat-trapping greenhouse gases polluting our atmosphere, 2015 is looking to be a super year and a possible turning point in which a few big decisions could make all the difference.

Here are five big things to watch in 2015:

1. Paris UN Climate Conference

Let's start at the end of 2015, when global leaders are expected to show up in Paris, France, in early December to negotiate a new global agreement on global warming pollution reductions. A preview of what is to come was on display in Lima, Peru, in early December when environment ministers and their delegations cobbled together the draft of what will be negotiated in Paris. The major sticking points in the negotiations were the same as they have been for a while now.

The first big issue is the commitment of funding from developed nations, such as the U.S., Canada and the EU, to less-developed nations such as Ethiopia, Bangladesh and the Philippines, to help build renewable energy sources and avoid the use of coal and other carbon-intensive fossil fuels as their economies grow. While the goal is $100 billion in financial commitments, developed countries have so far only put up $10 billion.

The second big issue on the negotiating table is the level of cuts to carbon emissions and by when they will be reached. Some countries want to commit to a shorter time period, like 2020, while others want a longer one. Any good project manager knows that clear, measurable objectives are the key to success. So nailing the percentage of carbon reductions countries will commit to, and by when, is crucial to success at the December 2015 Paris climate talks. 

But prior to these talks, there are some other big moments on the horizon that will likely play a role in deciding whether the Paris talks are the final note in a year-long crescendo or if it will all fall flat.

2. Keystone XL Pipeline

U.S. President Obama has a big decision to make on the Keystone XL pipeline in 2015. If approved, Keystone XL would mean a massive expansion of the oilsands in Alberta, Canada. The big issue here is that the oilsands are very carbon-intensive to produce. A typical barrel of oilsands oil produces three to four times more greenhouse gas emissions than a regular barrel of oil.

President Obama has been saying and doing all the right things when it comes to climate change lately, penning a greenhouse gas reduction deal with China and his Environmental Protection Agency (EPA) proposing new regulations for coal plants that would see sharp reductions in greenhouse gas emissions. 

However, Obama's recent positive moves on climate will be for naught if the president goes ahead and approves the Keystone XL pipeline project. For what it's worth, I would bet good money that Keystone XL is rejected. 

3. U.S. Congress of Denial

While the rest of the world deals with important issues like the fate of the human race and major disruption of the global atmosphere, the U.S. Congress, which is now completely controlled by the Republicans, is still grappling with understanding (or denying) the basic science. In the most recent elections, the Democratic party lost control of the U.S. Senate, and with that we'll see a comeback of the climate deniers running key committees. Most notably, Senator James Inhofe will most likely again be chairing the powerful Environment and Public Works Committee. Watch Inhofe, who claims climate change is the "greatest hoax ever perpetrated," call all sorts of hearings around the issue of climate change and embolden like-minded conspiracy theorists and deniers-for-hire.

With 2015 being such an important year, the U.S. Senate will be a circus act with consequences when it comes to the issue of climate change. 

4. Big Coal's Last Stand

There is a shake-up underway in the coal industry and while I don't think this most carbon-intensive of fossil fuels is going away any time soon, 2015 will be a decisive year in which coal will either rise from the ashes or continue a course to extinction.

In June 2014, President Obama's Environmental Protection Agency (EPA) announced a set of proposed new regulations that would see the U.S. coal sector reduce its greenhouse gas emissions 30 percent by 2030. Barring any new game-changing technology, these new regulations effectively stop the construction of any new coal-fired power plants in the United States. This also means coal companies just lost a big customer, and will have to look elsewhere to expand their market.

Unfortunately for Big Coal, one of the other big markets for their product, China, is also having second thoughts about expanding its use of coal for energy production. There have been rumblings for quite some time now that coal consumption in China has peaked, and it appears that may in fact be the reality.

With China dealing with civil unrest and bad international headlines over air quality issues, the country recently penned a joint greenhouse gas reduction agreement with the United States and also announced in September that it would soon ban the import of coal with high sulfur and ash content.

All of this is hurting the coal industry big time and you need look no further than Peabody Energy, the largest private-sector coal company in the world. In September, Peabody was dropped from the Standard & Poor's 500 stock index and the company has seen its stock price slide from a high of $72 per share four years ago, to today trading around $7.74. In reaction, Peabody has started an over-the-top new PR campaign called "Advanced Energy for Life" with the intent of softening the bad image of their dirty product and framing it as the savior for developing nations in Africa, Asia and Latin America.

Big coal is wheezing on its own fumes, and unless it successfully finds new markets for its products, 2015 will likely be the start of a death spiral. 

5. Down Under and the Great White North

With a collective population of roughly 58 million, Canada and Australia are relatively small countries, but when it comes to the issues of energy and climate change, they play an outsized role on the global stage.

Canada, with its tar sands deposits, has the third largest proven oil reserves in the world. Australia is the fourth largest coal producer in the world, with much of it exported to the Asian and South Asian markets. Both countries also have leaders bent on making their countries into energy superpowers, climate be damned. 

Canada's Prime Minister Stephen Harper is in his eighth year of power, with a federal election to be called by October 2015 at the latest. There remains a real chance that Harper could be re-elected, bringing with it another four years of inaction on climate change and cheerleading for the expansion of export pipelines and the tar sands. If that isn't bad enough, if he wins another term in office, watch Harper completely regress (if that is possible) on his country's commitments at the UN negotiating table in Paris in December. 

In his second year of power, Australia's Prime Minister Tony Abbot is making Stephen Harper look like a lightweight when it comes to punching holes in efforts to reduce global greenhouse gas emissions. Since taking office, Abbott has, among other things, scrapped Australia's carbon tax and shut down his country's climate commission. At the same time, Abbott has been clear on where he stands on fossil fuels, recently proclaiming that "coal is good for humanity." 

This summer, Harper and Abbott stood together and announced they had formed a pact to fight action on climate change and invited the leaders of the United Kingdom, India and New Zealand to join them. None followed, and nothing more has been heard of the Abbott/Harper pro-carbon coalition. What Harper and Abbott are doing may be political suicide. We are no longer in the heyday of climate denial and pro-oil pacts, and the electorate may punish Harper in the 2015 Canadian election for his outright disdain for the issue of climate change. 

If the electorate does punish Harper in 2015, Abbott will no doubt be watching and who knows what he will do in response. But what I do know is that the best way to get to a politician is either money or the threat of losing votes. 

When I first started working on climate issues, 2015 seemed so distant. At one point, I naively even thought that by 2015 we would have finally dealt with climate change once and for all. But it turns out that when dealing with an issue as big as climate change, there is no "once and for all" solution. Instead, climate change is an issue that will be dealt with through peak moments of big change and flat-lines of political morass. 

If we play our cards right, 2015 could be a big, great peak year for climate. 

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Uncannily occurring the week of Halloween, there is word today that Liberal leader and possibly the next Prime Minister of Canada, Justin Trudeau, has contracted a virus displaying "zombie-like" symptoms.

Top Trudeau adviser Igor Scareoffovitch told press today that:

"He [Trudeau] has been showing symptoms for some time, but it wasn't until last week on a trip to Washington, DC that we saw the virus really take hold. We are hopeful that it won't spread to the rest of the Liberal Caucus, but this particular virus can be really contagious if it is not contained quickly. It is one day at a time, and the long term outlook is good if the Liberal leader sticks to the daily regimen proposed by his medical team."

Last week in Washington, DC it was clear to many that something was amiss with the young leader. At a panel discussion hosted by the left-leaning think tank, Center for American Progress, Trudeau told attendees that he supports TransCanada’s proposed Keystone XL pipeline that would carry unprocessed tar sands crude from Alberta to refineries on the Gulf Coast.

Obviously taken aback by this statement, reporters asked Trudeau to clarify his support for the controversial pipeline and in an obviously fevered and somewhat droning (zombie-like) voice, Trudeau stated again that: “My support for Keystone is steadfast.”

While Trudeau has traveled extensively in the past, this was his first trip ever to Washington, DC which has medical experts thinking that it may be related.

Medical expert Dr. Mary Arachna at the Organization for Oil Zombification Education (OOZE) in Transylvania County, North Carolina had this to say:

"It is clear that this young man has undergone some type of zombification. What we see often here at the Center is young, charismatic leaders fall under some kind of spell, whether it be through a hypnotic trance brought on by oil lobbyists, or in more extreme cases an actual bite from a Republican or conservative politician. Either way, the result is devastating to future generations who will have to deal with the messy circumstances that come along with vocal support of such things as the expansion of the tar sands."

One popular depiction by an expert in the area, shows what Trudeau could eventually look like if full-blown oil-lobby zombification does occur:

Other scenarios are currently being run by OOZE on what exactly Justin Trudeau will look like if the virus overruns the young leader. They are asking experts to add their own depictions to a Zombies Got Canada Tumblr page.

There is some controversy in the zombie-medical community though.

In a brief statement, the lead U.N. negotiator with the Zombie Nation, Professor Elvira Desdemona, pointed to the fact that Trudeau showed symptoms of oil lobby zombification earlier this year when he came out publicly praising Alberta Conservative Premier Alison Redford's efforts to convince US President Barack Obama to greenlight the Keystone XL project.

"It is a scientific fact that Redford has been zombified by the oil lobby," read the statement from Prof. Desdemona. "And it may be the case that Trudeau initially contracted the virus from the Alberta Premier. Either way, it is clear that the symptoms have been exacerbated on his trip to Washington, DC where oil lobby zombification has been at epidemic levels for many years. Even President Barack Obama is suspected to be a carrier and a potential victim of the disease."

Trudeau is currently undergoing treatment, which mainly entails a series of briefings from top climate change scientists, such as Dr. James Hansen who consider the Keystone XL pipeline the "linchpin" to tar sands expansion efforts and runaway climate change impacts.

Other experts in the field of oil lobby zombification are running scenarios on what exactly Justin Trudeau will look like if the virus overruns the young leader, and they are asking artists and other such creative thinkers to add their own depictions to a Zombies Got Canada Tumblr page.

The Canadian progressive community is also rallying together with plans to hold events across the country on November 16th. Experts consider mass amounts of public pressure as one means of curing Trudeau of this unfortunate ailment.

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The results have been in since December but there’s still no indication of when the Alberta government’s internal report on pipeline safety will be available to the public.

NDP energy critic Rachel Notley believes Energy Minister Ken Hughes is deliberately withholding the report out of fear that it will make safety an even greater issue in the pipeline debate. She told the Calgary Herald she believes it’s part of a broader communications strategy.
    

“At the end of the day what we really need is for the public to review the review,” she said. “We’re the ones to whom Ken Hughes owes an obligation—not the shareholders of multinational corporations.”
    

Hughes denies the allegation that keeping the results of the report from going public has anything to do the Obama administration’s upcoming decision regarding the future of the Keystone XL pipeline. He says the government needs more time to review the results and that industry is still reviewing its own practices as well. He added that pipeline safety is just one part of a larger process and that he will release the information “in the not too distant future.”


This news comes several days after the National Energy Board discovered that Enbridge is failing to comply with safety regulations at ninety percent of its facilities. When ordered to reveal whether the company’s pump stations had backup power to operate emergency shut downs, Enbridge revealed that only eight of its 125 stations across the country complied with regulations.

Enbridge claims the breach in safety measures was merely a misunderstanding, caused by changes in the way the NEB has interpreted rules, despite those rules having been in place for more than a decade.
    

“Enbridge would never knowingly operate outside of regulatory requirements. In fact, we do more than ask people to trust us, we say look at the evidence. We say look at our record, which is better than the industry average,” Enbridge spokesperson Graham White told CBC News.
    

The oil company’s explanation for the lapse doesn’t inspire much faith in the contents of the Keystone safety report, particularly in light of Hughes’ comment that the report is “highly technical,” requiring more time to fully understand the nature of it.

Another strike against Canadian oil development followed this morning when the Globe and Mail reported that the European Union has proposed labeling Canadian tar sands dirty energy, a move that has Canadian Natural Resources Minister Joe Oliver threatening to take the European Commission to the World Trade Organization on the grounds that it was discriminating against Canadian exports and in contravention of international trade rules.

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TransCanada has made itself a defender of Canadian sovereignty in the debate over the Keystone XL pipeline this week as it fired back at the US Environmental Protection Agency (EPA)’s recent letter to the State Department encouraging the US to work with its northern neighbour to address climate change in the tar sands.

“We commend the Department of State's efforts to estimate the life cycle greenhouse gas (GHG) emissions associated with oil sands development and the proposed Project, to analyze the effect of the Project on Canadian oil sands production and to consider measures to reduce GHG emissions,” the EPA wrote.

They recommended the Final EIS "complement this discussion with an exploration of specific ways that the U.S. might work with Canada to promote further efforts to reduce GHG emissions associated with the production of oil sands crude, including a joint focus on carbon capture and storage projects and research, as well as ways to improve energy efficiency associated with extraction technologies.”

TransCanada’s reply expressed surprise at the “scope and tone of the EPA’s comments,” given that they had seen the agency as largely cooperative thus far.  

“The EPA’s recommendation that the State Department explore ways for the US to involve itself in ways to reduce GHG emissions from the Canadian oil sands ignores the fundamental sovereignty of the Canadian government, as well as the significant steps that Canada and Alberta have already taken in this direction. Respectfully, this goes far beyond the mandate of the EPA and legislators and others would not appreciate other countries interfering in issues of American federal or state sovereignty.”

But where did TransCanada get the idea that international cooperation on climate change might constitute a threat to Canadian sovereignty?

As Inside Climate News pointed out, there is nothing “unusual about the State Department working with other countries on ways to mitigate greenhouse gas emissions. On a recent trip to Asia, Secretary of State John Kerry worked out a significant agreement with China promising to do just that.”

In the past, the conservative government has been more than eager to have the US take the lead on climate change, especially when American targets were behind Canadian targets. This was true both in the Harper government’s decision to pull out of the Kyoto Accord and its strategy at the 2009 United Nations Climate Change Conference in Copenhagen.

"Given the integration of our two economies it is essential our targets remain in line—not more, not less," then Environment Minister Jim Prentice said in 2009 about their decision to marry the two country’s climate policies.

Indeed, conservative legislators have always been committed to international cooperation when it came to strategies to lower trade barriers. This was true of the North American Free Trade Agreement (NAFTA) in 1987 and is true of the Canada-China Foreign Investment Partnership and Protection Agreement (FIPA) today. And it is certainly true of the Keystone XL Pipeline itself. Why should they be averse to partnering on climate change as well?

TransCanada’s willingness to speak on behalf of the Canadian government seems especially odd, given that Premier Alison Redford went to such lengths to distance herself from the company after her speech to the Brookings Institution in Washington.

There she told reporters, that it’s "a private company that has a commercial interest, that is going through a process where they are addressing the issues that need to be addressed by decision-makers in the United States."

So who designated TransCanada defender of Canadian sovereignty? It certainly wasn’t the Athabasca Chipewyan First Nation, which plans to fight tar sands expansion tooth and nail for its encroachment on its sovereignty.

Perhaps TransCanada is simply taking its cue from Cenovus, whose advertising campaign last year unabashedly equated Canadian pride with tar sands development?

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Newly appointed U.S. Secretary of State John Kerry will meet on Friday with his Canadian counterpart, Foreign Affairs Minister John Baird. In any such bilateral meeting, it is paramount that each participant trust the words of their counterpart. After all, when it comes to the world of diplomacy, where wars are settled and treaties are signed, there's little more than words and trust. 

As a former employee in Canada's Foreign Affairs I have attended many bilateral meetings with foreign dignitaries. If I were advising Kerry, I would suggest one question he should ask of John Baird to see if he is an honest broker.

The question is: "Is Canada committed to confronting climate change?"

John Kerry is, and has been for a long time, a vocal leader on the issue of climate change. Sources inside his former Senate office have told me Kerry regularly expresses his commitment to act on climate change and understands the imperative of curbing water and air pollution to safeguard the economy.

Canadian Minister John Baird has a very different stance towards the climate change challenge, preferring to express contempt for proposals to implement market-based solutions to Canada's soaring greenhouse gas emissions. For example, just last year Baird told Parliament that the Harper government disbanded the National Roundtable on Energy and Environment because they did not like the Roundtable's recommendation that Canada adopt a tax on carbon.

"Why should taxpayers have to pay for more than 10 reports promoting a carbon tax, something that the people of Canada have repeatedly rejected? It should agree with Canadians. It should agree with the government. No discussion of a carbon tax that would kill and hurt Canadian families," Baird stated in Parliamentary debate.

For the record, polls consistently show that the majority of Canadians are in favour of a tax on carbon pollution.

When it comes to the issue of climate change, Kerry and Baird are diametrically opposed. If Baird is honest with Kerry he should explain to the freshly minted Secretary of State the rationale for the Canadian government's backtracking on international commitments to address climate change. Perhaps he can also explain why his party is currently running a national attack ad campaign against the Opposition party for proposing a carbon tax.

On the other hand, perhaps Baird will instead try to steer the conversation to what the Harper government considers a much more important and dire issue: President Obama's approval of the controversial Keystone XL pipeline that would pump millions of barrels of Canadian tar sands crude to U.S. refineries to largely serve an overseas market.

The Alberta tar sands is considered one of the dirtiest and most carbon intensive industrial projects on the planet. From extraction to upgrading, a barrel of oil derived from bitumen can be three to four times as carbon intensive as a conventional barrel of oil produced in the US or Canada.

Kerry, being the savvy diplomat he is, could (and hopefully will) point out to Baird, that any conversation about the fate of the Keystone XL pipeline is intrinsically tied to Canada evolving its postion on climate change. If Canada is serious about aligning with the U.S. on climate policy, as Stephen Harper has expressed, then Baird should be fully briefed and ready to cooperate based on President Obama's stated commitment to tackle climate change in his second term.

In his inaugural address two weeks ago President Obama said:

"We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations."

The Keystone XL pipeline poses a key test for President Obama's commitment to fulfill his promise on climate action. Encouraging rapid expansion of Canada's tar sands operations is irreconcilable with aggressive efforts to curb climate change pollution in North America.

If Minister Baird is honest with his counterpart, he will admit as much to Secretary Kerry. Anything less than honesty on Baird's part will start Canada's relationship off with the new Secretary of State very poorly. It is a tough position for Baird to be in, but it is one created by the Minister and the Conservative government itself.

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Thanks to Alberta's tar sands, coal-powered energy production just got cheaper, and dirtier.

That is largely due to an often overlooked byproduct of bitumen upgrading: petroleum coke. The byproduct, commonly referred to as petcoke, is derived from the excess heavy hydrocarbons necessarily processed out of bitumen in the production of lighter liquid fuels like gasoline and diesel. The leftover condensed byproduct, petcoke, bears a striking resemblance to coal, and is being integrated into coal power plants across the US and internationally, contributing a tremendous amount of carbon emissions to the tar sands price tag that has been previously unaccounted for.

That is, until the research group Oil Change International released a research report that calculates the use of petcoke in American energy generation increases the proposed Keystone XL Pipeline's emissions by a staggering 13 percent. 

The report, Petroleum Coke: The Coal Hiding in the Tar Sands, suggests that while groups like the European Commission use specific inputs to determine a 'well-to-wheels' analysis of tar sands emissions – which figures the unconventional fuel emits emissions 23 percent greater than conventional crude – such calculations do not account for petcoke and so only tell a portion of the story.

"Petcoke," states the Oil Change website, "has even higher carbon emissions than already carbon-intensive coal, emitting between 5 to 10 percent more CO2 than coal per unit of energy produced. A ton of petcoke yields on average 53.6 percent more CO2 than a ton of coal."

What is worse, as a byproduct petcoke is sold at a "to move" price, pushing the dirty fuel source into the market at a 25 percent discount to coal. Because petcoke undercuts the price of coal so significantly, the coal industry has begun to incorporate petcoke into its power generation.

"At the end of 2011 nearly 80 million tons (72.3 million metric tons of petcoke was stockpiled in Alberta. The stockpile is growing at the rate of about 4 million tons (4.4 million metric tons) a year." Image located on page 20 of the report.

"Indeed industry analysts have shown that a typical 1 gigawatt coal plant can save around $120 million per year in fuel costs by blending petcoke with coal in their boilers. That sounds to us like a boon for coal-fired generators and a bad deal for cleaner fuels competing with coal in a tight market."

The Petcoke Craze

The report's introductory blog post by Lorne Stockman highlights some significant statistics on the relationship between tar sands production and petcoke. 

• There is 24 percent more CO2 embedded in a barrel of tar sands bitumen than in a barrel of light oil.

• 15 to 30 percent of a barrel of tar sands bitumen can end up as petcoke depending on the upgrading and refining process used.

• Of 134 operating U.S. refineries in 2012, 59 are equipped to produce petcoke.

• U.S. refineries produced over 61.5 million tons of petcoke in 2011 – enough to fuel 50 average U.S. coal plants each year.

• In 2011, over 60 percent of U.S petcoke production was exported.

"Petcoke in the tar sands is turning American refineries into coal factories."

"Keystone XL refineries are among the biggest petcoke factories in the world," is the caption to this image, figure 3, found on page 17 of the report.

The Keystone XL refineries have a petcoke production capacity of 50,375 tons per day. 

Because of this, the "Keystone XL will fuel five coal plants and thus emit 13 percent more CO2 that the U.S. State Departmet has previously considered." The five coal plants would produce "16.6 million metric tons of CO2 each year."

 The "PetKoch" Connection

Oxbow Corporation, owned by lesser-known Koch brother William Koch (sibling of oil and gas magnates Charles and David Koch), is the largest petcoke trader in the world. The corporation is one of the largest donors to Republican Super PACs, with political contributions tallying at $4.25 million. 

The company also spent $1.3 million on lobbyists in 2012 alone.

Oxbow ships "11 million tons of petcoke annually around the world primarily from the Gulf Coast to Asian, Latin American and European markets."

The report states that "Oxbow's biggest facility and primary laboratory and testing facility are located in Port Arthur, Texas, where the Keystone XL pipeline would terminate and where some of the biggest petcoke producing refineries in the world are located."

Industry's Downplay

Last week, TransCanada, the company currently building the southern leg of the Keystone XL pipeline, announced the pipeline's construction was proceeding smoothly and without delay. This despite a prominent and ongoing protest along the route, with future sit-ins scheduled for Washington DC. 

"We factor things like that into our planning," Shawn Howard, a spokesman for the company told Reuters. "We've got a pipeline route that's hundreds of miles long so if there are activities that take place on one property, our crews still have plenty of work to do."

According to The Washington Post, the oil industry was quick to dismiss the findings of Oil Change International's report. 

TransCanada said the report contained "nothing new" and was merely "the latest attempt by professional activists who opposed Keystone XL to change the discussion." 

A statement issued by the company read, “Let’s be frank: this is not about the Keystone XL Pipeline, diluted bitumen, emissions or a substance that is in a particular blend of oil. It’s about a group that wants to end the use of fossil fuels entirely.”

Jack Gerard, president of the American Petroleum Institute, one of the most power oil and gas lobby groups in the U.S., had this to say: “It once again boils down to a political decision by the White House: will they follow what’s in the best interest of the country, or will they follow other political pressures?”

“It clearly is in the national interest, and that’s the only decision the president needs to make,” Gerard told The Washington Post, adding he saw carbon emissions as one of the “tangential issues to the conversation.”

The Keystone Conundrum

The Keystone XL pipeline will introduce a consistent stream of tar sands bitumen into the United States. The bitumen boom is creating a petcoke boom that is "an insidious aspect of tar sands production that is, until now, undocumented."

The report adds, "to date, petcoke has been hidden in most discussions about the Greenhouse Gas (GHG) intensity of the tar sands." That, crucially, includes discussions surrounding the Keystone XL.

If the pipeline is approved, "around 15,000 tons of petcoke per day will be produced from the bitumen in the dilbit it will deliver…That is over 50,000 tons of CO2 every day or over 18.3 million tons (16.6 metric tons) of CO2 a year."

The reality of the rise of petcoke means that the tar sands are significantly worse for the environment than previously thought. And the growing dependence on petcoke-generated energy will only increase that carbon-burden for the forseeable future.

At the very least, these are not numbers we can afford to ignore any longer.

"With more than 300 billion barrels of recoverable tar sands bitumen still in the ground in Alberta and hundreds of billions of barrels of extra-heavy and heavy oils in reserves around the world, it is time we understood the full impact of exploiting these low quality, high impact hydrocarbons."

The report traces the rise of petcoke energy and emissions through investments that have "transformed North America into the petcoke production center of the world." Pg 18.

The Consumption Quandary

Petcoke use, in comparison to coal-generated energy production, is small at this stage, although the overall effect of discounted petcoke in the energy market is unknown at this point. 

A number of negative consequences of increased petcoke consumption are likely, however, such as the lengthened life-span of coal-fired power power plants enabled by a steady stream of cheap petcoke. This in turn will assist in the continued suppression of large-scale investments in cleaner sources of energy in the U.S. and internationally. 

While an in-depth consequential life-cycle analysis of tar sands production may enable us to make more precise estimations of the greenhouse gas impact of opening up this vast resource, it seems clear the impact is subject to the basic laws of economics. More supply lowers prices, increases demand and competes with cleaner alternatives that are fighting to achieve the economics of scale. 

 

in addition, we must not forget that even if petcoke did replace coal consumption one-to-one and did not represent an increase in coal demand, which seems unlikely, its emissions are five to ten percent higher on a unit of energy basis. Petcoke is making coal-fired power generation more carbon intensive and cheaper at exactly the time that we urgently need low carbon solutions to energy production. 

The report concludes:

considering tar sands emissions in their entirety must surely lead to the conclusion that we cannot possibly exploit all the recoverable tar sands bitumen. this in turn should highlight the urgent need for society to grapple with one of the most crucial and challenging questions of our time: Which fossil fuels should we leave in the ground and how do we manage the process? 

Be sure to take a look through the entire report, which is thorough, informative and full of interesting visuals, graphs and images that bring this formerly obscure subject to light.

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