PHOTOS: Part of the Jackpine Oilsands Mine north of Fort McMurray, formerly owned by Shell and now operated by Canadian Natural Resources Ltd. (Photo: Pembina Institute.) Below: Author Kevin Taft.

Guest Post by Kevin Taft

Kevin Taft is a best-selling author, well-known speaker, and former provincial politician in Alberta. He served as an Alberta Liberal MLA from 2001 to 2012, and as leader of the Official Opposition from 2004 to 2008. The holder of a PhD in Business from the University of Warwick, Dr. Taft is often referred to in this space as the best premier Alberta never had. His most recent book is “Oil’s Deep State: How the petroleum industry undermines democracy and stops action on global warming – in Alberta, and in Ottawa,” published by Lorimer in 2017. The book will be officially launched in Edmonton next week. DJC

An unhealthy quiet has descended on Alberta’s relationship with its oil industry, which means important issues are being missed by the public. Issues like royalties.

How many Albertans realize the provincial government earned far more from gaming and alcohol sales than from bitumen royalties last year, and the year before that? If oil prices stay in their current range, this will be the normal pattern. Albertans should be talking about this, asking tough questions about our royalty system.

Another issue fallen under silence: the environmental liabilities created by the oil industry that could break the province’s finances. About 440,000 oil and gas wells have been drilled in Alberta, of which 105,000 have been reclaimed. That leaves 335,000 wells that will eventually need to be reclaimed[1], at a cost of tens of thousands to a million dollars or more per well. The Alberta Energy Regulator estimates the total liability for reclaiming these is $36 billion,[2] a huge number that is likely too small. Add in the 400,000 kilometers of oil and gas pipelines in Alberta –enough to circle Earth 10 times – plus the thousands of aging facilities that will need to reclaimed to protect farmland, waterways, and urban areas, and there are billions more in costs.

This doesn’t count the costs of reclaiming oilsands sites, which include several of the largest tailings ponds, earthen dams, and mines in the world. Only a tiny fraction of the costs of this reclamation work has been set aside by industry. History tells us that when these liabilities come due, companies often declare bankruptcy or otherwise dodge the bill, and the taxpayer gets stuck. They could break Alberta’s finances, so why the quiet?

Then there is the really big issue: global warming. The first big alarm bells that emissions from fossil fuels were causing global warming were rung in 1965 by the scientific advisory committee to U.S. President Lyndon Johnson, and scientists have been ringing alarms louder ever since. In the 1970s and 1980s the oil industry itself supported research that confirmed the science of global warming. By 1992, though, the industry realized that reducing fossil fuel emissions meant reducing fossil fuel use, a death knell for the industry. Taking a page from the tobacco and asbestos industries, it began a well-documented campaign to confuse the public and undermine climate change science and policies, in order to delay meaningful action to reduce emissions.

This could not succeed forever. The costs of denying the science of global warming dwarf those faced by the tobacco and asbestos industries, and a series of legal and regulatory investigations in the U.S. and elsewhere are setting the stage for lawsuits that will take many years to settle but could drive the oil industry over a cliff.

You may then ask: Why the quiet on these issues in Alberta? Where is the healthy public discourse holding the industry to account? Where are the MLAs who should be putting government on the spot over royalties, reclamation costs, and global warming?

There is an answer: a swath of Alberta’s important democratic institutions have been captured by the oil industry, so these topics are now out of bounds. I spent 11 years in the Legislature and all the major political parties – sometimes even the PCs – asked tough questions about royalties, the environment, and reclamation. Now there is barely a murmur, not because these issues have been solved but because political parties have become instruments of the industry.

A democratic institution is captured when it serves a private interest over the public interest. In Alberta, the signs of capture are widespread. The NDP government vows to turn British Columbia’s delays in approving the Trans Mountain bitumen pipeline into an interprovincial crisis, even while endorsing a royalty system that practically gives the bitumen away. The United Conservative Party, champion cheerleader of fossil fuels, demands the government kill the carbon tax and revitalize the coal industry. Meanwhile, the Alberta Energy Regulator is financed by the industry and chaired by an industry leader, while the province’s universities for years have had a rolling boil of controversies over industry influence that has generated resignations, audits, scandals, and court cases.

Change is coming to Alberta, mostly from outside, where a chorus of loud voices is challenging the power of the oil industry. Some of these voices belong to environmentalists fighting global warming and some to First Nations fighting for land rights. Others belong to entrepreneurs bringing forward an energy revolution that will leave fossil fuels behind, and still others belong to investors pulling out of pipelines and oilsands megaprojects because they see an industry facing global decline.

There should be a ruckus in Alberta about royalties, looming costs of reclamation, and global warming. Instead there is quiet, and in democracy quiet is rarely a good sign.

Note 1: Alberta’s End-of-Life Oil and Gas Liabilities, Policy Recommendations, Page 17.

Note 2: Alberta’s End-of-Life Oil and Gas Liabilities, Policy Recommendations, Page 18.

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  1. Taft’s analysis re AB liabilities to the public purse from petro-industry aligns with AB’s Auditor General reports and other expert reviews. Links below

    A huge debt burden falling on AB citizens/taxpayers for cleaning up industry’s messes courtesy of AB’s conservative political leaders in bed with Calgary’s corporate-tower political class. Has anyone been taking names?

  2. I don’t expect Alberta will ever have as vigorous debate about environment and energy, as say our neighbouring province, so I understand those that see a petro state here and the sometimes stifled debate. However, I think the declining influence of the energy industry will be felt even in Alberta.

    First, is in the area of government revenues, as has already been pointed out. As energy revenues fall in relation to other revenue sources, government will reevaluate the importance of this sector. Second, while we live in a bit of a bubble, we can not ignore the strong environmental movements across the world and in most other Canadian provinces. There are some in Alberta now who seem to think that if we just huff and puff loud enough all the pipelines wanted now will get built. However, if those people get elected, this strategy will fail spectacularly.

    I think that will be the beginning of the end of the petro state here. While not evident to everyone now, it will happen as quickly and almost as unexpectedly as Alberta stopped being a one party state.

  3. Can’t wait for the book release Kevin — good job in highlighting oil industry and government malfeasance.

    Unfortunately Alberta’s Frankenpapers are more prone to cheerleading for conservative ideology and the Ayn Randian worship of free enterprise than to be bothered with investigative journalism any longer. The failing Postmedia have pretty much abandoned muckraking journalism in favour of advocating for a return to “back-to-the-future” conservatism led by Jason Kenney and or Brian Jean. Keep up the good work — you’re an Alberta treasure.

  4. Yes, the mess left by the oil and gas industry is so stunningly profund, it could cause silence on what the heck to do about it. As former rural Alberta landowners we became well familiar with the goings on with the oil and gas industry in our area, who in our mind, operated with impunity, years ago already.
    Perhaps the answer lies with the money to be made with the burgeoning $trillion dollar renewable tech revolution and how other countries are dealing with climate change as an opportunity to make a lot of money, wuch as The
    Netherlands. Perhaps it would be wise to not fall behind with renewable tech.
    And also, just to say, as former landowners, if we were responsible for a fossil fuel spill on our yard, or whatever, we could be held responsible, even years later. So the little guy is responsible, but the “Big Guys’ are not? Leaking oil and gas wells, creosote-ridden former railway beds, etc…….?
    Also,+ + profits were made in the boom years. Where’s the money? Offshore? To foreign operators in their own country? $Multimillion homes, high end vehicles, vacations, second homes in the mountains, yachts, private jets……? Maybe it’s time to pay forward now.

  5. “…a swath of Alberta’s important democratic institutions have been captured by the oil industry…”

    Used to be that the 4th estate was considered a ‘democratic institution’. Alas, no more.

    CAPP has captured Alberta’s newsies – Calgary Herald & Edmonton Journal.

  6. The plundering of natural resoures has been going on since time immemorial, ever since the fur traders first came here in the 16th century. Canada has been a grazing ground for all sorts of raiders.

    The fact that Canada is giving away oil rights at bananna republic rates should come as no surprize. It’s the Canadian way.

    Heck, this is the heart of the softwood lumber dispute with the US which has been going on like forever. Lumber producers in the US harvesting their trees from privately owned lands have been complaining about Canadian producers have ben able to harvest public timberland for a song wich gives them an unfair cost advantage.

  7. I am not sure a “ruckus” is the best process to deal with profound and complicated issues like liability management, but (quietly) there are a lot of conversations taking place about all these issues.

    There was a Royalty Review that was fairly public just after the election. Unfortunately, the evidence collected didn’t support raising the rates with so much American shale oil on the market. We can’t look to royalties to fund government operations and services – we need a PST like everyone other province. Oil revenue will never again be the biggest source of government revenue – that era is in the past regardless of what we do on the rates.

  8. Mr. Taft: The Liberals and the NDP talk a good line, but when they get into power little of substance changes.

    Enough has been said about the disappointment with the Notley NDP, but look at what your buddies in Ottawa are signing on to:

    As you point out there is a good chance Alberta will become a bankrupt and polluted backwater. It looks like much the same may happen to Canada with trade deals like CETA which hamstring even local governments.

  9. That the Tories kowtowed to the oil & gas industry over the decades is established history. What I don’t understand — and am eager to discover — is how Notley’s NDP so quickly followed suit.
    Notley campaigned on getting a “fair share” for Albertans on royalties. No increase in royalties, and now she’s pushing pipelines. That’s not what we voted for. What happened?
    Big Oil’s easy cooptation of the NDP is a remarkable development. I hope Kevin Taft’s new book will give us incisive look behind the scenes. Albertans, especially NDP voters, deserve to know.

  10. Opening one’s mouth and removing all doubt, the hazard of ignorant people. Perhaps he should drive past the oil sand sites and do some research. At Syncrude he would notice that half of the original mine is filled in with sand and is being reclaimed while the other half is being cleaned up and shutdown in preparation for the same.

  11. Valid observations, but will this ever change? Any hint of raising royalty rates or doing anything else that might threaten the oil patch, and you can expect a long line of diesel one-ton duallies heading by torchlight down Hwy 63 from Fort Mac and down Hwy 43 from Grande Prairie to rally around the legislature in protest. It isn’t right, of course, but the people most likely to be hurt by such a move wouldn’t be the fatcats in Houston or Dubai, but the welders and pipefitters, truck drivers and camp cooks, and all the other front-line workers in the patch. That was who got hurt when oil dropped to $24/bbl, and they are just now starting to recover.

    What we need is a way to shift our economy gently away from pure resource extraction to value-added and renewable technologies, without putting all these people out of work and in line at the food bank. That means massive government intervention in the economy, far more than would be feasible in this province.

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