Most current Oil demand projections raise concerns about economic knowledge of Trans Mountain pipeline expansion

Most current Oil demand projections raise concerns about economic knowledge of Trans Mountain pipeline expansion

Investing $126 billion of taxpayer funds to construct a pipeline when economic sector companies are including ample capability to satisfy the predicted need is hard to justify, writes Thomas Gunton.

Pipeline for the Trans Mountain pipeline is unloaded in Edson, Alta. At the very same time that demand is declining and oil manufacturers are cutting back, Canada is significantly broadening its oil pipeline capability. (Jason Franson/The Canadian Press)

This column is an opinion by Thomas Gunton, teacher and director of the Resource and Environmental Preparation Program at Simon Fraser University, and former Deputy Minister of Environment for B.C. For additional information about CBC’s Viewpoint area, please see the FAQ

The federal government’s recent Throne Speech stated that climate action will be at the core of its strategy to produce a stronger and more durable Canada. This is great news; although it has been overshadowed by the pandemic, environment modification stays an existential crisis that threatens our health and economy.

Nevertheless, we have heard these pledges prior to.

These guarantees are easy to make yet difficult to keep. Under the Paris agreement, for instance, Canada dedicated to a 30 percent decrease in greenhouse gas emissions listed below 2005 levels by2030 The United Nations projections that Canada’s greenhouse gas emissions will be at least 15 per cent greater than its 2030 target.

And even if Canada and other countries meet their targets, the United Nations projections that world temperature level will still rise by 3 to 3.5 C by the end of this century, more than two times the Paris target of 1.5 degrees. Clearly, more powerful steps to attend to climate change are necessary.

While the government’s commitment to stronger climate action is therefore admirable, its actions raise major doubts about its genuineness. Among the most glaring examples of the inconsistency in between its actions and dedications on environment modification is the decision to spend an approximated $126 billion of taxpayer funds to develop the Trans Mountain oil pipeline expansion.

The federal government justifies this investment as a necessary compromise to balance the interests of Alberta and the oil market with the interests of those supporting environment action.

The irony is that developing the Trans Mountain Expansion Project remains in no one’s interest.

The throne speech, provided in the Senate chamber in Ottawa on Sept. 23, consisted of procedures to combat environment modification. (Adrian Wyld/The Canadian Press)

Since the project was proposed, oil demand projections have fallen. The International Energy Company(IEA) forecasts that oil need in 2020 will visit as much as 9 per cent due mainly to the pandemic, the largest decline on record. Its newest projection, released Tuesday, concludes that “the era of development in oil need pertains to an end within 10 years,” and that demand will need to fall permanently by about one-third by 2040 to fulfill the Paris environment change targets.

Energy giant BP just recently launched its 2020 anticipate that consists of three circumstances, ranging from a little decline in oil need to an almost 80 per cent come by 2050.

At the very same time that need is declining and oil producers are cutting down, Canada is broadening its oil pipeline capacity by simply over 2.4 million barrels per day (bpd). That growth consists of Enbridge’s Line 3 (370,000 bpd), Enbridge mainline expansions and Southern Lights turnaround (450,000 bpd), the Trans Mountain expansion (590,000 bpd), Keystone XL (830,000 bpd), plus 170,000 bpd from numerous smaller upgrades consisting of Keystone, Rangeland and Express.

Pre-COVID forecasts of the growth in western Canadian oil production to 2030 variety from a low of about 300,000 bpd according to the IEA, to a high of 1.2 million bpd according to the Canadian Association of Petroleum Producers

These pre-pandemic projections are certainly on the positive side– if BP’s report is right, oil production will actually decrease and no new pipelines will be needed. And even under the optimistic pre-COVID projections, pipeline growths surpass the anticipated increase in oil production by in between 1.2 and 2.1 million bpd.

The route of the Trans Mountain pipeline. The growth twins it.

That means if the Trans Mountain job were not developed, the other organized growths still surpass projected production increases by in between 610,000 and 1.5 million bpd.

While some pipeline expansion might be called for, investing $126 billion of taxpayer funds to construct a pipeline when economic sector companies are including sufficient capability to satisfy Canada’s need without any taxpayer support is difficult to justify.

Ironically, the oil sector might also be negatively affected by building the Trans Mountain Expansion, because shipping tolls will need to be increased to cover the expenses of redundant pipeline capability. This will decrease oil business earnings and tax payments to federal government.

The industry argues that higher expenses will be offset by getting greater prices in Asia. However oil is sold a world market that wears down any cost advantage in Asia, and in recent years prices for heavy oil there have in fact been lower than in the U.S. Gulf

The federal government likewise indicates the shipping agreements that Trans Mountain has as proof the pipeline is needed. These contracts were signed when the oil market was booming and, when they expire, it is unlikely that they will be renewed, leaving Trans Mountain and the taxpayer at risk. In the interim, oil will just be moved off existing pipelines to deliver on Trans Mountain.

Alberta Premier Jason Kenney reacts to the Sept. 23 federal throne speech. The premier and his government have been proponents of expanding pipeline capability. (CBC)

The reality is that the combination of ecological dangers from increased oil tanker traffic, the weak need for oil, escalating construction costs, and growth of other pipelines raises serious doubts about the economic wisdom of building the Trans Mountain growth. This is why Kinder Morgan was eager to sell the job to the government, and why a great deal of Canadian energy specialists just recently sent out a letter to the federal government inquiring to defer extra spending on Trans Mountain.

Oil will remain a vital part of the Canadian economy, however the oil boom is over. That is why significant oil business such as Shell and BP are transitioning to green investment and Alberta is taking a look at brand-new sectors such as hydrogen

The federal government ought to adjust its policies to match this brand-new reality by reallocating the estimated $126 billion from developing an oil pipeline to carrying out the dedications in the Throne Speech on environment modification. Those funds can likewise be utilized to assist Alberta shift to cleaner growth sectors and construct a more sustainable economy that studies reveal will generate more jobs than the fossil fuel sector.

We can not pay for to invest money on unneeded oil pipelines, and we can not afford another damaged guarantee on climate modification.


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