The future will not look like the past, or apparently even two weeks ago in the case of the oil industry. Shell just announced a 40 per cent cut in production spending and a refocus on renewables. BP stated last week that the world might have already passed peak oil demand. This month Exxon was dropped from the Dow Jones index after 92 years. The once blue chip behemoth is so saddled with debt that they may have to ditch their once sacrosanct dividend — a move that analysts believe would be “cataclysmic” for Exxon’s stock price.
With so much red ink pouring over the balance sheets of Big Oil, it is easy to overlook a very bad bet made by Alberta regulators that could see Canadian taxpayers on the hook for billions in cleanup costs. A bill so high it would wipe out all the money bitumen mining ever flowed into government treasuries.
For reasons to be pondered by indebted generations yet unborn, the beleaguered Alberta Energy Regulator allowed the petroleum sector to pile up massive unfunded environmental liabilities on the dubious assumption that bitumen extraction would remain profitable for decades into the future. So towering is the tally of unreclaimed tailings ponds that it is possible the largest part of Alberta’s energy sector — heavily hyped as the economic engine of the nation — never actually made any money.
Bitumen royalties paid to the Alberta government back to 1970 total $49 billion. Corrected for inflation, this figure is closer to $59 billion. This sounds like a hefty sum, except when compared to unfunded cleanup costs. Officially the AER estimates total oil and gas liabilities to be $58 billion with only $1.6 billion held in securities. Leaked documents from the AER instead peg potential cleanup costs of the tailing ponds alone to closer to $130 billion.
AER recklessly allowed operators to use unmined bitumen as a financial security to eventually deal with 1.3 trillion litres of viscous toxins that have been accumulating at an accelerating rate. The volume of impounded tailings has increased 300 times since the mid 1990s and now covers more than 220 square kilometres.
Companies like Suncor have also been allowed to estimate their own reclamation costs on a timeline stretching 70 years past scheduled mine closures, and rely on unproven “water capping” plans to cover the toxic slurry with artificial lakes that somehow won’t mix with the poisonous fluids below. What could go wrong?
With conventional oil giants now publicly planning for a very different future and bitumen royalties dwindled to only 12 per cent of what they were five years ago, isn't it an appropriate time to make industry settle their tab before ordering more drinks?
Bitumen mining is not the only source of unfunded taxpayer risk accumulated under decades of friendly provincial oversight. The leaked AER presentation suggested an additional $100 billion in unsecured cleanup costs from conventional oil and gas plus another $30 billion from pipelines. Together with tailing ponds, this adds up to an eye-watering figure of $260 billion. At the current leisurely pace of reclamation, it could take 126 years to plug an estimated 180,000 abandoned wells left behind by a previously profitable industry.
To be fair, the leaked AER presentation portrayed a “worst case scenario” — an apt description so far of 2020. However, the disruptive forces at play for the petroleum sector go far beyond the current pandemic. Dealing with the worst wildfires in state history, California just announced a ban on the sale of gas-powered cars in 2035. The U.K. announced a similar ban for 2030. Does it sound like bitumen extraction will be plausibly profitable decades into the future?
Apart from the enormous environmental liabilities are very real human costs, particularly for Alberta’s original inhabitants. First Nations including the Mikisew Cree, Athabasca Chipewyan and Fort McKay have all been fighting for action on leakage of toxic tailings into the Athabasca River impacting their communities.
“Our members have been concerned about tailings pond leakage for years. We have observed changes in odour and taste from groundwater and surface water in our traditional territories,” said Melody Lepine, director, Mikisew Cree First Nation Government and Industry Relations. “We don’t trust groundwater sources and now bring bottled water with us everywhere.”
In the absence of meaningful oversight from federal or provincial authorities, Indigenous governments filed a complaint with the international Commission for Environmental Cooperation, which confirmed in a recent report that tailings are leaking into local groundwater.
This problem has been festering in plain view for years. A 2012 study by Queens University on local lakebed sediments found up to a 23-fold increase in carcinogenic chemicals since bitumen extraction began in the 1960s. Research in 2014 by the University of Manitoba detailed elevated polycyclic aromatic hydrocarbons in local animals consumed by First Nations including moose, ducks and fish.
Local physician Dr. John O’Connor began raising the alarm in 2003 about obscure cancers among his patients in Fort Chipewyan until he was abruptly fired in 2014. The Alberta Cancer Board recommended a comprehensive baseline study on the incidence of cancers among First Nations potentially linked to bitumen extraction.
More than a decade has passed since that recommendation and Health Canada continues to drag their feet on an independent study of bitumen-related health impacts. Local leaders have little doubt that politics is at play. “The only reason they don’t want to do it is because of the magnitude — how big this is going to be,” Chief Allan Adam of the Athabasca Chipewyan First Nation told the National Observer. The federal government has also resisted repeated calls from First Nations to sample for potential Fisheries Act violations from leaking tailings ponds, apparently preferring to keep field staff closer to the coffee pot where they can’t collect troublesome data.
The human and economic costs of bitumen extraction will continue to climb long after the last oil boom is a distant memory. In the fullness of time it could well be that the so-called economic engine of Canada was not only a massive polluter and climate killer but a money loser as well.