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Alberta, Canada Needs You to Stay an Energy Powerhouse

Opportunity lies with myriad 'orphan wells' left by drillers.

Mitchell Anderson 6 Jun

Mitchell Anderson is a freelance writer based in Vancouver and a frequent contributor to The Tyee. Find his previous articles for The Tyee here.

Obviously Alberta is going through some hard times. The plunge in global oil prices threw 100,000 out of work and may prove permanent. The provincial budget has been gutted. Devastating wildfires and mass evacuation in Fort McMurray only added to the misery. Alberta has long been the powerhouse of Canada providing decades of abundant energy to the rest of the country. Can it continue to be so in a carbon-constrained economy?

At present, Alberta is poised to spend billions of dollars on folding more renewables into the mix of energy it produces and consumes in the province -- but details remain vague.

Here's an option that should not be overlooked.

Alberta has some of the best drillers in the world. The province also has massive geothermal energy deposits, virtually all of which have already been found from more than 400,000 oil and gas wells. The collapse of oil prices has quadrupled the number of "orphan wells" abandoned by bankrupt operators, all of which could become a massive public liability.

Or they could become a huge public asset if the province allowed new entrants to access the heat from these holes instead of the oil. No such luck. So entrenched is the petroleum mindset that geothermal companies have no regulatory framework to monetize this clean abundant base-load power. As is detailed in an excellent piece in DeSmog Canada, this nascent industry remains in limbo until policy makers can emotionally process that energy does not always need to come from fossil fuels.

"We've got these old wells that we know are hot and we're going to fill them with cement and walk away," Tim Davies, CEO of geothermal company Turkana told DeSmog. "It's just stupid. I own the well, I own the land and I own the oil. But I can't own the heat. There's just no mechanism for that in place."

Ben Lee, owner of Raven Thermal Systems expressed similar frustration. "You've got top-notch geologists, reservoir engineers, drilling and completion engineers, surface engineers and all the associated landmen and everything else that comes along with a successful drilling program. They are available, and available on the cheap to some extent right now, because there is so much supply." The world generates about 12.8 GW of geothermal power and Canadian companies are involved in producing about 20 per cent that capacity by virtue of our superb drilling expertise. And how much commercial geothermal power is produced in Canada? Zero. Nada. Not a single kilowatt, largely due to regulatory frameworks myopically focused on oil and gas.

This dinosaur mindset is not limited to Alberta. Here in B.C. the province presses on with the 1950s-era Site C dam in spite of evidence that geothermal could provide more power, more employment and lower costs. Meanwhile Nevada just approved an innovative project to provide grid-scale energy storage for a wind farm using automated railcars that carry cement blocks uphill. When the wind stops blowing the blocks roll down providing base-load power to the grid. No dams, emissions or risky new technology required. Knowing Canada, this will have to be implemented around the world before we even try it here.

Changing world

Meanwhile the holy grail of pipeline tidewater access persists even as the business case evaporates. Kinder Morgan claimed their Trans Mountain pipeline would build global markets for Canadian bitumen when they were approved to begin dangerous tanker shipments through Vancouver. Six years later, those tanker shipments have plunged from 71 in 2010 to 31 in 2015. Only one tanker left Vancouver in January, likely bound for Washington State. There is no demonstrable demand in Asia for Alberta's high-cost, low-value product.

The price differential between North American and international oil -- the main rationale for the Energy East pipeline -- shrank from almost $30 per barrel in 2012 to less than 30 cents per barrel today. Why? The U.S. is awash in flacked oil and recently approved previously prohibited crude exports.

While much of this production has gone offline due to collapsed prices, a huge "fracklog" of drilled and un-extracted wells can be ramped up again in as little as six months -- creating a permanent ceiling on global prices moving forward. Are we ever going back to prices close to $100 a barrel? The only people who believe that seem to be wishful thinkers in Alberta's oil patch.

The rest of the world seems to clearly see the oil industry is looking at a period not of continued growth but steady (or rapid) decline. Even Saudi Arabia -- the cheapest producer in the world -- is charting a course away from fossil fuels. Bear in mind that Alberta is not really in the oil business but the bitumen business -- amongst the highest cost, highest carbon and lowest value fossil fuels on the planet. Break-even production costs of bitumen operations are typically over $40 per barrel. Saudi Arabia produces high quality crude (not tar) for less than $10. Who do you think will be the last producer standing?

Get 'er done or be left behind

A recent report shows that global investment in renewables just eclipsed fossil fuels -- a trend that will only gather speed. Yet it's as if there is an information force field blocking Canada's politicians from seeing the obvious signs of petroleum's inevitable demise. Much of this is political expediency over either principles or good policy.

Alberta Premier Rachel Notley needs to show that she is in the corner of the oil industry even if that means riding the plunging sector into a province-sized crater.

Similarly, Prime Minister Justin Trudeau for all his sunny ways may well approve the Kinder Morgan pipeline expansion, as dangerous and pointless as it is, because he also needs to supplicate to the oil sector for the sake of national unity.

One can oppose such high-stakes policy options without being an enemy of everyday Albertans. The genuine outpouring of goodwill and sympathy from across the country after the Fort McMurray wildfires is a testament to how the ties that bind us as a country are strong.

Alberta has contributed hugely to our national prosperity, supplying the rest of the nation with abundant energy and employment. Canada needs Alberta now more than ever. However, the future will not look like the past. The faster we realize that, the quicker we can retool our internationally recognized know-how towards a renewable future and the "get 'er done" attitude Albertans are famous for.  [Tyee]

Read more: Energy

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