Mark Carney is reviving the oilsands discussion — and it's giving me whiplash

National Observer

27-06-2025

Mark Carney has certainly changed the dial on the oilsands discussion.
Ottawa has all but abandoned the idea of a cap on oilsands emissions — and now it's willing to consider a West Coast pipeline if it carries so-called 'decarbonized oil' (a ridiculous phrase, given that the crude would contain just as much carbon as it always has). As a result, Danielle Smith is suddenly all in on carbon sequestration, calling it a 'grand bargain ' if she can secure a pipeline as part of the deal.
There seems to be no point in repeating, yet again, that the oil industry does not need more new pipelines. The status of pipelines is not what's holding the oilsands back from returning to the golden era of 2000s mega-investment. Alberta's oilsands simply aren't the world's best place to put big money into oil — now or in the future.
But if you cling to the pipeline myth, you get to indulge the fantasy that all it takes is another pipe to unlock untold riches. You can't use facts to fight a delusion, though I keep trying.
I'm not too worried, though — so long as we can keep the government from getting involved in this pipeline project beyond just the approvals for it.
That means: no subsidies, no government guarantees on shipping volumes, and a real 'open season' where companies make long-term binding commitments to use it. It's clear that if we stick to those limits on government involvement, few companies will sign up. The cost of building a new line is massive — just look at TMX. A revived Northern-Gateway-like project would be no different. Northern Gateway's original cost estimates were in the same ballpark as TMX's early projections — meaning this new line would end up just as expensive as TMX's final price tag, if not more.
Meanwhile, Enbridge has lower-cost expansion options, and Enbridge connects to the Capline system — with 1.2 million barrels per day of capacity from the US Midwest to Louisiana and massive export capability. That system currently has about a million barrels per day of spare capacity. Connecting to Capline offers effectively unlimited capacity to export our crude through the Gulf Coast to anywhere in the world.
It's a fantasy that another pipeline will unlock new riches in the oilsands. But as long as the federal government doesn't pay for it, the industry is welcome to keep pining.
If shippers have to face the real cost of a new pipeline — not the highly subsidized tolls on TMX — they'll use those existing systems instead. Because it's cheaper. And it doesn't take someone with a PhD in economics from Oxford to understand that.
Mark Carney can push through the approvals with his 'nation-building' Bill C-5, giving cabinet the power to sidestep required reviews. But it won't matter if the economics don't support the project. So, sure — whatever.
At any rate, Smith has been as consistent as her predecessors in selling the fantasy of untold riches — if only we had another pipeline. On carbon sequestration, though, she's been anything but consistent. She's now fully on board, but as recently as last summer, she released a Deloitte report concluding that carbon sequestration for the oil sands was so uneconomic that companies would rather shut down production than invest in it. Deloitte reached that conclusion even assuming high subsidies from both the federal and Alberta governments.
So, according to Smith, carbon sequestration is so uneconomic that companies would shut down rather than do it — but if they get a pipeline, suddenly it makes sense?
I'm sorry, that makes no sense.
Here's the fundamental problem: the savings oilsands companies expect in industrial carbon tax reductions from carbon capture don't justify the capital they'd need to spend to achieve those reductions. Their solution? You and I — the taxpayers — cover most of the capital costs, while they pocket the carbon tax savings.
Worse, they want guarantees that the industrial carbon tax won't go down. If it does, they want the government — again, taxpayers — to top them up for the difference. Imagine that: we're being asked not only to pay to build the infrastructure but also to insure their revenue stream against policy changes they'll likely be lobbying for.
And that's not the only risk. Oil companies know full well that as global decarbonization accelerates, demand — and prices — for crude could collapse. That would leave some of these facilities stranded. And who would eat that loss? The party that put up most of the money: taxpayers.
As Oxford climatologist Myles Allen puts it, 'The case for CCS [carbon capture and storage] boils down to waste disposal.' And yet we're being asked to subsidize how companies dispose of their waste — and take on the financial risk. There is absolutely no reason taxpayers should be doing that. None.
Isn't the obvious solution on the other side of the ledger — the industrial carbon tax? Raise it for the oilsands to the point where carbon capture becomes economically viable. Use industrial carbon tax revenues from companies still emitting to help reward those who are actually sequestering. It would be a stronger incentive than anything currently on offer, while avoiding public money going into facilities that may or may not have a long life.
Instead, Ottawa and Alberta seem eager to keep throwing taxpayer money at the problem.
A 'grand bargain,' indeed.
No more TMX-scale boondoggles. No blank cheques for carbon sequestration. Raise the carbon tax until sequestration makes economic sense. Hold the industry accountable.