Trudeau’s Many Mistakes Are Actually Helping The Industry He’s Trying To Cripple

In the first quarter of 2024, a major new pipeline in Canada will be filled with crude oil.

It opens up new international markets with higher pricing and increased volumes, resulting in greater profits for Canada’s Big Oil.

Justin Trudeau’s government paid for the pipeline at five times the private sector’s estimated construction cost. [emphasis, links added]

This is very inconsistent with Trudeau’s initial plan to decrease the carbon dioxide (CO2) emissions associated with crude oil production by choking off pipeline access to new markets.

He previously killed off similar private sector pipeline projects and passed a law dubbed the “No More Pipelines Act.”

Trudeau now has a new plan to decrease the CO2 footprint of Canada’s Big Oil. It’s called carbon capture and storage (CCS).

If it goes ahead, the taxpayer may again assist private enterprises to achieve more oil production and increased profits.

Plan A morphed into a $35 billion helping hand for a new pipeline.

The Canadian oil industry is similar to the U.S. oil industry in three ways that set them apart from the rest of the world: both have very large non-conventional petroleum deposits, both are excellent at developing new technologies to develop those deposits, and both use free market capitalism to extract that crude oil responsibly.

The net result is that in Canada and the U.S., world-market-changing production growth is possible when economic conditions are favorable. In the rest of the world, the size of known conventional petroleum deposits is often the limiting factor in production growth.

Favorable economic conditions enabled the U.S. to regain its status as the largest producer of crude oil in the world (due to its significant increase in shale oil production) and vaulted Canada into fourth place. However, only Canada has the oil reserves to keep up its current production rate for another century.

Canada’s export oil market is almost exclusively the U.S. When there is excess production capacity in Canada above the ability of the pipelines to transport that oil to the U.S., the pipeline capacity becomes the maximum demand.

And when supply exceeds demand, prices drop. Canadian crude oil often gets a steep discount to the world price because it cannot access the world markets, and Canadian and American markets are restricted by pipeline capacity.

Canada’s Big Oil needs an export pipeline to the Pacific Ocean, Atlantic Ocean, or both.

Attempts to build new pipelines to northern ports on the Pacific Ocean were stopped by Trudeau’s oil tanker ban, even though American crude from Alaska transits the same waters.

A proposal for an Atlantic coast pipeline could not be blocked by a tanker ban because Eastern Canadian provinces import a significant amount of foreign crude oil by tanker, so Trudeau imposed new CO2 emissions regulations on the Canadian-produced oil shipped east that did not apply to foreign imported oil.

The only remaining project for accessing tidewater was to lay a new pipeline alongside the 60-year-old Trans Mountain pipeline (this is called twinning). The existing Trans Mountain terminates in Vancouver and serves local Canadian and American refineries.

In 2018 Canadian oil production was surging as projects that started before Trudeau’s tenure came online and existing pipelines were approaching capacity.

Canada also began shipping oil across the continent by rail, which entailed higher costs, safety risks, and CO2 emissions.

Trudeau supported environmental protests and court challenges to stop the Trans Mountain pipeline project. These protests were so successful, that the company behind the pipeline twinning pulled out.

Trudeau’s cabinet convinced him (correctly) that the twinning of the Trans Mountain pipeline with a resultant capacity increase of 690,000 barrels of oil per day was in the national economic interest.

Trudeau’s government bought the existing pipeline for $4.5 billion (all figures CAD) and the cost estimate of the new pipeline-twinning construction was then $5.4 billion.

The pipeline will be in service in 2024 and the current construction cost estimate is five times higher than forecasted—a budget-breaking $31 billion.

To put that in perspective, it’s one percent of Canada’s GDP. When added to the original purchase price, tax-paying Canadians now have $2,000 more national debt to bear.

According to the U.S. Energy Information Administration, during the year Trudeau took office, Canada produced 3.7 million barrels of crude oil per day.

For the latest fiscal quarter, it is now 4.6 million barrels per day, and because of the new pipeline capacity, it is expected to reach five million barrels per day in 2024.

Trudeau’s Plan A to restrict oil production was a spectacular failure.

Plan B could become a subsidy to bring old oilfields back to life.

If Trudeau cannot stop oil production, his backup plan is to stuff all the CO2 emissions caused by oil production back where they came from deep underground.

The technology that does that is carbon capture and storage.

CCS requires separating and collecting CO2 from the burning (or other uses) of natural gas at atmospheric pressure and injecting it into the underground permeable rock formations, similar to where natural gas originates.

The separation of CO2 from the other waste gases is expensive, as is the energy and equipment needed to compress the CO2 gas into a liquid for deep underground injection.

A good example is the state-of-the-art Quest CCS project near Edmonton, Alberta. It stores approximately one million tons of CO2 per year for $168 per ton (latest available data).

Scaling that up to eliminate the Canadian oil and gas industry’s annual CO2 emissions of 191 million tonnes (1/2 of one percent of the world’s total emissions) would cost $32 billion a year and require almost 200 Quest-sized projects.

It would be like building a new Trans Mountain pipeline every year, except there are no economic benefits.

No CEO in any industry would voluntarily invest in a project with no returns, and the Big Oil CEOs have the option to simply allow oil production to decline into the sunset, dividend the profits to their shareholders, and move their business out of Canada.

I suspect Trudeau’s cabinet would again advise him this would not be in the national interest as the industry represents five percent of the GDP and is growing. Reduced oil production would certainly make it harder to payout the new $31 billion Trans Mountain pipeline.

If CO2 must be stored, then a better plan would be to get the industry and governments to share CCS costs, and then use the stored CO2 for economic gain. Carbon capture and storage thus morphs into carbon capture utilization and storage (CCUS).

CO2 under high pressure has the property of being miscible with crude oil. That means it blends with oil and appears as one consistent liquid, much like vinegar blends with water used for cleaning. (When vinegar mixes with vegetable oil it is not miscible; it appears as two dissimilar liquids when mixed, as in a salad dressing.)

High-pressure CO2 has long been used to inject into older, depleted conventional oil reservoirs to push significantly more petroleum out. In engineering terms, this is called miscible flooding.

An example is the Weyburn oil field in Saskatchewan, the largest project of its kind in the world, where injecting CO2 into an older reservoir has more than doubled oil production rates. But sourcing CO2 is very expensive. The Weyburn project buys its CO2 from North Dakota.

Western Canada has hundreds of old oil reservoirs that are potential candidates for this technology; the hurdle to implementation is finding a large source of pure, high-pressure CO2 at a low cost.

This is where Trudeau is inadvertently stepping in. His government is actively pushing to subsidize large-scale high-pressure pure CO2 storage right next to these old oilfields.

Trudeau’s government has already said that any CCUS eligible for federal funding cannot be used to produce more oil.

But laws can easily be changed by successive governments or the courts; even his signature Impact Assessment Act (a.k.a. “No More Pipelines Act”) was recently ruled unconstitutional by the Supreme Court of Canada.

Should Big Oil ask if Trudeau is a Friend or Foe?

Despite the Trudeau government’s ambitions to phase out oil production, during its tenure Canadian oil production has been launched into global prominence.

The taxpayer paid an obscene price to ram through a pipeline the industry wanted to fund itself. Next is a much larger tax-subsidized CCUS scheme that could eventually be used to resurrect older oilfields.

Should Big Oil regard Trudeau as a friend or foe?

He is a foe, but as Napolean advised, it’s best not to interrupt an adversary while he is busy making mistakes that are to your benefit.

Ron Barmby (www.ronaldbarmby.ca) is a Professional Engineer with a Master’s degree, whose 40+ year career in the energy sector has taken him to over 40 countries on five continents. His book, Sunlight on Climate Change: A Heretic’s Guide to Global Climate Hysteria (Amazon, Barnes & Noble), explains in layman’s terms the science of how natural and human-caused global warming work.