[rad-green] U.S. Coal Bankruptcies Reveal The Future Of Alberta Tar Sands

*https://www.forbes.com/sites/prakashdolsak/2019/10/30/us-coal-bankruptcies-reveal-the-future-of-alberta-tar-sands/#6f21b1b9df46
<https://www.forbes.com/sites/prakashdolsak/2019/10/30/us-coal-bankruptcies-reveal-the-future-of-alberta-tar-sands/#6f21b1b9df46>Forbes
        Oct 30, 2019*



*U.S. Coal Bankruptcies Reveal The Future Of Alberta Tar SandsBy some
estimates, “the price of oil could permanently plummet to $25 a barrel by
the mid-2020s. Only the cheapest oil in places like Saudi Arabia could be
economically produced. Canada's oil sands, where most projects need an oil
price of $60 to $80 a barrel just to break even, would cease to make
financial sense.”*

*By Nives Dolsak and Aseem Prakash*

[image: BRITAIN-CANADA-OIL-GOVERNMENT-ENERGY-DEMONSTRATION]

*Demonstrators use a mock oil pipeline to block the entrance to the
Canadian Embassy in central ... [+]AFP/GETTY IMAGES*

The U.S. coal industry is in big trouble. This year alone, eight companies
have filed for bankruptcy protection, Murray Energy
<https://www.nytimes.com/2019/10/29/business/energy-environment/murray-energy-bankruptcy.html?action=click&module=Latest&pgtype=Homepage>
is
the latest one. Bob Murray’s friendship with President Trump could not save
the company. After all, the death of coal is due to fracking
<https://www.eenews.net/assets/2019/07/12/document_gw_01.pdf>, not
regulation.

While these bankruptcies might be good news for climate change, they have
caused havoc for coal miners and coal communities. Typically, bankrupt coal
companies renege on their pension and healthcare obligations. Miners and
pensioners are virtually left penniless. Just follow any story on Appalachia
<https://www.vox.com/energy-and-environment/2019/7/9/20684815/coal-wyoming-bankruptcy-blackjewel-appalachia>
to
get a sense of the social and economic chaos that collapsing coal inflicts
on local communities.

Coal implosion should hold important lessons for Alberta’s oil sands
economy. After all, both coal and oil contribute to climate change. Both
are vulnerable to regulatory and market challenges. It seems that Canada’s
Prime Minister Justin Trudeau does not see the decline of oil to be
inevitable. In 2018, courts blocked the construction of Kinder Morgan’s
Trans Mountain Pipeline, which would carry Alberta’s oil to the Pacific
Ocean. Trudeau’s government intervened and purchased the pipeline for $4.5
billion
<https://www.cbc.ca/news/politics/liberals-trans-mountain-pipeline-kinder-morgan-1.4681911>
(and
has committed additional billions of dollars for its expansion).

But Albertans remain suspicious of Trudeau and Ottawa. Some even want to secede
from Canada <https://www.bbc.com/news/world-us-canada-49899113>! In 2019
election, his Liberal party drew blank in Alberta
<https://www.theguardian.com/world/2019/oct/22/canada-election-2019-full-results>.
So how does he win over Albertans? At his first Press conference after the
2019 reelection, Trudeau declared that his government is committed to
fighting climate change and building the Trans Mountain Pipeline.
<https://www.eenews.net/climatewire/2019/10/25/stories/1061367645>

This is where a leadership deficit is showing. Instead of pandering to
Alberta, Trudeau should have shown tough love. The reason is simple: the
pipeline provides a false sense of economic security and discourages
Alberta from diversifying away from the tar sands.

*The Trudeau Syndrome: Real Climate Champions Love Oil Sands*

Alberta tar sands are an important economic resource for Canada*. *Natural
Resources Canada <https://www.nrcan.gc.ca/energy/publications/18756>, a
government body, notes: “The oil sands comprise 167.2 billion barrels of
crude oil – 97 percent of Canada’s 172.5 billion barrels of proven oil
reserves—and are a vital part of the Canadian economy. The industry is one
of Canada’s largest employers, with more than 400,000 people deriving
direct, indirect and induced employment from the oil sands and supporting
sectors.”

To justify his support for the pipeline to his pro-climate base, Trudeau is
playing the nationalist card, which for Canadians means a dose of
Anti-Americanism
<https://thecanadaguide.com/culture/anti-americanism/>. Trudeau
said <https://apnews.com/e294259c977f412cb5ebf24dfc961bbe>: "For too long
we have been selling our natural resources to the United States at a
discount ... Getting our resources to markets other than the United States
and getting that done as quickly as possible remains a priority.”

*The Stranded Asset Problem*

Trudeau might support the pipeline pointing to the projected growth in
energy demand
<https://www.capp.ca/canadian-oil-and-natural-gas/why-we-need-energy>.
There are over 1 billion cars in the world, and an additional 70 million
<https://www.worldometers.info/cars/> are added every year. If there are
cars, the logic goes, there will be a demand for oil, not to mention
the increasing
demand
<https://webstore.iea.org/download/summary/190?fileName=English-WEO-2018-ES.pdf>
for
petrochemicals. It is not surprising that almost every country (Norway
probably being the only exception
<https://www.independent.co.uk/environment/norway-oil-drilling-arctic-ban-labor-party-unions-a8861171.html>)
continues to explore for new oil reserves.

In the short run (10-20 years), this argument probably makes sense. But in
the medium term (20-40 years), the auto industry might look different and
the demand for oil will probably begin to soften
<https://www.reuters.com/article/us-oil-iea-demand/global-oil-demand-under-growing-threat-from-electric-cars-cleaner-fuel-idUSKCN1NI005>.
This is when Alberta will begin facing the problem of stranded oil sands
assets.

An asset is stranded
<https://www.greenbiz.com/blog/2014/03/24/exxon-stranded-assets-and-new-math>when
it becomes nonperforming during its useful economic life. The reasons
include technological innovations that render it obsolete, shifts in
consumer preferences, or changes in the regulatory structure.

Faced with extreme weather events, governments may enact even more
stringent laws to discourage combustion-engine automobiles. Second, courts
<https://www.nytimes.com/2018/04/18/climate/exxon-climate-lawsuit-colorado.html?module=inline>
may
announce large verdicts against major oil firms for imposing harms on
individuals, cities, and other actors. As a part of the settlement, oil
firms may accept penalties such as a large dose of a carbon tax in exchange
for immunity. This sort of carbon tax could reduce demand for oil. Third,
increased energy-efficiency of gasoline cars and the rapid expansion of
electric cars and trucks might dampen the demand for oil. Alongside, there
could be a “drive shame” movement encouraging individuals to take public
transportation (or simply walk) as opposed to driving. Indeed, millennials
are less interested in car ownership
<https://www.forbes.com/sites/quora/2017/10/16/why-millennials-are-buying-fewer-cars-than-older-generations/#267c68717726>
than
the previous generations.

With oil demand softening, only the most efficient oil producers will
survive. By some estimates
<https://www.vice.com/en_ca/article/paabxk/heres-how-canadas-oil-sands-could-collapse-by-2030>,
“the price of oil could permanently plummet to $25 a barrel by the
mid-2020s. Only the cheapest oil in places like Saudi Arabia could be
economically produced. Canada's oil sands, where most projects need an oil
price of $60 to $80 a barrel just to break even, would cease to make
financial sense.”

*Will Alberta Become the New Appalachia?*

An investment of more than $200 billion
<https://www.nrcan.gc.ca/energy/energy-sources-distribution/crude-oil/what-are-oil-sands/18089>
is
at risk. What if oil sands industry becomes uncompetitive
<https://www.nytimes.com/2015/02/03/business/energy-environment/lower-oil-prices-strike-at-heart-of-oil-sands-production.html?action=click&module=RelatedCoverage&pgtype=Article&region=Footer>
and
these assets become nonperforming? Mass bankruptcies will follow.
Governmental revenue will plummet and local communities dependent on oil
jobs will be devastated.

Just see how the bankruptcy of the coal industry is playing out in
Appalachia and the Powder River Basin regions of the United States. David
Roberts
<https://www.vox.com/energy-and-environment/2019/7/9/20684815/coal-wyoming-bankruptcy-blackjewel-appalachia>
notes:
“Coal mines have shut down, hundreds of people are out of work,
unemployment offices are overwhelmed, and there appears to be worse to
come. The coal industry, long seen as a friend and economic linchpin in the
state, is falling apart, and the very communities that have supported it
most are getting screwed over in the process.”

Labor unions are worried that a bankrupt coal sector will not be able to
fulfill its pension and healthcare obligations
<https://www.fastcompany.com/90381145/coal-companies-are-going-bankrupt-what-happens-to-the-pensions-theyve-promised-miners>.
Further, bankrupt coal firms tend to renege on mine clean up
<https://www.nrdc.org/onearth/who-pays-mine-cleanup-after-big-coal-goes-bankrupt>obligations
as well.

*Preparing for a Soft Landing*

Trudeau wants to become another Trump who promised to bring coal back
<https://abcnews.go.com/Politics/trump-bring-back-coal-jobs-verdict-mixed/story?id=46424808>.
One might argue that the decline of oil will be delayed by rolling back
climate laws or massive government funding for carbon removal technologies.
The reality is that coal jobs have not come back and probably never will.
Oil could follow a similar trajectory.

Generating false hopes for the revival of oil is irresponsible because it
is making Alberta, a high-cost oil producer, even more vulnerable to oil
downturns. The wise policy is to start preparing Alberta for a soft
landing. The basic idea is to invest in creating non fossil-fuel jobs. At
minimum, Trudeau’s government should not throw a lifeline to the Trans
Mountain Pipeline because it is creating an even bigger stock of stranded
assets.

The Trudeau syndrome reveals the perils of democracy where leaders embrace
policies to secure short term political gains. Trudeau’s false populism did
not fetch him votes in Alberta. Maybe it is time for him to reverse course
on the pipeline and guide Alberta towards a more diversified economy with a
sustainable economic trajectory.

*Nives Dolsak is Professor and Director of the School of Marine &
Environmental Affairs. Aseem Prakash is the Walker Family Professor and the
Director of the Center for Environmental Politics. Both are at the
University of Washington, Seattle.*

-- 

--- 
You received this message because you are subscribed to the Google Groups "Sid-l" group.
To unsubscribe from this group and stop receiving emails from it, send an email to [email protected].
To view this discussion on the web visit https://groups.google.com/d/msgid/sid-l/CACKppcymVZbgqzmWawtC0-_DUwmRnybNA-3bGcfzqrMEJQ5LOQ%40mail.gmail.com.

---
To unsubscribe: <mailto:[email protected]>
List help: <https://riseup.net/lists>