Prime Minister Mark Carney meets with Alberta Premier Danielle Smith in Calgary. The two signed a new energy accord on Thursday that includes a pledge for a new bitumen pipeline to the West Coast.Jeff McIntosh/The Canadian Press
Thomas Gunton is professor and director of the Resource and Environmental Planning Program at Simon Fraser University and is a former deputy minister of environment for British Columbia
The memorandum between the Carney government and Alberta to change environmental regulations and promote a new oil pipeline through B.C. is cause for concern.
While the federal government’s attempt to support Alberta is understandable, the failure to include B.C. in initial discussions of a pipeline and oil-tanker traffic that have significant implications for the province is a diplomatic misstep that could jeopardize billions of dollars of projects in B.C. as well as its environment.
Four of the 11 major projects prioritized by the Carney government are in B.C., and all of them depend on First Nations and B.C. government support.
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The agreement says the parties would consult B.C., that Ottawa would help the province on other projects and that the new pipeline would involve Indigenous co-ownership. But Ottawa’s move of signing a memorandum with Alberta that already agrees to a new pipeline without any consultation with the British Columbia government and B.C. First Nations threatens the relationships with the very parties that the federal government needs to make many major projects happen.
What is even more perplexing is why the federal government would risk these tangible investments by supporting a pipeline project when there is insufficient oil demand to fill a new pipeline and there are lower-cost options to meet Alberta’s needs.
Currently, the oil market is experiencing a large surplus with supply forecast to exceed demand by four million barrels a day (b/d) in 2026. Production will have to decrease, not increase, to balance the market.
Longer-term forecasts point to slower growth or decline in oil demand depending on future climate policies. The IEA forecasts that if there is no change in policy, oil demand will continue to grow to 2050 but at a much slower rate than in previous decades. With continued implementation of stated government policies, world oil demand will peak by 2030 and then decline by 3 per cent to 2050, and with net-zero policies demand will decline by about three-quarters by 2050.
Private oil companies such as BP forecast a decline in oil demand between 11 per cent and 68 per cent by 2050, while Chinese demand, which is the target market for a new pipeline, is forecast to peak about 2030 and then decline owing to the rapid electrification of its transportation sector.
Alberta oil production may still increase in a world of weaker oil demand, but there is sufficient lower cost transportation capacity available on existing pipelines to meet Alberta’s needs.
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The Canadian Energy Regulator’s most optimistic scenario is for Western Canadian oil supply exports to increase by just over 300 k/b/d from 2025 to 2034 and then begin to decline to 2050. Some forecasters are more optimistic, but even if production is higher than the CER forecast, there is over 1.1 million b/d of potential capacity available on existing pipelines at lower cost than building a new pipeline.
Building a new pipeline therefore does not make economic sense, and if it was built, the oil industry, Alberta and Ottawa would be worse off because the tolls required to pay for an expensive new pipeline would be significantly higher than the tolls on existing pipelines, resulting in reduced profits for the industry and reduced royalties for governments.
The final problem with Alberta’s proposal is that it entails significant environmental risks. The increased oil production required to utilize the pipeline would undermine Canada’s climate objectives and the risks of oil tanker spills along B.C.’s North Coast would threaten the ecological and economic health of the entire region.
Concerns over these environmental risks and potential removal of the oil tanker ban are igniting conflict between B.C., Alberta and First Nations that threatens Canada’s national unity at the very time Canadians need to come together.
It is important to support Alberta’s aspirations for a strong economy, and it is possible that the impact of other provisions in the agreement such as not having an emissions cap in return for supporting the industrial carbon price may turn out to be beneficial for the economy and the environment.
But what is certain is that building a controversial pipeline when oil demand is weakening and when there are lower-cost pipeline options available is not in the interests of Alberta, Canada or the oil industry. That is why no private company has come forward to build the project.
Prime Minister Mark Carney would be wise to facilitate a better path forward by working with Alberta to develop lower-cost options on existing pipelines and continue his support for projects such as critical minerals, renewable energy and electricity transmission between provinces that would strengthen the Canadian economy, protect the environment and make all Canadians better off.