The Secret To Survival For Canada’s Oil Sands

By Haley Zaremba - Sep 17, 2020, 11:00 AM CDT

Globally, there are a multitude of different answers (and even more non-answers) to the economic puzzle of how to account for and financially balance (aka pay for) negative environmental externalities. In Canada, the widely accepted answer to this issue is the polluter-pays principle, a core tenet so simple that a kindergartener could understand it, and indeed, could have written it.  Canada’s Globe and Mail explains it like this: “A central tenet of industrial development is the polluter-pays principle: Those who profit must pay for the mess generated by pulling resources from the ground or turning raw materials into goods. If you want to own the upside, you’ve got to own the downside.”

“The last thing Canadians should want are privatized profits, and socialized liabilities,” the Globe and Mail article asserts. Even in Canada, however, where the polluter pays principle is widely accepted and adopted, there were and are still many companies and projects that have managed to skirt the issue when it actually comes to payment. “There are many examples,” reports the Globe and Mail. “Take the Giant mine, near Yellowknife. It was one of Canada’s oldest gold mines, but after trading through various corporate hands numerous times, the last owner went bust and left behind 237,000 tonnes of arsenic trioxide. Giant is part of a $2.2-billion taxpayer-funded cleanup of eight abandoned northern mines that will take 15 years.”

This conversation is particularly relevant now because the future of Canada’s oil sands depends on it. 

Due to the Albertan oil sands’ naturally occurring crude bitumen - a thick, viscous, and sticky kind of crude oil that is particularly dirty and environmentally unfriendly - the oil sands stand to face huge polluter pays payments if the industry continues to expand, or even just exist as it is now. Canada is at a crossroads - the country’s rhetoric leans heavily on environmental consciousness and combating climate change, but they are simultaneously one of the largest contributors to the fossil fuel industry. “If Alberta, with its population of four million people, were a country, it would be the fifth-largest oil-producing nation,” National Geographic reported last year. “While it produces conventional oil, most comes from the Alberta oil sands, the world’s third-largest proven oil reserve at 170 billion barrels.” The figures come from an article entitled “This is the world's most destructive oil operation—and it's growing.”

COVID-19, however, threw a major wrench in Alberta’s plans. The Canadian oil sector, which has already had a particularly rough few years thanks to a severe pipeline shortage and volatile oil prices, was hit especially hard by the pandemic-fuelled oil price crash, which sent a lot of investors fleeing the scene. And just last week, an investigation conducted by the Commission for Environmental Cooperation (CEC) spurred by whistleblowers found “consistent evidence of seepage” from tailing ponds (which, according to National Geographic, contain “a toxic slurry of heavy metals and hydrocarbons from the bitumen separation process”) into the groundwater in Alberta. 

Much ink has been spilled about the Canadian oil sector’s future in the wake of the COVID-19 economic crash and the ever-lengthening list of environmental catastrophes associated with the oil sands. The latest is a cautiously optimistic opinion column published by the Globe and Mail this week that gives the oil sands a hopeful - if tempered - prognosis, under the headline “The oil sands have a future, and it includes polluter pays.”

In the column, the Globe and Mail’s editorial board posits that “while companies such as Suncor are losing money this year, they booked multibillion-dollar profits last year, even with relatively low oil prices. There’s no reason to assume the public must subsidize any future cleanup. The oil sands have been mined for more than half a century but only a fraction has been cleaned up.”

In short, the oil sands have been through hard times before, and there’s no reason to assume that they won’t bounce back from these setbacks just as easily. This time, however, polluter pays looks set to be an essential part of making the oil sands a sustainable part of the country’s economic future. “There is a lot of work left to do,” writes the Globe and Mail. “In the oil sands, Alberta and Canada have to make sure the mistakes of the past are not repeated.”

By Haley Zaremba for Oilprice.com