By David Yager
April 5, 2021
The Canadian Energy Centre (CEC) – often referred to as Jason Kenney’s “war room” – is back in the news again.
As usual, it is not all positive.
The CEC originated with Premier Kenney’s campaign promise during the 2019 election to fight back against false and defamatory information about Alberta, the oil and gas industry, and the oil sands.
Last month the CEC made international headlines after calling out Netflix for releasing a children’s movie titled Bigfoot Family, a cartoon depicting likeable animal characters trying to stop an evil and destructive oil executive’s scheme to make money by destroying Alaska’s wilderness and everyone who gets in the way.
The CEC attacked the movie as damaging propaganda aimed at children because the villain was a criminal oil tycoon who put profits over the environment, safety, and even the lives of the good guys.
Everything the CEO does is illegal, but this parallels the not uncommon narrative that producing fossil fuels is a crime against humanity.
The CEC encouraged a public letter writing campaign to Netflix, asking the company to quit distributing cartoons for children that propagate egregious depictions of oil companies.
Critics of Premier Kenney, the UCP, and the CEC immediately jumped all over this as yet another example of what a colossal waste of money the war room campaign pledge has become. Some found it embarrassing. But the oil industry has that effect on too many Albertans who don’t care or understand how the provincial economy functions.
Because it was a UCP campaign pledge, the CEC has been under attack since it was conceived. Kenney’s party only received 55% of the popular vote, meaning that mathematically 45% of Albertans didn’t like the idea from inception.
However, as anyone who still works in the oilpatch has learned from experience, those who don’t agree that the continued use of petroleum is a threat to the world’s climate have become popular targets. It is much easier for today’s oil executives to repeat the “net zero by 2050” mantra than try to talk common sense in a world increasingly driven more by emotion than facts.
Trashing fossil fuels is not new. For years it has been open season on oil, oil companies, oil executives, oil workers, and oil’s defenders. Critics can say anything they want with impunity no matter how derogatory, conspiratorial, misleading or factually incorrect the criticisms or allegations may be.
For decades Alberta was one of the world’s most highly regarded oil producing regions. Run by industrious, honest and sincere Canadians, it was respected at every level from its legendary regulator – the Energy Resources Conservation Board, now the Alberta Energy Regulator – to its leadership, ingenuity and innovation. Alberta-based producers, service companies, oil workers, equipment, and technology were welcome in every financial capital and oil producing jurisdiction in the world.
The oil sands have long been recognized as valuable. After Canada became a country in 1867, the Geological Survey Canada began mapping the oil sands and funding experiments to turn bitumen into money. The federal and Alberta governments financed significant research to unlock the resource potential. Great Canadian Oil Sands, today’s Suncor, launched the first commercial operation in 1967. During the oil crisis of the 1970s, Alberta, Ontario and the federal government took equity positions in the Syncrude consortium to get that project producing oil in 1978.
By the mid-1990s the oil sands were seen as critical to Canada’s economic future. In 1997 Jean Chretien’s Liberal government and Alberta jointly created the Generic Oil Sands regime with attractive tax and royalty benefits to spur growth and development. When the price of oil started rising early this century, capital poured in from all over the world because Alberta contained the largest oil deposit on the planet not controlled by sovereign nations or state oil companies.
Thanks to the hard work of industry scientists and entrepreneurs, Canadian governments, international investors and growing US oil demand, over a century of hard work paid off big time. Canada entered the 21st century with oil sands production averaging 610,000 b/d. The country exited 2019 at over 3 million b/d, nearly 500% higher.
Attracted by wealth, growth and opportunity, Alberta’s population also grew. In 2001 the federal census documented Alberta’s population at 2.97 million. The current population is 4.43 million, a gain of 1.46 million people or 49%.
Regardless of why so many chose to move to Alberta in the past 20 years – or decided to stay – be assured it had much more to do with oil sands than the weather.
Because whatever Albertans and others think Alberta should be, or could be, it exists in its current form because Canada and much of the world teamed up to exploit the oil sands to the point that it now produces 3% of the planet’s petroleum.
As I explained in my 2019 book From Miracle to Menace – Alberta, A Carbon Story, Alberta without oil is Manitoba with mountains. The only reason 4.4 million people live in this geographically isolated portion of North America – and why relatively few live nearby – is because of fossil fuels.
Alberta’s problems began in 2006, about the same time that the oil sands boom really got going. That’s when Al Gore released his movie An Inconvenient Truth which won a Nobel Prize and an Oscar. Long on emotional images and not excessively concerned about facts (there is still snow on Mt. Kilimanjaro and coastal Florida is not yet submerged), in my book I concluded this was the pivotal event that moved global warming (later climate change) from scientific theory to a mainstream public policy issue.
This was about the same time that the traditional media was in the early stages of being replaced by the internet and social media.
Legacy news outlets were built on researchers, fact checkers and owners financially committed to reporting the truth. It was a commercial business. Factual accuracy had financial value. Inaccuracy carried financial penalties, including litigation.
Today, the massive, uncontrolled, unregulated and largely free electronic social media network allows anybody to publish almost anything about anything. Today’s so-called “deep fakes” are downright dangerous. The woke generation, cancel culture and climate emergency phenomenon would not exist without this transformational change in how the world communicates, and how people receive information.
In 2008 the US environmental movement needed a new crusade, and the “tar sands” fit the bill. Lest anyone forget, go to https://corpethics.org/the-tar-sands-campaign/ and look around. Even today, San Francisco based CorpEthics International regards its attack on Alberta as one of its most successful accomplishments.
“CEI joined with dozens of Canadian advocacy groups already working against tar sands expansion and helped bring additional support to the campaign from groups in Europe and the United States…The resulting campaign successfully educated citizens about the harmful impact of tar sands expansion to our climate, native forests, and First Nations’ sovereignty…Together we successfully persuaded President Obama to block the approval of the Keystone XL pipeline…”
This is the edited version. CEI used to brag about how it helped influence Canada’s 2015 federal election which replaced oil-friendly Conservatives with materially less oil-friendly Liberals. But after CEI’s provocative bravado came to the attention of CBC TV, some of the more controversial accomplishments were removed.
The rest is history. Soon pipelines, once regarded as essential conduits to prosperity and nation building, were under assault. From 2015 to 2017 three major pipelines that could carry more than two million barrels a day to North American and global markets were killed. Keystone XL made such a compelling commercial case that the White House had to cancel that project twice.
Although long regarded as a national and strategic economic priority, the oil sands instead became a global poster child for the battle to save the world from climate disaster. Facts no longer mattered. Bitumen was branded as especially awful because it wore holes in pipelines. It wouldn’t float if it was spilled, making tanker transportation and underwater pipeline crossings particularly dangerous.
Bitumen was also alleged to have the highest carbon content of any oil on earth. No attempts were made to normalize carbon emissions by including flaring of associated produced gas, which is common in many producing jurisdictions including the US. Little or no recognition has been given to the continuous reductions in per barrel oil sands emissions.
The smear campaign was so convincing that the European Union was persuaded “tar sands” oil was the hydrocarbon equivalent of nuclear waste. Always wanting to be seen as doing the right thing, the EU was going to ban oil sands imports. Canada spent a bundle in Brussels to successfully convince the Europeans that despite what they had been told, it was actually only petroleum.
Meanwhile, Fort McMurray became popular among wealthy Hollywood celebrities undertaking jet fuel powered virtue signaling tours. Jane Fonda, James Cameron, Leonardo de Caprio and Neil Young flew to the oil sands in private jets, stayed long enough to pose for photos and trash the place, and returned to the US.
The world media dutifully reported that the oil sands were dreadful and that these famous jet setters were 21st century environmental heroes. Young, a recognized international expert on clean resource extraction and the dangers of nuclear weapons, called the oil sands “Hiroshima”.
In 2021 Alberta is in tough financial condition by comparison. The province is heading for $100 billion in public debt. Capital has fled and the modern ESG movement is helping ensure it doesn’t come back. Unemployment has skyrocketed. The myth has been perpetuated that lost oil jobs can be replaced in renewable energy, a disingenuous and aspirational claim for too many reasons to explain here.
The coordinated international attack on Alberta’s oil sands is not the only challenge. The multi-year collapse of gas prices thanks to the US shale gas boom hurt badly, as did the collapse in the price of oil. The last body blow was the COVID-19 pandemic, but its impact was not restricted to Alberta.
But in the 15 years since Al Gore changed the channel on the public perception of oil and the 13 years since the tar sands campaign was launched, the only major petroleum deposit in the world singled out for this level of vitriol and punishment is the oil sands.
In 2008 world oil production and demand was about was 82 million b/d. By 2019 it peaked at 102 million b/d, a 24% increase. Of the additional 20 million b/d required, less than 10% came from Canada. From the time US President and tar sands opponent Barack Obama assumed office in early 2009 to early 2020, America’s contribution to arresting the oil-driven climate emergency was to increase its petroleum output by 8 million b/d, or 160%. Most of the oil was fracked using enormous quantities of water. Huge volumes of associated gas was flared.
Growing US oil production also kept a lid on global crude prices from 2014 onward. This ensured that world demand growth would not be hampered by high oil prices.
Do as I say, not as I do.
When the NDP formed Alberta’s government in 2015, it was conflicted. Although it was managing one of the world’s greatest oil reserves, its default beliefs were sympathetic to climate change crusaders. Within months of forming office, the Climate Leadership Plan introduced emission caps and more carbon taxes and showed the world that those nasty oil sands were under more environmentally responsible administration.
Premier Rachel Notley even referred to the province that elected her as the “embarrassing cousin” of Confederation because of its management of oil sands development. Pretty easy to figure out why 52% of Albertans voted for the PCs and Wildrose in 2015, while only 41% supported the NDP. That conservative vote split is what prompted the merger that created the UCP.
The massive capital outflows from Alberta that began a year later were brutal. This was a combination of the NDP, the Liberal federal election win of 2015, pipeline cancellations, Canadian regulatory uncertainty, low oil prices, and the Donald Trump administration cutting taxes and other obstacles to expanded American oil and gas development.
It takes years to put a new oil sands project on production. As a result, when new pipelines were delayed and output grew, what emerged was a growing price differential for Alberta oil. Transporting crude to market by rail began in early 2012 at only 9,400 b/d. Seven years later it was up to 412,000 b/d, 44 times the volume. But rail was twice as expensive as pipelines.
There have been multiple factors depressing Alberta’s oil prices including quality (specific gravity), exchange rates and transportation costs. According to CAPP data, average oil sands production from 2010 to 2019 was 2.2 million b/d. If this were subjected to an average discount of only $5, the total loss to producers, suppliers, workers, the economy and the Alberta treasury would be $40 billion.
This figure is likely low. According to the Canadian Energy Regulator, the average discount between WTI and WCS for the first four months of 2018 was $US22.50. Combine this with capital outflows and the loss of investment and this is a huge amount of lost money and opportunity.
This was the state of Alberta when Jason Kenney and the UCP contested the 2019 election. Things were going to be different. The “war room” pledge to fight back on the multi-pronged, multi-year assault on Alberta and Albertans was, at minimum, refreshing.
After the UCP won, it was the job of newly elected MLAs and government bureaucrats to turn this campaign pledge into policy. A government-funded, pro-oil information department was new to the world, not just Alberta. It was ultimately named the Canadian Energy Centre with a mandate “…to promote Canada as the supplier of choice for the world’s growing demand for responsibly produced energy.”
Looking at major oil producers like Iran, Nigeria, Venezuela, Iraq and Russia, you’d think that this undertaking would not only be acceptable but appreciated.
But because it was political, the CEC was attacked from the start. Opposition politicians, environmentalists and the media took great pleasure in publicizing and criticizing every single mistake. The early mistake of releasing a copyrighted logo is repeated over and over by the media and critics as an obvious example of incompetence.
Another big issue was the cost of $30 million. But that is only 6/100 of 1% of the total cost of the aforementioned crude oil discounts. If Alberta could fetch another C$1 a barrel for its current oil sands output, Alberta’s economy would recover the CEC’s $30 million every ten days.
Then along came Bigfoot Family, yet another reason for the critics to pile on the CEC again. I have done multiple media interviews since. Here are three questions and my answers.
Q: Do you think public money should be used for this purpose?
A: Who else will do it? Oil companies can’t do it. They are accused of conflict of interest. Industry trade associations can’t do it. They too are accused of being conflicted. The government is doing it because nobody else will. The question should be is the CEC necessary? And my answer is yes.
Q: Do you think the Netflix campaign damages the reputation of Alberta oil producers?
A: You’ve got be kidding. What reputation? What on earth is left to call the oil industry, oil executives, oil producers or oil workers? There are no limits, no words too harsh, no accusations too extreme or ridiculous. Oil is already in the sub-basement of public opinion. How could it be worse?
Q: Should the Government of Alberta pick a fight with Netflix?
A: The portrayal of the oil industry and oil executives in this movie is egregious. Should nobody say anything? If the CEC is the only party willing to challenge Netflix on distributing this message to children, then so be it. Should nothing be said? Just move on and forget about it?
The movie’s producer claims to be enjoying great publicity thanks to the CEC. The CEC counters that its letter writing campaign was successful, and the issue of anti-oil cartoons targeting children has received the exposure is requires.
My own view, which I repeat regularly, is that in the last year the CEC has really hit its stride. It is primarily a source of solid research, expert analysis and support for the economic foundations and fundamentals of Canada’s most important resource industry by any measure.
The world needs oil. Whatever you hear, read or believe, nobody is prepared to live without it. Alberta is best in class in oil production by any measure.
Please think this through.
Can the CEC do better? Of course. Always.
Indeed, let’s keep the CEC and the government honest.
But will Alberta and Canada be a better place without it?
So let’s also keep the CEC going.
David Yager is an oil service executive, energy policy analyst, oil writer and author of From Miracle to Menace – Alberta, A Carbon Story. More at www.miracletomenace.ca