Politics

May and Blanchet declare the oilpatch 'dead,' warn Ottawa against financial supports

Canada's oil and gas sector is on the ropes as COVID-19 crushes demand and a global price war pushes domestic companies to the brink of bankruptcy — but two opposition leaders say Ottawa should simply let part of the industry wither and die.

Prime Minister Justin Trudeau has promised financial aid for Alberta's beleaguered oil and gas industry

Oil and gas industry supporters rally outside the venue where Finance Minister Bill Morneau addresses an Economic Club of Canada breakfast in Calgary, Wednesday, June 19, 2019. (THE CANADIAN PRESS)

Canada's oil and gas sector is on the ropes as COVID-19 crushes demand and a global price war pushes domestic companies to the brink of bankruptcy — but two opposition leaders say Ottawa should simply let part of the industry wither and die.

The Green Party's parliamentary leader Elizabeth May says governments around the world should use the pandemic, and the resulting economic fallout, as an opportunity to reorganize the energy mix and find other jobs for Albertans working in the sector.

Bloc Québécois Leader Yves-François Blanchet said Alberta's "tar sands" are "condemned" and federal funds should be directed at supporting renewable energy sources rather than projects like the Trans Mountain pipeline expansion.

"My heart bleeds for people who believe the sector is going to come back. It's not," May told reporters Wednesday. "Oil is dead and for people in the sector, it's very important there be just transition funds."

Watch: Green Party's Elizabeth May says 'oil is dead'

Green Party Leader Elizabeth May says "oil is dead" and urges the government to invest into a low carbon economy, including renewable energy, following the COVID-19 pandemic. 1:56

Blanchet agreed with May's remarks, saying in French that oil is "never coming back."

"Putting any more money in that business is a very bad idea," he said.

Speaking to CBC's Power & Politics later Wednesday, Blanchet said Alberta's oil is too costly to produce in the current environment and the federal government shouldn't prop up businesses "that will not be self-sufficient in any time in the future."

"It is clear that there is no long-term future for that kind of industry, so let's help them go somewhere else, something which is more green," he said.

While the industry has been hammered by COVID-19, a number of Canadian oil and gas producers posted profits last year in a time of depressed prices. Cenovus, for example, generated $2.2 billion in profits in 2019.

Asked if he thinks the oil sector should be left to die, NDP Leader Jagmeet Singh was less definitive, saying there will be "tough decisions" to make in the years ahead.

"I know that the future is going to be renewable, that we need to have more investment in sustainable economies that lower our emissions," he said.

Watch: Bloc Québécois says investment in oil is 'a very bad idea'

Bloc Québécois Leader Yves-François Blanchet says oil development is a dying industry and he believes the "tar sands" don't deserve federal investment. 1:34

While Prime Minister Justin Trudeau has pushed for a more 'green' economy and a carbon tax on emissions, his government has supported some oil and gas development. Finance Minister Bill Morneau arranged the federal government's purchase of the Trans Mountain project after its U.S. proponent backed out, and has since plowed billions of public dollars into the expansion.

"No country would find 173 billion barrels of oil in the ground and just leave them there," Trudeau said at a 2017 energy conference in Houston. "The resource will be developed. Our job is to ensure that this is done responsibly, safely and sustainably."

Trudeau has promised sector-specific support for the oil and gas industry beyond the $1.7 billion his government has allocated to clean up orphan well sites. He repeated that commitment at a press conference Tuesday.

May said governments have managed the ordered shutdown of major industries in the past, citing Quebec's decision to end the production of asbestos and the collapse of the cod fishery in Newfoundland and Labrador — and the current Liberal government can do it again with Alberta's oilsands.

"The pandemic, in a very real way, as horrific as this is at many, many levels, gives us an opportunity to stop and think about how we get this economy back on its feet," May said.

The collapse of the oil and gas sector would be devastating for the Canadian economy, and would have economic effects much greater than the end of asbestos production or the cod fishery.

Watch: Help Alberta recover, but don't invest in oilsands, Blanchet says on CBC's Power & Politics

NDP Leader Jagmeet Singh spoke to reporters on Wednesday. 1:16

In 2018, the energy sector made up 10.6 per cent of Canada's gross domestic product (GDP), with oil and gas accounting for 5.6 per cent of that figure. Oil and gas are the country's most valuable exports and the industry sent $132.2 billion worth of product to markets abroad in 2018, according to Natural Resources Canada.

The industry supported 530,000 jobs across the country in 2017 and provided roughly $8 billion in annual revenue to governments.

Canada is the world's fourth largest producer of crude oil, and sits on one of the world's largest proven oil reserves.

An 'Amish-type' society

Tim McMillan, president of the Canadian Association of Petroleum Producers (CAPP), said talk of ending oil production is a "fantasy" because the world still depends on oil products and natural gas for everything from clothing to home heating.

He said May and Blanchet have abandoned a pragmatic approach to flighting climate change and are embracing ideas pushed by "fringe" elements that are not supported by most Canadians.

"I am someone who normally tries to be very respectful of our elected officials but this one has struck a chord with me," McMillan said.

"What was put out today [by May and Blanchet] wasn't a call to action for technology. It wasn't about Canada taking a leadership role. It was a blanket statement based on ideology that is really pushing us toward a pre-industrialized, Amish-type society."

McMillan pointed to pre-pandemic data from the International Energy Agency (IEA) that suggested demand for oil and gas will be strong over the next decade, before that growth moderates as more renewable energy comes online.

The IEA projects that, if governments follow their stated policies, demand for oil will increase each year until it plateaus in the mid-2030s.

The agency also predicts that, under the sustainable development scenario required to avoid the worst effects of climate change, that demand could drop off much sooner.

Fossil fuels sink, renewables float

The IEA has documented a dramatic decline in demand for oil and gas products in the midst of this pandemic, calling it the "biggest shock since the Second World War."

The IEA said the virus has ravaged markets for fossil fuels — the collapse in energy demand is seven times greater than the slump caused by the global financial crisis. Renewable energy sources, meanwhile, have been comparatively resilient.

"It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before," said Fatih Birol, the IEA executive director.

The IEA's April oil market report projected global demand for oil this year will fall by 9.3 million barrels per day compared to 2019.

Because of COVID-19 containment measures, demand for oil in April was estimated to be about 29 million barrels per day lower than it was a year ago — a level last seen in 1995, the report said.

The price of West Texas Intermediate (WTI) and Western Canadian Select (WCS) briefly turned negative last month as suppliers struggled to find buyers for their product.

Shannon Stubbs, the Conservative natural resources critic, said the pandemic might actually be good for oil production as low prices could make it more attractive than renewables — especially if cash-strapped governments end subsidies for green technology.

"Canada should be the supplier of choice to the world, and the top destination for oil and gas investment and development, while securing energy self sufficiency," she said, adding oil gas are still the "most abundant and affordable" form of energy around.

Watch: NDP's Jagmeet Singh calls for energy workers to get COVID-19 relief funds, not companies

About the Author

John Paul Tasker

Parliamentary Bureau

John Paul (J.P.) Tasker is a reporter in the CBC's Parliamentary bureau in Ottawa. He can be reached at john.tasker@cbc.ca.

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