The Future of Earth-Energy Resources in Alberta and a Story of Alison in Blunderland

Recent cuts of the (Alberta) provincial budget have been portrayed by the government as the necessary result of falling revenues due to the bitumen bubble – not to mention low gas revenues. This caused me to consider the future of oil and gas revenues in Alberta. Can we expect high levels of revenue from oil and gas (and coal?) in the future?

One thing is certain: there is no shortage of oil deposits in Alberta. These are present as heavy oil, ultra-heavy oil and tight oil. Regarding heavy and ultra-heavy oil, Alberta has perhaps the most in the world. Consider that there is about 1.7 trillion barrels of the gooey stuff in the McMurray Formation, and another 500 billion barrels in the underlying Grosmont Formation. Well, we basically corner the market. For the record, we could add the Peace River, Cold Lake and Lloydminster heavy oilfields to that inventory. It is no lie to say that Alberta has about 2.5 trillion barrels of oil and heavy oil in place (not all of that is producible). These numbers are so large, I will not even bother discussing the tight-oil Bakken Formation.

Regarding gas, Alberta has LOTS of that, as well. There is deep-basin gas, for example in the Grande Prairie area, tight gas generally throughout NW Alberta (and NE BC) in the Montney Formation and un-estimated volumes of shale-gas in the Devonian Duvernay Formation. Not to mention shallow gas, coalbed methane and conventional gas. Way more potential production than all of Canada needs, and probably at least a 50-year supply of it!

So: there is no problem with resource availability. The limitations are infrastructure to get the products to market (both oil and gas) and the technology to exploit those resources. I see those coming in the future. Despite BC’s intransigence regarding a pipeline to the coast, it is in Canada’s best interest (yes Canada, not Alberta) to get the product to market. Regarding oil, pipelines WILL come and new means of partial upgrading at the well-site are on the horizon (lighter product is easier to pipe to market). So the future should be just fine.

The pity is that this is the same government that is whining about the bitumen bubble that would have seen this coming, had they listened to economists. The same government that permitted unfettered development of the oilsands from 2000 to 2008, so that we now have more bitumen than we know what to do with (also causing many other infrastructure problems in the process). The same government that refuses to look at royalties from the oilsands as part of the budget-solving equation. And now, here we are: cutting services and education. This is, in fact, a story about poor resource management and stewardship. It smacks of lazy government policy that lacks a vision of the future. It reveals the lack of ability our government has in consulting with the large number of talented Albertans working in industry and academe who have seen today’s issues coming. It is the result of an arrogant government that thinks it always knows best in spite of abundant evidence that it lacks any real talent.

Note to Premier Redford: regarding education cuts, we will probably need our economists, geologists and engineers once those pipelines are finished, so let’s not get too carried away.

Maybe I am over-reacting. Students: what do you think?

18 thoughts on “The Future of Earth-Energy Resources in Alberta and a Story of Alison in Blunderland”

  1. This unfortunately does not surprise me. The government is always screwing up somewhere and making our lives difficult. In my opinion Redford is going to cause Alberta some serious heartache in the near future. It’s so painful to know we do have the resources to fix the budget problem but unfortunately the government is too ‘now’ focused. They don’t want to wait for technology to advance to get the oil and gas; they want the money now and they see education budget cuts to do that. Which is crap!!! I agree with you Murray: we need future professionals to keep the industry going, and the education sector is the worst possible place to cut budgets. I won’t even go into how powerful education is. I wish the government would get their head out of their behind and stop making stupid decisions! Budget cut elsewhere but don’t you dare touch my education!!!!!

  2. I think its always disheartening when politicians make open-ended promises. Because these “promises” were geared towards physicians, teachers and other unions, the Tories easily walked into power. Yes, ignorance is bliss. The public services experienced hiked wages initially, and due to the lack of saving, we (record-holders of spending) are going to experience an immense deficit. When the budgets were balanced, the government should have saved and stopped unnecessary, lavish spending. If they did, we might be able to ride out this “unforeseen”(haha) fluctuation in oil price. From the looks of it, the cuts on services, especially health and education, are quite drastic and could have been avoided. The Wildrose Leader stated, “There was absolutely nothing in [Redford’s] speech tonight that should give Albertans any confidence that this premier knows how to solve the problems she created.” What did Redford expect was going to happen?

    The Conservatives are hoping energy prices are going to bounce back. All the while, borrowing great heaps of money and sucking the savings dry over the next three years. Let’s hope we can survive Redford’s spending (fingers crossed) and the following politician focuses on financial foresight. However, as long as the people hear what they want to hear, politicians will gain power. That is just the way the cookie crumbles.

    1. I find this very interesting. I would like to see if there is anything actually done towards the actual development of infrastructure after the education budget has been reduced or will this money just go towards paying for the things the previous income from the bitumen paid for. The government seems to lack focus on the future and is overly concerned with the present. Another question may be: Was I surprised that a cut to the education budget took place? My answer would be: definitely not! Unfortunately it is difficult to vote in a government that will be truthful to their promises. What government promises is different than what will be done once it is actually in office.

  3. Unfortunately, I am one of those people who don’t follow politics all that closely or as much as is should, so I don’t end up hearing about these issues until someone complains about it of Facebook or some other form of social media.
    However, just the mention of budget cuts to health and education is enraging. We need education now more than ever – there is so much other bad social media and such out there and less people wanting to pursue careers that require higher secondary education as it is, let alone cutting education budget costs. The further we advance into the future, the more professionals we will need to find new sources of energy, new ways to make “unprofitable” resources profitable and new technology for the people. We cannot hope to continue into the future without finding new technologies for the existing energy stores or new energy sources and we cannot do this without having people educated to do it.
    I hope that we can get passed this and that the government doesn’t continue to cut education budgets – I would like my children and my children’s children etc to be able to go to school without it costing both my arms and legs.

  4. This brings to light a few issues I have always been concerned with:
    1. The relationship of science and engineering with policy-makers.
    2. PC complacency

    In order to grow and to innovate, a society needs educated workers; in today’s world, I believe that the undergraduate degree is the new high school diploma. Not to mention the increasing interdisciplinary nature of challenges. This means we need more research and funding, not less. Personally, I think there is a grievous gap between the knowledge of innovators and the knowledge of policy-makers. This has to close.

    The PC government’s inability to connect with the people they govern, I think, comes from their complacency in office. Voters may have scared them last election round, but they proved that they can still take office with glaring deficiencies. There isn’t a reason for them to consult if the voting populace is apathetic. PC complacency comes from years of holding office with a subdued voter base. I find Albertans to be much less vocal than most other provinces.

    And finally, we should look at Alberta’s dependency on oil. It’s a growing industry, but there are still uncertainties in revenue. I find it similar to putting all of one’s eggs in one basket. Either the government adjusts royalties or we find other ways to support our government’s budget, so they don’t have reason to cut services when oil revenue is lower than expected. If one must make cuts, then don’t cut utterly necessary services or education. Stelmach cut hospital beds and the Alberta government is still failing to appropriately fund hospital services like food for the long term care wards in small communities like Lac La Biche. And now Redford’s government seems to think that the best move is to cut funding to the institutions that create geologists, engineers, lawyers, business people, and teachers. It may not be the head, but she sure is slashing at the knees.

    1. True… dependance on one revenue stream means that there is fluctuation that, by now, the government should be able to account for.

  5. I think the only problem for Alberta oil sands is lack of customers. Some Asian countries like China and India need a lot of oil, but how to transport them is a problem, so building a pipeline to the coast is the first step. Unfortunately, some stupid politicians ruin it. As a foreigner student, I am so confused about Canada political system.
    I also heard “shale oil” a lot recently, will that affect the oil sands in the future? If it does affect, will Calgary be the next Detroit? Here is my concern.

  6. Reading over the comments I hear lots of people blaming the government and blaming the Conservatives, but when it really comes down to it its our fault (meaning the general population) and that of our resource management system as a whole. How can we expect a government that was elected for a four year term to sacrifice short term gains and their chances of re-election on hypothetical bitumen bubble six or seven years down the road? I think that what we need is a board of expert economists, geo-scientists and environmentalists to have the final say on these development decisions rather than law-makers whose opinions are largely governed by who can put up the most money. If we want real efficient management we need to remove the short term planning from the equation and focus on the future of Alberta’s and all of Canada’s resources. This problem is only magnified when dealing with volatile commodities such as oil and gas. We have seen numerous booms and busts for as long the industry has existed, and this in large part is due the lack of foresight that seems to be so strongly associated with hydrocarbon development. Why would a government bother to implement an unpopular, yet economically sustainable multimillion dollar project when the opposition promises to scrap it and usher in four years of immense prosperity with no regard for the following ten to twenty years? Not to mention the big industry players screaming in their ear every step of the way.

    Whenever something goes wrong we always look for the quick and easy solution to problems. Nobody wants to see an economic development plan that will show results twenty years down the road. Like in the case of those “Ralph Bucks” we always love the quick and easy solution if it lets us have a bigger Christmas bonus so we can go buy the newest iPhone. Only when we see the consequences (look no provincial savings!) of these actions do we go and complain to our representatives, chastising them for their lack of foresight. I personally have never heard anyone complaining that “Times are too good right now.” And until we adopt a new way of thinking we are never really going to fix these ever bubbles and crashes which plague our industry which.

  7. I am not worried about the future of hydrocarbon resources in Alberta. Alberta has enough hydrocarbon resources. At the same time, there are places that are in desperate need of oil and gas. Where there are both demand and production, chances are there will be a successful business somehow. I do not think that it is only the Alberta government’s fault. It is quite common that people are in charge of something they don’t even understand well. I think one thing that differentiates good policy makers to bad ones is that if these people are willing to hear what the professionals think and actually do what they are supposed to do. Frankly, it is very hard to do. However, government refusing the construction of pipelines seems to be a bit confusing to me, since it is basically the only way to transport oil at a reasonable cost. There are markets out there waiting for oil and gas for sure. East Asian countries are huge potential customers. So far, African countries, Mid Eastern countries and Russia are the major oil suppliers for Asia. If people can transport oil all the way from Nigeria and Libya to Asia, I don’t see why albertans cannot sell oil to Japan, Korean, China and so on. At last, I think cutting funds for services and education firstly cannot solve current problems and secondly is not a reasonable move.

  8. I think stating that “government is always screwing up somewhere” is a broad and widely accepted statement in everyones separate opinion. It would be impossible for a government to be elected in which they did not “screw up” in the views of each member of an entire population.
    Alberta elected the conservative government in fear of a new Wild-Wildrose outbreak on the comfortable long lasting Conservative party. Alberta was in fear of change, and we now are seeing its repercussions in budget cuts to higher education and infrastructure problems hindering potential oil revenues trickling down to our university. Over the last 30+ years the conservatives have used the build-build-build attitude with little future thoughts, which has gained voting momentum; it has brought jobs, money, low taxes, cheap gas, even a prosperity bonus, along with higher living quality to many of us. The beneficiaries of this long lasting government are hard to budge towards new ideals, long-lived conservative voters do not want to vote on change with something they have grown rich with.
    Redford is becoming trapped and feeling increasing pressure as moving Alberta’s oil is more difficult in todays media onslaught of “dirty oil”. The US economy is in need of jobs (and our “dirty oil”), which our proposed pipeline can provide many jobs to them, however the Obama government is trapped now with their platforms on climate change.
    So where are we?
    -stubborn old aged conservative voting population of Alberta
    -poorly developed infrastructure to harness Alberta’s natural resource potential
    -pipeline proposals being stoned to death in todays bandwagon media
    -dwindling surplus in need of replenishment for Albertas future
    -current economy paying uneducated people more than university grads (“living the mac life”)

    basically–> Alberta is in a oil filled Conservative castle which has no plumbing.

    In this situation what does government do?
    -need more money? cut education
    -why can the government cut education? Many Albertans have grown prosperous without education, they will continue to vote without it too.
    -why not increase taxes? Affects the entire population, changes a lot of votes

    –>We can’t blame the government for strategizing themselves to remain in power. –>No government is going to their future terms at risk

    We can march to legislature, we can bicker and complain, we can light up social media sites as much as we want to bring attention to what we have (poorly) built for the last generation.

    We need education. We need a government which supports this. We need an educated Alberta. Without this we are just going to spiral deeper until Alberta completely flops.

  9. I am frustrated that the government has decided to value the opinion of foreign oil companies over the needs of the citizens who voted it into power. Education and health care cuts as a solution to budget problems is ridiculous when the government continues to bend over and let foreign companies take advantage of albertan resources, because of the proverbial threat of killing the goose that laid the golden egg.
    This “crisis” is not entirely a failure of the present government although they are the ones responsible for the current budget mess. I believe it is primarily the fault of prior governments who out of fear of disturbing the golden bird, allowed it to metaphorically crap all over alberta and exploit our resources without bringing adequate benefits back to the province.
    An interesting example is in Mongolia where the government is ensuring that their people will benefit from the Oyu Tolgoi mine that Rio Tinto is putting by demanding more for its country and stalling productions. This is what should have been done long ago and it is not too late now to change. While you may question the honesty of changing royalty schemes, the government is there to serve its people, not to serve foreign companies — and cutting health care and education costs is blatantly not in the best interests of the citizens of alberta.

  10. Alberta still has many years of oil and gas to drill. We’d better extend the pipeline infrastructure. As far as I know, USA is one of the countries that used to get oil and gas from Canada; however, in this year, the export of oil and gas to USA from Canada decreases. Since the oil price drops and the transportation fee is a lot, so price of oil after transporting to USA is more expensive than the oil generated from USA. So USA reduces the amount of oil that buying from Canada recently. I think it will probably be a problem for Canadian government.

  11. Dr. Gingras, I share you sentiment on this topic. It is infuriating to see how much the government has screwed up. The government does not care about our long term future. It only cares about surviving until the next election. It is extremely easy to see that permitted unfettered development of oilsands would lead to oversupply. On top of that, lack of planning for infrastructure make the problem even worse. Now Western Canadian Select (WCS) oil is sold at like $20/barrel at a discount to West Texas Intermediate (WTI) oil.
    Alberta’s oil sands is the third largest proven crude oil reserve in the world. There is so much potential to make money here. In order for us to make that potential a reality, Alberta needs her economists, geoscientists and engineers. However, the government’s lack of long-term insight once again hinders Alberta’s development.
    The government needs to wake up and realize that continuing to sacrifice long-term development for short-term gains will only create problems for future generations to deal with. Regardless of whether the incompetence stem from their arrogance or ignorance, we should change the way our system works. Our experts and academia working in the industry should have the final say in the development decisions rather than law makers. Either that or the government has to stop using quick and easy solutions and start listening.

  12. Our government is a fiasco. Though the PC’s are lionized for their decades in power they have been absolute fools with our resource gift. We squandered a great bounty by putting such revenues into general revenue instead of saving and growing it. That chunk of money in the budget is obviously not sustainable. Why on earth did we not do to the Heritage Fund what Norway did to its Sovereign Wealth fund? We could have an actual stable source of revenue now!

    BUT our culture and way of life is ENTIRELY different. In Norway the function is to save and conserve long term and invest, but here in Alberta its buy new stuff and programs and money for cities (where voter$ are) and spend spend spend as politicians want that political dividend. There is no desire by anyone it seems in the province to conserve. Even in private spending, everybody is getting loans on totally unnecessary things, such as boats, sled, quads, way too overloaded trucks and motorhomes, opulent homes, the list goes on and on. Everybody’s personal debt to GDP ratio is like Greece. That spending culture is present in our political system now. Nobody looks to the future but just short term to ride the wave of prosperity. What happens when its gone? Now we have greatly increased migration from the rest of Canada and infrastructure spending is through the roof, and the government is not taking in enough revenue to keep up our standard of living!

    So,

    1. Long term, especially with the growth of a million people in a decade not only is unsustainable but the money the government is spending now to keep up with this migration is going to make Ontario look like a cute pony with a bow on it.

    2. If we cant market our resources we will continue to get short changed on the transaction, and the way our political leaders are acting, and the ones that are running for the head chair now, its same old same old stupidity.

    3. We are the wealthiest jurisdiction in North America. And we have a deficit. So what happens when there are no natural resource revenues?

    This is going to end up being a disaster for Alberta, or rather Alberta is going to be a disaster. 30 years down the road and you wont even know what province you are in. All of it, the spending totally beyond its means, the growth, the use of resource revenue as general revenue is going to leave the people who stay in this awesome place with the bill, the pollution, and unsustainable infrastructure that cannot be up kept because if the boom stops, why would lots of these new million plus migrants stay in this cold barren jobless plain when they can go to warm and (in the future) more prosperous Southern Ontario or BC to work? Or older Albertans themselves for the matter? Hell we may not be able to even keep up with environmental and pollution remediation.

    Alberta I’m afraid has already squandered the gift and instead of being farsighted and investing like Norway in the future we will more likely mirror a cross between an oil barren Texas and an overpopulated (for the economy) and pollution ridden Nigeria.

    I hope some politician will do something about it, but I’m afraid most Albertan are so short sighted, they just don’t care. So why should the old boys on top?

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