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Energy notes from the edge: Coal trains vs high speed rail

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21 minute read

From the Frontier Centre for Public Policy

Author Terry Etam is a columnist with the BOE Report

They are accusing you of murdering people by producing fuel the world requires for survival. It’s silly; they (the NDP) have things precisely backwards – they are confused by the role of hydrocarbons in our life. So you need to address that first and foremost, because they are writing policy based on such faulty reasoning.

They are NOT asking you to produce your product better. They are saying you are killing the planet and its people and making a fortune while doing so.

Ah, you couldn’t make this stuff up, as we find ourselves saying on a daily basis.

Here’s a look at two ambitious infrastructure projects involving rail construction, separated by a few years and also by about everything else two projects could be separated on. One of the train stories dates way back to 2019; let me take you back to that era for all the readers less than five years old (not quite but close; last week I met a delightful family, a mother and two young daughters that are fascinated by pump jacks, love taking pictures of them, and are planning to launch an apparel line adorned by nodding donkeys. I’ll take five.) 2019 was the zenith of anti-hydrocarbon frenzy. It remains alive in small pockets of guilt-ridden billionaire inheritors and various political types that don’t understand energy and don’t want to learn, but 2019 was something else; hundreds of thousands of brainwashed children taking to the streets behind a strange Swedish kid that was treated like a messiah by confused adults. Canada’s prime minister jauntily joined one of her protests, standing proudly in front of signs explaining in emotional gobbledygook that the hydrocarbons that were keeping the sign-holders alive now and for the foreseeable future had to be eradicated immediately via some demand or magic or else the world will simply explode into flames a few decades hence.

Anyway, it was all surreal in one sense, but back to the railways: a few interesting milestones were hit around then that, when viewed alongside the climate hysteria of the era, prove without a doubt just how challenging it will be to transition to a new energy system.

But before getting to the 2019 story, we’ll check in on one that began long before then and continues to this day. It hails from sunny California, spiritual leader of the Movement To Use Extreme Wealth To Do Wacko Things. In 2008, voters approved a high-speed rail connection between Los Angeles and San Francisco, to be completed by 2020, at a cost of some $33 billion. Big numbers, both on the timescale and in the $ department. That’s reality these days though; nothing is easy or cheap, part of which is the price of going green. US energy transition advocates have reliably pointed out that high speed rail was a necessity all over the US, and the world for that matter. Nature website ran an article stating “…the role of high-speed railways in fostering a transition towards sustainable energy sources has gained prominence… these findings highlight the environmentally friendly attributes of high-speed railways and underscore the pressing need for effective policy measures to facilitate a global transition towards renewable energy, both in China and worldwide.”

A few interesting tidbits emerge out of this scenario. The first and most peculiar is that a scientific article on the scientific website Nature would assert that high-speed rail is important in “fostering a transition towards sustainable energy sources” – the statement has no logical basis, it flows from nothing, and is incoherent. HSR is wonderful, and makes efficient use of time, and possibly could replace air travel in some circumstances, and, as the paper rightly asks, HSR may well contribute to ‘nationwide energy savings and emissions reductions’. But none of these virtues foster a transition towards sustainable energy sources and to state it does is an oddly dumb non sequitur to feature as the anchor statement for an academic paper.

But anyways, whatever, the paper analyzes China’s experiences with HSR, which brings up a far more interesting point about the energy transition that is in the realm of That Which Must Not Be Discussed: the fact that in the west, major infrastructure projects are incredibly difficult to construct, whether green or not, and that initial cost estimates often turn out to be laughably low.

California did indeed set out to build an HSR in 2008, to be completed (as you may recall) some twelve years hence. But, as this California news website notes, “the blueprint is fraying”, which is some beautiful understatement. In 2020, the year the project was to be completed, Governor Newsom unveiled an updated plan, that California would settle for building a 171 mile initial segment – about a third of the distance of the original – at a cost of $35 billion, a number that exceeds the initial estimate for the entire 500 mile line. And the in-service date for the shortened version is now penciled in as 2030. As for an end date for the entire project, they haven’t a clue, don’t even bother taking a guess at it, but they have bravely provided an updated budget of, brace yourself, $128 billion. That’s almost four times the original estimate.

And even that number is scoffed at by engineers that have worked on HSRs. Bill Ibbs, a retired UC Berkeley engineer, says he is concerned about the lack of attention to engineering risks – that proponents don’t even address significant engineering challenges in the latest cost estimate, such as challenges likely to arise in the 38 miles of mountain tunnels required. (Per the article linked above: “Democratic leaders have declined or did not respond to requests for interviews.” Who saw that coming.)

That is what we are in store for in the western world. Keep this example in mind the next time you hear about net-zero 2050 visions based on almost any large scale infrastructure construction. You would have to be the world’s most naïve person to believe initial cost and time estimates.

Now, on the other hand, countries such as China have indeed made great progress though, as we’ll see in a second, the choice of China as an example is fairly ironic. The Nature academic paper notes that hundreds of Chinese cities already operate HSR networks. China has stunned the world with the pace at which it has developed infrastructure over the past 40 years; however, it is an authoritarian state that sweeps aside the sort of issues that bog down western democracies like a bear sweeps aside a hiker.

And if we’re going to marvel at the speed at which China has constructed these HSRs, then we should look at this one too. In 2019, China opened a brand new, 1,813 mile railroad, completed on schedule at a cost of $28 billion. It took 4 years to construct, and faced multiple significant challenges such as “crossing both the Yangtze and Yellow Rivers twice” and includes 770 bridges and 229 tunnels totalling 469 kilometres or 291 miles, some 8 times as many tunnel miles as California. This new rail line is dedicated to carrying… coal. It was created for no other reason. It was built entirely to handle coal.

That’s how they do it folks. An authoritarian state that removes any obstacles instantly, all to build a supply line for a fuel that the west is cleansing itself from as fast as it can. China realizes what it takes to build things. The West does not. Further, while China is the largest installer of renewable energy, it is fairly transparent about its appetite for any fuel. That’s how the world works, folks, except for some…

“How do you sleep at night?” Or… how to win a debate with extremist loons – hand them a microphone.

An NDP committee that hates things dragged a bunch of “Big Oil” (or “Big Canadian Oil”, anyway) CEOs onto the carpet to, literally, blame them for forest fires and floods. Their argument went about where you’d think it would, when your philosophical underpinnings are of that grade: Not only do you mooks create a lot of bad weather, but you line your pockets by doing so, gleefully so, and thus we want to know just how you can sleep at night.

The CEOs responded decently enough in their polished way, but I think it’s important when addressing an interrogation of that sort to firmly call out the lay of the land.

Rich Kruger, CEO of Suncor, said “I could praise the transformational virtues of hydrocarbons over the past century, convey the world’s dependence on oil and gas for decades to come, recite economic contributions to Canada’s prosperity and, yes, discuss the concerning effects of climate change and GHG emissions… however, today, I plan to dispel a series to myths. And paint a picture of opportunity.” The myths: oil & gas prosperity comes at the expense of the planet; Canadian companies are resisting the energy transition/decarbonization; and that Canada can demonstrate global leadership by restricting its oil & gas sector.

He’s not wrong, but there’s a significant subtlety that gets swept under the rug here, one that can cause grave danger to a lot of people.

First, y’all need to understand the battlefield. Kruger is right; it is to generate headlines, but consider the headlines carefully when selecting which myths to bust. They (the NDP) are literally accusing the hydrocarbon industry of murder – not with a gun, but via creating the emissions that cause weather disasters that kill people. They and their fellow warriors have created a lazy but sellable chain of causality there.

Mythbusting is important, but first, it is critical to take aim at the cornerstones of their argument, and not capitulate on those. In other words:

  • If someone accuses you of killing a bunch of people, might I suggest that saying “Yeah, well, we pay a lot of taxes…” is a losing strategy?
  • If someone accuses you of killing a bunch of people, might I suggest that saying “Don’t worry, I’m taking measures to mitigate how many people I kill.” is also a losing strategy?
  • Absolutely speak of emissions reduction improvements and any efforts made towards an energy transition – but don’t ignore the emotional point they use, when it undercuts everything else you say.

They are accusing you of murdering people by producing fuel the world requires for survival. It’s silly; they (the NDP) have things precisely backwards – they are confused by the role of hydrocarbons in our life. So you need to address that first and foremost, because they are writing policy based on such faulty reasoning.

They are NOT asking you to produce your product better. They are saying you are killing the planet and its people and making a fortune while doing so.

Their army of lawyers, with literally nothing better to do (hello, Sierra Club/Environmental Defense/EcoJustice/ad infinitum) are running circles around your lawyers. You are facing an army of extremely well-funded legal guerillas. You need to recognize their weapons. You are fighting against rifles with a diorama of your decarbonization efforts.

Here is the answer that addresses the inanity of the question in a simple and fool-proof way, which will do the trick, because they will have no answer: Hydrocarbon production enables life as we know it. Without hydrocarbon production, most of the earth’s 8 billion people will not survive a year. Hydrocarbon production feeds those people in a way that nothing else can. Hydrocarbon production keeps countless people from freezing to death, every year, like nothing else at present can. Hydrocarbon production provides the building blocks for our modern medical system, our transportation system, and almost any other thing within arm’s length.

Hydrocarbon production enables life, and it will do so for decades until a suitable replacement arrives on the scene that can not just match, but beat hydrocarbons for energy density, reliability, and cost. That will most likely happen some day. But to attempt to strangle today’s fuel system without a replacement is a clearer path to willfully causing human death than is the production of the fuel that keeps us alive.

There are multiple excellent pathways a hydrocarbon company can go down to show the public they are validly concerned about the environment, such as eliminating spills, eliminating pollution of all sorts, or respecting and revitalizing natural habitats.

But when you tell them how eagerly you are ‘decarbonizing’, you forfeit the match. Your product is carbon. That is literally the murder weapon they place in your hands.

The impact on humanity from more carbon in the air, whatever the consequences may be, pales in comparison – by an astounding degree – to what the impact on humanity would be if oil and gas production were to cease.

Mr. Kruger touched on the most important part, but then skipped right over it: the “transformational virtues of hydrocarbons over the past century”, as a phrase, skips right over the entire arc of the human benefits brought through the industrial revolution, treating them as secondary aspect that needs to take a back seat to convincing the world that Canadian companies really are trying to decarbonize.

And let’s be clear about that whole idea: anyone that places decarbonization as the number one priority should drop whatever they’re doing to get out and make nuclear energy happen here, there, and everywhere, because that’s the only game in town as far as a global, achievable solution goes. I don’t have a problem with that. I love cheap, clean energy, available reliably and in abundance. And almost every global citizen would agree with those four, but more importantly would prefer all four, of those characteristics. People don’t love oil & gas. They love what it can do. Want to replace them? Then it has to be better in every functional way.

While the fate of oil/gas on the global stage will be determined by billions who know how much they need it, the emotional messaging of the NDP et al nevertheless has the power to shape legislation, for example to sneakily introduce climate reporting requirements into financial statements and thereby open the door to countless lawsuits – lawsuits which the industry will be forced to defend. And those singular-function activist-lawyers will eat you alive if you are sitting at the table agreeing about the need to rapidly decarbonize.

The messaging should be that humanity requires oil and gas and will for decades, and that role of industry is to do this as cleanly and efficiently as possible. That might sound like a subtle distinction compared to a pledge to decarbonize asap, but it’s not – it’s the difference between a bullet missing you by an inch and not.

The reason you need to think this way is because hydrocarbons will remain standing for a very long time as a fundamental source of energy, as is witnessed by the sheer global force of increasing consumption of every type of energy (see: New Zealand completely backtracking on an oil & gas exploration ban once it dawned on them that existing fields deplete – coming soon to governments everywhere)… But Western energy leaders may get seriously wounded by the sheer legal might of the enemies faced at such panels, and by the minions they inspire, as bombastically comical as it might appear on the surface.

Terry Etam is a columnist with the BOE Report, a leading energy industry newsletter based in Calgary.  He is the author of The End of Fossil Fuel Insanity.  You can watch his Policy on the Frontier session from May 5, 2022 here.

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Alberta

For second year in a row, Alberta oil and gas companies spend more than required on cleanup

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From the Canadian Energy Center

By Grady Semmens

$923 million spent cleaning up inactive wells, sites and pipelines in 2023

As a business owner, Ryan Smith values few things more than predictability when it comes to the oil and gas market and the demand for his company’s services.

That’s why knowing that next year in Alberta, the regulator requires at least $750 million worth of work cleaning up inactive oil and gas wells and other legacy energy infrastructure is tremendously helpful for the CEO of Calgary-based 360 Engineering & Environmental Consulting.

“Having a minimum spend in place for the province makes the market more predictable and consistent, which in turn helps our clients and our business plan for the future, which is a good thing,” says Smith, whose company has completed more than 5,000 site closure activities in Canada and internationally since 2015.

“Site closure has really emerged as a growth market over the last decade, especially in Western Canada where the regulatory systems for oil and gas are more advanced than anywhere else we are exposed to. It is an integral part of the energy lifecycle, and if it is done well it adds a lot of value to the industry.”

The Alberta Energy Regulator (AER) introduced an industry-wide minimum “closure” spending requirement in 2022, part of Alberta’s Inventory Reduction Program to accelerate the remediation of inactive oil and gas wells, facilities and pipelines across the province.

The mandatory quota determines the minimum level of work a company must conduct primarily to decommission and reclaim a proportion of its inactive inventory.

Inactive wells are defined as those that have not been used for six months or a year, depending on what they are being used for. When a company decides that they will not reactivate an inactive well they decommission it through a process called abandonment.

A well is considered successfully abandoned after it is cleaned, plugged with cement, cut to a minimum of one meter below the surface and covered with a vented cap. After abandonment comes remediation and reclamation, where the land around the well is returned to the equivalent of its original state.

The first two years under the new rules saw Alberta’s energy industry significantly exceed the minimum closure requirements.

In 2022, companies spent more than $696 million, about 65 per cent more than the initial threshold of $422 million. The AER increased the minimum spend to $700 million in 2023, which producers surpassed by 22 per cent with total expenditures of $923 million.

The 2024 minimum remains at $700 million, while in July the regulator announced that the minimum spend for 2025 was raised to $750 million.

This closure work does not include remediation of oil sands mining sites, which is handled under the Mine Financial Security Program, nor does it include the closure of orphan wells (wells without a legal owner) managed by the industry-funded Orphan Well Association.

Gurpreet Lail, CEO of Enserva, an industry association representing energy service companies, suppliers and manufacturers, says there was an initial rush of closure work when the quotas were first put in place, but activity has since become more even as companies develop long-term closure plans.

“A lot of the low-lying fruit has been taken care of, so now companies are working on more complex closure files that take more time and more money,” Lail says.

Facility owners say that Alberta’s rules provide direction for planning closure and remediation work, which in the past may have been put on hold due to the ups and downs of the oil and gas market.

“When commodity prices are up, everyone is focused on drilling more wells and when prices are down, budgets are strained for doing work that doesn’t bring in revenue. Having a minimum spend makes sure closure work happens every year and ensures there is longer-term progress,” says Deborah Borthwick, asset retirement coordinator for Birchcliff Energy, an oil and natural gas producer focused in Alberta.

Over the last few years, Birchcliff has budgeted more than $3 million for annual facility closure work, far above its required minimum spend.

The company completed 11 well abandonments and decommissioned 23 facilities and pipelines in 2022, according to its latest environmental, social and governance report.

Borthwick says having the closure quota for 2025 already set has allowed it to plan ahead and line up the necessary service companies well in advance for next year’s remediation work.

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Economy

Trudeau Government Capping the Canadian Economy (and Energy Industry) Just to Impress International Agencies

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From EnergyNow.ca

By Kasha Piquette

The incoming Trump Presidency has promised  to “unleash American energy” with plans to “free up the vast stores of liquid gold on America’s public land for energy development.”  This week, the Trudeau government unveiled the draft details of its plans for a cap on greenhouse gas emissions from the Canadian oil and gas sector. These proposed regulations would cap all greenhouse gas emissions equivalent to 35 percent below levels in 2019 with the lofty goal of achieving a 40-45 percent reduction by 2030.

It is a plan that the province of Alberta and others contend would be a cap on production and cause elevated prices for consumer goods across Canada, cost up to 150,000 jobs and reduce national GDP by up to C$1 trillion ($720 billion).

These proposals would make Canada the only oil and natural gas-producing country to attempt an emissions cap on such a scale. The regulations propose to force upstream oil and gas operations to reduce emissions to 35 percent less than they were in 2019 by 2030 to 2032. Notably, while hydrocarbon production increased from 2019 to 2022, Canadian emissions from the sector declined by seven percent.

Perhaps significantly, and much to the apparent annoyance of Alberta’s Premier, the Federal announcement was made slightly ahead of the UN COP29 Climate Summit in Azerbaijan. Per the Paris Agreement, each country submits its climate ambitions to UN as National Determined Contributions (NDCs).  However, the federal government has also passed the Net Zero Accountability Act, which, by December 1st, 2024, could require even more aggressive reduction targets for 2035. Does this mean that the federal government may be positioning itself to announce even more ambitious emission targets – all to be announced at that conference?

It is unclear whether, how and in what form, the emissions cap will come into effect. With the next federal election slated for late October 2025 and polls that show the current Liberal-NDP coalition government to be far behind the opposition Conservatives, the federal carbon tax and the proposed emission cap have an uncertain future.

Other business interests have voiced concerns about Canada’s increasingly discordant, incoherent climate policies and regulations, which have caused the Canadian oil and gas sector to be at a competitive disadvantage in the global energy market.  Clearly, Alberta considers that the Federal government has, once again, overstepped its constitutional bounds with the proposed emissions cap and, along with its victorious Supreme Court challenge against the Impact Assessment Act, has vowed to launch more court challenges.  Alberta and other Provinces have contended that, with regional exemptions, the federal carbon tax is being applied unfairly as a patchwork of standards with Alberta, New Brunswick, Saskatchewan, Ontario and Nova Scotia, and the opposition Conservative party, mounting a growing chorus against the Liberal government’s broader price on carbon. By contrast, the proposed regulations for an emissions cap have been aimed specifically at one industry sector – one that is largely concentrated in western Canada.

Meanwhile, Canadian oil production, aided by the new export capacity of the TransMountain Pipeline completed this year, has grown to a record 5.1 million barrels per day making Canada the prime (60%) source of US crude oil imports in 2023.  Meanwhile, the industry has been engaged in considerations for the potential development of carbon capture and storage (CCS) to trap greenhouse gasses underground. However, this untested technology would cost billions, needs to be proven on a larger scale and requires industry cooperation combined with all levels of government support.

The Federal announcement, and the hostile reaction from Alberta and possibly other oil-producing provinces, mean that once again, Canadian investment in the oil and gas sector will be confronted with ever more uncertainty as they encounter time-consuming court challenges.  These competing political agendas ensure that major Canadian investment decisions will, once again, be deferred while other international jurisdictions race to develop their hydrocarbon export capabilities, investments that are unencumbered by any emissions caps.

Canadians need to consider carefully how these policies and debates are affecting our energy security and standard of living as Canada. In addition to carbon pricing, Canada has already promulgated regulations for EV mandates in the transportation sector, policies that have required tens of billions in subsidies. It has also introduced the complex clean fuel standard and the proposed national clean electrical standards. These policies are affecting not just Canada’s productivity, GDP and exports. By attacking the Western provinces, Ottawa is unnecessarily creating regional tensions and a less politically stable federation. We need to think about how co-operative federalism can be re-established in ways that account for the basic needs of all Canadians – and not just accommodate arbitrary targets for emissions designed to impress international agencies.


Kasha Piquette is an Alberta-based strategic energy advisor and a former Deputy Minister of Alberta Environment and Protected Areas.

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