Alberta
The Alberta energy transition you haven’t heard about
From the Canadian Energy Centre
Horizontal drilling technology and more investment in oil production have fundamentally changed the industry
There’s extensive discussion today about energy transition and transformation. Its primary focus is a transition from fossil fuels to lower-carbon energy sources.
But in Alberta, a fundamental but different energy transition has already taken place, and its ripple effects stretch into businesses and communities across the province.
The shift has affected the full spectrum of oil and gas activity: where production happens, how it’s done, who does it and what type of energy is produced.
Oil and gas development in Alberta today largely happens in different places and uses different technologies than 20 years ago. As a result, the companies that support activity and the communities where operations happen have had to change.
Regional Shift
For the first decade of this century, in terms of numbers of wells, most drilling activity happened in central and southeast Alberta, with companies primarily using vertical wells to target conventional shallow natural gas deposits.
In 2005, producers drilled more than 8,000 natural gas wells in these areas, according to Alberta Energy Regulator (AER) records.
But then, three things happened. The price of natural gas declined, the price of oil went up and new horizontal drilling technology unlocked vast energy resources that were previously uneconomic to produce.
By 2015, the amount of natural gas wells companies drilled in central and southeast Alberta was just 256. In 2023, the number dropped to only 50. Over approximately 20 years, activity dropped by 99 per cent.
Where did the investment capital go? The oil sands and heavy oil reserves of Alberta’s northeast and shale plays, including the Montney and Duvernay, in the province’s foothills and northwest.
Nearly 60 per cent of activity outside of the oil-rich northeast occurred in central and southeast Alberta in 2005. By 2023, overall oil and gas drilling in those regions had dropped by 30 per cent, while at the same time increasing by 159 per cent in the foothills and northwest.
“The migration of activity from central and southern Alberta to other regions of the province has been significant,” says David Yager, a longtime oil and gas service company executive who now works as a special advisor to Alberta Premier Danielle Smith.
“For decades there were vibrant oil service communities in places like Medicine Hat, Taber, Brooks, Drumheller and Red Deer,” he says.
“These [oil service communities] have contracted materially with the new service centres growing in places like Lloydminster, Bonnyville, Rocky Mountain House, Edson, Whitecourt, Fox Creek and Grande Prairie.”
Fewer Wells and Fewer Rigs
Extended-reach horizontal drilling compared to shallow, vertical drilling enables more oil and gas production from fewer wells.
Outside the oil sands, in 2005, producers in Alberta drilled 17,300 wells. In 2023, that dropped to just 3,700 wells, according to AER data.
Despite that massive nearly 80 per cent decrease in wells drilled, total production of oil, natural gas and natural gas liquids outside of the oil sands is essentially the same today as it was in 2005.
Last year, non-oil sands production was 3.1 million barrels of oil equivalent (boe) per day, compared to 3.4 million boe per day in 2005–but from about 13,600 fewer new wells.
Innovation from drilling and energy services companies has been a major factor in achieving these impressive results, says Mark Scholz, CEO of the Canadian Association of Energy Contractors. But there’s been a downside.
Yager notes that much of the drilling and service equipment employed on conventional oil and gas development is not suited for unconventional resource exploitation.
Scholz says the productivity improvements resulted in an oversupply of rigs, especially rigs with limited depth ratings and limited capability for “pad” drilling, where multiple wells are drilled the same area on the surface.
Rigs have been required to drill significantly deeper wellbores than in the traditional shallow gas market, he says.
“This has resulted in rig decommissioning or relocations and a tactical effort to upgrade engines, mud pumps, walking systems and pipe-handling technology to meet evolving customer demands,” he says.
“You need not go beyond the reductions in Canada’s drilling rig fleet to understand the impact of these operational innovations. Twenty years ago, there were 950 drilling rigs; today, we have 350, a 65 per cent reduction. [And] further contractions are likely in the near term.”
Scholz says, “collaboration and partnerships between producers and contractors were necessary to make this transition successful, but the rig fleet has evolved into a much deeper, technologically advanced fleet.”
A Higher Cost of Entry
Yager says that along with growth in the oil sands, replacing thousands of new vertical shallow gas wells with fewer, high-volume extended-reach horizontal wells has made it more challenging for smaller companies to participate.
“The barriers to entry in terms of capital required have changed tremendously. At one time a new shallow gas well could be drilled and put on stream for $150,000. Today’s wells in unconventional plays cost from $3 million to $8 million each,” he says.
“This has materially changed the exploration and production companies developing the resource, and the type of oilfield services equipment employed. An industry that was once dominated by multiple smaller players is increasingly consolidating into fewer, larger entities. This has unintended consequences that are not well understood by the public.”
More Oil (Sands), Less Gas
Higher oil prices and horizontal drilling helped change Alberta from a natural gas hotbed to a global oil powerhouse.
In the oil sands, horizontal wells enabled a key technology called steam assisted gravity drainage (SAGD), which went into commercial service in 2001 to allow for a massive expansion of what is referred to as in situ oil sands production.
In 2005, mining dominated oil sands production, at about 625,000 barrels per day compared to 440,000 barrels per day from in situ projects. In situ oil sands production exceeded mining for the first time in 2013, at 1.1 million barrels per day compared to 975,000 barrels per day from mining.
Today the oil sands production split is nearly half and half. Last year, in situ projects–primarily SAGD–produced approximately 1.8 million barrels per day, compared to about 1.7 million barrels per day from mining.
Natural gas used to exceed oil production in Alberta. In 2005, natural gas provided 54 per cent of the province’s total oil and gas supply. Nearly two decades later, oil accounts for 60 per cent compared to 29 per cent from natural gas. The remaining approximately 11 per cent of production is natural gas liquids like propane, butane and ethane.
Alberta’s non-renewable resource revenue reflects the shift in activity to more oil sands and less natural gas.
In 2005, Alberta received $8.4 billion in natural gas royalties and $950 million from the oil sands. In 2023, the oil sands led by a wide margin, providing $16.9 billion in royalties compared to $3.6 billion from natural gas.
Innovation and Emerging Resources
As Alberta’s oil and gas industry continues to evolve, another shift is happening as investments increase into emissions reduction technologies like carbon capture and storage (CCS) and emerging resources.
Since 2015, CCS projects in Alberta have safely stored more than 14 million tonnes of CO2 that would have otherwise been emitted to the atmosphere. And more CCS capacity is being developed.
Construction is underway on an $8.9-billion new net-zero plant producing polyethylene, the world’s most widely used plastic, that will capture and store CO2 emissions using the Alberta Carbon Trunk Line hub. Two additional CCS projects got the green light to proceed this summer.
Meanwhile, in 2023, producers spent $700 million on emerging resources including hydrogen, geothermal energy, helium and lithium. That’s more than double the $230 million invested in 2020, the first year the AER collected the data.
“Energy service contractors are on the frontlines of Canada’s energy evolution, helping develop new subsurface commodities such as lithium, heat from geothermal and helium,” Scholz says.
“The next level of innovation will be on the emission reduction front, and we see breakthroughs in electrification, batteries, bi-fuel engines and fuel-switching,” he says.
“The same level of collaboration between service providers and operators that we saw in our productivity improvement is required to achieve similar results with emission reduction technologies.”
Alberta
Response to U.S. tariffs: Premier Smith
Premier Danielle Smith issued a statement following the announcement of tariffs on Canadian goods beginning Tuesday:
“I am disappointed with U.S. President Donald Trump’s decision to place tariffs on all Canadian goods. This decision will harm Canadians and Americans alike and strain the important relationship and alliance between our two nations.
“Alberta will do everything in its power to convince the U.S. President and Congress, as well as the American people, to reverse this mutually destructive policy.
“We note the reduced 10 per cent tariff for Canadian energy. That is partially a recognition of the advocacy undertaken by our government and industry to the U.S. Administration. We’ve pointed outthe substantial wealth created in the U.S. by American companies and tens of thousands of American workers who upgrade and refine approximately $100 billion of Canadian crude into $300 billion of product sold all over the world by those same U.S. companies.
“It is also worth noting that if oil and gas exports are excluded, the United States actually sells more to Canada than Canada sells to the U.S. As I’ve stated to every American policymaker I’ve met with in these past months, Canada buys more from the U.S. than does any country on earth – more than the U.K., France, Germany, Italy and Vietnam combined. There is, therefore, no economic justification for tariffs imposed on any Canadian goods.
“Alberta will continue diplomatic efforts in the United States to persuade the U.S. President, lawmakers, administration officials and the American people to lift all tariffs on Canadian goods as soon as possible and to repair our relationship with the United States. I encourage all premiers and federal officials to do the same, especially as the effects of these tariffs begin to take their toll south of the border. Americans need to understand the detrimental consequences of this policy decision.
“Alberta will also work collaboratively with the federal government and other provinces on a proportionate response to the imposed U.S. tariffs through the strategic use of Canadian import tariffs on U.S. goods that are more easily purchased from Canada and non-U.S. suppliers. This will minimize costs to Canadian consumers while creating maximum impact south of the border. All funds raised from such import tariffs should go directly to benefit the Canadians most harmed by the imposed U.S. tariffs.
“Alberta will, however, continue to strenuously oppose any effort to ban exports to the U.S. or to tax our own people and businesses on goods leaving Canada for the United States. Such tactics would hurt Canadians far more than Americans.
“We also continue Alberta’s call for the appointment of a border czar to coordinate the securing of our border against illegal migrants and drugs moving in both directions, and to achieve our nation’s two per cent of GDP NATO commitment by 2027. These things should be done for the safety of all Canadians regardless of our trade dispute with the United States
“Despite the disappointment of today’s decision there is also an incredible opportunity before us as a nation. Canada can and must come together in an unprecedented effort to preserve the livelihoods and futures of our people and expand our political and trade relationships across the globe. We can no longer afford to be so heavily reliant on one primary customer. We must stop limiting our prosperity and inflicting economic wounds on ourselves.
“Rather, we must unleash the true economic potential of our country, which possesses more wealth and natural resources than any other nation on earth.
“To this end, Alberta calls on the federal government and our fellow provinces to immediately commence a national effort to fast track and build oil and gas pipelines to the east and west coasts of Canada, construct multiple LNG terminals on each coast, increase internal refining capacity, unleash the development of critical minerals, lower taxes, reduce red tape, tear down interprovincial trade barriers and re-empower provinces to develop our unique economies without constant federal interference and imposition of anti-resource development laws.
“Our province and our nation can overcome the formidable economic challenges ahead. But we can only do so if we start acting like a healthy and functional country that supports every province to export their best resources and products to world markets, thereby achieving their unique potential. By so doing, Canada can become one of the most prosperous and powerful nations on earth. Alberta stands ready to do our part if this true Team Canada approach is taken.”
Alberta
AMA challenged to debate Alberta COVID-19 Review
Justice Centre President sends an open letter to Dr. Shelley Duggan, President of the Alberta Medical Association
Dear Dr. Duggan,
I write in response to the AMA’s Statement regarding the Final Report of the Alberta Covid Pandemic Data Review Task Force. Although you did not sign your name to the AMA Statement, I assume that you approved of it, and that you agree with its contents.
I hereby request your response to my questions about your AMA Statement.
You assert that this Final Report “advances misinformation.” Can you provide me with one or two examples of this “misinformation”?
Why, specifically, do you see this Final Report as “anti–science and anti–evidence”? Can you provide an example or two?
Considering that you denounced the entire 269-page report as “anti–science and anti–evidence,” it should be very easy for you to choose from among dozens and dozens of examples.
You assert that the Final Report “speaks against the broadest, and most diligent, international scientific collaboration and consensus in history.”
As a medical doctor, you are no doubt aware of the “consensus” whereby medical authorities in Canada and around the world approved the use of thalidomide for pregnant women in the 1950s and 1960s, resulting in miscarriages and deformed babies. No doubt you are aware that for many centuries the “consensus” amongst scientists was that physicians need not wash their hands before delivering babies, resulting in high death rates among women after giving birth. This “international scientific consensus” was disrupted in the 1850s by a true scientist, Dr. Ignaz Semmelweis, who advocated for hand-washing.
As a medical doctor, you should know that science is not consensus, and that consensus is not science.
It is unfortunate that your AMA Statement appeals to consensus rather than to science. In fact, your AMA Statement is devoid of science, and appeals to nothing other than consensus. A scientific Statement from the AMA would challenge specific assertions in the Final Report, point to inadequate evidence, debunk flawed methodologies, and expose incorrect conclusions. Your Statement does none of the foregoing.
You assert that “science and evidence brought us through [Covid] and saved millions of lives.” Considering your use of the word “millions,” I assume this statement refers to the lockdowns and vaccine mandates imposed by governments and medical establishments around the world, and not the response of the Alberta government alone.
What evidence do you rely on for your assertion that lockdowns saved lives? You are no doubt aware that lockdowns did not stop Covid from spreading to every city, town, village and hamlet, and that lockdowns did not stop Covid from spreading into nursing homes (long-term care facilities) where Covid claimed about 80% of its victims. How, then, did lockdowns save lives? If your assertion about “saving millions of lives” is true, it should be very easy for you to explain how lockdowns saved lives, rather than merely asserting that they did.
Seeing as you are confident that the governments’ response to Covid saved “millions” of lives, have you balanced that vague number against the number of people who died as a result of lockdowns? Have you studied or even considered what harms lockdowns inflicted on people?
If you are confident that lockdowns did more good than harm, on what is your confidence based? Can you provide data to support your position?
As a medical doctor, you are no doubt aware that the mRNA vaccine, introduced and then made mandatory in 2021, did not stop the transmission of Covid. Nor did the mRNA vaccine prevent people from getting sick with Covid, or dying from Covid. Why would it not have sufficed in 2021 to let each individual make her or his own choice about getting injected with the mRNA vaccine? Do you still believe today that mandatory vaccination policies had an actual scientific basis? If yes, what was that basis?
You assert that the Final Report “sows distrust” and “criticizes proven preventive public health measures while advancing fringe approaches.”
When the AMA Statement mentions “proven preventive public health measures,” I assume you are referring to lockdowns. If my assumption is correct, can you explain when, where and how lockdowns were “proven” to be effective, prior to 2020? Or would you agree with me that locking down billions of healthy people across the globe in 2020 was a brand new experiment, never tried before in human history? If it was a brand new experiment, how could it have been previously “proven” effective prior to 2020? Alternatively, if you are asserting that lockdowns and vaccine passports were “proven” effective in the years 2020-2022, what is your evidentiary basis for that assertion?
Your reference to “fringe approaches” is particularly troubling, because it suggests that the majority must be right just because it’s the majority, which is the antithesis of science.
Remember that the first doctors to advocate against the use of thalidomide by pregnant women, along with Dr. Ignaz Semmelweis advocating for hand-washing, were also viewed as “advancing fringe approaches” by those in authority. It would not be difficult to provide dozens, and likely hundreds, of other examples showing that true science is a process of open-minded discovery and honest debate, not a process of dismissing as “fringe” the individuals who challenge the reigning “consensus.”
The AMA Statement asserts that the Final Report “makes recommendations for the future that have real potential to cause harm.” Specifically, which of the Final Report’s recommendations have a real potential to cause harm? Can you provide even one example of such a recommendation, and explain the nature of the harm you have in mind?
The AMA Statement asserts that “many colleagues and experts have commented eloquently on the deficiencies and biases [the Final Report] presents.” Could you provide some examples of these eloquent comments? Did any of your colleagues and “experts” point to specific deficiencies in the Final Report, or provide specific examples of bias? Or were these “eloquent” comments limited to innuendo and generalized assertions like those contained in the AMA Statement?
In closing, I invite you to a public, livestreamed debate on the merits of Alberta’s lockdowns and vaccine passports. I would argue for the following: “Be it resolved that lockdowns and vaccine passports imposed on Albertans from 2020 to 2022 did more harm than good,” and you would argue against this resolution.
Seeing as you are a medical doctor who has a much greater knowledge and a much deeper understanding of these issues than I do, I’m sure you will have an easy time defending the Alberta government’s response to Covid.
If you are not available, I would be happy to debate one of your colleagues, or any AMA member.
I request your answers to the questions I have asked of you in this letter.
Further, please let me know if you are willing to debate publicly the merits of lockdowns and vaccine passports, or if one of your colleagues is available to do so.
Yours sincerely,
John Carpay, B.A., LL.B.
President
Justice Centre for Constitutional Freedoms
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