Our premier thinks that Alberta desperately needs another oil pipeline to take our production to foreign markets. A big driver for this additional pipeline is her dream of doubling oil production in Alberta with the increased production commanding world prices in foreign, non-US markets. And why not? Make hay while the sun shines and all that. However, apart from the obvious difference between price received and netback to the oil producer, there is a conversation that is missing before embarking on such an ambitious program of expansion. Where is the additional oil to come from, who owns it and what will be the disposition of the royalties gained on that additional oil? It is a complicated situation.First a few facts. According to the Alberta Energy Regulator, the Alberta export oil pipeline capacity is 5.4 million barrels per day and in 2023, 4 million barrels of oil were exported to markets outside Canada. In 2024, Alberta's average oil production was 4.6 million barrels per day of which 4.1 million barrels were from bitumen production..MCMILLAN: To hell with the east, we want to be released.These 4.1 million barrels of bitumen-based production also contain up to 35% condensates necessary to dilute the bitumen and make it transportable by pipeline. These condensates are typically priced above the West Texas oil price and the bitumen is priced at a discount to the WTI price because refining such heavy oil is expensive. More importantly, the condensate from a Texas refinery can still find its way back to Alberta to be used as diluent again.If increasing volumes of diluted bitumen are sold offshore, will there be enough domestic condensate to make up for the loss of this diluent? I don't know but I hope that someone is keeping track of this..Our premier thinks that Alberta desperately needs another oil pipeline to take our production to foreign markets. A big driver for this additional pipeline is her dream of doubling oil production in Alberta with the increased production commanding world prices in foreign, non-US markets. And why not? Make hay while the sun shines and all that. However, apart from the obvious difference between price received and netback to the oil producer, there is a conversation that is missing before embarking on such an ambitious program of expansion. Where is the additional oil to come from, who owns it and what will be the disposition of the royalties gained on that additional oil? It is a complicated situation..GIESBRECHT: How to fix CBC? Hire Ezra Levant.The point is that pricing Western Canadian Select oil is very complicated and highly dependent upon refinery capacity and road paving schedules. Ever since Rachel Notley called the bluff of the US oil traders in 2018 and prorationed pipeline access (credit given where credit is due), I have not been convinced that Alberta oil producers have been forced to take a lower than necessary price by US refineries. Some producers might disagree with me. The larger issue, however, is the nature of the additional oil that our premier wants to produce. Is this oil that is currently undiscovered or is it oil that will be produced by mining more bitumen and adding more steam to drive more in situ production? If the added production comes from new discoveries, then produce away. If it is accelerated production from existing oil resources, then we need to talk..The philosophical issue is, who owns the oil that is scheduled to be produced in twenty years but will, instead, be produced in the next few years? Will geezers like me be the beneficiaries of the taxes and revenues on the oil that is produced early? Or are these royalties and taxes the patrimony of citizens who will be alive when I am long dead? In my view, those revenues are not mine but theirs. Hence the need for a conversation.Additionally, shouldn't we husband our resources while we resolve the issue of equalization payments? Does it make sense to double oil sales by accelerating production knowing that a lot of the tax revenue will be given to Quebec? We used to have an Energy Resources Conservation Board for this kind of analysis. Again, I don't have the answers but feel we need to have a conversation.What will come of the royalties paid on the increased production? Will most of it go into general revenues to be spent on projects to win my vote? That seems unfair to my grandchildren. Will the government instead put all the royalties paid on accelerated production into the Heritage Trust Fund for the benefit of my grandchildren?.MCCRAE: Every child matters, or perhaps not.That would satisfy my concerns. But governments are never able to keep their hands out of the cookie jar and will raid the fund as soon as they think they can. How is the patrimony of my grandchildren to be protected? Should politicians face prison terms if they steal my grandchildren's patrimony by redirecting tomorrow's royalty payments into today's General Account?I am not saying no to our premier's dream, but I am saying, let's first have a conversation about how this will work. The Alberta government, irrespective of the party in power, has a bad record of fiscal management, and I doubt the current UCP government will do better. Instead of blowing out the stops, let's optimize oil production within the constraints of a one-sided equalization formula. Let's discuss the ethics of stealing our grandchildren's patrimony by doubling today's production using tomorrow's resource.
