Oil Prices in Alberta

What do Falling Oil Prices Mean for the Environment?

May 3, 2016

Tags

Alberta, Energy, Falling Oil Prices, Oil, Oil Prices, power generation, renewable energy

Posted By

Craig Vatcher

CET, B.Tech.

Craig is the Senior Project Manager and Director of Western Operations for Novus Environmental, and is based in Calgary, Alberta office.

Contact Novus

It’s all doom and gloom it seems, especially in Alberta.  As recently as two years ago the cost of oil was up over $100 per barrel, and since then we’ve seen billions of dollars in projects go on hold, rumours of major oil companies laying off up to 20% of their workforce, and acres of idle oilfield equipment dotting the Alberta landscape.

Many are quick to blame the new NDP and Liberal governments and uncertainty around royalty prices and carbon taxation strategies, but the fact is that commodity prices are cyclical and there was just never going to be a sustained economy at $100/barrel oil.  After all, we saw this happen in the 70s and 80s.  The problem was two-fold: a faster-than-predicted drop in prices by 70% along with a glut of peripheral industries that relied on high oil prices to be profitable.

Over the past few years the costs of construction, fabrication, transportation and labour ballooned to the point where projects were not fiscally practical under $70-80 oil.  Employees in Fort McMurray were being paid to stay home in the event they might be needed, because the bidding wars for labour were so fierce that companies would lose staff immediately if they weren’t.  The environment industry, while much more arms-length from the price of oil, was not immune to this situation and firms capitalized on the “get it done quickly and you’ll be handsomely compensated” attitudes.  Well, that ship has clearly sailed.

The impact of oil prices on the environment

The impacts on the environment as a result of the crash in oil prices are threefold: an industry now also suffering due to high wages and low revenues, a regulatory environment forced to adapt to climate change but short on resources, and an increased interest in the feasibility of renewable energy.  The wage crisis is a direct result of the industry, and will eventually correct itself as firms trim budgets and overhead, and adjust prices to match the economy.  The latter two items are more driven by regulatory policy than direct economic factors.

There is little argument that the environmental and health impacts that result from coal-power emissions are much more severe than those of natural gas or (even more substantial) wind or solar power.  Hydroelectric projects have come under great scrutiny in the West recently and, while emissions and health effects are minimal, there is argument around whether the environmental impacts are acceptable.  The impoundment of a waterway causes a significant environmental disturbance to water resources, land use and wildlife habitat, against which the economic benefits must be weighed.

Renewable Energy Falling Oil Prices

The average power generated by all wind farms in Alberta is 57 MW

 

But the province of Alberta’s Climate Leadership Plan has stated that 2/3 of the coal power that is removed from the grid is to be replaced by renewable energy.  That’s about 3,800 MW of power generation that needs to be replaced; however,

  • the two largest wind farms in the province are planned to only generate 150 MW each (neither are operating yet),
  • the average power generated by all wind farms in Alberta is 57 MW,
  • and only three of the 22 currently generating hydro projects can produce > 100 MW.

Where is the renewable energy going to come from?

There is a significant opportunity for cogeneration due to the electricity generation potential which can reduce demand but does not help contribute MW back to the provincial power grid.  Solar farms are great (especially in the summer) for supplemental power generation but take up enormous amounts of real estate, as do wind farms.  How will the government balance the amount of NIMBY’ism that will certainly result in large-scale renewable resource development, combined with the (still relevant) environmental effects?  Even now, small scale renewables applications are subject to public backlash as a result of location and land-use.  The provincial government certainly has their work cut out for them if they plan to meet the coal-replacement target for 2030 that they set earlier this year.

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