'Just transition' is not the oil sector's doom, Premier Smith. It's the insurance policy

This column is an opinion from Andrew Leach, an energy and environmental economist, and professor at the University of Alberta. For more information about CBC's Opinion section, please see the FAQ.

Alberta's government has made the forthcoming "just transition" program the latest front in their war on Ottawa. 

If you believe Premier Danielle Smith, this is a tool to shut down the oil and gas sector. That's not what this is about. Worse, to attack it this way is to miss the serious discussion that federal and provincial leaders should be having. 

The practice isn't new. Canada's government routinely helps communities navigate economic transitions. 

Ottawa processes the country's firearms licenses 1,000 kilometres away in Miramichi, N.B. — the government's way to compensate, in part, for the closing of a military base. The Harper government moved federal payroll services there to offset jobs lost when it cancelled the gun registry. 

The idea and term "just transition" are not new, either. 

Tony Mazzocchi, a U.S. labour leader, is widely credited with devising the concept of a government transition for workers in polluting industries in the early 1990s. Mazzocchi, referring to the "Superfund" cleanup program for shuttered industrial sites, demanded a "Superfund for Workers." Years later, the Just Transition Alliance was launched.

Were Mazzocchi here today, he would likely agree that as Canada is preparing to spend billions on carbon capture and storage, we should also spend to ensure the livelihoods of oil workers.  

And that's exactly what Prime Minister Justin Trudeau has pledged to do. 

Just, in time

It's not a new promise. Help for workers was a priority in a mandate letter to Natural Resources Minister Jonathan Wilkinson in 2021. Similar language appeared in mandate letters to Wilkinson's predecessors. The agreement that secured support for the government from the NDP last March included a commitment to just transition. 

Smith is talking about it now because Wilkinson said last week that legislation would soon be tabled. However, his ministry has been consulting on this for years. There's even a discussion paper.

So if it's not new and it's not an attack on the oil industry, what is this? 

Think of it as insurance, or a hedge on bets that the oil industry and governments are making that demand for Canadian oil will continue and carbon capture technology will decarbonize its production.

As a lobbyist, Danielle Smith stated the oil industry needs a transformation, not a transition. If this technological transformation bet pays off, Albertan oil workers won't need the insurance on offer from Ottawa.

But if carbon capture fails to secure the future of the oilsands, many Albertans would benefit from a Mazzocchi-style Superfund for workers.

And make no mistake: the future of Alberta's oil industry is far from secure. It's not because of the federal government or lack of pipelines. The biggest challenge comes from eroding global oil demand.

Over the barrels

The International Energy Agency's 2022 World Energy Outlook finds oil demand peaking by 2035 in all scenarios they considered. Their most oil-friendly one sees demand rise about 10 per cent from today's levels before peaking in 2035. Their most climate-friendly scenario sees demand dropping 75 per cent by 2050.

This is new. Less than a decade ago, experts commonly predicted oil demand would rise by more than 30 per cent above current levels. Now every year brings downward revisions in long-term forecasts.

Alberta's oil industry is not going by the wayside any time soon. But it's been years since anyone sanctioned a major new oilsands project, and global investment in oil production remains far below levels seen a decade ago.

I'm not just parroting climate activists. When Suncor acquired a 21.3-per-cent interest in the Fort Hills oil sands mine from Teck Resources for $1 billion in cash, it should have given Smith and her team pause.

Why? Fort Hills cost more than $17 billion to build, and came online in 2018. It's supposed to last for another 50 years. Suncor's acquisition values the mine at less than $5 billion. 

The oilsands' value proposition has eroded at alarming speed. It's likely to get worse.

While a future without major investments in oil production is not what Premier Smith would choose, she might consider a bit of federal insurance in case her preferred future doesn't pan out.

But there is a downside to all of this talk of a just transition.

Lost in transition

Governments can't fully offset the impacts of the economic forces facing Alberta's oil industry today.

Though federal and provincial support has helped, hundreds of billions of dollars of private foreign and domestic investment created what is here today. That's what pulled workers from across the country and around the world to Alberta. 

No government support program is going to replicate that. 

You're not going to blunt the pain of a world shifting away from oil by relocating some government payroll offices in Fort McMurray. 

The energy transition is going to be painful for oil workers. For many oil workers, it already is. 

While Smith argues Trudeau's key aim is to destroy the oil and gas sector, perhaps his just transition message has a different overarching goal. It's to help other Canadians, often out of touch with the oil sector's realities, imagine its workers seamlessly finding work in new fields. Such warm and fuzzy notions minimizes the real costs of change.

Ottawa can't offer a painless transition. Meagre transition payments offered to Newfoundland cod fishermen remain a sore spot to this day.

Canadians need to be reminded that there are tens of thousands of Alberta oil workers. Many of them and their families have called Fort McMurray and other Alberta oil cities home for generations.

A job for a few months building a solar farm hundreds of kilometres away isn't going to help them much.

As the clouds approach

Smith needs to be at the table negotiating this insurance package.

She must hold Trudeau to account for promises that his government can provide what is necessary to shelter Alberta against the storm on the horizon. 

You don't want to cancel your insurance because you're hoping the storm doesn't come. But, you also need to know whether or not you can rely on your insurance.

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