Wednesday, 10 August 2016 11:51

Can financial consequences be accepted if S.E. Alta. oil plan fails?

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If the story reported in the Medicine Hat News is close to reality, magical thinking doesn’t begin to describe the city’s desire to waste taxpayer money on “the hypothesis that the deep geology in southeastern Alberta has not been fully explored.”
Much of my campaign in the last federal election was based on the science of the production of remaining oil in Alberta, and while there is still lots of oil in the ground, it most certainly cannot be produced economically below $100 per barrel. Drilling deep geology and fracking light tight oil have low returns on energy invested.
As drilling companies drill deeper and fracture remaining formations, greater and greater amounts of energy from the wellhead (which would otherwise be sold on the market) are diverted instead into the drilling and extraction of fossil energy. That is why a large number of U.S. shale and light tight oil companies are now bankrupt. The cost of production is far higher than the current price of oil.
Peer reviewed studies show that $75-$150 per barrel is required for such wells to be economical — the exact same price where demand destruction occurs, leading to lower oil prices and the current predicament Alberta finds itself in.
It is one thing for a private company to spend shareholder money on exploration and drilling in this low oil price environment. It is quite another issue altogether to spend taxpayer money on a whim and a prayer.
If the decision makers for the City of Medicine Hat want to ignore sound science and economics — which show expensive oil isn’t economical, and may never be — are they also prepared to accept the consequences of their actions? If this venture results in a loss of taxpayer money when all the evidence suggests this is a bad idea, will anyone be held responsible?
Brent Smith, Medicine Hat
(The writer was the Green Party candidate for Medicine Hat-Cardston-Warner in the last federal election.)

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