Freedom Gas?

The lowland bog was not the first choice for getting western Canadian natural gas to the coast. Nor was it the second. Nor the third. But then Russia invaded Ukraine. The European Union—Germany in particular—needed gas from places other than Russia at the same time as natural gas production in western Canada was rising to record highs. The rail line through the Hudson Bay lowlands to the deep-water ocean port at Churchill, Manitoba, proclaimed Alberta’s new premier, former oil-and-gas industry lobbyist Danielle Smith, was worth “a renewed look.” On October 24, 2022, less than two weeks after she was sworn in, Smith wrote a letter to her fellow prairie premiers, Scott Moe in Saskatchewan and Heather Stefanson in Manitoba, asking them to meet her in Churchill (pop. 870) to “kick-start our ongoing collaboration” about the port. “One of my first priorities as premier of Alberta is to harness the initiative of provinces rather than waiting for federal action,” she wrote. “Enhancing market access is critical for our collective economic prosperity.”

The dream of turning the Port of Churchill into a major export hub for Alberta oil and gas wasn’t new. Completed in 1931, the port—open some four months a year when Hudson Bay is ice-free—was mostly used for shipping grain until 2016, when it was shut down after Stephen Harper’s Conservative government ended the Canadian Wheat Board’s “single desk” marketing power and the Wheat Board was sold to a Saudi Arabian-owned company. In 2017 then-UCP leadership candidate Jeff Callaway pitched the idea that the Alberta government should buy both the port and the railway (a 1,000+ km track in northern Manitoba). At that time the rails were washed out by a flood. But if repaired, and a new pipeline were built to the port, said Callaway at a 2017 UCP leadership debate, Alberta oil could be sold directly to international markets instead of “selling at a discount to the Americans, who are just going to export to the same markets. And we’re also going to be selling to our friends in Newfoundland and New Brunswick. This is a real country-building measure.”

Callaway—a former Wildrose Party executive and the UCP “kamikaze candidate” who allegedly ran solely to undermine Brian Jean in support of Jason Kenney—dropped out of that leadership race. But his proposal remained alive, a flicker in the public mind spurred by the perceived lack of export capacity for Alberta oil and gas to anywhere but the US.

In 2020 Saskatchewan premier Moe formed a cabinet committee to examine proposals for export pipelines from his province, including to Churchill. After receiving Danielle Smith’s letter in 2022, Moe told reporters he supported any proposal to expand services to Churchill.

Manitoba premier Stefanson, however, was reticent. While Saskatchewan and Alberta contributed $0, in August 2022 the federal Liberals and Manitoba’s Progressive Conservative government announced a combined $147-million to repair the Hudson Bay Railway, which runs through increasingly unstable melting permafrost as it approaches the coast. That funding was on top of $157-million given since 2018 by Justin Trudeau’s Liberals to upgrade the railway and port, and to facilitate the purchase of both by the Arctic Gateway Group—a consortium of 41 First Nation and northern community groups who bought the infrastructure from OmniTrax, a US company that had owned it since 1997 (after the Canadian National Railway was privatized) but now claimed it was losing money and refused to fix the rail line.

“I understand where the premier of Alberta is [coming from],” Stefanson told reporters on October 31. “She’s facing an election and some tough things, tough challenges politically within her own province, … [but] there are other, more pressing things for us [in Manitoba] to be dealing with right now.” Acknowledging that the Russian invasion of Ukraine could cause a “very significant energy challenge” for Germany and the European Union (EU), Stefanson said, “I think we can be part of the solution, but let’s have that discussion with the federal government and across the country as well, including with provinces like Alberta and Saskatchewan.”

Premier Smith, however, didn’t want to tarry. “Our leadership will bring weight and purpose to the Canadian reaction against Russia’s atrocities,” she pitched in her letter to her fellow premiers. “There is indeed a business case to export low-carbon Canadian energy and food products to Europe.” It was a Venn diagram of morality and economy, she implied—it could not wait. “I’m planning a trip to Germany soon to talk about de-leveraging Russia’s hold over European markets for generations,” she tweeted on November 14. “Alberta is ready to help!”

Russian president Vladimir Putin’s decision to attack Ukraine on February 24, 2022, did spark an energy crisis across the EU. The EU imports most of the natural gas it uses, with Russia long the biggest single supplier. Germany—the continent’s largest economy, which uses gas for home heating and heavy industry—bought over 50 per cent of its gas from Russia in 2021, the most in the EU. A week after the invasion, the International Energy Agency released a “10-Point Plan” to reduce that reliance and eventually “decarbonize” much of Europe’s power system. Step two in that plan was to find “alternative sources” of gas. “The goal is to slash EU demand for Russian gas by two-thirds before the end [of 2022],” said the European Commissioner for Economy, “and to make Europe independent from Russian fossil fuels by 2027.”

Germany relies on coal, oil and gas for 76 per cent of its energy mix (with renewable energy making up 19 per cent). In need of new sources of energy, German Chancellor Olaf Scholz arrived in Canada for an official three-day visit in August 2022. He was looking to the future. Scholz and Prime Minister Trudeau signed a “joint declaration of intent” committing the two countries to enabling investment in clean (low to zero emissions) hydrogen and for Canada to ship green hydrogen produced by wind farms in the Maritimes to Germany by 2025. While no wind-to-hydrogen projects had yet been approved, let alone built, Scholz said, “We believe that Atlantic Canada presents a huge opportunity for us but also for Canada to contribute to a green energy transition. Canada is a close and like-minded partner in the energy transition.”

What Scholz didn’t get was a deal for gas shipped immediately and directly from Canada. That would have been impossible. Canada has no liquefied natural gas (LNG) export terminals in Atlantic Canada, though some are proposed. Calgary-based Pieridae’s project in Nova Scotia was “abandoned on financial grounds” in 2021 but has since been revived as an idea (without regulatory approval). Similarly, Repsol’s plan to turn an import facility in New Brunswick into an LNG export terminal was abandoned in 2016 as “not economically viable” but is again under discussion, with completion at least three to five years away. Both projects would need pipelines expanded or built, either from the US or through Quebec, though the latter is unlikely. Quebec cancelled the Énergie Saguenay LNG project in 2021 (which would have connected Alberta gas to the Atlantic coast) and in April 2022 Quebec banned oil and gas production in the province.

“There has never been a strong business case” for LNG exports from Atlantic Canada to Germany, said Trudeau, at a news conference in Montreal with Chancellor Scholz. “Right now, our best capacity” for selling gas to Europe, said Trudeau, “is to continue to contribute to the global market.” In other words, Canadian gas would get to Europe via the US, where Canada—the world’s fourth largest producer of natural gas, two-thirds of which comes from Alberta—sells almost all its oil and gas, often at a discounted price.

Europe didn’t wait. LNG exports from the US to Europe surged in 2022, nearly doubling from the previous year. Norway replaced Russia as the top supplier of gas to Germany, and in late November Germany and Qatar signed a 15-year deal (starting in 2026) for two million tonnes of LNG a year, supplying 3 per cent of annual German energy consumption.

Still, these sources likely won’t fill the supply gap left by cutting out Russian gas. “The role of gas in Germany will increase, certainly over the next 10 years,” said Germany’s former energy minister Peter Altmaier in a late 2022 interview with Calgary’s ARC Energy Research Institute. By 2035 clean hydrogen will be meaningfully replacing natural gas in Germany, he said, but until then the “transition process” there would need gas, preferably from “like-minded” nations. “If Canada would come to the decision and the conclusion that export of more LNG would become an option,” he said, “then I’m sure there will be a lot of interest from Germany.”

 

Politicians in both Germany and Alberta see natural gas as an existential issue. But not in the same way. For Germany, buying LNG today is not just a way to survive in the short term, it’s a means to a goal of phasing out fossil fuels, a challenge to be met in an interconnected world threatened by climate change and warmongering authoritarian states. For Alberta’s new premier Danielle Smith and her fellow travellers from her Wildrose days, on the other hand, selling oil and gas is foundational to Albertan identity. Those that threaten “our industry”—as Smith said in the Legislature on December 7, 2022—should be seen as “our enemies.”

This view of Alberta has remained consistent for Smith since she became leader of the Wildrose Party back in 2009. “Only when the government of Alberta supports and trusts its most important industry—oil and gas—will Alberta’s future be truly secure,” reads a fundraising letter for the party that year.

That letter was co-written by David Yager, who was the top fundraiser for Smith’s party leadership bid. After the Wildrose’s 2012 election loss, Yager became party president and remained in the position until Smith’s floor-crossing to the Progressive Conservatives in 2014—a move that doomed both the PCs and the Wildrose in the 2015 election.

Repeated losses, however, didn’t dim the vision. “Alberta’s attractions are not weather, beaches or market access,” wrote Yager in an August 30, 2022, Energy Now article. “Alberta is isolated in northwest North America. That 4.4 million people live here is only because it is a global fossil fuel warehouse with enormous quantities of coal, oil and natural gas.”

A vision of Alberta empty and bereft but for the grace of the oil and gas industry has implications. A proclivity to doubt climate change is one. “Climate policy is driven by a quasi-religious impulse or at best an ideology rather than practical or empirical considerations, let alone pure science,” wrote University of Calgary political science professor Barry Cooper, in a review of Yager’s 2019 book, From Miracle to Menace: Alberta, a Carbon Story. “It is anyone’s guess how long Albertans will put up with this assault on their interests.”

Cooper was a prominent member of the conservative “Calgary School” of political science professors at the U of C when Danielle Smith was student–president of the University of Calgary Conservatives in the 1990s. He’s also the co-author—in 2021 with Derek From and Rob Anderson, now the executive director of premier Smith’s office—of the Free Alberta Strategy, which the authors claim in an email to supporters “swept a new Premier to power” who in turn swept “our Sovereignty Act”—which grants Alberta the power to defy “harmful” federal laws—“through the Legislature.”

For Danielle Smith, selling oil and gas is foundational to Albertan identity.

Unfettered market access for Alberta oil and gas is the dream, and the grievance, that underpins the Alberta Sovereignty Within a United Canada Act, also known as the Sovereignty Act, the first bill of Smith’s tenure as premier. Referencing proposed pipelines that didn’t get built—Energy East to the Atlantic, Northern Gateway to the west coast and Keystone XL to the US gulf coast—premier Smith told conservative podcaster Jordan Peterson on November 17, 2022, that “every single time that we have tried to find a way to get more of our products to market we have either had a federal government that has actively cancelled it [or] actively stood in the way of the regulatory environment…. They have stymied us at every single step.” She didn’t mention that the federal Liberal government bought and is building the Trans Mountain Pipeline expansion in BC, or that the Coastal GasLink pipeline in BC received federal approval and is under construction, both at escalating billions in costs.

“It’s not like Ottawa is a national government,” Smith said in the Legislature when the Sovereignty Act passed into law on December 7. She has long held this sentiment. Prior to running for the UCP leadership race in 2022, Smith had an online talk show where she interviewed Gerard Lucyshyn from the Frontier Centre, who presented maps where the northern half of BC (including the port of Prince Rupert) was part of Alberta, and the northern half of Manitoba (including Churchill) was part of Saskatchewan. They discussed “redrawing Alberta’s and Saskatchewan’s borders to correct an historic wrong and give us access to deep-water ports,” tweeted Smith. “What say you, BC and Manitoba?”

On November 15, 2022, Manitoba premier Heather Stefanson revised her messaging in response to premier Smith’s letter about the only deep-water ocean port in the prairie provinces. “With the energy challenges in Europe,” the PC premier told reporters, “Manitoba is well positioned with the Port of Churchill to be able to look at what that could mean in the long term for our province.” Primarily, she said, “we are looking at liquefied natural gas.”

Manitoba NDP Leader Wab Kinew said his province should produce hydrogen to ship through Churchill instead of gas from Alberta and Saskatchewan. Stefanson’s PCs, he said, “seem intent on creating job opportunities for people in other provinces instead of jobs here in Manitoba.”

In Alberta premier Smith didn’t dispute that. She appointed Devin Dreeshen as Minister of Transportation and Economic Corridors, with a mandate to focus on growing trade routes, including to Churchill, “to expand employment, economic growth and non-renewable resource revenue for Albertans.” He’s an ironic choice. As a policy adviser in Stephen Harper’s federal government, Dreeshen was credited as being the “point man on ending the Canadian Wheat Board monopoly.” That action—killing the Wheat Board—led to the temporary closure of the Port of Churchill, which Dreeshen is now tasked with helping to expand for energy exports.

It’s no easy task. “The Churchill port and connecting infrastructure have always been for social gains rather than economic ones,” note researchers in a 2018 report for the Polar Research and Policy Initiative. The region is remote, sparsely populated and hemmed in by ice for eight months a year. Referencing the gap between when a charter to build the railway was given in 1880 and when the port was finally completed in 1931, the researchers write, “it is safe to assume that the 50-year delay… highlights the marginal financial returns expected on the route.”

Up to the present day, the railway and port have functioned as a critical supply chain that connects First Nations and other communities on the rail line and delivers food and fuel to parts of Nunavut. The port does have fossil fuel infrastructure—holding nine 85,000-litre storage tanks for gasoline, diesel and jet fuel for the town, the airport and northern communities—along with a grain terminal in “very good condition.” But none of this has ever made much money. According to Barry Prentice, professor of supply chain management at the University of Manitoba, the peak shipping year at the port was 2006, when 621,000 tonnes of grain moved through the terminal. “By my calculations,” he says, including the costs to maintain rail lines, the railway to Churchill “needs to generate about two million tonnes of [grain] traffic per year” to make a profit and it’s likely that historically the railway was “never self-sustaining.”

In 2013 OmniTrax, the company that then owned the port, wanted to boost profits and announced they would ship a trial run of 330,000 barrels of oil from Churchill. But the plan was abandoned. Oil-pumping infrastructure at the port was slow, and local First Nations protested about potential spills—fears not unfounded given that the derailment rate on the Hudson Bay Railway that year was three times higher than a decade earlier, with “severe permafrost issues” a major hazard.

Thawing permafrost is but one of the many impacts of climate change in Churchill and the Hudson Bay lowlands. According to the 2020 Churchill Climate Change Adaptation Strategy, extreme weather events are now more common. “Unprecedented” winter storms in 2017 led to spring flooding that knocked out rail service. The next summer saw record temperature highs followed by heavy rains that washed out a bridge, causing the derailment of several dozen railcars, some “carrying liquefied petroleum,” and the death of a railway worker. The Arctic Gateway Group reopened the port to grain shipments in 2019 but shut it again in November 2021 (until summer 2023) so the railbed could be stabilized on the way into Churchill, where 200+ km of track by the coast sits on muskeg and permafrost.

The town of Churchill itself “is built on a thin layer of fill covering a wetland area,” says the Climate Change Adaptation Strategy. “It is really scary for a town to think about permafrost disappearing and how that’s going to affect the land, buildings and people’s homes. We have no idea what the future will look like.”

 

On the “opportunity” side, however, says the town’s climate change report, Hudson Bay will see less ice. A University of Manitoba study in 2016 found that “the number of ice-free days [is] increasing by an average of about 1.14 days a year. [And] between 2030 and 2050, some models predict sea ice in the bay could start to look more like that found in the Baltic Sea, where shipping is open year-round.”

Such rosy predictions inspired politicians to dream. “I am aware that expanding the Port of Churchill has long been considered a costly endeavour,” wrote premier Smith in her letter to premiers Moe and Stefanson, “but the economics appear to be changing.”

Former federal Conservative minister Peter MacKay wrote in the National Post on March 31, 2022, that “New railways and pipelines would be needed, as would roads, telecommunications infrastructure, a new terminal with an underwater pipeline and emergency services infrastructure. But none of the challenges is insurmountable with modern engineering and environmental expertise…. The financial and geopolitical returns coming from private/public partnership justify a significant investment [in the Port of Churchill].”

MacKay didn’t put a dollar figure on that investment. And neither conservative politician mentioned the duty to consult First Nations. But Brian Zinchuk, the editor of Pipeline News in Saskatchewan, did analyze some of the logistics of the proposal. A new pipeline, he suggested, would likely hook up to existing infrastructure in southern Manitoba, some 1,300 km from Churchill. From the port, polar icebreakers might be needed to get through Hudson Bay, though Canada’s icebreaker fleet is aging, and new polar icebreakers won’t be delivered until 2030 at the earliest (one was commissioned in 2008 at a cost of $1.3-billion, but it’s not yet built and the deal has changed to two icebreakers for an estimated $7.25-billion). Alternatively, wrote Zinchuk, until a decade or two or three from now when the bay might be ice-free, “ice-capable tankers” could shuttle fossil fuels in winter to a transfer point in Newfoundland, a round-trip distance that’s slightly less than from Kitimat, BC, to South Korea. The costs would be high.

University of Manitoba professor Barry Prentice, however, says “there is an opportunity for Alberta and Manitoba to get together and utilize that corridor for exports.” In his view, “the future is most likely going to be the export of hydrogen.” The hydrogen would need to be transformed into anhydrous ammonia and transported in containers, he says, but that “has the advantage of being lighter—the track is not that stable—and you could do it in much less time than [would be needed for a pipeline]. To build a pipeline, just to get approvals would be crazy.”

Thawing permafrost is but one of the impacts of climate change in Churchill.

Alberta has plans to sequester carbon and produce hydrogen, says Prentice, and hydrogen could be exported from Churchill if the port had a container-handling facility, which it currently lacks. “It’s not as cheap as just selling natural gas,” he says, but “I think the demand for hydrogen is going to be permanent.” Civil servants from the Alberta government contacted him about the idea, he says, “and then they didn’t follow up. I don’t know if the interest waned or what.”

When asked about contributing to the expenses related to expanding the port, minister Dreeshen’s press secretary said that Alberta “will continue to advocate with other provinces for Ottawa to further explore supporting the Port of Churchill.”

In mid February, in place of premier Smith who didn’t go, energy minister Pete Guthrie flew to Germany to pitch European politicians on “Alberta natural gas products” as the “best” option for “meeting Germany’s long-term energy needs.” It’s a beautiful flight over the Arctic, in sight of the northern reaches of Hudson Bay. Seen from above—from far away—the vast land below in winter can look white as a blank canvas.

Tadzio Richards is associate editor of Alberta Views.

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