Oilsands proponents, among them Alberta's governing United Conservatives, want to tell you a story about the oilsands.

They want you to remember the years from 2010 through 2014, when the biggest concern the oilsands industry faced was how to keep the costs of the ever-increasing set of projects under construction from ballooning even further.

And they want you to believe that we could be back there again, if it weren't for a few specific foes.

What's to blame? The Canadian Association of Petroleum Producers is quick to tell you: "Pipeline constraints, a lack of market diversity, and inefficient regulations are largely responsible for holding back Canada's oil sector."

Ask Premier Jason Kenney, and it's the failed policies of Prime Minister Trudeau or former premier Rachel Notley. You're to believe that domestic policies have caused production growth rates to be lower by half than what was foretold in 2014, and that this slowdown can be solved by changing those policies.

They're selling you a bill of goods.

The real issues

There are four major issues affecting the oilsands.

First, and by a long shot the most important, is the sustained decline in global crude oil price outlooks. Even if we had seamless market access, the long term expected market value of oilsands production has dropped significantly from 2014 levels.

Market access is the second big factor. In a low price environment, additional uncertainty and/or increased transportation costs matter a lot.

Transporting crude oil by train has become increasingly common. (Dave Rae/CBC)

The third factor is a global reduction in oil investment and a shift toward short-cycle investments. Oilsands are as long-cycle as investments get.

Finally, climate change pressures on global supermajors like Shell, Exxon-Mobil and Total mean that investments in the oilsands are hard to sell to shareholders and lenders alike.

Let's talk prices.

Playing the long game

For oilsands projects, today's price is largely irrelevant, as investment decisions are generally made three to five years before producing oil.

For example, Suncor's newest mining project, Fort Hills, saw investment approved by the company in October of 2013, but didn't see first oil until late 2017, and only reached full production capacity in mid-2018. The mine is expected to continue production until 2057. These are long-term projects.

Earlier this decade, in the boom times for oilsands, oil prices were high and expected to increase for the foreseeable future. The U.S. Energy Information Administration's (EIA) 2014 Annual Energy Outlook had prices for the North American benchmark West Texas Intermediate crude increasing to over $230 US per barrel by 2040. Their most recent outlook, from earlier this year, has 2040 prices forecast to be $165 (US) per barrel.

Translate that to an oilsands project like Fort Hills — a decrease in oil prices from the 2014 EIA forecast to the 2019 version would reduce expected net revenues after royalties and taxes by around $20 per barrel in today's dollars.

Want some context? Reducing corporate taxes from 12 per cent to eight per cent in Alberta would increase the same project's net revenues by less than two dollars per barrel.

So, if someone is telling you how corporate tax rate reductions will stimulate oilsands development, remind them that the effect of the change in prices we've seen is negative and roughly 10 times larger.

Next, we turn to market access.

What it costs to move oil

There's no question that a lack of pipeline capacity has affected confidence in Canadian oilsands investments.

How much are local differentials hurting the value of oilsands projects? It really depends on your access to transportation. In the worst case scenario, where you are going to be subject to selling all your crude at whatever the local market will bear, you're facing a very dim and risky future if pipelines aren't built.

It's an open question though what industry or political leaders can do to get pipelines built.

A picker unloads pipe from a truck and stacks it in a Trans Mountain yard in Edson, Alta. (Terry Reith/CBC)

In Canada and the U.S., pipelines are held up in myriad legal battles and, despite the efforts of leaders from Harper to Trudeau to Trump, we haven't brought a new export pipeline online in nearly a decade.

What about investment?

As oil prices have declined, investment has declined globally and shifted toward projects with shorter life cycles. Both of these trends are bad news for capital-intensive and long-cycle oilsands projects.

Globally, investment in oil production has decreased from a peak of about $550 billion in 2014 to just over $300 billion in 2018. Canadian investment dropped a little more than average, but our share of global expenditure was seven per cent in both 2014 and in 2018 per the EIA, although we accounted for eight to nine per cent of global investment between 2009 and 2013.

If you're convinced that capital is fleeing Canada's oilsands and being invested in the U.S., it's not. In the United States, 2018 capital investment was down about 40 per cent compared with 2014, although the U.S. share of global investment is increasing.

Finally, let's talk climate change.

Carbon charges and carbon revenues

A lot of ink has been spilled wondering if changes in regulatory policies, including carbon prices, are at fault in the declining investment rates in oilsands.

They're not.

In 2018, Suncor saw average costs from climate policies in Alberta of less than 20 cents per barrel, with some of their facilities even earning net revenue from the sale of carbon credits.

Earning money from carbon taxes? Yes.

The Carbon Competitiveness Incentive Regulation in place in Alberta is such that a new or existing facility with low emissions intensity would see revenues, not costs, from Alberta's climate change policies.

The costs of climate change policies are certainly material to some operations, with our highest-emissions facilities seeing costs well above five dollars per barrel, but these costs are not indicative of what would be expected for a new project, assuming the new project was built with best-in-class (or even lower-than-average) emissions performance.

Unless a company is planning a new project with emissions intensities much higher than the average North American barrel of crude oil, existing GHG policies aren't changing the investment thesis a lot.

So much for the dreaded carbon tax chill on investment.

Where climate change factors in

Climate change has had a material impact on capital availability for oilsands projects.

Global supermajors like Shell, Total and Exxon-Mobil have been under pressure to reduce their climate change risks. High-cost, long-life and relatively high-emissions projects like the oilsands are not an easy part of that picture.

In its 2018 Sustainability Report, Shell states that, "In 2017, we continued to reshape Shell as a world-class investment case that could thrive in the energy transition with a strong licence to operate, selling assets not central to our strategy, such as our partial divestment of oilsands mines."

Until they divested most of their holdings, Shell would often carve-out oilsands from the rest of their global holdings when the subject turned to emissions or energy-intensity, as the graphic below from their 2016 Sustainability Report shows.

(Yes, Shell's oilsands assets were about six times as energy intensive as their average unit of oil production.)

Shell's not alone. From Exxon-Mobil, we're told that "there is concern among a range of stakeholders regarding the development of oilsands."

Total? In their 2018 responses to the Carbon Disclosure Project, they state that they face a risk that "some investors may divest from Total if they consider that some of our assets are stranded. For instance, those with high carbon intensities (coal, oilsands, etc.)."

It's convenient for some to suggest that these companies are exiting the oilsands solely because of carbon policies. Quite the contrary — most evidence suggests that they were made more likely to leave because oilsands had become symbolic of high carbon fuels, and that innovation has not been sufficiently rapid to assure them that oilsands will be part of our energy future.

Of course, some companies are more convinced of the long-term case for the oilsands, but even amongst those there is concern.

Rough ride ahead

In its 2019 Climate Report, Suncor uses global energy market scenarios to assess risk. In one scenario, which they call "autonomy," the future of the oilsands is thrown into question.

This scenario describes a world where abundant and cost-effective energy supply is coupled with declining demand for oil in transportation, leading to low oil prices for the long term. In such a scenario, Suncor sees big challenges for the oilsands.

While they suggest that no existing assets would be stranded, and that cash flow could be sufficient to underpin modest expansion at existing plants, new oilsands growth projects are challenged and unlikely to proceed, while growth options in other resource basins are considered.

Sound familiar? Those aren't my words, they're Suncor's.

In this file photo, Mark Little, incoming CEO of Suncor, speaks at Houston's CERAWeek energy conference on March 11, 2019. (CERAweek by IHS Markit)

Of course, Suncor has other scenarios where the oilsands thrive, but those rely on much higher oil prices, which seems unlikely given both the abundance of cheap oil and the rapid progress of alternatives.

In a world with cheap oil, challenging pipeline construction, a shift toward short-cycle investment, and the combined forces of alternative energy innovation and action on climate change, the oilsands are in for a rough ride.

Our politicians and industry lobby groups, which influence both policies and the public's understanding of these issues, would be well-served to make sure people are clued-in to this reality, rather than blaming everything on Trudeau and Notley.

They should think about these factors carefully and prepare for them, rather than promising a return to the boom times that they'll likely be unable to deliver.