Varcoe: Election scrap over carbon tax, emissions cap splits Alberta’s oilpatch


When Rachel Notley unveiled her signature climate change strategy in 2015, four oilpatch heavy-hitters stood directly behind her — and Alberta’s plans for taxing carbon and capping oilsands emissions.

Leaders of Suncor Energy, Canadian Natural Resources, Shell Canada and Cenovus Energy endorsed the idea of limiting greenhouse gas emissions from the oilsands to 100 megatonnes and backed a new carbon-pricing regime.

“Today’s announcement is a significant step forward for Alberta and for the industry,” declared Murray Edwards, chairman of Canadian Natural Resources.

Fast-forward 40 months.

The tandem issues of a carbon tax and an emissions cap are taking centre stage in the election campaign, with the NDP on one side, the United Conservative Party on the other, and the oilpatch caught in the middle of a political firefight.

Anyone who thought the 2015 accord would bridge an energy-environment policy divide in Alberta was mistaken.

“You cannot associate the individuals that stood on the stage with the premier as representing the full interests of the industry,” said Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors, which opposes the carbon tax.

“We should definitely get rid of it, because it puts you into an uncompetitive (position) and you are not really moving the dial on carbon,” added Tamarack Valley Energy CEO Brian Schmidt.

The idea of an emissions cap and carbon tax divided industry players more than three years ago, and it continues to highlight a fault line within the sector itself.

In a report last week by Royal Dutch Shell, the supermajor reiterated its support for carbon pricing and the Paris climate agreement.

Shell Canada, which sold off much of its oilsands assets in 2017, also sees the emission cap “as an expression of confidence in our industry’s continued ability to innovate to reduce GHG levels,” said company spokesman Tara Lemay.

Large oilsands producers such as Suncor and Cenovus also back the tax.

Most company officials declined this week to wade into the issue during a heated election campaign.

But that hasn’t a stopped a broader debate from churning.

Energy economist Peter Tertzakian, executive director of the ARC Energy Research Institute, believes a carbon levy can be a “competitive differentiator” for Canada’s oil and gas industry.

A carbon tax encourages companies to lower emissions and energy use, driving down costs and making them more competitive over the long run, he said.

In a world focused on decarbonizing, a levy will also make it easier for producers to raise capital in the future.

“Whether there is a government-imposed carbon tax or not, the financial industry is levying a carbon tax on you, on your ability to raise money or on your stock price,” said Tertzakian.

Steve Laut, executive vice-chairman of Canadian Natural Resources, said this week that the company supports a levy on the oil and gas industry, although he stressed a carbon tax on the public “is not our realm.”

“When it comes to the oil and gas industry, we supported that, particularly for the oilsands,” he told reporters.

“It was important that we support it and, as you can see, support it (with) more than just words. Our (energy) intensity has gone down dramatically.”

A report last year by consultancy IHS Markit noted average emissions per barrel — or the energy intensity — from the oilsands has dropped by 21 per cent in the past decade, and could fall another 16 to 23 per cent by 2030.

But with overall production rising in Canada, total emissions from oil and gas production jumped by 16 per cent between 2005 and 2016, putting more pressure on governments.

Producers agree climate action is needed and government policies should encourage innovation and investment, while avoiding any damage to the sector’s competitiveness.

However, divisions still exist over a carbon tax and the oilsands emissions cap.

Schmidt, who was chairman of the Canadian Association of Petroleum Producers when Alberta’s climate plan was unveiled, noted it caused “a lot of sparks” within industry.

“There’s a real difference in how the carbon tax is viewed,” he said.

“Most members, I would say, in town here are not in favour of the cap or the tax that was put in place in Alberta, because they just didn’t think it would get you anywhere.”

Scholz points out all of Alberta’s climate measures haven’t won “social licence” that would see pipelines accepted and built in the rest of the country.

“The facts speak for themselves,” he said.

Yet, removing the existing policy won’t stop the industry from facing a cost for carbon.

The federal government has imposed carbon pricing on provinces that don’t have their own plans, although the issue is the subject of a constitutional court challenge.

The UCP has also promised it will retain a carbon levy on larger industrial emitters, such as oilsands plants, if it’s elected.

Under its program, larger emitters would have to reduce their emissions intensity by 10 per cent compared to their average performance between 2016 and ’18. The UCP will also cut industry’s compliance costs from $30 to $20 per tonne.

In an interview, UCP Leader Jason Kenney said he’s not surprised companies like Shell back a broad carbon tax, although it hasn’t altered his position.

“I am not going to take the advice of millionaire multinational executives when it comes to punishing people for living normal lives,” he said Thursday.

“Economic masochism is not a responsible policy. Imposing massive costs on ourselves, which competing jurisdictions are not imposing on themselves, is a recipe for carbon leakage, the flight of capital and the loss of jobs.”

Notley contends the UCP plan would encourage emissions to grow in Alberta. Removing the carbon tax would penalize companies that have made significant investments to lower their emissions, she added.

“Many leaders in the oil and gas industry are playing the long game,” Notley said this week.

“And the long game means taking responsible action to combat climate change, and being part of the kind of plan we have in place.”

Tuesday’s election will settle where Alberta’s climate policy is headed next.

But it won’t resolve a split within industry on what’s the best step for an energy-powered province to take in a world that’s struggling to decarbonize.

Chris Varcoe is a Calgary Herald columnist.

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