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Alberta delays cap on oil sands emissions
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Premier does about-face on measure that seemed a done deal as she faces uphill re-election battle
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By SHAWN MCCARTHY
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Wednesday, December 12, 2018 – Print Edition, Page B1


Alberta's NDP government is shelving until after the spring election its long-promised cap on oil sands carbon emissions - a measure that provincial and federal politicians have claimed would rein in the sector's growth in greenhouse gases.

Faced with fierce opposition to her climate-change stance, Premier Rachel Notley is doing an aboutface on a policy she highlighted as recently as two weeks ago during a speech in Ottawa, when she characterized the 100-megatonne limit on greenhouse gas emissions from the oil sands as a done deal.

Based on current polls, Ms. Notley faces an uphill battle to win reelection in a vote scheduled for late May. She has taken a far more aggressive position in defence of the beleaguered oil industry and distanced herself from the environmental community.

In doing so, she cancelled planned increases in the provincial carbon tax; supported investments in refineries and upgraders; promised to purchase 7,000 rail cars to get Alberta crude to market; and ordered a 325,000 barrel-a-day acrossthe-board cut in the province's oil production in an effort to boost depressed prices.

The NDP government passed the Oil Sands Emissions Limits Act two years ago, and set up a panel that advised the government on the required regulations, including how to allocate emissions if the sector approaches the cap and how to enforce the limits.

"Alberta continues to engage with oil sands companies and other organizations as the corresponding regulations are developed," Matt Dykstra, a spokesman for provincial Environment Minister Shannon Phillips, said in an e-mail on Tuesday.

"We need to get this right and as such, this work will continue over the coming year."

Mr. Dykstra confirmed the consultations would not be concluded before the election scheduled for the end of May. He noted it would be years before the oil sands sector reaches emissions levels approaching the cap.

"The final regulations must reflect the latest in clean technologies and extraction procedures.

Our focus today is on creating good jobs and getting full value for Alberta's resources," Mr. Dyskstra said in the e-mail.

When the Premier announced her climate policy three years ago, she argued it would help Alberta win support in other provinces for oil pipelines to new markets. However, the B.C. government and Indigenous communities have succeeded in stalling the Trans Mountain pipeline expansion project while the shortage of oil export capacity drove down prices that Alberta producers could fetch for their crude. The result, Ms. Notley has declared, is a province in crisis.

Prime Minister Justin Trudeau and Environment Minister Catherine McKenna have pointed to Alberta's climate action - including the proposed emissions cap - when defending Ottawa's efforts to support the oil sector, including the $4.5-billion purchase of the Trans Mountain pipeline and promised financing of its expansion. Ms. McKenna said earlier this year that the 100-megatonne cap would provide "certainty" that there were limits on Canada's fastest-growing source of greenhouse gas emissions.

The proposed cap has also figured in the federal government's effort to placate Ms. Notley on its new assessment regime for resource projects. Ottawa has indicated it would exempt some types of oil sands projects from full federal impact assessment reviews if Alberta has the emission cap in place. The new impact-assessment legislation is currently in the Senate and has drawn fierce opposition from Alberta's industry and government leaders, who worry it will bog down proposed resource projects in onerous, lengthy assessment panels.

Alberta's United Conservative Party Leader Jason Kenney pledged to cancel Ms. Notley's climate-change policies should he win the election scheduled for May.

"The NDP imposed an arbitrary emissions cap on Alberta - a cap on potential growth and opportunity - and has little to show for it from the Trudeau Liberals," United Conservative Party spokeswoman Christine Myatt said in an e-mail.

While there is strong criticism of Ms. Notley's climate plans among political opposition and some oil-industry executives, three of the biggest producers in the oil sands continued to support the proposed cap.

Suncor Energy Corp., Canadian Natural Resources Ltd. and Cenovus Energy Inc. all endorsed the emissions cap in separate e-mails on Tuesday.

"We continue to support the goals of Alberta's Climate Leadership Plan, which was designed to position Canada as a world leader in responsible oil production while also helping ensure industry competitiveness," Cenvous spokesman Brett Harris said on Tuesday. "Our support for these measures shows the government and the public we are serious about emissions reduction."

However, given the current state of the industry, there is little prospect the emissions cap would be hit by 2030 or even thereafter, said Stephen Kallir, Alberta-based analyst with Wood Mackenzie Group, an international consulting firm. He estimates the oil sands would add another 1.4 million barrels a day of production on top of the current three million barrels. But with improving emissions per barrel and the likelihood of some major exemptions for certain operations, GHG emissions are likely to top out at around 95 megatonnes, he said.

But that would still leave the oil sands as representing nearly 20 per cent of the 532-megatonnes emissions target that Canada is pledging to hit by 2030, down from 704 MT in 2016.

The oil sands cap "is a meaningful signal to the industry," said Nikki Way, an analyst with Calgary-based Pembina Institute, an environmental think-tank.

"Alberta needs to be clear it will cap emissions, and if the economics swing in favour of a boom in the oil sands again, that we will stick to our commitment and there will be fair rules."


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