Varcoe: 'Nothing in need of the NEP' — Oilpatch girds for Ottawa's new cap-and-trade emissions plan for sector

‘It is the single-biggest existential menace (to the sector). An emissions cap is a cap on manufacturing. It is so simple as that,’ mentioned Ensign Vitality Providers president Bob Geddes

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Premier Danielle Smith was in a automobile on Wednesday night heading down a seven-lane freeway in Dubai for a dinner with Alberta Atmosphere Minister Rebecca Schulz and different Canadian policymakers.

The occasion was being hosted by federal Atmosphere Minister Steven Guilbeault, whom the premier has beforehand referred to as a “maverick” and “renegade.”

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The dinner with about 24 different Canadian politicians and officers, on the sidelines of the COP28 local weather summit this week, occurred on the eve of an announcement from Guilbeault of Ottawa’s controversial emissions cap for the nation’s oil and fuel sector — and a showdown between the feds and the province.

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“I noticed him briefly (this week) and mentioned hi there, and he’s internet hosting a dinner this night,” Smith mentioned in an interview shortly earlier than the occasion, which additionally included Saskatchewan Premier Scott Moe.

“I’m very upset that he got here right here clearly with an agenda to unilaterally announce main reductions in emissions that we see will probably be manufacturing caps.”

The framework for the emissions restrict on the oil and fuel trade, which would require the sector to cap after which reduce them, will probably be launched Thursday. It can use a cap-and-trade regime, in keeping with federal sources.

It’s certain to result in a nasty tussle between Alberta and the Trudeau authorities, though each side have adopted a goal of net-zero emissions by 2050.

Steven Guilbeault
Minister of Atmosphere and Local weather Change Steven Guilbeault speaks throughout a media availability on Parliament Hill in Ottawa, on Monday, Nov. 27, 2023. Canada is poised to stipulate on Thursday a federal emissions cap on the oil and fuel sector utilizing a cap-and-trade framework that might start no sooner than 2026, says a federal authorities supply. Photograph by Justin Tang /The Canadian Press

The oil trade is the most important emitting sector within the nation. The Canadian authorities has vowed to chop total emissions within the nation by 40 to 45 per cent by 2030.

Its emissions discount plan final 12 months modelled a 42 per cent reduce from the oil and fuel trade (from 2019 ranges) by the tip of the last decade.

Alberta sees the cap as unconstitutional, as provinces can solely make legal guidelines associated to the exploration and growth of non-renewable pure sources.

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“I hear that he’s meaning to announce an emissions cap, which we see as a manufacturing cap on oil and fuel . . . It’s a fairly outrageous factor to do, to come back to a convention like this with out having shared the small print with us,” Smith mentioned earlier than heading into the dinner.

“I’ll be well mannered, as I at all times attempt to be, however I’ve to be agency, that they’ve continued to violate our jurisdiction, they lose in court docket after which they act as if they will function outdoors the regulation.”

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Federal sources mentioned that 42 per cent is not going to be the ultimate quantity for emissions cuts by 2030, and confused the framework will probably be technically achievable with some flexibility mechanisms put in place for trade.

“We’ve made certain it’s a cap on air pollution, not on manufacturing,” mentioned one supply.

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The federal authorities examined two potential choices final 12 months for the coverage, however has determined to make use of a cap-and-trade system, the sources confirmed. Such a course of would probably set a tough restrict on trade emissions, establishing a complete quota of allowable emissions, which might fall over time.

As soon as a baseline quantity of emissions is about, corporations will be capable to purchase offset credit — and Ottawa may even create a decarbonization fund — to make sure predictable cuts.

Regardless of discuss of additional session with the sector because the laws are developed, the oil and fuel trade is annoyed by the transfer. The sector additionally faces a rising nationwide carbon value, clear gas requirements and new guidelines to chop methane emissions.

“We strongly oppose an emissions cap and it’s pointless to fulfill Canada’s Paris commitments,” Tristan Goodman, head of the Explorers and Producers Affiliation of Canada, mentioned Wednesday.

“It’s merely a punitive strategy, not according to different international locations.”

The president of considered one of Canada’s largest drilling companies blasted the concept of a cap, saying it’ll push trade funding into different international locations.

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“It can put 1000’s of Albertans out of labor, and a cap on manufacturing is nothing in need of the NEP (Nationwide Vitality Program) over again,” Ensign Vitality Providers president Bob Geddes mentioned Tuesday evening.

“It’s the single-biggest existential menace (to the sector). An emissions cap is a cap on manufacturing. It’s so simple as that.”

Tristan Goodman
Tristan Goodman, president of the Explorers and Producers Affiliation of Canada (EPAC). Gavin Younger/Postmedia file

Trade leaders are anxious in regards to the impact of the emissions cap, as Canada is the fourth-largest oil producer on this planet, however the one main exporter dealing with such a measure.

Nonetheless, there’s additionally rising stress for all the fossil gas sector to chop emissions shortly as issues over local weather change develop. One debate going down at COP28 focuses on a push to section out fossil fuels, whereas some international locations are advocating for a much less aggressive “section down” over time.

Smith mentioned she is assured the trade can meet its decarbonization goals by 2050. By setting a shorter 2030 timeframe, there’s a threat that know-how “doesn’t materialize in seven years” and manufacturing can be shut in.

Her authorities will take steps to make sure that doesn’t occur and is ready to make use of the Alberta Sovereignty Inside a United Canada Act in one other power confrontation with Ottawa.

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“The Sovereignty Act movement is the best way we might litigate it, as a result of what we might say is that is what we’re doing as an alternative. And it’ll be as much as the federal authorities to take us to court docket in the event that they suppose one way or the other they’ve a proper to remove our constitutional authority,” Smith added.

“The Structure issues, and in the event that they don’t respect it they will create a nationwide unity disaster.”

Danielle Smith on carbon capture
Alberta Premier Danielle Smith. David Bloom/Postmedia

The Worldwide Vitality Company forecasts that demand for oil and fuel will peak later this decade. But, there are questions on assembly the rising international urge for food for oil within the brief time period and if the cap will push manufacturing — and carbon emissions — into different producing international locations.

Whole Canadian oil manufacturing is anticipated to rise by greater than 300,000 barrels per day subsequent 12 months, topping 5.4 million barrels, mentioned Kevin Birn, a vice-president with S&P International Commodity Insights.

Birn mentioned if the notion is the emissions cap is just too steep or unachievable, it might have an effect on the movement of funding into Canada. However particular particulars of the initiative will decide the way it impacts the trade.

“If the coverage units expectations which can be too stringent or too rigid, then it has the potential to negatively influence capital flows,” Birn mentioned.

“The chance right here is that we undermine the flexibility to finance the very initiatives that we need to carry ahead to decarbonize, to enhance the (trade) competitiveness.”

Chris Varcoe is a Calgary Herald columnist.

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