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‘Green’ rules won’t harm economy Canada’s environment minister assures oil patch leaders new strategy will start with ‘intensity-based’ targets Gary Park For Petroleum News
The Canadian government will not impose absolute caps on greenhouse gas emissions, GHGs, when it unveils a new “green” plan, but major industries will face emissions targets, senior federal cabinet ministers told the petroleum industry Feb. 9.
Unease has been building within the oil patch as Prime Minister Stephen Harper has adopted a tougher line on dealing with climate change, with industry executives concerned that oil sands and pipeline projects could be at risk.
Environment Minister John Baird told reporters after two hours of private meetings that the federal government is committed to tackling emissions targets without endangering a “strong, growing economy.”
He said the new strategy will contain “realistic solutions. ... Any action we take with industrial regulation will get real benefits for Canadians.”
Baird gave an assurance that initially the government will set intensity-based targets, which will require cuts to GHGs per unit of production, before it moves to overall reductions regardless of production levels.
He had previously told a House of Commons committee the regulations would be applied on a sector-by-sector basis and would be implemented within three years.
Rules expected to be public in March The rules are expected to be made public in the federal budget on March 20.
Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said his industry made a forceful case to Baird, Indian and Northern Affairs Minister Jim Prentice, who is also chairman of a new cabinet committee on the environment and energy security, and Natural Resources Minister Gary Lunn.
“We understand the government will regulate, but it’s got to be done carefully, otherwise it will be counterproductive,” he said, adding that his association must now wait for the details to see how the regulations will be applied on a project-by-project basis.
Alvarez said Baird insisted that Harper intends to regulate GHGs in a “way that doesn’t harm the economy and that recognizes that technology takes some time to bring into place.”
Baird said the ministers and industry officials had a “good exchange of ideas. We learned more about some of the challenges and some of the opportunities.
“It’s important before we act or regulate industry we do a lot of listening,” Baird said.
Industry chief executive officers who attended the meeting included: Randy Eresman of EnCana, Clive Mather of Shell Canada, Tim Hearn of Imperial Oil, Charlie Fischer of Nexen, Hal Kvisle of TransCanada and Steve Snyder of TransAlta.
Opposition parties putting pressure on government The Harper government has also been under pressure from the three opposition parties in the House of Commons to eliminate the federal capital cost allowance that permits companies to write off the full cost of equipment in the year it is purchased.
New Democratic Party leader Jack Layton has argued the allowance is a subsidy for the oil sands sector and an indirect source of GHGs and suggested that money should go instead to support renewable energy and energy efficiency programs.
But CAPP Chair Kathy Sendall, in a letter to prentice earlier in February, challenged claims that the oil sands are unfairly subsidized.
She said the capital cost allowance was introduced in 1996 in recognition of the high front-end spending, long investment horizons and financing risks associated with oil sands projects.
Sendall warned that oil sands investment could evaporate if the federal and Alberta governments imposed new environmental standards and raised taxes.
She said companies require oil prices of about US$50 per barrel to achieve a reasonable rate of return, suggesting that because of higher labor and materials costs in the sector, the economics are as challenging now as they were when oil prices were much lower.
Underscoring the importance of the industry, she said it paid C$27 billion to federal and provincial governments last year and expects to invest C$40 billion across Canada this year. But, with Canadians leaving no doubt they rate protection of the environment above all other current issues, the Harper administration is being forced to act if it hopes to survive the next federal election, which could be called this spring.
Harper: GHG emissions, fuel efficiency to be regulated Harper said in a major policy speech Feb. 7 that GHG emissions will be regulated, as will the fuel efficiency of motor vehicles starting with the 2011 model year.
Without imposing some new standards on the oil patch, which is widely identified as the national environmental culprit, Harper will not be able to obtain the votes he needs in Ontario and Quebec, which make up 60 percent of Canada’s population.
The same anxiety is spreading among provincial premiers who have vowed to do their part to cut GHGs.
That list includes newly elected Alberta Premier Ed Stelmach, who said the provinces have agreed not to wait for the federal plan, but to press ahead with their own efforts.
“Alberta can lead by example ... but let’s do it in a pragmatic way,” he said.
Alberta Environment Minister Rob Renner gave one hint of that leadership by promising to release details this spring of GHG regulations and an Alberta-based carbon trading market.
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