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Countering ‘slander, lies, disinformation’ Canada’s new environment minister defends oil sands as ‘ethical, secure’ energy source; pledges action to reduce carbon footprint Gary Park For Petroleum News
The Canadian petroleum industry may have landed its most outspoken advocate at the political level in recent memory.
In only his first two weeks as federal environment minister, Peter Kent has tackled the industry’s critics, especially those of the oil sands, head on.
He has also sent out a message to anyone ready to listen that Canada is a source of “ethical” oil, but did promise that Canada will introduce new regulations to reduce its carbon footprint.
No sooner had Kent been named by Prime Minister Stephen Harper to succeed Jim Prentice (who quit politics in November) and John Baird (who filled the post on an interim basis), than he waded into the most sensitive issues and mounted an aggressive defense of the oil sands, responding to two years of international scorn.
“There has been a great deal of exaggeration about how much the oil sands contribute to greenhouse gas emissions — domestically or internationally,” he said in an opening salvo in which he estimated that extracting and processing the northern Alberta resource accounts for about 5 percent of Canada’s GHGs, less than 0.1 percent of global GHGs and less than 1 percent of equivalent GHGs from US coal-fired power plants.
He said the oil sands have been the target of “slander and disinformation and outright lies from some quarters,” adding “I’m not going to stand by while outsiders demonize Canada, Canadian practices and values and our ethical oil products.”
A former TV anchor and foreign correspondent, who reportedly attracted Harper’s attention during his brief term as a junior minister of trade, Kent defined his role as “communicating, trying to encourage any discussions with skeptics, if not cynics, and let’s deal with the facts.”
‘Secure oil’ But he didn’t leave a lot of negotiating room by insisting the oil sands provide “secure oil in a world where much of the free world’s oil is somewhat less secure.” Harper promptly endorsed Kent’s “ethical” theme, with neither apparently concerned about what impact they might have on some of Canada’s diplomatic ties with oil-producing countries in the Middle East and Africa.
Kent said the Obama administration must be reminded that, unlike much of the 8.5 million barrels per day of crude it imports (of which an average 1.8 million bpd, peaking at over 2 million bpd, came from Canada last year), oil sands petroleum is the “product of a natural resource whose revenues don’t go to fund terrorism … it is a regulated product in an energy superpower democracy.”
His primary audience, beyond his critics at home, seemed to be the U.S., where some state governments are still threatening to impose restrictions or bans on imports of oil sands crude and where the Obama administration faces tough opposition if it issues a permit for Keystone XL, a 500,000 bpd expansion of TransCanada’s Keystone oil sands pipeline.
Billions at stake What’s at stake, based on a new report by investment dealer Peters & Co., is an estimated C$180 billion in capital spending on oil sands projects over the next year, with state-owned national oil companies of Asia and European giants such as Total and Statoil ready to pour billions into developing their holdings.
“The increased level of transactions can be attributed to robust economics and the scarce availability of large-scale resources with low political risks,” said a Peters’ report.
“Ultimately, the oil sands will continue to be attractive for entities wanting to amass large oil resources in an economically and politically safe environment, as Canada arguably has a strong combination of these attributes relative to other jurisdictions.”
BMO Capital Markets analyst Mike Mazar projects investment of C$20 billion this year, rising to almost C$30 billion in 2015, and said those numbers could be revised upward “assuming we get continued strength in oil prices.”
Industry welcomes stance For now, the industry welcomes the stance taken by Kent.
“I’m glad he understands the true facts … particularly the economic and energy security importance of the oil sands to both Canada and North America,” said Don Thompson, president of the Oil Sands Developers Group, which speaks for the sector’s developers and operators.
“The role of the Canadian government is to manage the best interests of the country and that’s what they’re doing, so what (Kent) has to say ought not to surprise people,” he said.
Thompson said that regardless of where Kent is directing his message, the facts about the oil sands are “so straightforward and unassailable that he is just stating what I and many in the industry have said to be reality for many years now.”
He said the Oil Sands Developers Group estimates about 800,000 bpd of new production is under construction, 1.4 million bpd has regulatory approval and another 1.4 million bpd is before regulators — a total that is more than double current output.
Regulations expected this year Kent said Ottawa hopes this year to introduce regulations as part of its climate-change mitigation strategy that will involve “better” national air quality standards and rules for public reporting, modeling and monitoring, including a joint effort with the Alberta government to monitor water quality in Alberta’s Athabasca River, the major waterway in the oil sands region.
But he said those measures will not compromise Ottawa’s over-riding goal of economic recovery by deterring investment in its oil and gas industry, especially the oil sands.
“It is not our intention to discourage development of one of our great natural resources,” he said. “We know it can be developed responsibly.”
The Harper administration has indicated its first specific GHG-reduction measures will apply only to coal-fired generators, followed by other large emitters, including refiners, but will be modeled on U.S. actions so that Canada does not place itself at a disadvantage against its major trading partner.
Thompson said Ottawa “must not penalize Canada relative to its international competitors and must be equitable with respect to various industries. As a diverse economy, we need all segments of our economy to be functioning on all cylinders.”
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