Canada to match US climate-change rules

Gary Park

For Petroleum News

Canada will play ball with the United States on climate-change regulations to avoid crippling tariffs on its oil exports, but will continue to press its case in Washington for other clean-energy alternatives, Environment Minister Jim Prentice said.

If the Waxman-Markey bill that squeaked through the U.S. House of Representatives survives what is expected to be a rough ride in the U.S. Senate, Canada will introduce “comparable” regulations, without copying the letter of the U.S. legislation, he said June 30.

But Prentice also promised that Canada will be as tough as the U.S. on its major industrial emitters of greenhouse gases, which points to tough times for the oil sands sector.

Under the U.S. Clean Energy and Security Act, all U.S. industrial emitters will need permits for every ton of GHGs they spew into the atmosphere, a measure the American Petroleum Institute has warned could force the closure of one in every six refineries by 2020.

Canadian exporters at risk

Unlike some critics, Prentice does not regard that provision as a disguised attempt at trade protectionism, saying the threat applies only if Canada fails to adopt “commensurate” climate-change legislation.

“Everything we are doing is to ensure we do have a commensurate system,” he said.

Prentice conceded that Canada has little choice but to match U.S. measures, which would impose harsh emissions-reduction limits on refiners at a time when light crude supplies are diminishing and plants are being forced to turn to heavier crudes, such as oil sands bitumen.

He made his comments in Washington during discussions of cross-border environmental issues with U.S. Energy Secretary Stephen Chu and Lisa Jackson, administrator of the Environmental Protection Agency.

The Alberta government and oil sands producers worry that the U.S. legislation would impose punitive costs on exporters of bitumen, which uses more energy and generates more GHGs during the refining process than conventional oil.

However, the Canadian Association of Petroleum Producers welcomed the U.S. House decision to exclude from the Waxman-Markey bill proposals to adopt a low-carbon fuel standard, similar to one adopted in California — a move that would have imposed significant costs on oil sands producers.

Tom Huffaker, CAPP’s vice president of environment and policy, told the Globe and Mail that his organization was delighted those standards were excluded, but would resist “dancing on the table because we know this is a work in progress.”

Alberta advances capture

It announced June 29 that C$2 billion will go to three projects to build carbon capture and storage demonstration projects, which are expected to store about 4 million metric tons of carbon dioxide annually by 2015.

The winners selected from three finalists are:

• Shell, Chevron and Marathon Oil Sands, for their Quest carbon capture project, which is designed to capture about 1.1 million metric tons a year for use at the Scotford heavy oil upgrader near Edmonton;

• A joint undertaking by Enbridge and Epcor Utilities to develop a next-generation power plant to turn coal into synthetic gas and capture 1.25 million metric tons of carbon dioxide a year. Enbridge plans to ship the gas to aging oil fields for enhanced recovery; and

• A partnership of Enhance Energy, Agrium and North West Upgrading to transport carbon dioxide to oil production fields in central Alberta, sequestering 1.8 million metric tons in its first year, possibly as early as 2012.

An Alberta government spokesman said the emerging technologies are extremely expensive when first applied, but costs should come down from the initial C$500 per metric ton, “as they are commercialized.”

The province’s goal is to use carbon capture and storage to reduce GHGs by 139 million metric tons by 2050, or 70 percent of its overall target.