When he was elected a year ago, Canadian Prime Minister Justin Trudeau promised to consult with provincial and territorial governments on all major issues.
That pledge is now in tatters, with Trudeau accused by Saskatchewan Premier Brad Wall of demonstrating a “stunning ... level of disrespect” by taking unilateral action on a national carbon tax.
Wall and the premiers of Nova Scotia and Newfoundland were enraged by Trudeau’s ultimatum that unless provinces adopt either a tax on greenhouse gas emissions or introduce a cap-and-trade system by 2018 the Canadian government will impose its plan.
Wall said he could not believe that Trudeau announced the tax in the House of Commons at the same time provincial and territorial environment ministers were meeting with federal Environment Minister Catherine McKenna “on a so-called collaborative climate change plan.”
C$10 per ton
The tax will start at C$10 per metric ton in 2018 and grow by C$10 a year to C$50 by 2022, a level that is C$20 above a tax proposed by Alberta and British Columbia.
Wall said Saskatchewan will be one of the provinces hardest hit by the tax because of its reliance on resource exports, estimating the cost will reach C$1,250 a year for the average family in 2022 and siphon more than C$2.5 billion from the Saskatchewan economy.
He said the tax will likely result in an exodus of oil and gas rigs to the United States.
Alberta Premier Rachel Notley withheld support for the move pending federal approval of export pipelines the industry insists are vital to access global prices.
Wall said he does not believe Trudeau’s promise to make the tax revenue-neutral by returning the money to provinces and territories, allowing them to cushion the impact on families and industries.
“It’s not going to work,” he insisted, adding that Saskatchewan is preparing an alternative strategy, using technology to capture carbon from a coal-fired power plant and boosting the use of renewable sources to account for 50 percent of the energy generated in the province by 2030.
If all else fails, Saskatchewan will consider its legal options, including a possible constitutional challenge.
Industry hesitant to comment
Alberta’s largest oil producers were hesitant about passing judgment on the tax regardless of the mounting financial pressures they face.
The Conference Board of Canada estimated the industry is on track to post a pretax loss of C$10 billion this year, after losing C$11 billion last year, marking the first time it has registered consecutive annual losses.
Tim McMillan, president of the Canadian Association of Petroleum Producers, said that until the details of the tax are released companies are unable to decide whether they can live with a C$50 levy.
He hopes Alberta and the Canadian government will remain focused on the principle they agreed to in March to pursue a pan-Canadian strategy that would take into account competitive pressures on key industries, with special emphasis on energy-intensive sectors that face tough international competition.
Lorraine Mitchelmore, former president of Shell Canada, told the Globe and Mail the industry must understand that carbon pricing is a fact of life and will rise over time as international efforts are made to achieve the commitments made last December at the Paris climate summit.
Gary Leach, president of the Explorers and Producers Association of Canada, speaking for small and mid-sized producers, wasted no time attacking the federal plan as “damaging” to his member companies which lack the financial heft of their larger rivals.
Martin King, director of institutional research at GMP First Energy, said the problems for producers will be compounded by mid-2018 unless more pipelines are approved, forcing them to look at options such as rail to move their crude.
He estimated the transportation shortfall will reach 100,000 to 200,000 barrels per day by 2018, but rail offers a quick solution through its idled capacity of 1 million bpd in Western Canada.
