Canada’s revised Kyoto plan ‘lipstick on a pig’

Government promises to cushion impact on major industries, but federal department warns energy sectors would experience ‘large contractions’ under climate-change treaty

Gary Park

PNA Canadian Correspondent

Canada’s Kyoto showdown is moving into high gear with less than a month remaining before the federal government forces a Parliamentary vote to ratify the climate-change accord.

Revised plan tabled

Environment Minister David Anderson and Natural Resources Minister Herb Dhaliwal promised to cushion the impact on major industries — notably the petroleum producing and refining sectors — that are seen as the main sources of polluting gases.

Plan greeted with skepticism

Alberta Environment Minister Lorne Taylor described the plan as “lipstick on a pig. It’s a clear breach of trust. They (the federal government) are not working on collaboration with the provinces when they release it to the press and the public without even discussing it.”

Gwyn Morgan, chief executive officer of EnCana Corp., warned the federal government faces “years and years” of court battles if it starts interfering with provincial jurisdiction over natural resources.

Canadian Natural Resources Ltd. vice-president Real Doucet said his company has already reallocated C$100 million of planned spending on its C$8 billion oil sands project to its operations in Ivory Coast and could soon shelve another C$202 million.

Huge impact estimated

Industry Canada said crude petroleum and natural gas could see investment slump under Kyoto by 48 percent and employment drop by as much as 14 percent by 2010, two years before the accord was to be fully implemented. For refined petroleum, investment could be down by 55 percent and employment by 27 percent.

“Energy sectors are the most affected,” the study said. “These sectors undergo large contractions.”

The paper cautioned that the government should compare whether the economic costs of compliance will outweigh the benefits of having a lower level of carbon dioxide — the chief greenhouse gas — in the atmosphere.

Government calling for implementation specifics

He said the largest emitters will not be asked to lower emissions by more than 55 million metric tonnes a year, or less than one-fifth of the projected 240 million metric tonnes needed to achieve the Kyoto target.

“Any further reductions will be achieved through use of incentives,” he promised.

The latest federal estimates of Kyoto costs include an added 3 cents per barrel of conventional light crude, 1.5 cents per barrel of heavy crude and 12 cents per barrel from the oil sands. Industry projections have puts the oil sands costs as high as C$5 per barrel.

Even at the federal level, however, Suncor Energy Inc. said its current production of 220,000 barrels per day from its Alberta oil sands operation could translate into a bill of C$10 million a year, or an extra 1 percent a year.

“This is a hit, but it’s not a killer if those numbers are correct,” said Neil Carmata, vice-president of oil sands at Shell Canada Ltd., which is just about to open Alberta’s third oil sands plant. “One percent matters in the oil sands business .... but besides Kyoto, there are other risks in the oil sands — oil prices, exchange rates, capital costs,” he told the Calgary Herald.

In recent weeks, other companies with oil sands projects on the table — Petro-Canada, Canadian Natural Resources Ltd., EnCana Corp., TrueNorth Energy Corp. and Husky Energy Inc. — have either slowed plans for billions of dollars worth of investment or warned they will seek refuge from Kyoto in the United States by building upgraders south of the border.

Industry concerns not answered

He said there had been some important steps forward by the federal government in its “language about competitiveness, about costs, about what’s achievable for individual sectors.” But Alvarez said the plan was still not a basis for long-term planning of major projects.

Other Kyoto-related developments

Gary Park, PNA Canadian correspondent

• In an unexpected twist, the Alberta government tabled legislation Nov. 19 declaring greenhouse gases to be natural resources that automatically come under its jurisdiction.

The bill, which won’t be passed until next spring, provides the ammunition for Alberta to take its case to the Supreme Court of Canada if the federal government ratifies the climate-change treaty, said Alberta Premier Ralph Klein.

Under the legislation, gases such as carbon dioxide and methane would acquire the same constitutional status as Alberta’s oil and natural gas, which are owned by the province.

• Klein told reporters Nov. 21 the new plan fails to address a key demand of the provinces — a guarantee they will be compensated for any economic losses as a result of the accord.

He suggested the provinces and territories should band together and defy federal attempts to impose Kyoto, a tactic that has some support from British Columbia, Saskatchewan and Nova Scotia, but is opposed by Manitoba and Quebec.

• The Canadian Association of Petroleum Producers, in a Nov. 18 letter to federal and provincial energy and environment ministers, warned that unreasonable emissions targets would “simply be a tax on production in Canada” that might have to be met by shifting production outside Canada.

Consistent with its opposition to the Kyoto process and its support for a “made-in-Canada” solution, the association called for negotiated sector plans for action on emissions by Canadian industry that would “begin as soon as is practical and would be sustainable over the medium- and longer-term.”

• Bob Hill, president of the Canadian Energy Pipeline Association, and Enbridge Inc. President and CEO Patrick Daniel said in recent presentations that the deadline for Parliament’s ratification vote is unrealistic, although both said they support the concept of Kyoto.

But Daniel said on Nov. 4 that the accord makes some of Canada’s most promising energy frontier opportunities — the Arctic, the oil sands and the East Coast offshore — too expensive because of the capital costs of investing in even greater emissions reductions.

He said that if consumers are hit with the costs of Kyoto they could turn to cheaper oil from countries such as Venezuela, in which case global greenhouse gas emissions would actually increase.

Hill said developing new pipeline technology that would make a meaningful contribution to achieving Kyoto goals would d be “very, very expensive and very difficult (to implement). There has to be a balance between the cost of Kyoto and the cost of doing business.”