Q&A: As Alberta energy sector transforms, Danielle Smith weighs in on industry’s future

Alberta’s energy sector is transforming, with oil and gas companies increasing production while preparing for a net-zero future. At the same time, proponents of new infrastructure, renewable projects and LNG want to meet the growing appetite for energy.

Herald business columnist Chris Varcoe spoke with UCP Leader Danielle Smith this week on her party’s energy policies in the run-up to Monday’s provincial election. (An interview on energy with NDP Leader Rachel Notley will appear Friday.)

What follows is an edited and abbreviated transcript of the conversation with Smith.

Q: Does your party expect to see oil and gas production grow over the next four years and, if you’re elected, how will you specifically accomplish that?

Smith: The answer is yes, on not only conventional oil but also natural gas, as well as bitumen. There are a few reasons for my confidence. One is it looks like the Trans Mountain pipeline, well over budget, is going to be scheduled for completion in the first quarter of 2024.

We also will see the completion of the Coastal GasLink (pipeline), as well as it looks like at least a couple of additional (LNG) projects.

We have the Pathways (Alliance oilsands) project, which I think having set a very aggressive target for net zero by 2050 — and having a meaningful plan to get there — if we can get our tax credit and investment framework aligned with the federal government . . . that will allow for them to continue producing.

Q: Can we increase production over the next four years and at the same time reduce emissions?

Smith: Yes, we can. We can increase production and there may be a longer time horizon for reducing emissions, let’s be reasonable about that. Because I think the real challenge that we’re facing with Ottawa, and why we have to win this fight, is that we’re in alignment with their objective of carbon neutrality by 2050.

We put forward a plan for emissions reduction and energy development just before the (election) affirming that we’re in sync with that target . . . If we have a reasonable time frame, I believe anything is possible with innovation.

The problem comes when we’ve got a federal government that wants to achieve unrealistic targets too quickly, without the time frame and without the technology to do it. And their proposal of a 42 per cent reduction in emissions in oil and gas by 2030 . . . they’re not achievable without essentially shutting in production.

Q: We’ve talked in this province over the past decade about getting more oil and gas pipelines built. But was it a mistake for the provincial government to invest in the Keystone XL pipeline?

Smith: I don’t think it was a mistake. I know it didn’t turn out the way we wanted it to. But, unfortunately, so much uncertainty has been created in this industry.

Part of the reason the federal government took over from Kinder Morgan to build the Trans Mountain pipeline is the company lost confidence in the regulatory processes . . . I think because that occurred, it created almost an expectation that having a government backer is necessary to move infrastructure along. That, to me, is what’s really unfortunate.

I think there’s still an active lawsuit that is going to take place (over the province’s $1.3-billion lost investment in Keystone XL).

Q: Carbon capture, utilization and storage (CCUS) is touted by oilsands operators as necessary to decarbonize. They’ve also said more support is needed from federal and provincial governments to be competitive with the U.S. Inflation Reduction Act. If elected, what will the UCP do to secure large-scale investments in CCUS?

Smith: We have more dollars coming in from the TIER (Technology Innovation and Emissions Reduction) program that will be dedicated toward dealing with emissions reduction.

Our current carbon pricing model for industrial (emitters) has companies pay into a fund and then those funds go to Emissions Reductions Alberta. And they’ve been investing in a variety of different innovations so that we have more dollars that are going to go toward that.

And one of the first things we wanted to do is to expand out the Alberta Petrochemical Incentive Program (APIP) to include all carbon capture utilization and storage infrastructure, because there are many historical companies that aren’t able to access that tax credit.

Q: APIP provides a grant worth 12 per cent of capital costs to developers once a petrochemical project starts operating. Your campaign platforms talked about developing a program similar to APIP for more capital-intensive technologies. How would you change the APIP program?

Smith: We would want it to apply to all carbon capture utilization and storage infrastructure. And that is for not just new projects, but legacy projects — as well as not just on-site projects, but also the pipelines and storage and infrastructure leading up to it.

We want to make sure that it applies to more investment and more industries around specifically carbon capture utilization and storage.

Q: So it would not just be the oilsands and petrochemical facilities — all industries would be eligible to get a grant if they invested in CCUS?

Smith: Yes. That’s the intention.

Q: What would the cost be to expand APIP to cover CCUS?

Smith: Well, the nice part about the way APIP is structured is that it’s paid out at the end, once the facility is in production. And so we still have a bit of work to do, because we have to see if the federal government will co-ordinate with us, so we have the desire and the intention to do that.

We intend to also use the TIER funding that we’re already receiving and, as I understand it, that is $500 million a year, over however many years, and I think it’s an increasing amount.

So that gives you a range of the pot of money that we’re looking at . . . It doesn’t come out of general tax revenues.

Q: If elected, would you look to move ahead with the $100-million pilot program for the liability management incentive program, previously known as R-Star?

Smith: I advocated for some kind of liability program because I’ve been very concerned for a long time about inactive wells, that have been inactive for decades and no one cleans them up. And then they get packaged up and just passed forward.

The problem is when you have a bunch of inactive wells, if a company falls into distress and ends up going under, then all of those wells end up in the Orphan Well Fund. I was watching this play out over the last 10 years and it was unacceptable.

There’s been a couple of things that have happened in the meantime. One is that we now have a policy that forces companies . . . to spend three per cent of their liability down each year. It’s about $760 million that they’ll be spending of their own money (in 2024) to clean up these liabilities and it will keep on increasing year after year.

So, we’re going to monitor that, make sure that it’s working. We’ll have a better idea, of course, as we get to the end of the year, which companies are in compliance.

Q: Can Alberta’s electricity system get to net-zero emissions by 2035?

Smith: No, it can’t . . . If we go out to the 2050 time scale, I think that’s far more achievable. But to be carbon neutral by 2035, it’s not achievable. And it’ll cause massive harm to our business investment community and massive harm to those, especially those on fixed income.

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