The energy conflict between Alberta and Ottawa has centred on the Clean Electricity Regulations over the past two months, but another, potentially “nastier” fight is coming soon.
Get ready for the Eruption over the Emissions Cap.
On one side is federal Environment Minister Steven Guilbeault, who is in Dubai this month for the COP28 climate conference.
He’s expected to release details on the long-awaited emissions cap on the country’s oil and gas industry during the meeting, but has also seen his government lose two high-profile court rulings on the environmental front recently.
On the other side is the Alberta government, with Premier Danielle Smith and Environment Minister Rebecca Schulz also attending the United Nations Climate Conference, vowing to fight the feds if its planned emissions limit turns into a production ceiling.
And watching closely is the country’s oil and gas industry, which has been waiting to see details of the proposal since the federal Liberals initially promised during the 2021 election campaign to “cap and cut” emissions in the sector.
“We have done a number of things to tackle the emissions from the oil and gas sector. But unfortunately, that’s not enough,” Guilbeault told reporters from the conference on Friday.
Schulz said it would be “embarrassing for Canada” to release the long-awaited plan at the global summit, while other Canadians are busy explaining to an international audience how the country will grow the economy and reduce methane and CO2 emissions.
“This is what he does. He flies around the world and goes and makes these commitments and statements to appease all of his climate activists, and then comes back and tells the provinces, ‘Yeah, we’re going to let you figure out how to how to do it,’ ” she said in an interview Thursday.
“We’ve been clear. We are not accepting an emissions cap from the federal government.”
It’s shaping up to be another provincial-federal fracas, coming in the wake of the ongoing scrap over the federal Clean Electricity Regulations. The Trudeau government is pushing for a net-zero power grid by 2035 instead of the 2050 timeline favoured by Smith.
“This is different,” said Mount Royal University political scientist Duane Bratt, noting the battle over electricity is about what year the grid must reach net-zero emissions, while the cap could directly affect Alberta exports, jobs and government revenues well into the future.
“It’s going to be a much more nastier fight because the stakes are so much higher.”
The oil and gas sector was responsible for about 28 per cent of all emissions in the country in 2021, making it the largest emitting sector in Canada. Many of the sector’s producers, including oilsands operators, have adopted a target of reaching net-zero emissions by 2050.
The International Energy Agency said in a recent report that to align with international targets to limit global warming to 1.5 degrees Celsius, emissions from industry operations need to fall by 60 per cent by 2030.
“This is the make-or-break regulation,” said Simon Dyer of the Pembina Institute. “This is the regulation that will actually drive the investments that we need to see from oil and gas companies in decarbonization.”
The oil and gas sector also directly employs 177,000 Canadians, including 128,000 in Alberta. Over the past year, oil and gas represented about 17 per cent of total Canadian exports.
In its mid-year update Thursday, the province projected resource revenues will hit nearly $20 billion this year.
There is also a legal element at play. The Constitution says provinces can exclusively make laws related to the exploration, development and management of non-renewable natural resources.
While Ottawa won a lawsuit allowing for a national carbon price, the federal government has lost two key lawsuits in the past two months: one over the Impact Assessment Act and the other over the government deeming plastic items as toxic.
On Friday, Guilbeault acknowledged he wanted to be able to introduce the framework for the emissions cap earlier.
“The federal government can certainly intervene when it comes to matters just of pollution, and including climate pollution. But we have to be very careful not to impede on provincial jurisdictions,” he said, noting the recent court rulings.
“It has meant we have to make sure that our regulation does exactly that — that it tackles pollution without infringing on provincial jurisdiction, and that has meant that it has taken a little bit more time than maybe we had initially anticipated.”
The federal government’s emissions reduction plan released last year modelled a 42 per cent reduction in emissions from the oil and gas industry by 2030.
A report by S&P Global Commodity Insights last fall indicated the oilsands may have to reduce potential production by up to 1.3 million barrels per day (bpd) to meet that target.
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“We are worried that an emissions cap will create a production decline and, second, we are concerned it will create negative investor sentiment,” said Tristan Goodman, president of the Explorers and Producers Association of Canada.
Similarly, Canadian Association of Petroleum Producers CEO Lisa Baiton said the group doesn’t see a path to achieve the emission reductions required by the federal cap without production being curtailed.
Tamarack Valley Energy CEO Brian Schmidt pointed out the oil and gas sector is the only Canadian industry facing such a limit on emissions, while producers are actively investing more to cut methane and CO2 emissions.
“I just don’t get why we’re treated differently. A molecule of carbon dioxide from a cement plant is no different from a molecule of carbon dioxide from the oil industry. So why don’t we treat them the same?” Schmidt said.
“I don’t even know how you put that cap in place . . . How is this all going to work, as a company? How are you going to decide who’s going to cut? We in the industry just can’t figure (it) out.”
Chris Varcoe is a Calgary Herald columnist.
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