Varcoe: Report warns oilsands productions ‘at risk’ with emissions cap, as Guilbeault to meet Alberta counterpart

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This week’s face-to-face meeting between federal Environment Minister Steven Guilbeault and his provincial counterpart Rebecca Schulz should be an intriguing one, as sparks fly again over the energy and environment files.

There’s enough combustible material to set off another federal-provincial firestorm, despite the progress observed in recent weeks during other official gatherings between the two sides.

However, recent comments by Guilbeault over Ottawa’s plan for a net-zero electricity grid by 2035 prompted a blast from the premier’s office on Saturday.

Add to the mix the publication Monday of a study, prepared by S&P Global Commodity Insights last fall. It indicates the oilsands sector may have to throttle back potential production by up to 1.3 million barrels per day (bpd) to meet the Trudeau government’s emissions target for Canada’s oil and gas industry by 2030.

Put it all together and this week’s sit down between Schulz and Guilbeault will be closely watched by industry and government for signals on what will happen next.

“It is going to be very tense,” predicted Martha Hall Findlay, a former Liberal MP and recently retired chief climate officer at Suncor Energy.

“Forcing the industry to cut production is nonsensical. Whether it’s politics, whether it’s business, for gosh sakes, sit down at the table and figure out how to make this work.”

Hall Findlay’s comments come as a report by S&P Global warned that the Trudeau government’s emissions target for the sector — a planned 42 per cent reduction by 2030 — would lead to oilsands production being “put at risk.”

On Monday, Schulz called the numbers shocking, saying such a cut could devastate the economies of Alberta and Canada, potentially impacting up to 9,500 direct jobs.

The study, first reported in the Globe and Mail, indicates the oilsands sector can use carbon capture, utilization and storage (CCUS) and other feasible abatement technology to cut close to 15 megatonnes of emissions by the end of this decade.

Yet, it leaves the sector about 29 megatonnes shy of Ottawa’s interim objective — a 2030 goal on the road to Canada reaching net-zero emissions by 2050, a position also adopted by major oilsands producers.

According to the S&P study, if the oilsands players invest in abatement measures, reaching the federal target could lead to 800,000 bpd of production being reduced.

That’s compared to its base-case scenario where output is expected to reach 3.7 million bpd by the end of this decade — up 24 per cent from 2019 levels — under existing policies.

Such a loss in output would affect 5,400 jobs and the cumulative potential revenue impact would be $530 billion by 2050, it states.

However, if the sector decides to minimize its investment in emissions abatement, production would be curbed by 1.3 million bpd, impacting 9,500 positions — and increasing the cumulative potential revenue impact to $960 billion, the report notes.

Officials with S&P declined to comment on the specifics of the study.

In an interview, Schulz said the loss of about one million bpd of potential production and almost 10,000 jobs, “would be devastating for Alberta’s economy … this is something that should concern Canadians as well.”

The emissions cap, along with the federal minister’s plan for a net-zero electricity grid by 2035, will be on the agenda of Wednesday’s meeting in Calgary.

“What the federal government is proposing is just a production cap, essentially,” Schulz said Monday.

“What I’m hoping for is that the federal government chooses common sense and working with Alberta over ideology.”

It remains to be seen if the two environment ministers can see eye-to-eye on these policies.

Premier Danielle Smith sat down with the prime minister at the start of Stampede and the two leaders apparently made progress. Justin Trudeau noted a joint working group between the two governments was being established to find common ground on energy-environment matters.

Smith also reported constructive discussions with Natural Resources Minister Jonathan Wilkinson and federal Intergovernmental Affairs Minister Dominic LeBlanc last month.

However, Smith’s office sent out a press release on the weekend, criticizing comments made by Guilbeault, in which he reiterated Ottawa’s intention to require provincial power grids to reach net-zero emissions within a dozen years.

Smith insists Alberta can’t reach that number without significant economic pain and wants the target extended until 2050. She also blasted the incoming oil and gas emissions cap, saying it would create investor uncertainty.

In an interview with the European news website Euractiv, Guilbeault noted the provinces have jurisdiction over natural resource production, but said the federal government can play a role in limiting pollution, such as by creating a national price on carbon and pursuing a net-zero electricity grid by 2035.

“We will also be introducing regulation to cap the emissions of the oil and gas sector — a cap and cut regulation — in the coming months. Our goal is that whatever happens to production, we need to ensure that the emissions from Canada’s oil and gas sector go down over time.”

On Monday, Guilbeault’s office released a statement saying the federal department is working to develop a cap that reduces emissions from the sector “in a way that supports competitiveness and reaches net-zero by 2050, both of which are goals clearly articulated by the industry.

“The cap will target emissions, not production, aligned with meeting our Paris targets.”

But the federal government is sending mixed messages, Hall Findlay said bluntly.

“You can’t have some senior (federal) ministers saying we do not want to cut production, and you have other ministers saying and doing everything that will, in fact, force a cut in production,” she said.

This sets the table for Wednesday’s meeting between the environment ministers, another high-profile gathering as both sides stake out their ground on these contentious issues.

“You know, it’s one thing to be making grand pronouncements on the international stage,” added Schulz.

“We need to look at what’s actually happening here in Canada and Alberta.”

Chris Varcoe is a Calgary Herald columnist.

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