Canada’s oil-producing province of Alberta is fighting the federal government on the plan to cap emissions from oil and gas production, which Alberta and the industry see essentially as a cap on output.
Early this month, Canada’s federal government unveiled its draft regulations to drive significant emissions cuts at one of the most polluting sectors of the economy.
However, the oil and gas sector is of huge importance to Alberta and its economy, as well as to Canada’s economy, exports of goods, and economic growth.
Emission Cap
The Government of Canada has proposed regulations to set a cap on greenhouse gas pollution within the oil and gas sector and have companies reduce emissions by 35% compared to 2019 levels. The planned legislation would also introduce a cap-and-trade system designed to recognize better-performing companies and incentivize those that are higher polluting to invest in making their production processes cleaner, the federal government says.
Alberta and its oil and gas industry argue that the emissions cap is basically a cap on oil and gas production as companies are required to either invest a lot of money to make production cleaner, or simply cut production to comply with the emissions cap.
Producers will have to be prepared to comply with the cap beginning in 2030.
Commenting on the federal plans, the Business Council of Canada said “At a time when Canada’s economy is stalling, imposing an oil and gas emissions cap will only make Canadians poorer.”
Alberta Premier Danielle Smith didn’t mince words.
“I’m pissed — I’m absolutely angry,” Smith said in response to the proposed emissions cap.
Smith also said that the draft legislation violates Canada’s constitution, whose “Section 92A clearly gives provinces exclusive jurisdiction over non-renewable natural resource development yet this cap will require a one million barrel a day production cut by 2030.”
“Canadian parents and workers will suffer while Justin Trudeau outsources the duty to provide safe, affordable, reliable and responsibly produced oil and gas to dictators and less clean producers around the world,” the Alberta premier said when the emissions cap plan was unveiled.
“We could be the solution. Instead, Ottawa would rather sacrifice our ability to lead.”
Alberta Fights Back
Three weeks later, Premier Smith said on Tuesday that Alberta’s government would introduce an Alberta Sovereignty Within a United Canada Act motion “to stop a federal cap from infringing on the province’s distinct jurisdiction and killing good-paying jobs.”
The resolution asks the legislative assembly for approval to take a series of swift, effective actions designed to protect Alberta if the production cap ever becomes law.
“We will continue to defend our province from Ottawa’s senseless and direct attack. Our motion protects Albertans’ jobs and livelihoods, puts Ottawa back in their place, and ensures we can continue to support global energy security with Alberta oil and gas for decades to come,” Smith noted.
“This cap is not actually about emissions. This is about the federal government wanting to cut oil and gas production and control our energy sector, even if it costs thousands of jobs and hurts Canadians from coast to coast,” said Rebecca Schulz, Alberta’s Minister of Environment and Protected Areas.
The actions in the motion, if approved, would ensure that no provincial entity participates in the enforcement or implementation of the federal cap. It would also ban entry to any individual, including any federal official or contractor, into oil and gas sites unless these are specifically licensed to enter by the Government of Alberta.
In one of the more controversial actions, the motion would declare all information on emissions as proprietary information exclusively owned by the Government of Alberta, and mandate that all emissions data be reported and disclosed at the province’s discretion.
Industry hasn’t been consulted on these intentions of Alberta, but companies and sector associations have already expressed frustration over the proposed federal emissions cap.
The Canadian Association of Petroleum Producers (CAPP) commented on Alberta’s move to protect its oil and gas industry, with CAPP president and chief executive Lisa Baiton calling on the federal government to scrap the proposed emissions cap.
“This punitive policy, layered on top of an already complex web of energy and climate regulations, threatens to reduce oil and natural gas production in Canada and restrict cross-border energy trade,” Baiton said on Tuesday.
“These challenges are especially significant given Canada’s current struggles with productivity, competitiveness, and affordability, compounded by a new incoming U.S. administration considering 25% tariffs on all Canadian imports.”
Apart from the emissions cap, perceived as a cap on production, Canada’s oil and gas companies are balking at the complexity of the planned cap-and-trade system as another layer of federal emissions rules on top of existing provincial and federal legislation.
Michael Belenkie, chief executive of producer Advantage Energy, said, as carried by Financial Post,
“All we’re doing is we’re shutting ourselves down at our own expense and watching global emissions increase.”
By Tsvetana Paraskova for Oilprice.com
