Alberta oil/gas industry wants to emulate US climate policy, but needs to be clear about which American policy model it means

Prof. Victor Flatt, University of Houston.

Prof. Victor Flatt.

Federal climate policy under Trump is a confusing jumble of legislation and litigation, Texas has none and never will, while California is plunging ahead aggressively

Under Barack Obama, the United States was pursuing aggressive federal climate policies. Under Donald Trump, Alberta’s biggest customer for oil and gas reversed course. This change in direction has the energy industry calling for Canadian climate policy to be applied more gradually in order to align with the Americans. But what does American climate policy really look like under Trump? Prof. Victor Flatt says combatting greenhouse gas emissions is “baked into” federal legislation, as well as regulations in many states.

Flatt holds the Olds Chair in Law, is the faculty director of the Environment, Energy, and Natural Resources Center at the University of Houston, and a distinguished scholar of carbon markets at the Global Energy Management Institute. He is a recognized expert on environmental, climate, and energy law.

“If Trump had his way, there would be no climate policy, but there are a lot of things that are already baked in that you can’t affect with just an executive order or something of that nature,” Flatt said.

In typical American fashion, much of the debate about carbon pricing and climate policies has taken place in court, and Flatt doesn’t expect that trend to stop anytime soon.

The most important federal law is the National Environmental Policy Act (NEPA), which requires that any federal agency consider environmental impacts of any major federal action.

“The Trump administration would like to do nothing about greenhouse gases for oil and gas extraction, and transference by pipeline or rail, but because of NEPA that won’t come to pass in any consistent way. What we’re looking at in the United States is continued litigation,” says Flatt.

He adds that Americans who oppose pipelines will utilize NEPA as a tool to stop or slow down government approvals.

“We’re seeing that with every major interstate gas pipeline that’s being proposed and built out in the United States right now, including the Atlantic Coast pipeline, the Trail pipeline, still part of Keystone and part of Dakota Access, all those issues are still playing out,” he said. 

There has been a trend in the past five or six years by courts to require federal agencies to consider downstream impacts of emissions from natural gas or oil extraction. 

“Federal agencies are under court-ordered requirements that they can’t do things that are arbitrary and capricious or abusive of discretion. So, they can’t do things that are not logical or are not supported by evidence. They have to include a price for carbon in some way.”

Trump tried to get rid of the “social cost of carbon” calculation used by federal agencies when considering the impact of downstream emissions, but failed.

“The big question in the United States is going to be, Are they going to stick more or less with the one that the Obama administration used at $40 a ton, or are they going to try to do something else and are they going to be able to defend that something else in federal court?” asks Flatt.

President Trump has ended Obama-era restrictions on fracking and drilling on federal lands simply by not enforcing existing rules. Flatt calls them “zombie laws” and he expects they will continue to be litigated because a decade ago the Supreme Court ordered the Evironmental Protection Agency to consider the health impacts of GHG emissions.

Flatt says that finding is unlikely to be challenged by the White House because it just doesn’t have the necessary scientific evidence.

“Even though Trump has said we’re not going to regulate emissions from these pipelines and fracking sites, in general there’s still legal argument that they have to do something. And so lawsuits are still being used to push the EPA to create some regulatory system for that,” he said. 

State governments are also legislating emissions limits and some states are involved in cap-and-trade to apply a rudimentary price on carbon within their borders.

The one glaring exception is Texas, which can build pipelines from oil and gas basins straight to tidewater on the Gulf of Mexico without crossing state borders and triggering federal jurisdiction.

“There’s no federal law involved, no NEPA, no FERC [Federal Energy Regulatory Commission], nothing. Texas is unique because it’s so big that it can contain the entire pipeline from the fracking site to the refineries and the shipping on the Gulf Coast,” Flatt said.

The state regulator is called the Railroad Commission of Texas and would be akin to the Alberta Energy Regulator. Is the Commission likely to regulate GHG emissions?

“It’s not part of their authority. Texas law is not about greenhouse gases, it’s about the waste of natural resources. Nor are the people who have been elected to that commission predisposed politically to want to do that,”says Flatt.

Flatt points to the current shortage of natural gas pipeline capacity to handle the rapidly growing production expansion, especially in the giant Permian Basin.

“What the Railroad Commission has done now, which nobody likes, is they’re allowing more flaring of the natural gas in West Texas becuase they can’t get it out through pipeline,” he said.

Looking at United States climate policy from a Canadian view, there appear to be three relevant situations.

One, the roll back of federal regulations and Obama’s executive orders by the Trump Administration. The consequences are still uncertain because of litigation and Prof. Flatt believes the trend is for courts to impose stricter limits on emissions.

Two, California, which is aggressively regulating emissions and already has a clean fuel standard in place.

Three, Texas, which does little or nothing to regulation emissions from oil and gas production or pipeline transmissions and probably won’t in the future.

When the Canadian Association of Petroleum Producers writes, “Canada’s climate policies must ensure our resource development is cost and carbon competitive with other jurisdictions, especially the U.S. as our largest trading partner,” which American climate policy model are they talking about?

Perhaps CAPP should keep in mind Prof. Flatt’s admonition that if the “Administration changes any time soon, it’ll [climate policy] come roaring back, I think.”

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