Energy Future vision for ‘producing cleaner oil and gas’ a rework of Alberta policies – except for using nuclear to electrify oil sands production

Most of the “cleaner oil and gas” section is ripped off from Alberta…except for the eye-opening suggestion small nuclear power plants could help electrify the oil sands

The Canadian government released the Energy Future Council’s report Thursday and Albertans will be forgiven for thinking that the oil and gas section looks familiar. Almost a carbon copy of Alberta policy and programs designed to reduce both costs and carbon-intensity of crude oil and natural gas, in fact.

Oh sure, there are a few deviations. Small nuclear power for the oil sands might a bridge too far for Rachel Notley’s New Democrats, but proposals like lowering the carbon-intensity of oil are lifted wholesale from the Alberta playbook.

Marg McCuaig-Boyd, Alberta energy minister.

The Alberta government seems mostly pleased to have the feds once again following their lead on energy policy which is reviewing the report.

“Many of the recommendations are in line with actions that Alberta is taking to reduce our emissions while growing our energy sector. Central to our campaign to Keep Canada Working and get the Trans Mountain Pipeline built is Premier Rachel Notley’s belief that any climate plan that ignores the needs of working people is no plan at all,” an energy dept. spokesperson said in an email.

“Our made-in-Alberta plan means getting top dollar for our resources to help invest in innovation that is fundamental to Alberta’s and Canada’s transition to a lower carbon economy.”

“The Council’s report is another step toward Canada’s bright energy future, but I am looking to all Canadians to continue to provide ideas, insights and views on how we can reach our destination of a reliable, affordable, inclusive low-carbon economy,” Natural Resources Minister Jim Carr said in a press release.

The Council’s report set three key priorities, which just happen to dovetail perfectly with recently introduced Alberta policies and regulations:

Reducing emissions per unit of oil or natural gas produced: “Developing new processes for lower cost and more energy efficient extraction of crude oil…Continuing to improve the cost and carbon competitiveness of Canada’s oil, natural gas and natural gas liquids production by developing and implementing new technology, by applying innovative new systems and processes…”

Innovative new systems like solvent substitution for steam in SAGD (steam-assisted gravity drainage) and paraffinic froth treatment in bitumen mining.

The Alberta oil sands has declared its intent to be “carbon-competitive” and that means “taking carbon out of the barrel” bitumen and heavy crude oil. Expect new oil sands production to have the carbon-intensity of the average American crude oil – cf. Suncor’s new Fort Hills mine – and producers to apply new technologies to existing production, helped along by Alberta’s new Carbon Competitiveness Incentive Regulations and a $1.4 billion Innovation Fund.

Industry and the Alberta government are way ahead of Ottawa on this file, but if the Trudeau Government can contribute funding and support from its innovation eco-system, it may yet make a positive contribution to the process.

Jim Carr, natural resources minister.

Improving the cost competitiveness of Canadian oil and gas: “For oil and gas producers, pursuing this pathway starts with their own energy use, because using less energy reduces both their carbon pollution and their production costs. This is not a new challenge for Canadian oil and gas producers – the pursuit of lower costs and less energy use has been a focus of the business for years.”

Whenever you hear Alberta oil sands producers talking about carbon-competitiveness, cost-competitiveness is sure to be in the same sentence. As Environment Minister Shannon Phillips is fond of pointing out, carbon in the form of natural gas is a big cost in the oil sands. If companies can figure out how to replace gas with solvent, especially at lower temperatures, the only losers are the gas suppliers.

Speaking of the gas sector, they’re having a tough time because of low prices and aggressive competition in traditional North American markets from US shale producers. Western Canadian natural gas companies desperately need a positive decision by LNG Canada later this year.

It will be interesting to see how the Canadian Association of Petroleum Producers reacts to this new energy vision. CAPP has released its own vision that more closely mirrors American policy – no or almost no climate policy, emphasis on innovation not regulation, government support for new technologies, etc. – that it says will fix Canadian competitiveness issues.

These two visions are incompatible. Even if Jason Kenney becomes premier next year and undoes Rachel Notley’s energy policies – which in my opinion would be a huge mistake – he will have to come to grips with an aggressive federal government that has backstops for every one of Alberta’s policies.

This tussle promises to be interesting. Stay tuned.

Expanding the scope of value-added oil and gas products and services for both domestic and export markets: “Diversifying the product mix produced by the oil and gas sector, with a particular emphasis on uses with lower life-cycle greenhouse gas emissions such as petrochemicals, non-combustion uses for bitumen, and using carbon dioxide to produce other products such as biofuels.”

The Alberta government recently introduced three new downstream diversification programs: $1 billion of support for partial upgrading technology commercialization, $500 million for Phase 2 of the petrochemical diversification program, and $500 million for natural gas infrastructure to support petrochemical expansion.

I argued in a March 13 column that the petrochemicals programs weren’t nearly ambitious enough and that Alberta should lobby long and hard to get Trudeau to provide additional federal funding.

This is the Prime Minister’s opportunity. We’ll watch carefully to see if he backs up the plan with some actual dollars.

By 2025, reduce methane emissions by 40 to 45 per cent from 2012 levels, with ongoing improvements thereafter: a few months ago, Alberta launched a new set of regulations to reduce methane emissions by 45 per cent by 2025 and committed $2.3 billion to help producers get the job done.

Predicatably, CAPP complained bitterly about the regulations and ignored the financial assistance.

But it remains to be seen how the feds plan to play in this sandbox. The best guess is they’re happy with Alberta’s efforts and will supply more funding to help with the cause.

Since methane makes up around 90 per cent of natural gas, which has economic value, presumably CAPP will stop carping and support government efforts to help producers keep more of their product out of the atmosphere and in the pipeline.

The big new piece: electrifying Alberta oil sands production

Electrifying industry is a big piece of most Canadian governments’ climate policies. The International Energy Agency says global fossil fuel consumption could be reduced 20 per cent with just this one initiative.

Alberta has already taken a few modest steps in this direction with Energy Efficiency Alberta’s Business Non-Profit and Institutional Energy Savings Program, but $3.5 million doesn’t go a long way.

But if Ottawa decides to commit to nuclear as the pathway to rapid electrification, as the report suggests, then that could be a major step forward to both lowering emissions and (presumably) lowering operating costs.

Watch for a future column on small nukes. I interviewed Dr. Jessica Lovering of the Breaththrough Institute last year about nuclear power generation and she says advanced nuclear is safe, efficient, and can be designed small enough to power a single house. This may be a perfect fit for the oil sands.

This is an exciting time for the Alberta oil sands, with innovative new technology de-carbonizing increased production backed by new regulations and funding at both the provincial and federal levels.

Sure, there are issues, as CAPP regularly reminds anyone who will listen, but if Canada can fix its market access (read, pipeline) problems, the oil sands are poised for a busy and prosperous decade or two.

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