Oil sands access to American markets unspoken goal of radical Alberta climate strategy

Alberta’s new climate strategy goes much further than Obama – includes carbon tax, oil sands emissions cap

Something momentous happened in Canada yesterday. No, it had nothing to do with hockey or moose. But it had everything to do with the American energy industry and President Obama’s climate change agenda.

I wrote two weeks ago that the real significance of Obama’s rejection of the Keystone XL pipeline was that it signaled the triumph of climate change politics and the beginning of the end for fossil fuels’ social license.

Sunday afternoon, CEOs of four of the biggest Canadian oil and gas companies – Suncor, Shell, Cenovus, CNRL – stood on a podium with Alberta Premier Rachel Notley as she announced the most ambitious environmental policy overhaul in Canadian history.

Here are the highlights of the new Alberta strategy:

• Economy-wide carbon tax ($20/tonne economy-wide in Jan. 2017 rising to $30/tonne in Jan. 2018)
•  Hard cap of 100 meagtonnes of CO2 emissions for Alberta oil sands producers (currently emitting 70 megatonnes), with provisions for new upgrading and co-generation (adds another 10 megatonnes to the cap)
  • Financial support for new technologies to help oil sands producers reduce GHG emissions
• Methane reduction strategy to reduce emissions by 45 per cent from 2014 levels by 2025.
• Phase-out of coal for provincial power generation (coal currently accounts for 55%)
  • Two-thirds of coal-generated electricity will be replaced by renewables – primarily wind power – backstopped by natural gas
  • Renewable energy sources will comprise up to 30 per cent of electricity production by 2030

America has started decarbonizing the national power generation system and the EPA is introducing regulations to reduce fugitive methane emissions from energy production, but not even Obama, for all of his aggressive climate change rhetoric of late, has had the nerve to cap energy production emissions or apply an economy-wide carbon tax.

Why such a radical move now? And why would oil and gas CEOS – along with Big Oil’s lobby group, the Canadian Association of Petroleum Producers – wholeheartedly endorse it?

Because combatting climate change is now the price of admission to the American market.

Sure, Rachel Notley and the ragtag crew of activists, teachers, and bureaucrats that make up her cabinet and caucus are democratic socialists a la Bernie Sanders. No question ideology made it easier for Notley to pull the trigger.

But the need for continued expansion of the oil sands (to 6.4 million b/d by 2035, almost double current production) forced Alberta’s hand. And those four CEOs now  understand that expansion and market access depends upon Alberta shedding its image as an environmental and climate change laggard.

Consider this comment from Lorraine Mitchelmore, president and Country Chair Shell Canada and EVP Heavy Oil for Shell: “Alberta’s new climate change policy sends a clear message that Alberta intends to live up to those expectations. Today’s announcement sets Canadian oil on the path to becoming the most environmentally and economically competitive in the world.”

Environmentally AND economically competitive, eh?

Mitchelmore’s comments – echoed by the other CEOs – are a clear message to Barack Obama: Alberta is serious about defending oil sands production and its position in American markets.

Don’t be surprised if – after a suitable period – Keystone XL rises from the dead like Lazarus.

That would hardly be more shocking than Big Oil’s fulsome praise for Rachel Notley’s climate strategy.