Time for Canada to get tough with Alberta over broken handshake deal

Prime Minister Justin Trudeau and Alberta Premier Rachel Notley meet in Edmonton Alta, on Wednesday February 3, 2016.

No new pipelines, no new LNG projects, 85 Mt oil sands emissions cap, $50/tonne industrial emitters carbon tax, SAGD projects subject to Bill C69 rules

The Calgary Stampede – always a big deal for local oil and gas executives – is in full swing this week. Evoking old-time Western values, as it does, brings to mind the handshake deal between Prime Minister Justin Trudeau and former Alberta Premier Rachel Notley: climate mitigation policies in exchange for pipeline approvals and more lenient treatment under federal regulations. New Premier Jason Kenney repudiated the deal, essentially freeing Trudeau of his obligations. Now it’s time for him to get tough with Alberta.

Premier Jason Kenney shaking hands with little girl at 2019 Calgary Stampede. Source: Jason Kenney/Facebook.

The deal was a fair, moderate, and reasonable approach, in line with how Canadians want Canada to manage the long-term transition from fossil fuels to a low-carbon energy system.

Running hard against the “Trudeau-Notley alliance” during the recent election campaign, however, the United Conservative Party vowed to walk back pretty much all of Notley’s Climate Leadership Plan.

Kenney’s first piece of legislation cancelled the province-wide carbon tax. He has promised to gut the industry-approved heavy emitter rules, called the Carbon Competitiveness Incentives Regulation (CCIR). Energy Efficiency Alberta is no more. A $30 million “energy war room” will soon be launched and a $2.5 million public inquiry into “foreign-funded” anti-pipeline activists was announced Thursday. He also promised to stop the Notley phase-out of coal-fired electricity generation.

The Premier’s aggressive opposition to all but the most tepid climate mitigation and decarbonization policies has given Alberta-based oil and gas leadership carte blanche to retreat into regressive narratives completely at odds with Canada’s need to successfully manage the pivot to the low-carbon future.

For example, Peyto Exploration CEO Darren Gee told shareholders in his June newsletter that “Sunspots and the regular cycle of solar activity” are to blame for climate change, not greenhouse gas emissions, echoing the anti-science nonsense of the Friends of Science astroturf organization. A month later, Gee mused about the federal Liberal government being successful in “phasing out” the energy industry in Western Canada by actively discouraging any reinvestment into future development, as they have suggested…”

Jeff Tonken.

Think these sorts of paranoid fantasies are restricted to the odd eccentric executive? At a June 14 press conference the board chair of the Canadian Association of Petroleum Producers (CAPP), Jeff Tonken, said publicly that “we believe is the federal [Liberal] government is positioning itself to let the energy industry die so that they can get votes to get re-elected.”

As wacky as the comments of Gee and Tonken are to non-Albertans, one can hear those sentiments – and far wackier – in any office, restaurant, or the Calgary Petroleum Club.

There should be consequences for breaking a handshake agreement and spitting on the cowboy boots of the other party. Here are some suggestions.

No more pipelines. Ever.

The first goal of CAPP’s “Vote Energy” federal platform is, “Support completion of currently proposed major pipeline projects and actively support development of additional projects.”

The response from Trudeau should be, “nope, not happening.’

Trans Mountain Expansion is a done deal, it’s far too late to back out now without risking even more damage to Canada’s regulatory regime and its reputation as a welcoming jurisdiction for resource development investment.

Future pipelines? Off the table for the foreseeable future.

Speaking of an oil sands cap

Premier Rachel Notley, at podium, launches Climate Leadership Plan, Nov. 22, 2015 surrounded by four oil sands CEOs.

Five oil sands CEOs and a handful of ENGO executive directors struck a deal in 2015 to support a 100 megatonne oil sands emissions cap in return for no cap on production. Notley enshrined that deal in her Climate Leadership Plan, heartily endorsed by those same CEOs.

Trudeau is no longer obligated the 100 Mt limit.

The industry is currently emitting close to 80 Mt per year, so lower the cap to 85 Mt and filch the implementation guidelines – that include severe penalties for exceeding the cap – created by the Oil Sands Advisory Group that Notley dragged her feet on to avoid a campaign controversy.

Perhaps such a move would finally motivate progressive CEOs like Suncor’s Steve Williams to shorten the leash of the rabid conspiracy theorists within the industry.

A carbon tax with teeth

Industry executives like Harbir Chhina of Cenovus have told Energi Media that starting the CCIR carbon price at $20 per tonne and raising it slowly would provide the oil sands producers with the longest “runway” to innovate and implement new emissions-reducing technology.

Perhaps a price of $50/tonne rising rapidly to $100/tonne by 2025 would get their attention.

Clean Fuel Standard

“Withdraw the proposed Clean Fuel Standard (CFS) in its entirety, as it will increase costs to both industry and Canadians,” is another CAPP “Vote Energy” goal. “If the CFS proceeds, it should provide EITE protection to the oil and natural gas sector, allow GHG reductions to earn CFS credits, and provide sufficient compliance flexibility for obligated parties.”

This should get a resounding thumbs down from Trudeau.

No new LNG projects

LNG Canada
LNG Canada image.

LNG Canada recently gave a positive Final Investment Decision on its $40 billion Kitimat-based LNG project that includes an $8 billion natural gas pipeline. This is a great project, not least because of the innovative benefit agreements negotiated with regional BC indigenous communities.

Not surprisingly, industry wants to build more. CAPP thinks the federal government should “support the conditions to complete four major LNG projects, on Canada’s West and East Coasts.”

If Alberta won’t play ball with Ottawa, then the federal government should take its ball and go home.

Subject Steam Assisted Gravity Drainage (SAGD) projects to federal environmental impact assessment

Part of Trudeau’s deal with Notley was that the existence of the emissions cap and the robustness of the provincial environmental assessment process would exempt Steam Assisted Gravity Drainage from the project list under the new act included as part of the much-reviled (in Alberta) Bill C69. The Prime Minister has already warned Kenney that removing the cap, as the UCP promised during the election, would negate that deal.

Ottawa should go even further by imposing its own 85 Mt cap (see above) and putting SAGD projects on the list anyway.

How hard would this the oil sands producers? Bitumen production is forecast to rise by 1 million barrels per day by 2030, almost all of it from SAGD, that’s how hard.

Decarbonize or else

Energi Media‘s editorial position is that oil and gas companies committed to decarbonization, to lowering their emissions and improving their environmental performance, have earned the moral right to build pipelines to tidewater. This argument assumes that the provincial government, in this case Alberta, must demonstrate its commitment with a robust suite of climate and energy policies designed to support industry efforts.

Does it not stand to reason that repudiating that commitment invalidates any right to new pipelines?

To be clear, none of the punitive measures suggested above should happen. Far better for Alberta, the Canadian economy, and various government budgets for wiser heads to prevail. But what will it take to make Alberta see the folly of its ways?

If Alberta persists in making lunatic conspiracy theories (see Vivian Krause’s Tar Sands Campaign for just one example) the basis for significant policy changes, legal challenges, communications campaigns, and all around political mischief, then the rest of Canada has an obligation to respond.

There is no point fooling around. If Canada is serious about meeting its Paris target, Trudeau has to get tough with Kenney. Perhaps more importantly, if Canada hopes to successfully navigate the transition from fossil fuels to electricity generated by low-carbon technologies like wind and solar, the country needs its energy province onside.

Reneging on a handshake used to be a big deal in the oil patch and Justin Trudeau needs to remind oil and gas executives, as well as Jason Kenney, that it still is in some quarters.

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