To PM Trudeau: No more federal money for Alberta CCUS until oil sands project changed

Develop industrial strategy, policy tied to Pathways Alliance CCUS, terminate pipeline in Industrial Heartland near Fort Saskatchewan

To win the May election, Danielle Smith needs to spend the next five months fighting with Justin Trudeau. On Monday, the Prime Minister obliged her. All political hell broke loose after he suggested that Alberta pay more to decarbonize oil and gas production. Not only is he right, but he’s opened the door to a bigger conversation: that the $50 billion oil sands Pathways Alliance CCUS project not receive a penny more of federal support without major design changes.

Here’s what the Prime Minister said in a Reuters news story: “We’ve seen for a while Alberta hesitating around investing in anything related to climate change. But CCUS is one of those tangible things…I think there’s a role for provinces with surpluses, with the capacity to be investing in their future and their workers future.”

Think of CCUS (carbon capture utilization and storage) as a bolt-on solution that enables producers to keep extracting crude oil without major changes to their operations.  The CO2 is captured during extraction or processing, then sent via pipeline to a sequestration hub where it is stored underground. The International Energy Agency says reaching net-zero by 2050 is impossible without CCUS. Plans to lower Alberta oil sands emissions – which rose from 72 megatonnes (Mt) per year in 2017 to 80 Mt last year and are forecast to rise to 90 Mt by 2025 –  rely heavily on the technology.

The question is, who pays?

Follow the Money

The Oil Sands Pathway Alliance project will cost $75 billion and they want governments, primarily Canada, to pay two-thirds of the cost. Their rationale for the request is that since Norway is subsidizing 80 per cent of the Northern Lights CCUS project to the tune of about $2 billion, why shouldn’t Canada do the same for the oil sands?

Thus far, Ottawa has ponied up $7 billion in invest tax credits out to 2030, while Smith’s UCP government has committed $305 million. Oh, and Alberta enjoys a $12.7 billion budget surplus this year and similar bounties are expected in the future. Did we mention that oil companies are enjoying record profits (oil sands producers alone earned more than $22 billion in the first six months of 2022) and giving most of them back to shareholder in the form of dividends and share buybacks rather than investing in the Alberta economy?

Under the circumstances, it takes some chutzpa to argue that Canada should pick up the CCUS tab. That didn’t stop Smith. “This is not something that we are late to the table on. It’s the prime minister who is late to the table on this. We will continue to support carbon (capture) technology,” she said on her radio show, as reported by Don Braid of the Calgary Herald.

The UCP’s contribution thus far is only four per cent of the federal commitment. And Smith hasn’t offered to top up her miserly offer. Who’s really late to the table?

Pathways Alliance Project “unacceptable as is”

The funding fight is mostly about CCUS for the oil sands. The project has three phases. The first will cost $16.5 billion and capture 10 to 12 Mt per year. Carbon dioxide from 22 sites will travel via a 400-kilometre pipeline to a  storage hub near Cold Lake in northeast Alberta. A detailed evaluation of the hub was authorized by the Province in early January. Preliminary engineering is either underway or has been completed on other parts of the project.

Gil McGowan, president of the Alberta Federation of Labour, says the Pathways Alliance proposal as designed is unacceptable. McGowan argues that the captured CO2 has future value as a feedstock for advanced materials manufacturing and sustainable fuel production in Alberta. The problem is with the pipeline terminus. Instead of Cold Lake, it should terminate northeast of Edmonton in the Industrial Heartland region, home of a growing clean energy “industrial cluster.”

“We should be having a conversation about CCUS in Alberta,” he said in an interview. “But it shouldn’t be the Pathways Alliance proposal or nothing.” He added, “If we’re using public money to create this network of pipelines, why are we doing it just to cater to the narrow interest of a handful of companies when we could actually create a network that supports other companies to reduce their emissions, and also creates feedstock for emerging industry?”

Full disclosure: Energi Media occasionally provides freelance writing, presentation, and video production services to the AFL.

Pivotal Moment for Oil Sands CCUS

A fundamental question needs to be answered about the Pathways Alliance project: Is it acceptable to spend tens of billions of taxpayer dollars for the sole benefit of companies (whose shareholders mostly live outside Canada) or should that capital be used to also leverage industrial development in Alberta? Watch my interview with industrial policy expert Dr. Bentley Allan, Johns Hopkins University, about Alberta’s lack of a strategy for clean energy industry.

McGowan and the Alberta labour movement support the latter approach. He says there is some support in Ottawa for that argument. Despite much work having already been done on the Pathways Alliance project, it is not too late to change direction, though it soon will be if governments don’t get back to the table with the oil sands companies.

Trudeau’s Liberal government has promised a response to the August announcement of the American clean energy industrial strategy – the $369 billion US Inflation Reduction Act and the hundreds of billions in related programs. An obvious place to start would be an industrial strategy, followed by appropriate policy, tied to oil sands CCUS. But Trudeau needs Smith to cooperate. That seems unlikely, at least for the next five months.

He could attach strings to further oil and gas CCUS funding, forcing Alberta to negotiate an industrial strategy, but that would put him squarely in the political crosshairs. Then again, his recent comments have placed him there already.

If he’s going to have a political brouhaha with the Alberta premier anyway, he may as well try to get the most bang for the Canadian taxpayers’ billions of bucks.

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