Trudeau calls oil patch’s bluff

CEOs blithely assumed they could rope-a-dope Ottawa with promises of new technologies and vague commitments to start lowering absolute emissions sometime next decade

Hands up, who didn’t see it coming? That lonely hand in the back is the Alberta oil patch, which for years has promised that lower greenhouse gas emissions are right around the corner. The Liberal’s Emissions Reduction Plan finally called the bluff. Will CEOs now finally get serious about emissions or try once again to tap dance their way out of substantive action?

The Plan calls for a 42 per cent cut to oil and gas GHGs by 2030. That’s 81 megatonnes  (Mt) per year. The oil sands was planning on 22 Mt (almost half from one company, Suncor) and producers think they might be able to do 30 Mt.

But 81 Mt? Not a chance.

Alberta Premier Jason Kenney calls that target “nuts,” his environment minister Jason Nixon thinks the plan is “insane,” and former climate darling Rachel Notley of the NDP thinks it’s a “fantasy.”

The Pembina Institute, on the other hand, thinks the industry can achieve 103 Mt per year of reductions simply by doing more of what it’s already doing. The Calgary-based think tank released a study several weeks ago laying out six areas where the oil and gas can make the cuts “using technology and funds already at its disposal.”

“Decarbonizing Canada’s oil and gas supply Cutting the sector’s emissions by 2030 is key to reaching net-zero by 2050,” by Jan Gorski, Janetta McKenzie, Pembina Institute, 2022.

The big reduction is methane emissions, which is 80 times more potent than CO2 as a GHG over the first 20 years. Canada’s new target is to reduce methane leaks by 75 per cent by the end of this decade. Pembina suggests that being a tad more ambitious (88%) nets a total saving of 33 Mt per year. And remember, every molecule of methane saved is a molecule producers can sell.

Last week, I moderated a webinar panel that included Dave Collyer, former head of Shell Canada and past CEO of the Canadian Association of Petroleum Producers, who opined that the Pembina proposal is unrealistic. As an experienced engineer and respected moderate within the oil and gas community, his opinion shouldn’t be dismissed.

There likely are huge technical hurdles for Pembina’s plan. For example, while BC natural gas producers have extensively electrified their production, Collyer cautions that the same opportunity doesn’t exist in Alberta.

But the value of Gorski and McKenzie’s work is not as a prescription, but as the start of a conversation about how to get to the 42 per cent target.

My response to Collyer during the panel discussion was that oil and gas CEOs need to raise their ambition.

Apart from Suncor, which promised investors it would cut emissions from 29 Mt per year to 19 Mt per year by 2030, the rest of the industry does not prioritize cutting emissions. Growing output, lowering operating costs, and returning capital (a LOT of capital lately) to investors – in other words, the status quo – are all much higher priorities for producers.

CEOs have blithely assumed they could rope-a-dope the federal government with promises of new technologies and vague commitments to start lowering absolute emissions sometime during the 2030s. They’ve been using a similar approach with the oil sands tailings ponds for the better part of two decades, so experience says governments always knuckle under eventually.

That’s about to end.

Three days after the 2019 federal election, my column (With election of Liberal minority govt, Canada officially has an Alberta problem, with only one solution) argued that when it comes to climate policy, “Trudeau has many ways to bring Alberta to heel and Kenney has almost no leverage with which to fend him off.” That observation proved out. Steven Guilbeault, a former Greenpeace campaigner and now the federal environment minister, is not backing down on Trudeau’s promise of a hard cap on oil and gas emissions within the next year.

Oil companies will either comply with the cap or likely face harsh penalties. The CEOs, their lobbyists, and the Alberta politicians who act as their proxies need to accept that fact.

Once they do, perhaps Canada can have a civilized conversation about lowering oil and gas emissions. If they don’t, expect a nasty political battle between an aggrieved Alberta and a Liberal government with three years of electoral security thanks to its agreement with the NDP.

Either way, emissions are coming down.

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