In new emissions plan, Ottawa gives oilpatch a pass — for now

Without deep cuts in the oilpatch, there is scant chance Canada will meet its 2030 climate goal, but at least for now, the federal government is giving the sector a free pass from any major new regulations or costs aimed at slashing emissions.

The federal government unveiled its Emissions Reductions Plan on Tuesday; a wide-ranging document covering every source of pollution from electricity production and landfills to agriculture and home heating.

The oilpatch is the largest source of emissions in the country, and the government’s modelling shows a need for the sector to make significant strides in less than a decade to help the country hit the 2030 goal.

The oil and natural gas industry produced 191 megatonnes of carbon dioxide in 2019 and, according to the federal plan, those emissions need to fall to 110 megatonnes in 2030. The decline is projected to start relatively small before accelerating in 2029 and 2030.

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Still, that’s more than a 40 per cent drop, and experts note it’s an ambitious reduction given that oil production is on the rise, time is tight, and there’s a lack of detail for how to reach the target.

“The path to 2030 requires pretty big emission reductions from the oil and gas sector,” said Dale Beugin, vice president of research and analysis at the Canadian Climate Institute, a climate policy research organization.

“What are the details of the policies that will drive those emissions reductions and drive that contribution?” 

Alberta reached a record high in oil output this winter, and the federal government recently made an international pledge to increase production this year in response to the European energy crisis.

Actual policy still in development

For now, the oilpatch isn’t facing any new regulations as the actual policy is still in development. There are no details yet on how the cap will be set, how it will change over time and how it will be enforced.

On one hand, the industry could benefit from having the policy sooner rather than later considering the 2030 climate target is fewer than eight years away, said Beugin, but it’s such an important policy that it makes sense to develop it properly.

“There is some tension between those two things: get going soon enough to get the rules of the game clear for everybody, but get that system designed in a way that makes sense,” he said.

The precipitous emission target isn’t sitting well with some in the industry.

“It’s really, frankly to me, utterly astonishing that this has come out,” said former TransCanada executive Dennis McConaghy, referring to the current affordability and global energy security concerns.

“I think this is an enormously misguided initiative, totally predictable, and it should really cause, I think, Canadians in total, to have a real reconsideration of what is the contribution Canada needs to make right now to the world,” he said.

‘A critical challenge of our time’

Others in the sector recognized the plan as ambitious, but possible — with the right supports.

“We recognize climate change is a critical challenge of our time,” said Kendall Dilling, interim director of the Oil Sands Pathways to Net Zero Alliance, which represents the large oilsands producers, in a statement.

“While we recognize the federal government’s ambition to drive even faster results, the Pathways Alliance has been clear that the interim goals set for our industry must be flexible, realistic and achievable.”

There were few surprises, said Tristan Goodman, president of the Explorers and Producers Association of Canada.

The emissions target is ambitious, he said, but “the main focus is all tools are going to have to be available there and that was recognized in the plan.”

Oil production is increasing in the Alberta oilsands, but emissions could begin to fall within the next five years considering the rate of innovation in the sector, according to S&P Global. (Kyle Bakx/CBC)

Carbon capture support

There’s another imminent federal policy related to oil and gas other than the emissions cap.

In the upcoming budget, Ottawa is expected to unveil a tax credit for large industrial players to build carbon capture and storage facilities, which would collect emissions and store them deep underground.

That policy could mean billions of dollars every year not only for the oilpatch, but many other industries such as manufacturing and fertilizer production.

Those facilities are expected to take several years to design and build, which would align with the federal government’s timeline calling for the deepest cuts from the oilpatch to come near the end of the decade. 

A few carbon capture and store projects already exist in Alberta, including the Quest facility, which is located at Shell’s Scotford complex northeast of Edmonton. (Kyle Bakx/CBC)

The federal government also wants to ramp up its methane regulations by reaching at least a 75 per cent cut in those emissions from the oilpatch by 2030. 

In the energy sector, emissions from natural gas production have fallen in the last 15 years, while oilsands emissions have jumped by 137 per cent since 2005 as the sector has expanded.

There’s also a wide range of how polluting some oilsands projects are compared to others. On average, for every one barrel of crude produced in the oilands in 2020, there were emissions of 69 kilograms of carbon dioxide equivalent, according to S&P Global.

Some facilities had emissions of 41 kilograms per barrel, while the highest was 175 kilograms.

At the rate of innovation and progress within the industry, total emissions from oilsands production are expected to begin declining within the next five years, according to S&P Global.

Plan acknowledges oil patch’s contribution to GDP

The 2030 oilpatch target “really shows the magnitude of the challenge,” said Sara Hastings-Simon, an energy systems researcher and an assistant professor in the School of Public Policy and the Department of Physics and Astronomy at the University of Calgary.

“There have been some emissions intensity improvements, for example, in the oilsands over the past decade. But they really have been small compared with what’s needed to get to that target,” she said.

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New federal emissions plan has a focus on the oil and natural gas sector, says Sara Hastings-Simon, an energy systems researcher and an assistant professor in the School of Public Policy and the Department of Physics and Astronomy at the University of Calgary. 1:09

In Canada, to reach ambitious climate targets, experts say all paths go through the oilpatch because of its top spot as the biggest source of emissions. 

The federal plan does acknowledge the oilpatch’s importance to the national economy, contributing nearly six per cent of Canada’s GDP, especially in Western Canada and Newfoundland and Labrador. There’s also attention paid to how the sector needs to be carbon competitive with its competitors around the globe, while also driving down costs to attract investment.

Still, the federal government makes it clear it does not intend to make small changes here and there to trim emissions, but instead, attempt to take bold action and ramp up efforts to address the climate crisis. New policies aimed at tackling oilpatch emissions are coming, just not on this day.

“There is no doubt: Canadians are facing climate change head-on, developing and adopting solutions to the greatest challenge of our time. As a government, we stand with them,” wrote Environment Minister Steven Guilbeault as part of an introduction to the plan.

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