Varcoe: Oilpatch grappling with new climate policies


What is clear is that liberal climate and energy policies will remain in place, including a higher carbon price and a national goal of reaching net zero emissions by 2050.

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Canadian oil producers will face a new federal mandate to reduce methane emissions by the end of this decade, and the industry will be given new five-year climate goals from Ottawa.

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With another Liberal minority government elected on Monday, new energy and environmental policies are arriving, although investors and oil industry players see them as an evolution, not a revolution, of Canada’s climate goals.

“The industry has gone through stages of mourning and now we are in the acceptance phase,” said Eric Nuttall, senior portfolio manager at Ninepoint Partners, an investor in Canadian energy companies.

“It’s a hamburger with nothing. . . I don’t see last night’s result as a major catalyst one way or the other.

On Monday, Liberal Leader Justin Trudeau won 158 seats in the federal election, more than any other party, but not enough to secure a majority government.

The Canadian oil and gas industry is trying to determine what the fallout will be for the sector, from the cost of complying with new regulations to the implications for future liquefied natural gas (LNG) projects.

“It’s déjà vu, back to where we were,” Whitecap Resources CEO Grant Fagerheim said in an interview on Tuesday.

“The energy industry wants to understand what the policies are, versus moving targets and shifting emissions targets that we continually see without consultation.”

What is clear is that the Liberals’ climate and energy policies will remain in place, including a higher carbon price and a national goal of reaching net zero emissions by 2050.

Two election promises will affect the province’s largest industry over the next few years.

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The Liberals pledged to pass regulations that require oil and gas companies to reduce their methane emissions by 75% from 2012 levels by the end of this decade. (Methane does not stay in the atmosphere as long as carbon dioxide, but has a much greater effect on the climate.)

Audrey Mascarenhas, CEO of Calgary-based Questor Technology, which helps oil companies reduce their methane emissions, said the goal is “easily achievable” if government and industry focus on adopting solutions practice.

“We have to decide that we want to do this and all roll up our sleeves,” she said.

During the election campaign, the Liberals also promised to adopt five-year emissions targets for the oil and gas industry “based on advice from the advisory body Net-Zero”, starting in 2025.

These would be the first such benchmarks implemented, although the industry has invested heavily to reduce emissions per barrel in recent years.

In fact, emissions per barrel in the oil sands decreased by 20% between 2009 and 2018; they are expected to fall by at least 16% by the end of this decade, according to a report released last year by IHS Markit.

However, as total Canadian oil production has increased over the past 15 years, overall industry emissions have increased.

“The challenge on climate change is to start reducing emissions of oil and gas, and the use of oil and gas for transportation,” said Chris Severson-Baker of the Pembina Institute.

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“Evaluating and reducing emissions – this is something that is long overdue. “

While the federal focus on reducing emissions is not new, national targets have changed.

In the Paris climate agreement, Canada pledged to reduce its national emissions by 30% from 2005 levels by 2030. In April, the Trudeau government announced that Canada would reduce its emissions of 40 to 45% during this period.

Oil sands producers like Suncor Energy, Canadian Natural Resources and Cenovus Energy have net zero targets already adopted by 2050 and work together to achieve these goals.

They are also seeking significant government assistance for major investments in Carbon Capture, Use and Storage (CCUS) projects. The Liberals plan to introduce a tax credit for such expensive projects.

Energy investors say the Liberals’ new promises will do little to change the way they view Canadian oil and gas companies.

“Even without these policies, the oil and gas industry was moving in this direction anyway,” said Laura Lau, chief investment officer at Brompton Group.

The problem facing Canada’s oil field is how the government is implementing a plan to meet its Paris target and what will be required by producers, said Robert Johnston, managing director of global energy at Eurasia Group, a Washington-based political risk consultancy.

Along with tighter restrictions on Ottawa’s methane gas, he expects a “very limited appetite for entirely new, new projects” that increase Canada’s oil and gas production – and emissions.

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“There are two big questions: carbon neutrality for existing production and what is the way forward for new oil and gas production, if any,” said Johnston.

“The most complicated question concerns the role of new oil supplies, new export projects, new LNG. Where does it fit? ”

With no major new oil sands projects on the horizon, additional production growth is more likely to come from expansion of existing developments, as well as conventional oil and gas drilling.

Precision Drilling CEO Kevin Neveu called the election a “colossal waste of time and money” for an unchanged result.

He doesn’t expect the outcome to mean much to the industry – and that’s the problem.

Rising commodity prices should create favorable conditions for Canada to increase its energy production to meet growing global demand, Neveu noted.

However, the Liberal government’s target ignores the importance of oil and gas to the economy and jobs, he said.

“It is quickly becoming a lost opportunity,” added Neveu.

“The goal line keeps moving, and as they keep going that route, they make the goal line both harder to hit and more expensive to hit.”

Chris Varcoe is a columnist for the Calgary Herald.

[email protected]

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