New Alberta climate plan has oil sands emissions limits, carbon tax

Saying it was past time for Canada's major energy-producing province to start addressing climate change, Alberta Premier Rachel Notley released a climate management plan that would begin to limit oil sands emissions, broaden and improve its existing carbon pricing system, and move the province away from coal-fired power generation.

The Canadian Association of Petroleum Producers responded that the plan will allow the industry to grow, further enhance its environmental performance through technological innovation, and is expected to improve Canadian oil's access to more markets.

Noting that hundreds of thousands of well-paying jobs across Canada depend directly on energy, Notley said in a Nov. 22 speech in Edmonton. "This will continue for many decades to come," she said. "But for it to continue, in our role as Canada's principal energy producer, we need to step up to the climate change issue."

Notley commented that while many Alberta energy leaders have said for some time that the province needs to and can do a better job on this, Alberta got a major wake-up call when US President Barack Obama called the province's oil production "some of the dirtiest oil in the world" as he rejected the Keystone XL pipeline project's cross-border permit application (OGJ Online, Nov. 6, 2015).

"That is the reputation that mistaken government policies have earned for us," Notley said. "We are a landlocked energy producer with a single market that just took a very hard run at us. We need to do better, and we are going to do better."

Notley said Alberta's new climate management plan will include its first overall oil sands emissions limit of 100 megatons/year, with a provision for upgrading and cogeneration, from an industry which presently generates about 70 megatons/year. The province also will begin regulating methane emissions, she added.

Cites industry's commitments

CAPP Pres. Tim McMillan said the climate plan will build on the industry's commitment to environmental performance and emissions reductions. He said Environment Canada reports that emissions per barrel of oil produced from the oil sands are down 30% from 1990 levels.

Pilot projects that use solvents in oil sands in-situ operations, and projects that use carbon capture and storage technology are examples of technological innovation the industry is pursuing already to reduce per barrel emissions even further, McMillan said.

Alberta also will phase in a higher carbon price of $20 (Can.)/ton in January 2017 and $30 (Can.)/ton a year later, Notley said. "[It] will be adjusted "to keep pace with prices and growth, taking account of what our peer jurisdictions and competitors do," she explained. "We will put every penny raised through the carbon price to work here in Alberta-building our economy, creating jobs, and doubling down on efforts to reduce pollution and promote greater efficiency."

The province also intends to phase out all coal emissions from power plants by 2030 and replace it with generation from renewable sources, Notley said. "Specifically, we will aim to replace two thirds of our existing coal electricity with renewable energy," she said. "We will keep the costs of renewables as low as possible by using market mechanisms, such as auctioning."

McMillan said this also will provide an opportunity to use more natural gas to generate electricity. "Fuel switching would create about 1.5 bcfd of new gas demand in Alberta," he said. "Under the current royalty regime, this translates into roughly $140 million (Can.)/year in new royalties for the province, because gas pays much higher royalties than coal based on price and production."

He said Alberta's government clearly recognizes the importance of technological innovation as part of the Climate Leadership Plan. "At the same time, however, we realize this is only a first step as several of the principles outlined today require more detail before they become part of the province's climate change policy," McMillan said.

"We will work with the government as these principles are put into practice, and we encourage the province to follow a balanced approach, recognizing that our sector can only become a global supplier of responsibly produced oil and natural gas if we are competitive on the world stage," CAPP's president said.