Canadian Manufacturing

Harper questioned over stalled regulations to curb oil and gas emissions

Prime Minister Stephen Harper questioned over contention Canada can't curb oil and gas emissions without U.S. alignment



OTTAWA—Opposition critics and energy experts are questioning Prime Minister Stephen Harper’s contention that Canada can’t move to curb greenhouse gas (GHG) emissions from the oil and gas sector without American alignment.

Harper this week flatly ruled out what he calls unilateral action on long-awaited regulations, which his government has been promising since 2007.

New Democrats Megan Leslie and Libby Davies each asked the government to provide some evidence it has begun talks with the United States administration over common oil and gas regulations.

“Could the prime minister, or anyone over there on the government side, tell us the last time he spoke with President Barack Obama about creating harmonized oil and gas regulations to reduce greenhouse gas emissions?” asked Leslie.

Colin Carrie, the parliamentary secretary to the environment minister, responded by attacking NDP policies, while Natural Resources Minister Greg Rickford remained rooted in his seat.

Rickford raced past reporters outside the Conservative caucus, responding over his shoulder to a pursuer that regulating the oil and gas sector “wouldn’t be a very good idea right now.”

Harper rallied his Conservative caucus earlier this week by calling oil and gas regulations a “crazy economic policy,” given low world prices.

“In fact, nobody in the world is regulating their oil and gas sector,” Harper said. “I’d be delighted if they did. Canada will be there with them. But we’re not going to impose unilateral penalties.”

His comments came as a United Nations (UN) conference on new climate change targets was in full swing in Lima, Peru.

Trouble is, many jurisdictions—including the European Union (EU), Norway, a number of U.S. states and Alberta—have moved ahead with their own oil and gas sector regulations.

Experts say there’s no reason Ottawa can’t do the same.

And no one has seen any evidence the Conservatives have even broached substantive harmonization talks with the United States about the continental oil and gas sector.

“I just have no idea what he meant by that and I haven’t seen anyone come out and try to clarify it. It’s astounding,” Andrew Leach, the Enbridge Professor of Energy Policy at the University of Alberta, said in an interview.

“If you look globally there are tons of jurisdictions that regulate greenhouse gas emissions from their oil and gas sectors, and that’s probably going to increase.”

Dave Sawyer of the consultant firm EnviroEconomics notes that North Sea oil and gas emissions have long been covered under the European Union Emissions Trading System (EUETS).

Canadian companies with North Sea operations, such as Nexen, have had compliance obligations under the EUETS for years.

Norway, meanwhile, has long had a carbon tax on oil and gas, which it doubled last year.

Petroleum production and natural gas extraction pay Norway’s highest rate of almost US$72 per tonne, while other carbon intensive industries pay lower amounts or are exempted.

As for global market fluctuations, many wonder what price the government considers the right one to curb sectoral GHG emissions.

Since the Conservatives announced their sector-by-sector regulatory approach in 2007, oil prices have spiked above US$120 a barrel and are currently below US$70.

“First we’re too rich and can’t kill the golden goose, and now we’re impoverished. So when’s the right time?” asked Sawyer.

Leaked reports about proposed regulatory scenarios have put the cost to producers anywhere from 10 to 40 cents per barrel.

“Is oil and gas production in Canada really sensitive to compliance costs in the order of 15 cents a barrel—a Timbit a barrel?” said Sawyer.

The government’s do-nothing stance is creating increasing frustration among policy wonks, opposition critics and even, behind the scenes, some oil industry executives.

“All of the major oilsands companies have been very clear that they’re benchmarking their projects assuming these (regulatory) prices get imposed. They’ve already baked this into their projects,” said Leach.

By not acting, the government is simply adding to the profitability of investments that are already taking place, he said.

“This isn’t the old national energy program view where somebody has a drilling rig and they’re trying to figure out which side of the border to set it up on,” said Leach.

“The oilsands are multi-year, multi-billion projects that for the most part are undertaken by major global oil companies.”

Canada is competing for global capital, he noted, but doesn’t globally harmonize its labour policies, safety policies, royalties, income taxes and a host of other domestic policy choices.

In Lima, Peru, the executive director of the International Energy Agency said this week that current price conditions present “a golden opportunity” for policy-makers.

“Now is the time to put a meaningful price on carbon and slash fossil fuel subsidies,” Maria van der Hoeven said on the sidelines of the UN conference.

“Low prices mean that economic impacts will be that much less painful.”

She said fossil fuel prices will inevitably rebound, “carrying away this golden opportunity.”

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