Some in Alberta oil patch support NDP provincial government climate plan

In a secret deal with four top companies operating in the oil-sands, together with four environmental organizations, the Alberta NDP government climate change plan includes a hard cap on emissions from oil-sands production.

The new plan represents a breakthrough in that corporations, environmentalists, and the government came to an agreement instead of criticizing each other. However, the plan will no doubt cause divisions within the oil patch, NDP supporters, and environmentalists not part of the deal. When Alberta premier,Rachel Notley, announced the deal:

 Four oilsands leaders — Murray Edwards, the billionaire oil investor and chairman of Canadian Natural Resources Ltd.; Steve Williams, president and CEO of Suncor Energy Inc.; Lorraine Mitchelmore, president of Shell Canada; Brian Ferguson, president and CEO of Cenovus Energy Inc. — stood behind Notley Nov. 22 as she announced an aggressive climate change plan for Alberta. In addition to imposing a $3-billion a year economy-wide carbon tax and phasing out coal-fired electricity generation, the plan strictly caps the oilsands’ share of provincial emissions at 100 megatonnes per year, from about 70 megatonnes today.The plan will be part of Canada's offering for the UN climate change conference taking place in Paris. Notley said:“I’m hopeful that these policies, taken overall, will lead to a new collaborative conversation about Canada’s energy infrastructure on its merits, and to a significant de-escalation of conflict worldwide about the Alberta oilsands."

This appears unlikely to happen. CEO of Imperial Oil, Rich Kruger, and CEO Bill McCaffrey of MEG Energy Corp. were not consulted about the deal and are apparently outraged. Senior oil industry sources said they did not know who backed the deal except for the Pembina Institute. They should know now that several of the largest oil-sands producers are involved. The Oil Patch has not been able to form a united front against the government and environmentalists, One senior industry source complained that the details and financial implications of the deal had not been worked out and it was not clear how the plan could be enforced. Some members of the Canadian Association of Petroleum Producers(CAPP) who produce conventional oil, such as Encana Corp. are angry that the four corporations broke ranks.

CAPP president,Tim McMIllan, said the group supported part of the plan. He mentioned in particular increased use of natural gas rather than coal to generate electricity. He said that details on the carbon tax needed to be clarified. The group was going through the numbers to see what effect the plan will have on the province. Murray Edwards said that while talks with environmental groups were controversial he thought that the end result would be more positive discussions rather than the adversarial relations of the past.

Not all environmental groups agree to the deal. 350.org, based in Brooklyn NY, a strong opponent of the Keystone XL pipeline, said it would continue to oppose pipelines. Cameron Fenton, who organizes anti-oil-sands campaigns from Vancouver, said: "The only way that we stop fighting pipelines is when we stop pipelines.”

Journalist and activist Naomi Klein was very critical of the deal:“In my opinion, there is no circumstance in which greens should be negotiating with tarsands operators, and I don’t think that in the current political context any green group could seriously believe they could get away with that again. The grassroots resistance is too strong."

The new policies will reward companies that are more efficient in terms of producing less greenhouse-gas emissions per barrel of oil. Those that produce more will be hurt by the plan. Energy analyst, Rob Mark said:"What I see from this policy, as we've read it, is that Alberta is going push capital towards efficiency. Whether it's a company, a reservoir or a technology. We are going to tip the scales so that capital flows away from the least efficient reservoirs, companies, technologies."

Trevor Tombe, an economist at the University of Calgary, claims what is called an output allocation in the plan is actually a subsidy that will help efficient operators such as Cenovus and Devon but punish other such as Shell in the Peace River and Nexen: Tombe estimates (there are no details yet for the subsidy) that the average return to oilsands operators will be $1.50 per barrel, which will mean the most efficient operators, such as Cenovus and Devon, will pay little to no carbon tax in the early years and may even earn credits that they can sell. At the other end of the scale, Shell in Peace River and Nexen at Long Lake will pay quite a bit more, as much as $5 a barrel in the case of Nexen.

Ed Whittingham, executive director of the Pembina Institute, that supports the plan, claimed the plan allowed Alberta to take its rightful place on the world stage and that the world needed more of this type of leadership in jurisdictions that were major energy producers in order to avoid dangerous climate change, Greenpeace praised parts of the plan but claimed it was not enough. Forest Ethics Canada Director, Karen Mahon, and Steven Guibeault founder of Equiterre were also present with Notley at the announcement of the plan. As the appended video notes, the plan will increase the costs to consumers for gasoline and for home heating bills with possible rebates to some consumers.