The way Alberta Premier Alison Redford tells it, if there is one problem with the oil sands, it’s that people love them too much.
This was a message Ms. Redford sought to convey this week to anyone in Washington questioning Alberta’s commitment to reducing overall greenhouse gas emissions from its energy production. Sure, the numbers will increase, she says, but her province’s energy industry is just giving the people what they want – more bitumen.
Of course, the talking point stems from a couple of key developments that could affect the eventual U.S. government decision on the Keystone XL pipeline. Adding urgency, it comes as Alberta’s coffers face another hit due to a return this month to deeply discounted heavy oil prices, a function of tight space on conduits carrying it to traditional markets.
One was the recent Environment Canada projection that rising emissions from the oil sands will overshadow reductions in other sectors. As a result, in six years, the country’s carbon emissions will be 20 per cent above the Harper government’s target under the Copenhagen Accord on climate change.
The other was that U.S. President Barack Obama has put carbon – and Canada’s strides in chopping emissions – front and centre as he considers whether to give Keystone XL the nod amid the din of opposition from environmental groups and factions within his Democratic Party.
As it turns out, Ms. Redford told Alberta media in a phone call from Washington late Tuesday, officials with the U.S. State Department and Environmental Protection Agency didn’t ask about that.
Still, she said her response would have gone like this: “One of the reasons that the federal government is saying what they’re saying is that we continue to see demand for the product that Alberta is producing, so that even though on a per-barrel basis we’re having great success with respect to emissions reduction, we see volume increases because of consumer demand that have an impact on those figures. And while we’re prepared, and certainly have in Alberta taken the lead … and borne a lot of the responsibility to deal with those figures, we also say that it has to be a solution that includes consumer decisions as well.”
So there’s just too much love for Alberta crude, and the energy sector, despite its efforts to cut emissions from each barrel under current regulations, keeps pumping out more barrels. Alberta is a relatively sparsely populated place with little influence on the buying habits of Americans. Everyone has to work together on this.
While Ms. Redford was making the rounds within the Beltway, governments in other jurisdictions raised new questions about the oil sands and their greenhouse gas emissions. Ontario announced plans to review TransCanada Corp.’s proposed Energy East pipeline and Quebec said it would hold two weeks of hearings into Enbridge Inc.’s Line 9 reversal project. This after the Alberta leader and B.C. Premier Christy Clark came to an agreement that could eventually smooth the way for heavy crude to get to Pacific Ocean ports.
It all goes back to the need for Alberta and its energy industry to swallow tougher measures. Last April, Alberta Environment Minister Diana McQueen floated the idea of lifting the province’s overemitting levy to $40 a tonne of carbon from $15, and requiring a 40-per-cent reduction in emissions over time. Since then, the concept has been kicked back and forth. The Canadian Association of Petroleum Producers has lobbied against it, according to documents obtained by Greenpeace through Alberta’s Freedom of Information Act. CAPP said such a move would reduce the competitiveness of an already high-cost industry for an uncertain benefit to its “social licence.”
Some oil market experts peg a normal Canadian heavy crude discount at $15 to $25 (U.S.) a barrel under U.S. benchmark crude when there are no transport constraints. Admittedly, there are no guarantees, but today’s cost of doing nothing more, as other governments push back against pipeline proposals, may be about $10 a barrel, give or take, based on the current heavy oil spread of $35.
That bargain could be one reason why customers love Alberta’s oil so much.