Canada’s oil and gas sector must lower its emissions to net zero by 2050 or risk losing the public’s support for its operations, according to Derek Evans, the chief executive of MEG Energy, one of the country’s largest oil sands producers.
Like many in Canada’s fossil fuels sector, Mr. Evans says his ultimate vision is that the country will lead the world in delivering socially responsible, clean, environmentally friendly energy.
“The key thing that people want to see – and that I think is going to allow us that social licence to continue to operate – is that net zero by 2050,” he said in a recent interview.
“Until we get there and until we’ve developed that track record, I think it’s going to be hard to convince others that we should be exporting our products elsewhere.”
And the sector must move quickly, he said, because if Canadian oil producers don’t massively reduce emissions they will “be fighting a rearguard action as to whether our barrels are better than anybody else’s at the end of the day.”
The biggest risk of Canada’s net-zero strategy? Not reaching net zero
While Mr. Evans and other Canadian oil and gas executives fret over ways of balancing the need to lower greenhouse gas emissions with the need to secure ample energy production, the world frets with them. Russia’s war on Ukraine has Europe trying to wean itself off its energy dependence on Moscow, and oil and gas prices are hovering around multiyear highs. Meanwhile, a report released earlier this month by the UN’s Intergovernmental Panel on Climate Change says the world must urgently shift away from fossil fuels or risk catastrophic consequences.
Mr. Evans happily acknowledged that he is a believer in plans and goals. But rather than Canada developing a plan for its energy sector in isolation, he said, the country should take into consideration what other parts of the world are doing.
That would mean a broad and frank discussion about how the transition to cleaner fuels will work in a practical sense, and about the unintended consequences of moving too fast. Those consequences would be most keenly felt in the developing world, he said.
As the push toward greener fuels picks up speed, he added, the world needs to figure out what role developed nations will play in supplying cheap, reliable, net-zero energy to poorer countries, so that they can access affordable food and improve their standards of living.
Even as the prices of fossil fuels surge, the Canadian energy industry is under significant public pressure to reduce its carbon footprint.
Prime Minister Justin Trudeau told reporters in Edmonton this week that the conflict in Ukraine has presented a short-term supply opportunity for oil and gas producers, including those in Canada. But, he said, the crisis is also a chance to “go even faster in reducing our emissions, in transforming our energy mix.“
“We know that there is going to be increasing need for reliable, safe, sustainable sources of energy ... and the Alberta energy sector is already investing massively in transforming itself to respond to those needs in the future,” he said.
Groups such as the International Energy Agency say carbon capture, utilization and storage (CCUS) – which forces carbon-dioxide emissions deep into the ground to keep them out of the atmosphere – will play a huge role in getting to net zero.
CCUS is already at the heart of the Oil Sands Pathway to Net Zero initiative, an alliance between companies that covers 95 per cent of crude production in the oil sands. The group has pledged to reduce net emissions to zero by 2050.
MEG Energy is part of that collective. And Mr. Evans said a new CCUS tax credit in the 2022 federal budget – which will cover half of the construction costs of most of the energy sector’s planned carbon-storage projects – will ease the sector’s path to that goal.
The federal government said in the budget that it would engage with Saskatchewan and Alberta (the only parts of Canada that have sufficient regulations to ensure carbon dioxide is permanently stored) with the expectation that the provinces will add their own financial incentives to accelerate the adoption of CCUS technologies.
There has been no word yet on what that provincial assistance might look like.
Saskatchewan’s Minister of Energy and Resources, Bronwyn Eyre, told The Globe that the province already has a host of initiatives to support CCUS, including oil and gas processing investment incentives and pipeline investment programs.
And while Ms. Eyre said she is disappointed that the federal tax credit can’t be used for enhanced oil recovery, in which captured carbon is injected into mature oil wells to boost their production, she said 50-per-cent coverage for CCUS construction costs is “a workable number.”
Mr. Evans said he is hopeful that Alberta will step up with incentives of its own, to bring the oil sector closer to the 75-per-cent tax credit it had originally asked for.
Alberta’s energy ministry didn’t respond to questions about whether it is planning to come to the table with new programs to support CCUS.
Mr. Evans said he expects more clarity on the issue once Alberta Premier Jason Kenney’s leadership review is complete. The results of that vote, which will determine whether Mr. Kenney remains as leader of his United Conservative Party, are scheduled to be announced on May 18.
“We think that there’s a very good chance that they are going to step to the table,” Mr. Evans said.
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