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Marchers pass the White House while protesting against the Keystone XL pipeline: Alberta, trying to sell the pipeline to the U.S. population, is proposing surprisingly high emission standards and harsh penalties. A demonstrator holds up a sign during a march past the White House to protest against the Keystone XL pipeline in Washington, February 17, 2013. The TransCanada Corp pipeline would link the oil sands of northern Alberta, the world's third largest crude resource, to refineries and ports in Texas. Environmentalists say approval of the pipeline will encourage more development in the oil sands, where extraction is carbon intensive, leading to greater greenhouse gas emissions. REUTERS/Richard Clement (UNITED STATES - Tags: ENVIRONMENT POLITICS CIVIL UNREST ENERGY)


Alberta's energy industry is pushing for carbon taxes half as high as what government has proposed, with oil sands companies lobbying for less stringent goals that would leave the province short of meeting its emissions goals.

The Canadian Association of Petroleum Producers has suggested the province target a 20-per-cent reduction in per-barrel emissions, and a $20-per-tonne tax on those unable to comply, according to a provincial document.

That falls well short of an Alberta proposal for oil sands emissions reductions of 40-per-cent per barrel – up from 12 per cent under current rules – and a $40-per-tonne tax – up from $15 today. The so-called 40-40 proposal, which would come into effect by 2020, was made March 27, at a breakfast meeting with senior oil and gas figures in Calgary, when Alberta described plans for what it called a "climate change policy renewal."

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A slide deck from that meeting seen by the Globe and Mail makes clear that Alberta believes it has little choice but to act as it works to convince others of its commitment to the environment.

"Increases in policy price and target stringency are required to gain credibility," the document says. The "low average price in Alberta is a criticism of the current regulatory system."

The broad gulf between government and industry targets sheds new light on the stakes in discussions with the oil and gas sector.

Industry officials have argued that a higher carbon tax could impair their competitiveness, and were stunned by the Alberta proposal. But the province is mired in a fight to improve its image abroad, and in particular in the United States, where Alberta Premier Alison Redford has travelled this week to meet with policymakers. It is the premier's fourth trip south of the border in 18 months, amid a tense bid to convince the U.S. to approve the Keystone XL pipeline project to carry oil sands crude to the Gulf Coast.

In the slide deck, the government lists "social license" as one of the goals of its greenhouse gas strategy. "You might as well have written Keystone there," said a person familiar with the proposal.

Alberta wants to reduce its greenhouse gas emissions by 50 million tonnes a year from a 2020 "business as usual" projection. According to the slide deck, the 40-40 plan would achieve a 61-million-tonne reduction. The Canadian Association of Petroleum Producers proposal would cut 45 million tonnes. Another proposal put forward by the federal government would achieve a 53-million-tonne cut. That would include a 30-per-cent per-barrel emissions cut with a dual carbon price of $30 and $60, where companies would pay the lower price for some emissions and the higher for the remainder.

A spokesman for the Alberta ministry of environment and sustainable resource development declined specific comment. An official in the office of federal Environment Minister Peter Kent said there "remains work to be done" in sorting out the new policy, and it is "premature to discuss any solution."

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But the competing proposals constitute the yardsticks in the bid to develop energy sector greenhouse gas regulations. And Alberta, which has taken pains to emphasize that it is still deciding what to do, is not wedded to its 40-40 proposal. The slide deck outlines two "Alberta oil sands options." The second calls for a 30-per-cent reduction in per-barrel emissions, with a $30 carbon tax.

Alberta says it has "commissioned three financial firms to review this work and provide comment as to its 'reasonableness.'"

The document also suggests the province may not apply the same price to all portions of the energy sector. It mentions an "opportunity to make adjustments based on economic rational[e]." In other words, while the oil sands may face the highest targets and carbon price, lower standards may be applied to those that, for example, produce natural gas or refine oil.

Alberta says it is not planning to enforce its emissions reductions on smaller emitters, meaning the rules will apply only to those producing 100,000 tonnes a year of carbon.

The 40-40 proposal has stirred substantial discussion in Alberta, and in particular among those companies that may face substantially greater costs. Some are skeptical that the province will follow through, saying 40-40 constitutes an initial high number for negotiations. "We note that the proposal is still in early days and will face many challenges to becoming a reality," Andrew Potter, an analyst with CIBC World Markets Inc., wrote on Monday. He noted that, "in our opinion the proposed levy is designed to appease considerations associated with KXL."

Calculations completed by FirstEnergy Capital Corp. suggest the 40-40 target would cost some oil sands producers roughly 60 cents per barrel after tax. But that may be worth it, FirstEnergy concludes. The firm says if it influences the U.S. decision on Keystone XL, "then we would view such a trade-off (slightly higher costs vs. much more security regarding heavy oil differentials and thus revenues in the longer term) as a net positive for oilsands producers. But that small number may mask a larger impact: For some projects, it's enough to cut the net present value by fully 15 per cent – although most will face a more modest 2-to 3-per-cent reduction."

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