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As Trump resets climate policy, Ottawa will stick to long-term strategies, says resources minister

Cenovus is proceeding with a 50,000-barrel-a-day expansion plan at its Christina Lake facility, and expects to increase its overall oil sands production by 14 per cent in 2017.

Brent Lewin/bloomberg

The federal government needs to stick with a long-term strategy on energy and climate policy even as U.S. President Donald Trump overhauls Washington's approach, Natural Resources Minister Jim Carr told a global conference Tuesday.

Mr. Carr was in Houston for IHS Markit's CERAWeek conference, which draws senior politicians and energy executives from around the world. Prime Minister Justin Trudeau will deliver a keynote address here on Thursday.

In a morning session, the Liberal minister said Ottawa can work with the Trump administration in areas of mutual benefit, even as it pursues climate policy aimed at meeting long-term commitments to reduce greenhouse gas emissions.

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Some business leaders and conservative politicians insist governments need to go slow or even roll back planned climate regulations, including the federal and provincial carbon pricing plans, in order to ensure Canadian companies remain competitive as Mr. Trump pursues his pro-business agenda.

Echoing Alberta Premier Rachel Notley's comments here Monday, Mr. Carr said that ensuring economic growth – including a healthy oil industry – is consistent with climate policy.

"We're at the point of generational decisions … This is not a short-term game; this is a generational game," he said. "If some of us have to take a short-term political hit, I think we'll be doing our kids a favour."

He pointed to the federal approval of two pipeline proposals – Kinder Morgan Inc.'s Trans Mountain and Enbridge Inc.'s rebuild of its main Line3 export pipeline – as evidence Ottawa is committed to the health of the industry.

"We believe Canada will be positioned to be a very serious player in the international energy marketplace," he said.

The minister also expressed some confidence that the Canadian industry will be largely unscathed by protectionist actions being bandied by the Trump administration.

"Our American counterparts and friends say they understand there is a convergence of interests," he said. "We're in this together and we are going to create jobs together for people."

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However, Conservative Party natural resources critic Mark Strahl said oil and gas companies worry that governments are piling on costly environmental regulations at a time when their U.S. competitors will see an easing burden as a result of Trump administration action.

He said the independent oil and gas sector is particularly vulnerable.

"Those are the people we hear from saying they can only bear so much, they can only handle so many additional costs before they can't be competitive globally," Mr. Strahl said after Mr. Carr's panel session.

"The energy sector is global in nature. Capital can flow anywhere and governments in Canada need to be very careful they don't price us out of the market."

Both the federal and provincial governments are working on details of key policies, including carbon pricing and regulations that would force oil and gas companies to cut their emissions of methane – a powerful greenhouse gas.

As they conclude those plans, they need to keep the competitiveness issue front and centre, said Tim McMillan, president of the Canadian Association of Petroleum Producers.

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"That's the lens we have to take: It's not one or the other. We have to be competitive if we want to be attracting capital. And we have to reach the environmental outcomes that are expected of us," he said.

Executives from oil sands producers said they believe they can continue to increase production at current prices, even as the province's carbon pricing plan takes effect this year.

Cenovus Energy Inc. – which specializes in steam-based production – has cut its well cost in half over the past few years and is developing new technology that will cut both GHG emissions and costs, Judy Fairburn, the company's executive vice-president for innovation, told the morning panel session.

"We can be cost competitive," Ms. Fairburn said. "We believe that ourselves and our peers are well-positioned for growth."

Cenovus is proceeding with a 50,000-barrel-a-day expansion plan at its Christina Lake facility, and expects to increase its overall oil sands production by 14 per cent in 2017.

Houston-based ConocoPhilliips Co. also expects to increase oil sands production in the coming years but will focus on smaller increments of between 20,000 and 50,000 b/d rather than undertaking capital-intensive megaprojects that require longer planning horizons.

ConocoPhillips CEO Ryan Lance said the oil sands operations are seeing the same kind of productivity increases that are happening in the U.S. shale oil fields.

"We'll find ways to make that competitive in the global market that will generate capital investment and future growth," he said.

Ms. Notley insisted the oil-sands sector remains competitive, although she said companies need to take a longer-term view rather than the short cycle focus of the shale oil production.

Ms. Notley – who spoke on a panel Monday - met with a number of corporate executives during her stay in Houston. She said the prospects of new pipelines helps build confidence while oil sands producers have cut costs to the point they can generate cash at an oil price of $45 (U.S.) per barrel for West Texas Intermediate.

"We've made tremendous progress on market access and assuming we get shovels in the ground later this year, that will really improve investor perspectives on the oil sands," she said.

With an election looming in British Columbia, the premier downplayed any concern a new government could stop the Kinder Morgan expansion.

"I am of the view that at the end of the day the province has a limited forum within which to exert its influence over the progress of the pipeline," she said. "So I don't know that there are any tools available for a subsequent government regardless of its political stripe, at this point."

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