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An oil pump jack pumps oil in a field near Calgary in this file photo.

Todd Korol/Reuters

Ottawa's new national plan to drive up taxes on greenhouse gas emissions threatens to deal the Alberta-based oil industry another financial blow.

Prime Minister Justin Trudeau this week surprised the sector, now in its third year of a painful downturn, with a plan that would require the province to increase its tax to $50 a tonne by 2023, or the federal government will impose an added levy.

Alberta Premier Rachel Notley withheld support for the move pending concrete action on pipelines that the industry argues are key to boosting prices for landlocked crude.

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Read more: Liberal government's carbon tax plan provokes anger from provinces

It comes as producers digest the NDP government's planned carbon price, set to hit $30 a tonne in 2018, and cap on emissions from the oil sands. Several large producers endorsed the provincial plan in hopes of smoothing the way for contentious pipelines such as Kinder Morgan Inc.'s Trans Mountain expansion, which would more than double capacity to the Pacific coast.

Meanwhile, financial pressures are mounting despite recent strength in oil prices. The Conference Board of Canada said the country's oil industry is on track to post a pretax loss of $10-billion this year, after losing $11-billion in 2015. It marks the first time the industry has registered consecutive annual losses, the board said.

"Can we live with $50 a tonne? We like the acknowledgment that certain industries need to be protected, but a lot depends on the details," said Tim McMillan, president of the Canadian Association of Petroleum Producers, the industry's main lobby group. "We don't know the math yet."

He said he hopes Alberta and the federal government remain focused on the principle they agreed to in Vancouver last March, when they agreed to pursue a pan-Canadian strategy.

The Prime Minister and premiers agreed then that carbon pricing should be undertaken in a way that takes into account competitiveness pressure on key industries, with special care for energy-intensive sectors that face tough international competition.

The federal government promises to give provinces full flexibility to design their systems, so long as the carbon price reaches $50 a tonne by 2023 in those jurisdictions that choose a tax over a cap-and-trade plan. The largest oil sands producers are comfortable with Alberta's approach for the biggest emitters, but questions remain about how smaller producers will fare, Mr. McMillan said.

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On Tuesday, several major oil sands producers reiterated their support for broad-based carbon pricing in principle. Royal Dutch Shell PLC weighs future investments against an internal carbon price of $40 (U.S.) a tonne. The European oil majors and others endorsed Alberta's emissions cap and carbon price last year.

Still, with oil prices hovering at less than half the levels of mid-2014, the industry is highly sensitive to even the smallest changes in its cost structure, although that could change if oil prices rise.

"It's important that any national carbon policy does not put Canadian industry at a disadvantage with competitors in other jurisdictions," said Brett Harris, spokesman for Cenovus Energy Inc.

The industry has repeatedly cut staffing levels, idled rigs and shelved billions of dollars' worth of expansions to weather the slump, with pain particularly concentrated among small and mid-sized producers.

Many lack the financial heft of their larger rivals and can't afford added costs, said Gary Leach, president of the Explorers and Producers Association of Canada. "It's damaging," he said.

At the same time, the industry is clamouring for additional pipelines, even after slamming the brakes on growth projects.

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Martin King, director of institutional research at GMP FirstEnergy, said he believes Canada's crude producers will run short on pipeline capacity by mid-2018 – and begin looking to options such as rail for crude transport.

Mr. King said he estimates the industry will be short 100,000 to 200,000 barrels of day of capacity in 2018. With close to a million barrels a day of idled rail capacity in Western Canada, he believes that additional crude could be picked up by train transport.

"If you're a railer, certainly there could be an opportunity there – looking into 2018 and 2019 – if the pipe capacity additions do not materialize," he said.

Lorraine Mitchelmore, former president of Shell Canada, said the industry needs to understand that carbon pricing is here to stay and that prices will rise over time as Canada and other countries work to meet the commitments they made at the Paris climate summit last December.

Alberta has one of the most aggressive carbon policies of any major crude exporter, she said. But it's the only major producing jurisdiction that is landlocked with limited access to international markets.

"You can only afford [heightened environmental costs] when you give on the other side," Ms. Mitchelmore said. "We've got to get it right and think about how we play in the global market."

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With a file from reporter Kelly Cryderman in Calgary

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