The president of the Canadian Association of Petroleum Producers hasn’t endorsed the Alberta NDP’s new emissions limits, despite support for the policy from some of the lobby group’s major members.Jimmy Jeong/Bloomberg
Canada's top oil lobbyist is playing down an industry rift over a plan to cap carbon emissions from the oil sands while conceding he was not consulted on the measure.
In a year-end interview, Tim McMillan, president of the Canadian Association of Petroleum Producers, refused to endorse new emissions limits imposed by Alberta's NDP government – even as four of the group's biggest members insist the curbs are essential to building support for stalled pipelines.
"I think on any given issue there's different points of view," he said, acknowledging that CAPP "did not contribute" to the policy, which limits oil sands emissions to 100 million tonnes a year from around 70 million tonnes currently.
"I would reserve my judgment of it until we have an opportunity to work on the details," he said, adding that it's still unclear how the cap will work in practice. "There's a target, but how will it be implemented?"
The comments underscore divisions in the industry as it grapples with rock-bottom commodity prices and mounting opposition to major export proposals. They also point to uncertainties clouding Alberta's pledge to rein in soaring oil sands emissions.
Premier Rachel Notley unveiled the cap as part of a sweeping overhaul of the province's climate change regulations earlier this year, drawing on support from top executives at Suncor Energy Inc., Royal Dutch Shell PLC, Canadian Natural Resources Ltd. and Cenovus Energy Inc.
The hope is the self-imposed limits will help blunt opposition to planned pipelines such as TransCanada Corp.'s $15.7-billion Energy East project, seen as critical to expanding markets for Alberta's landlocked crude.
But resistance to such projects remains fierce. Environmentalists have urged a halt to pipeline reviews currently before federal regulators, saying approvals should be weighed against impacts on climate change.
Meanwhile, even the policy's backers say details are scant. It remains unclear, for example, how the remaining 30-million-tonne allowance for growth would be divvied up as companies jostle for new approvals, Cenovus chief executive officer Brian Ferguson conceded in a recent interview.
"That's one of those questions we don't yet have an answer to," he said.
Still, Cenovus has approvals in place covering 600,000 barrels a day of capacity, including its existing projects, meaning its growth prospects won't be squelched under the policy, he said. At the same time, it rewards more efficient operators, he said. "There's an emissions limit, not a production limit."
Oil sands producers such as Cenovus, Suncor and others have poured hundreds of millions of dollars into new technologies aimed at stemming growth in carbon, but overall emissions have soared as production volumes surged.
Earlier this year, U.S. President Barack Obama rejected TransCanada's $8-billion (U.S.) Keystone XL pipeline on climate grounds, dealing a blow to the industry's export ambitions.
The sector faces the potential for added costs as the Liberal government in Ottawa seeks to follow through on an international pact to stop global temperatures from rising by more than two degrees Celsius above preindustrial levels.
How that commitment translates into a national policy is an open question. However, Mr. McMillan warned against piling new costs on an industry already struggling to adapt to the sharp plunge in U.S. and global oil prices.
Companies have jettisoned thousands of jobs and put off billions of dollars' worth of investments to cope with the downturn that some analysts say could last for years.
"We're likely to see higher prices in coming years. But I think we need to be prepared for higher prices not being in the $80s but maybe being in the $50s or $60s," he said.
Canada risks ceding more ground to competitors in the U.S., he said, where oil production has surged as drillers harness new technologies to tap huge shale formations underneath Texas and North Dakota. "There's no carbon price … in North Dakota," he said.