Climate policy is good for pipeline projects, resources minister says

Share

Alberta's new climate-change policy should help the battered oil and gas sector in its quest for new pipelines to get crude to more lucrative markets, Canada's new Natural Resources Minister says.

During his first visit to Calgary as minister, Jim Carr also told energy executives the federal Liberal government understands the industry's need for investment certainty, assuring them pipelines that are already under review will not have to start from scratch as regulations are updated. But details on a "transition phase" for these regulatory reviews are yet to come.

On Sunday, Alberta Premier Rachel Notley unveiled a $3-billion-a-year carbon tax and a cap on oil sands emissions – moves she said should help the province's environmental reputation, which had hindered efforts to improve access to markets. She was joined in the announcement by prominent oil executives and environmentalists.

"Because we're going to have to work together as a nation to give confidence to Canadians that the process is in the national interest, that you have the Premier of Alberta, leaders within the oil sector and leaders within the [nongovernmental organization] community there at the same time, saying the same thing, is very helpful and very positive," Mr. Carr said in an interview in Calgary on Wednesday.

"It's exactly the kind of display of unity of purpose that we're going to need as we move forward toward sustainable development of our natural resources in Canada."

Energy executives have long lamented scant pipeline access to coastal ports that would allow oil-sands-derived crude to reach markets beyond Canada and the United States, saying it has resulted in deep discounts for the oil versus international benchmark crude.

Meanwhile, pipeline proposals have stalled amid concern over the environmental impact of oil sands development. Ms. Notley said U.S. President Barack Obama's recent rejection of the Keystone XL pipeline was a "kick in the teeth" that was partly the result of a "mistaken" policy that looked light on carbon limits.

Mr. Carr, MP for Winnipeg South Centre, met with industry executives on Wednesday – including Imperial Oil Ltd.'s Rich Kruger, Nexen Energy ULC's Zhi Fang and Canadian Natural Resources Ltd. chairman Murray Edwards, as well the heads of pipeline companies TransCanada Corp., Kinder Morgan Canada and Enbridge Inc. He said they told him their priorities, as an industry hindered by the collapse of crude prices, are bolstering access to markets and having the regulatory certainty that would ensure they can still attract investment capital.

The industry and investors have been concerned about the new government's intentions for more stringent regulatory reviews for pipelines. Specifically, Kinder Morgan's $6.8-billion Trans Mountain Expansion and TransCanada's $12-billion Energy East project are already in NEB reviews, and questions have been raised about whether they would have to restart them under new rules.

The minister said they would not. "The proponents will not be asked to go back to square one," he said. "There will be a transition phase, and I will be working with my colleagues in order to be clear about what that transition phase means, and we will do that as soon as we can." He did not give a timeline.

In the federal campaign, the Liberals promised to modernize the regulatory regime to build trust with Canadians, but Mr. Carr said it is too early to say how new requirements might be layered on to reviews that are under way.

The minister also provided no further clarity on his government's intentions regarding Enbridge's Northern Gateway project, or its proposed formalization of an oil tanker ban off British Columbia's northern coast – saying he would not speak about specific projects.

On Wednesday, neither TransCanada nor Kinder Morgan would comment on the regulatory processes for their pipeline projects. But TransCanada agreed that Alberta's forceful climate change plan could help get pipelines built.

"We believe that strong and achievable policies that set us on that path towards a clean energy future will also help Alberta and Canada gain access for the delivery of oil and gas," TransCanada spokesman Mark Cooper said. "And it's important to note that will be required for decades to come."

In an e-mail, Kinder Morgan Canada president Ian Anderson said the climate change plan is a positive step forward and "the collaboration of industry, the government of Alberta and environmental groups helps pave a path forward and provides important clarity to policy and direction for the entire industry."