Alberta’s push for a longer carbon-pricing runway is slowing a federal-provincial energy deal that could clear political space for a new oil pipeline to the West Coast.
Negotiations between Alberta and Ottawa are stuck on how quickly the province must raise its industrial carbon price to $130 a tonne from the current $95 a tonne, according to federal and provincial sources. The $35-a-tonne increase was included in the energy memorandum of understanding signed by the two governments in November, but the agreement did not set a timeline.
The two sides have already settled two of the four provisions that were supposed to be finalized by April 1. Ottawa and Alberta have agreed on streamlining environmental impact assessments and on Alberta cutting methane emissions by 75% from 2014 levels by 2035.
The unresolved items are the carbon-pricing path and a CO2-capture project in the oil sands. Senior federal and provincial sources said the two governments are making progress on how Alberta can reach the $130-a-tonne price and are not far apart, but the deadline remains the sticking point.
For industry, the difference between a five-year deadline and a 10-year roadmap is material. Alberta Premier Danielle Smith’s government views the $130-a-tonne price as a major concession made to support a new pipeline to the West Coast, and the province argues that a short implementation period would be unrealistic and could price Alberta oil out of global markets.
Ottawa sees a deal as possible within one to three weeks, though a federal source does not expect sign-off when Prime Minister Mark Carney and Smith meet in Ottawa later this week. The talks are also facing pressure from First Nations court challenges to the MOU.
Carney has used the MOU as evidence of improved federal-provincial relations on energy. He has also pointed to the Building Canada Act as part of Ottawa’s effort to accelerate projects deemed in the national interest.
The political backdrop in Alberta is also deteriorating. The province faces a potential vote on secession driven partly by separatist claims that federal policy continues to constrain the energy sector and Alberta’s economy.
Industry pressure is moving in the opposite direction from Ottawa’s carbon-pricing demand. The Oil Sands Alliance said Monday that complex regulation, uncompetitive carbon frameworks and fiscal systems have weakened sector growth, with no major greenfield oil sands project sanctioned since 2013.
The alliance, whose members produce about 90% of Alberta oil sands crude, said unpredictable regulatory and fiscal frameworks have pushed away investment and reduced capital spending. It called on Ottawa and Alberta to reform their systems to attract the billions of dollars needed to develop the resource.
The same group is tied to the CO2 project referenced in the MOU. The proposed 400-kilometre pipeline would move captured carbon from oil sands facilities to an underground hub near Cold Lake, Alberta, with a target of reducing emissions by 22 megatonnes a year.
Carney has said lower oil sands emissions, including progress on the carbon capture project, would be a “necessary condition” for approving any new pipeline to Canada’s coasts. No private proponent has yet submitted a proposal for a new West Coast pipeline.
The alliance said it remains “committed to continuing to reduce emissions intensity,” including through the carbon capture and storage project. But it argued that a project of that size needs supportive regulatory and fiscal frameworks, “not an uncompetitive industrial carbon tax that no other major heavy oil producing jurisdiction faces.”
Information for this story was found via The Globe And Mail and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
