Max Fawcett: Alberta's oil sector needs the truth. Rex Murphy should give it to them.
His appreciation for the oil-and-gas sector is obvious, and it comes from a place of empathy. But true friends can't always tell you what you want to hear.
For years now, Rex Murphy has defined himself by his willingness to say whatever it takes to defend Alberta’s oil and gas industry. It wasn’t surprising, then, to see him come and attack the federal government’s latest climate plan, one that will raise the price of carbon to $170 per tonne by 2030. Over the course of three consecutive columns, he lambasted the federal government’s carbon tax as “meaningless” and “global virtue-signalling,” and suggested that it would “throw a spike in the heart of the oil and gas industry.” What he neglected to mention is that the large oil sands companies that serve as that beating heart have been paying a carbon tax for more than a decade — and that it’s been the driver of one of their biggest success stories.
In 2007, Ed Stelmach’s government introduced something called the Specified Gas Emitters Regulation. It established an emissions benchmark for large emitters like electricity plants and oil-sands facilities, one based on their recent history, and required them to make reductions from that level. If they couldn’t or didn’t they had to pay a carbon price, one that escalated from $15 per tonne when it was first introduced to $20 per tonne in 2016 and $30 per tonne in 2017. As it happens, in the decade-plus since then those large oil companies have reduced their per-barrel emissions by as much as 30 per cent or more. All told, Alberta’s industrial price on carbon delivered nearly 100 megatonnes worth of CO2 reductions between 2007 and 2018.
And, according to a recent study funded by Alberta Innovates and Emissions Reduction Alberta and conducted by researchers at three major universities, the emissions reductions made by oil sands companies were even bigger than anyone thought. Compared to a previous study from 2015, the more recent 2018 data had emissions from MEG Energy’s Christina Lake SAGD (steam-assisted gravity drainage) coming in at 11 per cent lower, while CNRL’s Horizon project saw a 32 per cent reduction from the 2015 estimates. And according to the researchers, the emerging technologies they studied at these facilities could reduce upstream SAGD emissions by a further 14 to 19 per cent.
This isn’t a coincidence. Instead, it’s a direct result of the price on carbon and its effect on businesses who will naturally look to minimize it where possible. That’s why those companies invested billions of dollars in emissions-reducing technologies, and it’s why those investments made economic sense. And as the federal carbon price rises past $50 per tonne, those sorts of investments will pay out even bigger dividends, both in terms of cost savings and emissions reductions. It will also prepare Alberta’s oil-sands companies for the possibility of so-called “border carbon adjustments,” one that the European Union has said it will apply to imports and one the Biden administration is seriously considering as part of its own climate strategy.
And make no mistake: while Canada’s oil-sands companies might be quiet about carbon taxes here at home, they’re more than happy to champion them on the world stage. At 2019’s CERAWeek, a major annual conference for the global energy sector that’s held in Houston, Husky Energy senior vice president Janet Annesley talked up the virtues of Alberta’s industrial carbon tax and the way its revenues were spent. "Not only do we have the carbon tax that applies to large emitters like Husky in the oil sands, but frankly, the flip side is that the government is using some of those revenues to help industry reinvest in technology,” she said during a panel appearance. “The combination of both of those policies is particularly powerful.”
If Rex Murphy wants to help the oil and gas industry, he should encourage his friend Jason Kenney to restore the tax structure that the NDP government created — one that rewarded the most environmentally efficient facilities in ways his government’s TIER legislation doesn’t. According to a research note from GMP FirstEnergy, the biggest polluters among steam-based oil-sands projects are paying 33 cents per barrel of oil compared to $1.69 under the previous regime, while the projects with the lowest pollution levels swung from receiving 32 cents per barrel in credits to paying 13 cents in tax. Where the NDP’s system rewarded success, the UCP’s subsidizes failure. That has to change.
But so does the attitude and approach of people like Rex Murphy. His appreciation for the oil-and-gas sector is obvious, and it comes from a place of empathy — after all, it was the oil-sands companies that put many of his fellow Newfoundlanders to work after their fisheries went bust. His desire not to see the same thing happen to those very companies is understandable. But a good friend doesn’t always tell you what you want to hear, and they don’t send you into fights unprepared for what’s about to happen. Instead, a good friend gives it to you straight — and helps you overcome the challenges that stand in your way.
And as the most recent data from Alberta Innovates and Emissions Alberta shows, carbon taxes are an important part of the recent success that oil-sands companies have had in reducing emissions. They’ll continue to incentivize new technologies that reduce operating costs and increase efficiency. And they’ll help them compete in a global economy that is increasingly mediated by concerns about climate change and its associated financial risks. If Rex Murphy can’t see that, maybe he’s not as much of a friend to the industry as he thinks he is.
Max Fawcett is a freelance writer and the former editor of Alberta Oil and Vancouver magazines. He worked in the Alberta Climate Change Office from 2017 to 2019.
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