Federal Emissions Cap Concerns Oil Industry on Possible Production Cut

Concerns have spread throughout the oil patch over whether or not the federal government’s proposed cap on gas emissions will force them to reduce production by the end of the decade.

Earlier this week the federal government announced the consideration of two possible options to meet its climate targets on gas emissions; a cap-and-trade system with a set number of allowances distributed to oil and gas facilities, and a modified carbon-pricing system that could make the industry pay a higher price for carbon.

Although the federal government hasn’t said where the emissions cap could be set, a new paper written by Environmental Minister Steven Guilbeault, is upsetting the country’s oil producers.

The paper was published on July 18, and it states that emissions must not rise above current levels (approximately 191 million tonnes of carbon dioxide equivalent in 2019), and a cap must take into account the government’s Emissions Reduction Plan’s targets, which call for 110 million tonnes by 2030, or a 42% reduction from 2019 levels.

“We think it’s probably not realistic that the sector could achieve that level of reduction,” said Mark Cameron, vice-president of the Pathways Alliance, a group of energy companies that account for 95% of production in Alberta oilsands.

“The biggest risk is if we just can’t comply and don’t have the mechanisms that allow us to comply, that we would have to shut in production as opposed to investing in technology to reduce emissions.”

The proposed cap’s design could have a big impact on the Canadian economy in the upcoming ten years. The oil and gas sector in Canada generates a significant portion of the nation’s export revenue as well as a huge amount of emissions, or nearly a quarter of all emissions.

The Pathways Alliance is now analyzing a $14 billion CO2 trunk line and sequestration hub project in Alberta, as well as the use of solvents and the electrification of operations, to reduce emissions.

However, the group and Trudeau’s government have had trouble agreeing on what a realistic pace and scale of decarbonization are.

“We have a very detailed plan to achieve a 22-megatonne absolute reduction by 2030 with the existing regulations in place,” said Cameron. “So adding new regulations — it doesn’t change the laws of physics, we won’t be able to go faster than 22 megatonnes. It just makes the compliance with federal regulation that much more difficult.”

Original source material for this article taken from here