Greenhouse gas reduction called threat to oil industry

Alberta's proposed oil and gas regulations are too ambitious andwill hobble the Canadian industry's ability to compete, says the industry association in Alberta government documents obtained through provincial freedom of information laws.

The industry group says the proposed regulations won't buy any goodwill andthe government should delay their introduction.

The 200-page trove of memos, correspondence and reports offers a rare glimpse behind boardroom doors at the negotiations between industry and government to craft rules to reduce greenhouse gas emissions.

The Canadian Association of Petroleum Producers offers blunt assessments of Alberta's plan to introduce rules that would demand industry reduce greenhouse gases by 40 per cent per barrel and charge $40 per tonne of CO2 above that level.

Alberta already has a carbon pricing scheme that costs CAPP members about 10 cents per barrel of oil. The new plan could cost industry up to 94 cents per barrel.

"Proposed 40/40 is 9 fold increase over current. Why such a dramatic step?" writes David Daly, CAPP's manager of fiscal policy. The average price that a barrel of western Canadian bitumen fetched in 2013 was about $75, so the carbon-pricing increase wouldrepresentabout a one per cent increase in the cost of a barrel oil.

That is just one quote from a file titled, CAPP Concerns and Questions for Alberta and Consultants.It tells the tale of an industry afraid that strong oil and gas regulations will rob it of what little competitive edge it has.

Strikingly candid comments

The candour is striking:

• "Will higher stringency requirements impact production and revenue? Very likely."
• "GHG policies should be done in concert with other jurisdictions. US has no carbon tax. Why be so far out in front of them? What is that based on?"
• "Will higher stringency requirements [oil and gas regulations] deliver greater GHG reductions? Unlikely. The challenge with the oil sands is that current technology is not yet available for deployment."

In the end, the industry's prescription is to delay putting the regulations into effect.

"Major policies like this one should not be fast-tracked. Adequate time is required for study analysis and consultation," writesDaly.

That suggestion irks environmentalists, who point out that negotiations over oil and gas regulations between industry and the federal and provincial governments have been going on for over two years.

"This is not a case where we need more research. We need more action and that's what hasn't been happening," argued Clare Demerse of the Pembina Institute, an environmental think-tank.

The industry defends itself by pointing out that the documents providejust a snapshot in the middle of negotiations and that nothing is final yet.

"What we want to ensure is that we've got a competitive industry in Canada that can continue to grow, but also, very importantly, can continue to invest in the technologies that are going to be extremely important in driving down greenhouse gas emissions," said David Collyer, CAPP's president, in an interview with CBC News.

In the documents, the CAPP plan calls for a 20 per cent intensity reduction and $20 per tonne of CO2.

That is half of what the Alberta government's plan is and only marginally stronger than the regulations now 12 per cent and $15, said Demerse.

But the CAPP document explains the association's approach.

"Will higher stringency requirements 'secure' social license [public support] and forestall negative policy action elsewhere? Unlikely," writesDaly.

Demerse, on the other hand, believes that weakregulations are just going to make doing business harder for the oil and gas industry.

"The customers of the oilsands are asking very tough questions. Right now, the sector does not have good answers to give. When they continue to ask for what is essentially the weakest possible regulation, I don't think that is working for their real best interest."