An Open Letter to Prime Minister Trudeau
The war in Ukraine created a real-time test of the policies that support development of the world’s energy supplies. Energy security has been destabilized and the narrative that renewables alone can power the world right now has been disrupted.
Instead of Canada being a leading supplier to countries in desperate need of reliable, affordable, secure energy, such as Canadian LNG, we’ve taken a different approach. One where it’s better to speak of virtue rather than practice virtuous behaviour.
The federal government has released the Options to Cap and Cut Oil and Gas Sector Greenhouse Gas Emissions to Achieve 2030 Goals and Net-Zero by 2050 Discussion Document and is seeking feedback.
Written comments can be submitted by email up to September 30, 2022, to PlanPetrolieretGazier-OilandGasPlan@ec.gc.ca, with the finalized plan set to be released in early 2023.
The Discussion Document lays out an approach to cap and cut emissions from the oil and gas industry using two potential regulatory approaches:
The development of a new cap-and-trade system under the Canadian Environmental Protection Act, 1999 (CEPA). In other words, a carbon market to trade offsets or credits, but, uniquely, only among those in the oil and gas industry.
The modification of existing carbon pollution pricing systems under the Greenhouse Gas Pollution Pricing Act (GGPPA). In layman’s terms, an increased carbon tax specific to the oil and gas industry.
This new plan supports the government’s previously announced plan to reduce emissions economy-wide by 40-45% below 2005 levels by 2030. The modelling done for the Emissions Reduction Plan projects the oil and gas sector will have to reduce emissions by 31% from 2005 levels to reach 110 Mt in 2030 (equivalent to a 42% reduction from 2019 levels).
“A key element of the Government’s plan is to cap and cut GHG emissions from the oil and gas sector at a pace and scale necessary to contribute to Canada’s 2030 climate goals and to achieve net-zero emissions by 2050.”
Below is my open letter in response to the government’s proposal. The questions highlighted are from the Discussion Document.
September 6, 2022
Dear Right Honourable Prime Minister Trudeau and Honourable Minister Guilbeault,
I am writing to provide feedback on the Discussion Document titled: Options to Cap and Cut Oil and Gas Sector Greenhouse Gas Emissions to Achieve 2030 Goals and Net-Zero by 2050.
1. HOW DO YOU ENVISION THE FUTURE OF THE OIL AND GAS SECTOR IN THE CANADIAN ECONOMY OR YOUR COMMUNITY?
I’d like to thank you for acknowledging that Canada’s oil and gas companies have the expertise and a history of making major investments averaging $1 billion per year in clean technology, proving we have the capability to lead the energy transformation.
I’m also pleased that the government finally recognizes the more than 178,500 direct workers in the oil and gas industry for their skills, knowledge, and capabilities to contribute to our country’s energy future.
The oil and gas industry already contributes greatly to the economy and communities where we operate, and we will continue to weather the energy disruption to lead the energy transformation future.
11. HOW SHOULD THE TRAJECTORY OF THE OIL AND GAS EMISSIONS CAP BE DESIGNED TO SUPPORT CANADA’S 2030 TARGETS AND ACHIEVE NET-ZERO BY 2050? SHOULD THE CAP SET ANNUAL OR MULTI-YEAR EMISSION LEVELS?
12. SHOULD THE TRAJECTORY BE FIXED OUT TO 2050, OR SHOULD THE APPROACH INCLUDE STEPS TO RATCHET UP THE TRAJECTORY AT ONE OR MORE FIXED INTERVALS?
The industry is already working on initiatives and requires realistic regulatory targets and timelines; to determine this, ask the very people who work in the industry, not activists with an unreasonable, unrealistic agenda.
7. SHOULD CONSIDERATION BE GIVEN TO FACILITY EMISSION THRESHOLDS TO SET DIFFERENT APPROACHES AND REQUIREMENTS FOR SMALL VERSUS LARGE EMITTERS?
9. ARE THERE OTHER CONSIDERATIONS RELEVANT TO DETERMINING THE SCOPE OF THE CAP?
The cost to implement emissions reductions will be burdensome to Canadian oil and gas companies, small companies in particular. What requirements will be placed on imported foreign oil to ensure equality, fairness, and competitiveness for Canadian companies?
The government acknowledges “the [oil and gas] sector has gone from representing 30% of private sector capital spending in Canada to 11%.” This is in large part due to hostile energy policy and legislation that has created distrust and uncertainty. Nonetheless, it’s in line with the overall decline in business investment in Canada as measured by the World Bank’s Ease of Doing Business Index – Canada’s relative rankings fell from 4th in 2007 to 23rd in 2020.
I’d like to correct a misstatement in the Discussion Document: “Canadians, like people around the world, are paying more for gas due to a global supply shortage caused by the Russian invasion of Ukraine and the coronavirus pandemic.” The global supply shortage is also caused by misguided energy policy in the West, placing a disproportionate reliance on unreliable solar and wind sources. Governments in the West played a role in creating the energy insecurity and price instability we are experiencing. This is why future energy policy must make energy security a priority.
Regulations that increase the cost of production and affect the affordability of oil and gas must be reconsidered.
There are real, impactful consequences to limiting supply and increasing prices. An in-your-face example is Poland’s Grupa Azoty, the European Union’s second-biggest producer of mineral fertilizers, who recently curtailed output due to high natural gas prices. This is at a time when world-wide food shortages are a real possibility for the first time in my lifetime.
Food is not grown in a grocery store, nor is it transported by unicorns.
The Canadian government must not place arbitrary targets and restrictions on oil and gas and agriculture, two bedrock industries required for survival.
21. HOW SHOULD A CAP ON GHG EMISSIONS BE IMPLEMENTED TO MAXIMIZE EMISSION REDUCTIONS WHILE AVOIDING POTENTIAL CHALLENGES RELATED TO LAYERING OF MULTIPLE POLICIES AND REGULATIONS?
22. WHAT OTHER FACTORS RELATED TO IMPLEMENTATION SHOULD BE CONSIDERED IN DEVELOPING AN APPROACH TO CAP AND CUT GHG EMISSIONS FROM THE OIL AND GAS SECTOR?
The oil and gas industry is already subject to numerous stringent, costly, business-hampering requirements including, but not limited to:
For new oil and gas projects subject to the federal Impact Assessment Act, commonly known as Bill C-69, an additional component called the strategic assessment of climate change.
Carbon tax, going to $170/ tonne of CO2e by 2030, increasing by $15 each year
Reducing Methane Emissions from Canada’s Oil and Gas Sector calling for a 75% reduction in methane emissions by 2030 relative to 2012 levels
Clean Fuel Regulations
Private sector obligations, such as Canada’s six major banks targeting emissions reductions for their energy portfolios
ESG standards and disclosure requirements
Why is another requirement being added? Does the government not trust the effectiveness of its existing regulations and requirements? Layering more rules on top of rules suggests you do not have confidence.
Perhaps for good reason. The Guiding Principles of the Document require the plan to “achieve the desired environmental outcomes, while minimizing impacts to workers and communities and avoiding unnecessary administrative burden.” However, governments have not met their targets to reduce emissions in the past, so how will you ensure success now?
The Discussion Document talks about the emissions reductions the industry has made over the years. This leads me to wonder what the government’s true desired outcome is and why oil and gas is being targeted when other industries with increasing emissions profiles are not? Emissions caps targeting one industry are sure to fan the geopolitical flames between the feds and the provinces, flames that have already been stocked by Ottawa’s unabashed infringement on provincial jurisdiction.
Disruption is happening in our energy sector, and Canada’s oil and gas companies have an opportunity to lead the energy future. We are well on our way. And if not Canadian oil and gas, whose?
Cc: Greg McLean, Shadow Minister for Natural Resources email@example.com PlanPetrolieretGazier-OilandGasPlan@ec.gc.ca