Alberta Premier Alison Redford landed in Washington, D.C., April 8 amid headlines telling of “Alberta’s bold 40/40” action plan on industrial emissions. Almost immediately, she was explaining that the proposal, which would require a 40% reduction in carbon dioxide emissions per barrel produced by the province’s oil industry, and a $40-per-tonne payment into the government’s technology innovation fund when that limit is exceeded, was nothing more than talk, and certainly not policy nor even proposed policy.
The plan leaked out of a meeting of Alberta Environment Minister Diana McQueen with federal officials and representatives of the energy industry in Calgary in early April. Though Redford stressed that neither the proposal nor its timing had anything to do with the approval process for the Keystone XL pipeline in the U.S., some industry sources (who prefer to remain anonymous) beg to differ. And if it isn’t just about the pipeline—or both oilsands pipelines, the all-Canadian Northern Gateway as well as Keystone—one suggests, it should be. Alberta’s finances continue to be adversely affected by the price differential that discounts Canadian crude below world prices. Canadian producers are even more vested in getting their product to ports and to global markets. Avery Shenfeld, chief economist at CIBC, puts it succinctly: “Keystone will improve access stateside and put a cap on adverse price differentials for Western Canadian producers.”
The big question for those connecting the dots: How far will Alberta, and the oilsands industry, bend to get it built? The discussion around 40/40 suggests that the province, at least, is willing to bend quite a bit further than it has in the past. (The carbon levy established in 2007, by comparison, sits at just $15 a tonne over mandated levels.) And as one insider notes, on this issue, where Alberta goes, Ottawa will follow—not the other way around.
Redford can’t and won’t say aggressive action on emissions is part of any quid pro quo with the Obama administration. But as energy industry insiders note, it’s clear the province is selling the viability and desirability of the oilsands as hard as it can. At the same time, industry itself increasingly understands that real action on emissions is the price of its social licence to operate in a global marketplace. Though some at the Calgary meeting reportedly balked at the 40/40 proposal, operators such as Norway’s Statoil and Alberta’s own Cenovus Energy have already set themselves carbon-intensity benchmarks that exceed Alberta’s current standards.
So is 40/40 the harbinger of standards to come? Although Redford quickly said that “40/40 isn’t a number that we’ve in any way landed on or proposed,” nobody’s denying that it’s a possibility. And while haggling about the ultimate price and benchmarks will be intense, its release and the discussion around it have set it up as the benchmark against which any official policy, when it comes, will be compared.
It’s possibly too late to have an impact on Keystone’s approval, of course. But as CIBC’s Shenfeld has stressed, Keystone is just one of the pieces in the puzzle that will determine the future of the Canadian energy sector. “Rising shale-oil prospects stateside, the shift in consumption growth to Asia, and a growing list of oil-producing countries open to foreign participation all pose challenges,” he says. Which means industry, and Alberta, will also need to ensure the price of its social licence—be it less or more ambitious than 40/40—keeps the oilsands competitive as a global oil basin.