The Politics Of Climate Change A Growing Concern For Oilpatch

By Paul Wells
Nickle's Daily Oil Bulletin
16 February 2007

When you are caught directly in the crosshairs of the most pressing political issue of the day, it is not a time to blink. Such is the case with the oilpatch as it continues to stare down the latest threat to its bottom line: climate change and the resulting uncertainty over whether the federal government will impose harsh new environmental rules on the energy sector.

"We are not afraid of the substance of the issue. In fact, we've taken this on, we're up to the challenge," said Pierre Alvarez, president of the Canadian Association of Petroleum Producers (CAPP).

But confronting the issue is one thing, Alvarez added. Dealing with the politics that many industry officials fear will result in government offering up the petroleum industry as fodder for political gain, is quite another. "Where our concern lies is that when you see these issues become as political as they have, when they get used for political purpose, then it gets awkward," he said.

"You start seeing east-west issues start to get played out, you see rural-urban issues play out, you see partisan issues in Parliament play out. For an industry this big and spending this much capital, that poses a far greater risk of prompting an unfortunate outcome than the issue itself," Alvarez added. "We feel very confident that with the right circumstances, the right policy, the application of technology, we will continue to improve (environmental performance)."

The energy industry has been pushing for so-called intensity targets that would be applied across all industries and a focus on technology to reduce emissions.

Canada's House of Commons passed a bill on Wednesday designed to force the minority Conservative government to achieve the steep cuts in greenhouse (GHG) gas emissions required by the Kyoto Protocol on climate change. The bill would require the government to prepare a plan within 60 days that describes the measures Canada will take to meet its Kyoto obligations to reduce greenhouse gases to six per cent below 1990 levels by 2012.

All three opposition parties support Liberal Pablo Rodriguez's bill. After passage in the House, it has to go to the Senate, where a Liberal majority should ensure its passage.

A day prior, the industry faced another political hardball, as British Columbia Premier Gordon Campbell announced that the province will build on its reputation for environmental stewardship by establishing targets, actions and processes aimed at reducing B.C.'s GHG by at least 33% below current levels by 2020. That target will place emissions 10% below 1990 levels.

As momentum, public opinion and political posturing leans ever increasingly toward the tougher environmental legislation that is in all likelihood mere months away, the oil and gas industry feels it has been painted as the problem child of the issue. And for good reason, said Dave Russum, manager of geoscience for AJM Petroleum Consultants.

"Certainly, the oil and gas industry is a very natural target. It's a high profile industry, it's perceived to be very wealthy, it's based in Western Canada -- there are a lot of issues there that would make it an attractive target in the political process," Russum said.

"Clearly, the industry has to be part of the solution. Whether it should take a disproportionately high hit compared to other parts of industry and the population of Canada may be unfair," he added. "But I think the reality is going to be that the majority of the population and the majority of politicians are going to see the oil and gas industry as very much fair game."

Russum said that those pointing fingers at the petroleum sector should also consider the industry's contribution to the country's overall GHG emissions. To make his point, Russum compared the GHG output of oilsands activities to the overall emissions growth in Canada since 1990.

Russum said he utilized data from an Environment Canada study published in 2004 and which looked at trends from 1990 to 2004.

"For example, (Canada's overall) GHG emissions in 2004 were 758 million tonnes compared to 599 million tonnes in 1990 -- that's a growth of 159 million tonnes in emissions," he explained. "By my calculations, if we were to just say that in 2004 we were producing about one million bbls per day of oil from the tar sands from in situ methods, that looks like it liberates about 75 kilograms of CO2 per bbl, on average, so one million bbls would amount to 75,000 tonnes of CO2 per day, which would equate to about 27.5 million tonnes per year."

Given the calculated annual amount, Russum said even if the oilsands were issued a complete cease and desist edict, the resulting reduction in GHG emissions would be a relative drop in the bucket compared to the national increase since 1990. "If we were to shut down all our activity in both mining and in situ extraction, that 27.5 million tonnes per year is only about 17% of the growth of greenhouse gasses in Canada since 1990," he said. "Other things we are doing in Canada are responsible for the other 83% of the growth in GHG emissions in the country."

Alvarez, who along with other petroleum industry heavyweights met with Northern Affairs Minister Jim Prentice, Environment Minister John Baird and Natural Resources Minister Gary Lunn in Calgary to further discuss issues surrounding the pending Clean Air Act, said the oil and gas sector is not deviating from its stance on any new legislation and its feasible targets.

"We've been very clear about some of the things we think are important - not buying hot air, not being forced into a domestic emission trading systems, the need to focus on technology. We've been heard and I guess we'll find out whether and how much our proposals have been picked up by the government," CAPP's Alvarez said.

John Dielwart, president and CEO of ARC Energy Trust, said the energy industry is prepared to do "our fair share" in reducing GHG emissions, but warns that if targets sector are too onerous, it won't just be the oilpatch that suffers the consequences.

"Where we draw the line is that don't expect the energy industry to pick up a disproportionate load relative to the rest of the economy. The message we continue to send is yes, emissions are in fact growing in the energy industry but emission intensity is in fact declining and therefore we are doing some very good things and seeing significant improvements in emission intensity," Dielwart said.

Gord Lambert, vice-president of sustainable development for Suncor Energy Inc., believes the oil and gas industry is better positioned than many in tackling the challenge of reducing impact on the environment.

"I think it's important to recognize where the oil industry is starting from as public engagement increases. We are one of the most heavily regulated industries in Canada in regard to environmental performance," he said. "The industry itself has simply built in environment as a core element of how to conduct our business activities."

Lambert admits the industry can certainly do more, and technology is the key to achieving better environmental performance in the sector.

Saying that innovation and technology should be the "key emphasis" in reducing the sector's environmental footprint going forward, Lambert said it's vital that industry and government are on the same page.

"It's going to be the commitments of both levels of government to work with our company and other companies to ensure the pace of technology development and innovation is increased and that the risks involved in deploying new technologies are addressed," he said.

"Secondly, over time, there is significant scope to reduce both the energy and emission intensity of the oilsands operations with the use of gasification and carbon sequestration technologies as well as the potential use of nuclear power as a heat source."

Bill Gunter, director of the Alberta Research Council and a participant in developing a federally-sponsored carbon capture roadmap, recently estimated that as much as 30 million tonnes of CO2 a year could be removed from Canada's fossil fuels by 2030 through the use of capture and clean coal technologies.

About 100 million tonnes of CO2 a year are now emitted through the production and processing of oil and gas in Canada and that's expected to grow to beyond 130 million tonnes in the next decade. And, according to Dr. David Keith of the University of Calgary's Institute for Sustainable Energy, Environment and Economy, that should be reason enough to ensure CO2 capture and storage is part of any GHG reduction solution.

"The world will eventually regulate emissions in a serious way. As the U.S. inches ever closer to strong national regulations, there will be pressure on Alberta as a very rich, very high emissions province to act quickly. CO2 capture and storage can play a vital role in allowing Alberta to meet the climate challenge with reasonable costs," Keith said.

AJM's Russum agrees that the increased focus on climate change and the new legislation that will result "will create incentive" to sequester CO2, but adds that even with all parties on board, it will "take considerable time" to occur.

"That type of situation has to be a huge public relations approach from this industry, assuming we really are serious about looking at these issues and understanding what it would take to get a sizeable CO2 collection/distribution system that would get the CO2 to the place where it could be effectively used in the reservoirs," Russum said. "Again, it's a relatively long-term solution, but we have to start taking those steps now."

ARC's Dielwart agrees there are many hurdles that would have to be overcome for CO2 sequestration to become a logistical reality.

"It's not as simple as saying let's reduce emissions, because once you do take the CO2 out, you have to do something with it. Until you get an opportunity to develop an end use for this stuff -- and in Alberta we do have end-use opportunities with re-injection into mature oil fields for enhanced oil recovery -- but these things don't just happen, there's quite a lot of lead-in time involved," he said.

"No matter how much you want to reduce emissions rapidly, you've got to be able to connect all the dots and get infrastructure, get end users and get emitters capturing, Dielwart added. "It's not as simple as saying we're going to meet the Kyoto objective by 2010, or something like that. There are physical limitations."

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