Business·Analysis

Paris climate talks could be boost for oilsands

For two weeks, delegations from every country in the world will meet in Paris to grabble with climate change. That can only be a good thing for Alberta's oilpatch.

Alberta politicians will be fighting the 'dirty' oil label at COP21

Provincial and federal governments hope new technology, coupled with new environmental policies, will help reshape the image of the oilsands (CBC)

Delegations from every country in the world will soon meet for two weeks in Paris to grapple with climate change. That can only be a good thing for Alberta's oilpatch.

The notion may not be the obvious conclusion, especially considering fossil fuels are the prime target of political leaders motivated to take action on climate change. 

'We're going to have a very different kind of delegation than we are used to at COP21 in Paris.'- Naheed Nenshi, Calgary mayor

The energy industry has already been battered and bruised due to the collapse in oil prices, with more than 36,000 jobs lost in Alberta since the summer of 2014, and some observers believe the Paris conference could be another crushing blow.

Rather than sound the death knell for Alberta's oilsands, industry watchers should view the annual UN Conference of Parties gathering, also known as COP21, as a fresh start, a chance for the oilpatch to clean up its image.

Alberta's new NDP government certainly views it that way. With the Paris conference one week away, the government announced its new climate change policy, which introduces a carbon tax, caps oilsands emissions and fast tracks the elimination of coal fired power plants.

"This will be the first time Alberta will be able to hold its head high," said Shannon Phillips, who will attend the conference as Alberta's environment minister. "We will be able to say to the world in a real and substantive way that we are an energy producing jurisdiction, we understand the science of climate change, we understand, as industry does, that we are heading into a carbon competitive world and we are ready to take on that challenge."

Dirty oil label

The label the oilsands just can't escape is "dirty." It's a characterization reinforced over the years and stated loudly again this month by U.S. President Barack Obama, in his rejection of TransCanada's proposed Keystone XL pipeline.

Stripping away that adjective won't be easy and it won't be quick, but Calgary's mayor says the process might start at Paris as Canada's delegation sets a new tone about environmental performance.

"We're going to have a very different kind of delegation than we are used to at COP21 in Paris," said Naheed Nenshi.

He's referring to the oil industry cheerleading in the last decade by federal and provincial conservative governments. He points out that approach didn't pay dividends, particularly when it came to the  construction of any new export pipelines. 
Alberta Environment Minister Shannon Phillips announces her province's new climate change strategy on Sunday. (CBC)

"The work on climate change is not an attack on our energy industry. We have to give our governments the space to manage the opportunity to respond to these changing expectations both here, at home and around the world." 

The "dirty" label is not only prevalent internationally, but also domestically. The Paris and subsequent climate change policies are key to convince the premiers of B.C., Ontario and Quebec that new pipelines make sense as part of a climate change strategy.

Industry making strides

All year, in the corporate boardrooms and conference centres, talk of the Paris conference has been prevalent. That's why the oilpatch isn't a deer staring into the headlights of the climate change caravan.

"It doesn't matter if oil is at $50 or $100, this is something that is a long-term business and we need to think about things in a long-term viewpoint," said Cenovus CEO Brian Ferguson. "We're very focused on how do we continue to improve not only our environmental performance, but our cost and capital performance. They are all very aligned." 

Innovation is the key that oilsands players point to. If technology keeps advancing, it should improve environmental performance, while also cutting costs through reducing the amount of energy needed to produce oil.

According to the companies operating in Fort McMurray, Alta., if you look at today's state of the art technology, the greenhouse gas footprint of the most efficient oilsands producers is as good or better than the average barrel produced around the world. 

Cushion for industry

Industry needs to clean up other areas of its environmental performance outside of emissions, such as its water use. In the mining operations, water use was down 30 per cent in 2014 compared to 2012 levels. Still, 1.5 barrels of water from the Athabasca River was used to produce each barrel of bitumen in 2014, according to Canada's Oil Sands Innovation Alliance.

New technology, coupled with new environmental policies in Alberta and Canada, will help reshape the image of the oilsands and will be funded, at least in part, by the changes that will come at a cost.

This is about a global conversation about Alberta's energy products.- Shannon Phillips, Alberta environment minister

Carbon taxes will add costs to the industry and hurt its overall competitiveness. In Alberta, the oilpatch is trying to figure out how it can also absorb tax and royalty increases. While the industry realizes the necessity of new technologies, companies are struggling to find the cash to fund them. Cenovus, for example, trimmed its research and development budget as part of across the board reductions and staff layoffs this year.

Under the province's new climate change plan, some of the revenue will go towards helping industry reduce carbon emissions by increasing the pace of technological innovation.

The costs from government may be cushioned. That's what industry is pushing for.

"Any increases in environmental taxes should be offset by decreases in royalties. I think it should be a net-zero impact on the industry," said Mark Scholz, who is with the Canadian Association of Oilwell Drilling Contractors, after the organization announced it's preparing for 2016 to be one of the industry's worst years

CAODC on climate costs

7 years ago
Duration 0:38
CAODC's Mark Scholz doesn't want any new climate costs on industry

Bringing in a carbon tax, as announced in Alberta over the weekend, and then shielding Big Oil from paying for emissions, is likely not what environmentalists want to hear, but politicians may oblige.

Alberta's new carbon plan will be showcased in Paris not only by the province's premier, but also its environment minister. 

"This is about a global conversation about Alberta's energy products," said Phillips, in an interview with CBC News. "Taking that message to the world, this is not the province people thought it was."

Add it up and Paris might offer a window of opportunity for Alberta's oilpatch. A chance to change its stained image, increase support for pipelines in Canada, and showcase the technological advances it has made. It may be hard to believe, but the oilsands might emerge as a winner as part of the world's largest climate change conference.

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