Green rules are costing hundreds of millions: CAPP
ENERGY
• An oil and gas industry group said Wednesday that federal and provincial environmental regulations are costing producers hundreds of millions every year, repeating past claims that onerous new policies are making Canadian energy companies uncompetitive with foreign jurisdictions.
The Canadian Association of Petroleum Producers released a report estimating that various regulations could cumulatively cost between $450 million and $760 million in coming years, as oil and gas producers struggle to attract foreign capital. Investors have in recent years flocked to prolific U. S. shale basins, which tend to offer quicker and better returns than large- scale projects like those in the Canadian oilsands.
The association included in the study a wide range of policies that could cause the cost increase, particularly carbon taxes implemented federally and in Alberta.
“That is a very meaningful additional cost as well,” said Tim McMillan, CEO of CAPP.
The cumulative costs are only a small portion of the roughly $ 200 billion in oil sales by Canadian producers in 2015.
The study comes as producers around the world grapple with low commodity prices and a weak capital market. Overall capital spending in Canadian oil and gas is expected to total $ 44 billion in 2017, down 19 per cent from the year prior and well below its peak of $81 billion in 2014.
Differing attitudes toward carbon taxes continue to drive a wedge between the typically chummy members of Canada’s oil and gas industry, particularly between large- scale producers who have been supportive of the tax and small or mid- size companies.
Last month the Financial Post reported that several smaller oil and gas firms are no longer members of CAPP, citing a variety of reasons.
Along with the carbon tax, Alberta’s NDP government has also established a hard cap on emissions from the oilsands, restricting emissions to 100 million tonnes per year from the current rate of around 70 million tonnes.
Analysts point out that the carbon tax will not hit every company equally, but will instead favour companies with lower emissions intensities on a per- barrel basis, theoretically encouraging companies to invest in cleaner technologies. In total, the tax is expected to average well below $1 per barrel of oil produced for larger companies, according to some estimates.
“It’s a very small percentage of the overall cost of a barrel,” said Nick Martin, a policy analyst with the Canada West Foundation in Calgary.
Of larger concern is the constant political wrangling over the incremental carbon tax, some analysts say, which could in turn scare off investors. “Regardless of what the regulations are, the market needs certainty,” said Jihad Traya with Solomon Associates in Calgary. “Largescale investments like these need clarity around how these policies will be implemented.”
CAPP said the report included a wide scope of regulations in its study, including wetland policy, liabilities around well abandonment and the monitoring of caribou populations in Canada’s north.
McMillan said another example of added costs is Canada’s decision to maintain its methane emission regulations, despite vocal signals from the White House that the U. S. may scrap its own policies. “We just are very conscious of doing this in the most cost- effective manner possible, when our largest neighbour and trading partner isn’t doing methane regulations,” he said.
The association has been supportive of Alberta’s carbon tax ever since some of its largest member companies, including Suncor and Canadian Natural Resources came out in support of the policy when it was announced in November, 2015.
The lobby group said the report published Wednesday was done by internal analysts, drawing from several public sources.