Energy industry wants a say in transition

Current tech will be needed to aid green shift

OTTAWA • Oil and gas executives are urging the federal government to consider their role in the broader energy transition, as Ottawa reportedly readies stringent environmental policies aimed at driving down greenhouse gas emissions.

Industry leaders have long sought to shake off claims that they are strictly polluters who need to be phased out in order to transition toward cleaner sources of energy. The message has taken on heightened urgency in recent weeks, as some industry insiders worry that Ottawa could wield overly blunt tools as it unveils its “green recovery” plans later this month.

“There is of course a concern that the importance of the industry is not recognized, and likewise that the ability of the industry to be a real partner in Canada’s climate ambitions is overlooked,” said Kevin Krausert, CEO of Calgary-based Beaver Drilling.

Krausert is among a number of oil and gas executives who have been saying that current oil and gas technologies will have to be used in the shift toward greener energy in Canada.

Drilling companies would be crucial in tapping deeplying pockets of geothermal energy, for example, while existing natural gas pipelines could be converted in order to transport hydrogen.

“Anything from hydrogen to geothermal to ‘bitumen beyond combustion’ are areas the industry is very seriously and very heavily working on, and there are ways for the oil and gas sector to partner with government in the climate recovery,” he said.

The comments come as Prime Minister Justin Trudeau prepares his Sept. 23 speech from the throne, which could include tight new environmental policies aimed at sharply lowering Canada’s greenhouse gas emissions, according to some media reports. Ottawa has already hinted that hydrogen, electric vehicles, and new regulations aimed at blending more ethanol with gasoline could be used to drive down Canada’s emissions.

Industry groups in general support such efforts, but warn that an overly stringent environmental regime could snuff out a sector that has already been clobbered by slumping oil prices in the last five years.

Those pressures have been intensified by decades of failure in Canada to build major new oil pipelines, which has depressed Canadian oil prices and deepened resentment in Western provinces.

Tim Mcmillan, head of the Canadian Association of Petroleum Producers (CAPP), says the COVID-19 pandemic has forced oil and gas companies to shut in significant volumes of production, while trimming their capital spending plans by $8.6 billion.

In a letter to the Prime Minister’s Office earlier this month, Mcmillan urged Ottawa to consider the interests of oil and gas as it seems poised to introduce new environmental measures, particularly as the industry continues to suffer from low oil prices and widespread layoffs. The sector has cut 19,000 jobs since the beginning of the pandemic alone, and could cut another 15,000 by the end of 2021.

“It is essential the strengths and potential benefits of gas and oil investment are highlighted in the speech from the throne, as this will represent a crucial signal to Canadian and international investors,” he said in the letter.

Calgary energy executives say a central piece of the challenges they face is that the topic of energy transition in Canada tends to run along absolute lines, which fails to capture the nuance and complexity required in expanding the country’s clean energy capabilities.

Fossil fuels tend to be uniformly disregarded as harmful, for example, rather than hydrocarbons of varying emissions intensity. Some pockets of heavy bitumen emit far less GHGS than others, while lighter oils and natural gas can be used to offset more emissions-intensive resources.

“To me, it’s a spectrum,” said Phil Hodge, chief executive of Calgary-based natural gas producer Pine Cliff Energy.

Many experts agree that a transition to clean energy will take decades. The International Energy Agency expects oil demand to continue growing for years to come, before it begins to gradually taper off. Others argue that the right combination of smart policy and government subsidies could rapidly transform the global energy mix.

But clean energy sources like solar and biofuel also carry their own environmental downsides that are likely to slow their adoption on a wide scale, Hodge said. A rapid switch to electric vehicles would boost demand for electricity that would need to be largely supplied by fossil fuels.

“Every energy source has got its own issues that makes its implementation not as readily available as people might like,” Hodge said.

“The reality is it’s going to take a long time,” he said. “The other major reality as a Canadian is that oil and gas makes up a big portion of our GDP. So just saying we’re going to stop pulling our hydrocarbons out of the ground and exporting them to the world — mainly to the U.S. — I think is a bit naive.”