Pipe­lines big­gest ob­sta­cle to oil pro­duc­ers: re­port

Edmonton Journal - - CITY - GOR­DON KENT gkent@postmedia.com twit­ter.com/ GKen­tYEG

The main govern­ment pol­icy hurt­ing the com­pet­i­tive­ness of Western Canada’s con­ven­tional oil pro­duc­ers is in­suf­fi­cient ex­port pipe­lines, not car­bon taxes, an up­com­ing C.D. Howe In­sti­tute re­port shows. The lack of pipe­lines to take oil to mar­ket re­duces the prof­itabil­ity of the av­er­age new well by an es­ti­mated $600,000, cut­ting rev­enue by about $5 a bar­rel and mak­ing some in­vest­ments un­eco­nom­i­cal, ac­cord­ing a study be­ing re­leased Thurs­day. “Con­struc­tion has yet to start, how­ever, on any ma­jor pipe­line ex­pan­sion due to pro­ce­dural hur­dles. These hur­dles are likely the largest com­pet­i­tive­ness cost for Cana­dian oil pro­duc­ers rel­a­tive to U.S. pro­duc­ers,” the study says. “The fed­eral govern­ment should en­sure that the projects it has ap­proved as be­ing in the na­tional in­ter­est are not bogged down by fur­ther pro­ce­dural de­lays.” In the lat­est pipe­line skir­mish, Premier Rachel Not­ley called an emer­gency cabi­net meet­ing and blasted the B.C. govern­ment this week for try­ing to stall the Trans Moun­tain ex­pan­sion by re­strict­ing bi­tu­men ship­ments un­til more spill re­sponse stud­ies are done. On the other hand, green­house gas emis­sion levies have a rel­a­tively small ef­fect on the com­pet­i­tive­ness of Western en­ergy pro­duc­ers out­side the oil­sands, the study found. While the Al­berta car­bon tax is $30 a tonne, it won’t be im­posed un­til 2023 on con­ven­tional oil pro­duc­ers, who will then receive most of that money back as a re­bate based on their out­put. “There’s a re­ally smart de­sign to the car­bon tax in Al­berta, be­cause it’s a two-part sys­tem,” said au­thor Ben­jamin Dachis, the in­sti­tute’s as­so­ciate di­rec­tor of re­search. “Com­pa­nies with low emis­sions per bar­rel will be bet­ter off un­der this sys­tem.” His re­port de­ter­mined Al­berta oil wells have about $770,000 in to­tal costs that are the re­sult of fed­eral, pro­vin­cial and mu­nic­i­pal poli­cies, which also in­cludes roy­al­ties and in­come and prop­erty taxes. That’s more than twice such “pol­icy costs” for pro­duc­ers in the U.S., though Dachis said his re­search didn’t look at whether Cana­dian com­pa­nies re­ceived larger ben­e­fits. He hopes the re­port will fo­cus dis­cus­sion on the best way to en­sure the Cana­dian en­ergy sec­tor keeps up with its Amer­i­can com­peti­tors. “If we spend more of our time de­bat­ing things like emis­sion pric­ing and don’t re­ally look at what it’s go­ing to take to get pipe­lines built, we’re not look­ing in the right places.”

There’s a re­ally smart de­sign to the car­bon tax in Al­berta, be­cause it’s a two-part sys­tem.


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