Green rules are cost­ing hun­dreds of mil­lions: CAPP

EN­ERGY

National Post (Latest Edition) - - FINANCIAL POST - Jess Snyder

• 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.

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