Windsor Star

Wary oilpatch looks for opportunit­ies as Canada, U.S. amp up climate targets

Energy execs see goals as achievable but absence of specific plans, rules irks them

- GEOFFREY MORGAN

As Canada and the United States announced new, more aggressive climate targets Thursday, oilsands producer Cenovus Energy Inc. said it, too, was working to set new emissions goals.

Cenovus is among the Canadian companies expected to be affected by the new U.S. climate targets, as it has stakes in refineries in Ohio and Texas and also recently acquired more U.S. refineries as part of its blockbuste­r $9-billion deal to buy Husky Energy Inc.

“We will be completing an analysis to set new near-term ESG (environmen­t, social and governance) targets, including for emissions, this year that align with our revised long-term business plan for the combined company,” Cenovus spokespers­on Reg Curren said in an email, adding that both Cenovus and Husky had made net-zero emissions pledges in recent years.

At a summit of global leaders to mark Earth Day, U.S. President Joe Biden set emissions targets that are more stringent than the targets previously put forward by former president Barack Obama, which were then set aside by his successor Donald Trump.

The U.S. is now pledging to cut its emissions by 50 per cent to 52 per cent below 2005 levels by 2030 — a move that is expected to reverberat­e across the Canadian oil and gas companies with significan­t assets in the U.S.

In lockstep with the U.S., Canada also set a more aggressive emissions reduction target, pledging to reduce emissions by 40 per cent to 45 per cent below 2005 levels by 2030 as part of an updated Paris Agreement commitment. Canada's previous target was a 36-per-cent reduction below 2005 emissions.

“Canada is a committed partner in the global fight against climate change, and together we will build a cleaner and more prosperous future for all,” Prime Minister Justin Trudeau said in a release, announcing the country's new emissions targets.

But the absence of specific plans or regulation­s for achieving emissions reduction goals irked some executives in the energy sector, even while they said the targets could be met.

“These are obviously extremely aggressive targets being laid out by leaders in Canada and the U.S. and I think there's an absence of process or plan behind the targets,” Precision Drilling Corp. president and CEO Kevin Neveu said on an earnings call. Precision operates a fleet of rigs in Canada and the United States.

“I think that from a drilling perspectiv­e, getting to zero or near zero, or certainly the targets that they've talked about which are 40- and 50-per-cent reductions, are achievable,” Neveu said, adding the company has already switched some of its rigs fuelled by diesel to power from renewable energy-powered electricit­y grids.

TC Energy Corp., which owns a network of oil and gas pipelines in Canada and the U.S., said in an emailed statement it “sees tremendous opportunit­y in energy transition.”

“Billions of dollars of new investment­s will be required in the world's shift to lower GHG emission energy. As part of our contributi­on, TC Energy is investing in several renewable energy and GHG reduction projects,” the company said. TC Energy recently sought bids to power its existing pipelines in the U.S. with renewable energy.

Indeed, a shift in U.S. federal policy has highlighte­d the potential business case for carbon in Canada, said Robert Fitzmartyn, an analyst at Stifel First Energy.

“We expect E&PS (exploratio­n and production companies)... to advance carbon sequestrat­ion initiative­s, to continue to explore ways to monetize what is effectivel­y the creation of a new business. We would expect credible proposals on hydrogen-based initiative­s as well, as E&PS chase availabili­ty of capital to aid in reducing overall costs ahead,” Fitzmartyn wrote in a note earlier this week.

The American Petroleum Institute, which finally agreed to back a carbon tax in the U.S. this year, said climate regulation­s need to be “workable for all industries, support access to capital for all sectors and avoid a one-size-fits-all, prescripti­ve approach that would only stifle the innovative work underway in the private sector to manage climate-related risks and opportunit­ies.”

Some observers though, expect to see new carbon border taxes in both Canada and the U.S. to address the risk of carbon leakage.

It is critical for both Canada and the U.S. to establish border carbon adjustment­s, said Tristan Goodman, president of the Explorers and Producers Associatio­n of Canada, which represents small- and mid-sized oil and gas producers.

“It seems really inappropri­ate if those two countries are showing leadership, but we're continuing the import of goods and products that are not having the same stringency on carbon applied,” Goodman said, adding that he was encouraged to see the feds include plans for a carbon border adjustment tax in the federal budget this week.

“Our members have already pivoted and moved their companies to meet the new regulation­s,” he said, adding, “We need to see what directions government­s are going to take to implement these targets.”

Environmen­tal groups, however, want to see Canada set even more lofty targets, in line with its G7 peers. “While we would have liked to see Canada match the U.S. on climate ambition — and we hope the target settles at 45 per cent rather than 40 per cent — targets are only part of the picture,” said Merran Smith, executive director at Clean Energy Canada. “New targets provide direction and motivation, but the long and hard work of meaningful climate action comes in the years that follow.”

 ?? VINCENT MCDERMOTT FILES ?? The new and more aggressive U.S. climate targets are expected to reverberat­e across the Canadian oil and gas companies with significan­t assets in the U.S., including Cenovus.
VINCENT MCDERMOTT FILES The new and more aggressive U.S. climate targets are expected to reverberat­e across the Canadian oil and gas companies with significan­t assets in the U.S., including Cenovus.

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