Oil and gas companies to cut GHG emissions by a third

Photo: Victor R. Caivano Associated Press A truck hauls oilsand at Suncor’s facility near Fort McMurray, Canada, in September 2023. Upstream oil and gas operations, including production and refining, contributed about 31 per cent of Canada’s total emissions in 2022.

Mia Rabson – The Canadian Press in Ottawa

Published at 8:43 a.m.

• Canada

Canada's oil and gas producers will have to cut their greenhouse gas (GHG) emissions by about a third over the next eight years under new regulations released Monday by Environment Minister Steven Guilbeault.

The regulations, which are still in draft form and about two years behind schedule, could further damage relations between Ottawa and the Alberta government, which recently launched a $7-million ad campaign to “remove the cap.”

For the Liberals, the regulations fulfill a 2021 election promise to force the energy sector to do its part to fight climate change.

In an interview with The Canadian Press, Guilbeault said everyone needs to “do his fair share.”

The minister is scheduled to hold a news conference Monday afternoon with his Natural Resources colleague, Jonathan Wilkinson, to unveil details of the plan.

Mr. Guilbeault noted that the oil and gas industry is a major source of emissions, but has done less than most other sectors to reduce them in the fight against climate change.

“I think most Canadians — even those who aren't my biggest fans — would agree that it's not acceptable for a sector to not do its part, and that's what these regulations are primarily about,” he said.

Upstream oil and gas operations, including production and refining, contributed about 31 per cent of Canada's total emissions in 2022.

The regulations propose to force emissions from upstream oil and gas operations to fall by 35 per cent from 2019 levels between 2030 and 2032.

Emissions from the sector have already fallen by 7 per cent between 2019 and 2022 – the most recent year for which statistics are available – with similar levels of production.

Production unchanged, Ottawa says

Guilbeault is aware there will be backlash, but he says he is committed to meeting the Liberals' climate goals. The government is also adamant that the regulations can be implemented with existing technology, without reducing production.

Guilbeault said federal models show that even with the regulations, oil and gas production will still increase by 16 per cent by 2032, compared to 2019.

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The minister argues that reducing emissions from Canada’s oil sector is the only way for Canadian oil to remain competitive in a world that is increasingly looking for the greenest option available.

“In a world where carbon emissions are limited, the people who are going to continue to demand oil are going to demand low-emission oil,” he said. “And if our companies and our oil and gas sector don’t make the investments to make that happen, they’re not going to be able to compete in that world.”

The cap doesn’t dictate what companies must do to meet the target, but Guilbeault noted that modelling suggests about half of the reductions will come from cutting methane emissions. Those reductions are already happening, as oil producers install equipment to prevent methane leaks that were a major source of emissions.

The rest will be spread across various technologies, including carbon capture and storage. Ottawa is expected to spend about $12.5 billion in tax credits to encourage and help companies invest in these systems that trap carbon dioxide and send it back into underground storage.

The broad outlines of the policy were outlined nearly a year ago when Guilbeault released a “framework” for the plan, which promised to force emissions from upstream oil and gas production to fall until they were 35 to 38 per cent lower in 2030 than in 2019.

The draft regulations, which will be open for public comment until January 2025, ultimately settled on the lower end of that range. Guilbeault says the decision came after lengthy discussions about what could be regulated without forcing a decline in production.

Impacts expected in Alberta

Production is expected to be at the heart of the debate when the regulations are released Monday. Several economic studies based on the December 2023 framework have indicated that the only way to meet the targets is to reduce production.

The Conference Board of Canada said in March that overall oil and gas production would increase by about 14% without an emissions cap and 1.6% with an emissions cap. The organization predicted that government revenues, particularly in Alberta, would be significantly lower as a result.

It also predicted that job growth would be slower, with a greater impact in Alberta.

Goldy Hyder, president of the Business Council of Canada, argued in a statement before the emissions regulations came into effect that imposing a cap was a bad decision for the country.

He said the cap would hurt the economy, restrict cross-border energy trade with the United States and make climate policy “even more incoherent and uncompetitive.”

Alberta Premier Danielle Smith has vowed to fight emissions caps, saying they would be a “devastating blow” to her province’s economy and jobs.

Last weekend, members of Smith’s ruling United Conservative Party voted overwhelmingly in favour of a resolution to scrap the province’s plans to cut emissions and declare carbon dioxide an essential element, not a pollutant.

Conservative Leader Pierre Poilievre has also promised to scrap the emissions cap regulations.

A “win” for Guilbeault

The regulations won’t be finalized for months, and it’s possible that the next federal election be held before it actually comes into force.

For Steven Guilbeault, the implementation of these regulations in a fight against climate change that he says has become so politically charged that even progressives are wavering, seems like something to celebrate.

“In this day and age, where climate change is caught up in this culture war that we see in many parts of the world, being able to continue to advance progressive policies to fight climate change is a big victory in itself,” he said.