With an election coming, updates on Alberta energy policy

pembina energy alberta 2019With a provincial election looming large in Alberta, the Pembina Institute released a new publication, Energy Policy Leadership in Alberta, on March 8,  with  this introduction: “Like most Albertans, we want to see the responsible development of oil and natural gas. The province’s policy and regulatory environment must ensure that our resources are produced in a manner that is both economically and environmentally sustainable. … Alberta’s future as an energy provider is directly linked to an ability to demonstrate a demand for its products in a decarbonizing world. With the right policies, Alberta can be competitive, attract investment, spur innovation and remain a supplier of choice in the global energy market.”  The 17-page document, intended to reach across political partisan thinking, continues by outlining 23 policy recommendations “to unleash innovative technologies, deploy renewables, promote energy efficiency, continue greening our fossil fuel industries, and reduce climate pollution.”

The Alberta government itself is active in getting out its story about its energy policies.  Most recently, the Alberta Climate Leadership Progress Report  was released in March 2019, documenting the fiscal year of April 1, 2017 to March 31, 2018 –  the first year Alberta collected a carbon levy.  The report states that a total of $1.19 billion of carbon revenue was invested back into the economy that year, and a press release of March 7  catalogues the impacts, including:

  • Climate Leadership Plan (CLP) investments have supported more than 5,000 jobs in 2017-18. CLP commitments, such as the Green Line in Calgary, will support a further 20,000 jobs in the coming years.
  • Combining 2016-17, 2017-18 and 2018-19 fiscal years, a total of $978 million in rebates has made life better and more affordable for lower- and middle-income Albertans.
  • The solar industry in Alberta has grown by more than 800 per cent…. About 3,100 solar installations have been completed across the province.
  • Alberta is forecast to cut emissions by more than 50 megatonnes in 2030.

Further press releases from the government :

“Alberta solar on the rise“: (Feb. 15) announced a new contract for  solar electricity with Canadian Solar,  to run from 2021 to 2041,  at an average price of 4.8 cents per kilowatt hour, sufficient  to supply approximately 55 per cent of the government’s annual electricity needs while creating jobs in Southern Alberta.

Premier’s plan unlocks $2-billion energy investment” (Feb. 20) announced that the province will provide up to $80 million in royalty credits, funded through the Petrochemicals Diversification Program , to support phase one of the a Methanol production project by Nauticol Energy  . Construction is scheduled to begin in 2020, with a commercial operational date set for 2022; the government states that the project will create “as many as 15,500 construction jobs and an additional 1,000 permanent jobs.”

The Alberta Community Transit Fund announced a program which will provides $215 million over 4 years .  The press release lists 33  municipal projects awarded funding  on March 7, 2019.

Supreme Court rules in Redwater: bankruptcy is no escape from “polluter pays”

Supreme court of canada buildingOn January 31, the Supreme Court of Canada released a long-awaited, precedent-setting decision which holds fossil fuel companies responsible for the clean-up costs of their abandoned operations, and gives environmental clean-up costs precedence over other creditors’ claims.  The case arose from the 2015 bankruptcy  of Redwater Energy, a small, Calgary-based oil and gas company; the agent managing the  bankruptcy was proposing to  sell the company’s  profitable wells to pay off debts, and leave the clean-up costs of the other non-producing wells to the Orphan Well Association (OWA), a provincial, industry-funded agency.  The Supreme Court provides its own “Case in Brief” summary of the the case,  Orphan Well Association v. Grant Thornton Ltd.  here , with links to all the official documents.  The full decision is here ; French-language versions of the Case in Brief , and the full decision are also provided. The response by the Orphan Well Association is here  .

For a brief reaction:  “Redwater decision reassuring, but we aren’t out of the woods” by the Pembina Institute (Jan. 31) or from the  National Observer special series Legacy of Liabilities ,  a summary of the decision  and the more detailed, “Alberta lauds court ruling but has no oil well cleanup plan”

Deeper background and analysis appears in  “Alberta’s Mega Oil and Gas Liability Crisis, Explained” in The Tyee , in which Andrew Nikoforuk asks, “Just how will an increasingly indebted industry, hobbled by low energy prices and rising costs, find the up to $260 billion needed to clean up its inactive pipelines, wells, plants and oilsands mines as it enters its sunset years?”  He concludes with words from Regan Boychuk, a founder of Reclaim Alberta, an advocacy group which began in 2016 to propose an Alberta Reclamation Trust , which would clean-up inactive wells and provide funding for job creation in the energy sector.   Boychuk’s own insider’s view appeared in the National Observer as “Putting the Supreme Court’s Redwater decision in context”  (Feb. 1) .  (Boychuk also provided a briefer Opinion piece as a guest blogger in David Climenhaga’s Albertapolitics.ca ).

Other detailed articles:  An Explainer from The Narwhal: “What the Redwater ruling means for Alberta’s thousands of inactive oil and gas wells”  or from a legal point of view, from Osler law firm, “Supreme Court of Canada decision in Redwater: Early Implications “. 

It is clear that the implications of this decision are huge and expensive, not only for Alberta, but for all extractive industries across Canada.  As the Pembina Institute points out:  “obligations have steadily grown, and now include over 80,000 inactive oil and gas wells, facilities, and pipelines as well as 1.4 trillion litres in fluid oilsands tailings. The Government of Alberta officially estimates it will cost CAD$57 billion to cleanup these sites, though there are ongoing concerns about the accuracy of this figure. Conversely, only $1.2 billion is currently held in securities to protect the public. ”  (A joint investigation by the National Observer, Global News, the Toronto Star, and StarMetro Calgary  in November 2018 estimated that the actual clean-up costs are approximately $260 billion in Alberta alone).

The latest analysis: What does Canada gain from the Trans Mountain Pipeline purchase?

pbologoInto Canada’s highly sensitive and highly political debate over pipelines comes the report on January 31 from the Parliamentary Budget Officer (PBO) :  Canada’s purchase of the Trans Mountain Pipeline – Financial and Economic Considerations . The report provides an overview and timeline of the negotiations and federal government purchase of the pipeline and its assets from Kinder Morgan, in August 2018 . The PBO financial analysis estimates that the $4.4 billion  price paid by the government  was at the high end of the value, and calculates the effects of construction delays or higher construction costs on the price that the Government could negotiate for its re-sale –for example, a one year delay would result in a loss of value $693 million. The report finds that the economic benefits relate to the pre-construction and construction periods: impact on GDP is estimated to peak at 0.11 per cent in 2020; impact on employment is estimated at  7,900 in 2020, with both declining thereafter.

“The main benefit of the TMEP would arise from the increased capacity of Canadian producers to sell oil to export markets, which could lead to a reduction in the differential between Western Canadian Select (WCS) grade of crude oil and other grades, most notably West Texas Intermediate (WTI).”  Stating “It is difficult to determine the impact of the TMEP on the price differential between WTI and WCS grades”, the report refers to estimates in its December 2018 report to Parliamentarians, and flags the other factor which might affect the economic impact, which is “increasing transportation capacity.”

Coinciding with the PBO report, the National Observer has brought an article out of its archives, which critiques the economic arguments used by supporters of the Trans Mountain purchase. “False oil price narrative used to scare Canadians into accepting Trans Mountain pipeline expansion” was written by Robyn Allen, and was originally published in November 2018.  More recently, she has also written,  “What Bill Morneau didn’t tell Canadians about the Trans Mountain Purchase” (Dec. 5 2018)  and an Opinion piece “Trudeau’s oilsands supply outlook reflects a future that doesn’t exist” (Jan. 25 2019)  , which concludes: “It is madness pretending that Trans Mountain’s expansion is financially or economically viable. A return to sanity begins with getting realistic about the supply of heavy oil in a world that knows — even if Trudeau won’t take his head out of the oilsands — that neither the economic system nor the ecosystem can, or will, support rapid oilsands growth.”

orcasagainstvancouverskylineFor coverage of both the economic and environmental aspects, follow the National Observer Special Reports on Trans Mountain.  An up-to-date review of the  environmental arguments by experts Marc Jaccard and Kirsten Zickfeld  appears there in “IPCC authors urge NEB to consider climate impacts of Trans Mountain pipeline expansion” (Jan. 21).

The National Energy Board documentation about all stages of the Trans Mountain Expansion project is here (and  here for French documentation).  Information about the current Reconsideration process is here   (and here in French); the deadline for the Reconsideration report to the government is February 22, 2019.

New report recommends mandatory financial disclosure of climate-related risks for Canadian companies

iisdleveraging-sustainable-financeThough written mainly for a financial audience, a new report from the International Institute for Sustainable Development (IISD) is relevant to the livelihoods and pensions of all Canadians.  Leveraging Sustainable Finance Leadership in Canada: Opportunities to align financial policies to support clean growth and a sustainable Canadian economy was released on January 16,  examining and making  recommendations for Canadian companies to disclose climate change risks to their shareholders and to the public. A press release summarizes the report.  Why is it so important?  It concludes with an analysis of financial disclosure in the oil and gas industry, (found in Annex E), and this warning about the dangers to us all of stranded assets: “When these emissions are counted via proved and probable reserves, as disclosed by Canadian oil and gas companies, a picture emerges of significant, undisclosed—and therefore unaddressed—risks to Canadian companies, financial institutions, pension beneficiaries and savers…. Once the implications of the Paris Agreement are fully priced into the market, oil and gas asset valuations will shift. If this change is sufficiently large, debt covenants may be triggered in companies. This will in turn impact financial institutions, including banks, insurance companies and pension funds. Debt downgrading could ensue, and bank capitalization thresholds could be impacted.” (And a related risk for oil and gas companies:  in December 2018, the Canadian Shareholders Association for Research and Education (SHARE) joined an international campaign for improved disclosure by oil and gas companies of the water-related risks of their operations ).

What is to be done?  Canada’s transition to a lower carbon economy requires private investment capital, and Canada’s financial markets cannot operate in isolation.  Canada has a lot of regulatory “catching up” to do regarding climate risk, (outlined in “Data Gap” in Corporate Knights magazine in May 2018) , and  evidenced by the examples given throughout the report of current practice amongst  European Union , G7 and G20 countries. The report shows the state of  Canadian regulation, with  frequent reference to the two major Canadian studies to date on the issue:  the Interim Report of the government-appointed Expert Panel on Sustainable Finance (Oct. 2018), and the Canadian Securities Association Staff Notice 51-354 (April 2018).  In Leveraging Sustainable Finance Leadership in Canada, author Celine Bak, sets out a three-year policy roadmap for Canada, calling for Canadian laws and statutes to be updated to require mandatory disclosure of climate risk by 2021. The report also calls for the Toronto Stock Exchange to  join the UN Sustainable Stock Exchanges Initiative, and that the the Canada Pension Plan Investment Board  be required to report on the climate change risks which might affect its fully-funded status.  Detailed and concise summaries are provided in the Annexes, titled:  “An Overview of the Key Reports on Corporate and Financial Sector Climate- and Environment-Related Disclosure”; “G20 and G7 Precedents for Implementation of TCFD Recommendations in Canada”; and  “Analysis of EU Sustainable Finance Proposed Actions, EU Laws and Canadian Equivalents”.

Expect more discussion and publications about sustainable finance issues, as Canada’s Expert Panel  concludes its public consultations at the end of January 2019, and releases its final report later in the year.  The European Union Technical Expert group on Sustainable Finance (TEG) is also expected to report in June 2019,  and the international  Task Force on Climate-Related Financial Disclosures Task Force will publish a Status Report in June 2019,  updating its first report,  published in September 2018, with analysis of disclosures made in 2018 financial reports .

Canada at COP24: Summary and reaction

COP24-table of delegatesIn the wee hours of Saturday December 16, after a dramatic extension of negotiations, the Katowice Climate Change Conference of the Parties (COP24) concluded with the adoption of  the Katowice Climate Package.   The meetings had brought together over 22,000 participants, including nearly 14,000 government officials, over 7,000 representatives from UN bodies and agencies, intergovernmental organizations, and civil society organizations, and 1,500 members of the media.  What was accomplished?    IISD Reporting Services provides an overview summary of accomplishments,  and a 34-page compilation of official decisions . For a more readable general overview, the UNFCC summarizes and links to the highlights in a release on December 14 , including reports and developments of civil society participants. Next steps for the international negotiators: Another round at  COP 25 in Chile in November 2019.  In preparation, UN Secretary-General Antonio Guterres will convene a Climate Summit in New York City in September 2019 .

Canadian reaction to COP24:  As characterized by Elizabeth May, leader of Canada’s Green Party – there was a dual agenda at the COP24  meetings: first,  to agree on  the “Paris Rule Book”,  which will govern a shared approach to calculating and reporting on the specific items required under the  Paris Agreement, and secondly, to respond to the urgency and dire warnings of the October IPCC report to hold global warming to 1.5 degrees C.  Recognizing the difficulty of achieving any level of agreement in the politically fraught atmosphere of 2018, reaction in Canada and internationally was generally positive and aimed to put the best light possible on the failure to resolve other points, such as more ambitious GHG reduction targets.

From Canadian sources:COP24 delivers progress, but nations fail to heed warnings of scientists”  (Dec. 15) from the Climate Action Network Canada; “The Hard Work Starts Now as COP Delivers Incomplete Rule Book, Low Ambition”   from the Energy Mix (Dec. 18); “Environmental activists frustrated COP24 deal not strong enough” at CBC ; and from Greenpeace Canada  “COP24 ends without firm promises to raise climate action and ambition.”   More critical comments come in “Trudeau government fails to take bold action at COP24 to avoid climate breakdown” (Dec. 16)  and  “McKenna’s global carbon market plan more charade than genuine climate action”   both  by Brent Patterson in Rabble.ca.  On December 14, CBC broadcast an interview with Elizabeth May , where she asks  “Do we want to survive or not?” , criticizing the focus on bureaucratic process which interfered with addressing the fundamental question of how to reduce emissions.

What did Canada achieve at COP24?:  Canada’s  Minister of Environment and Climate Change pledged to improve Canada’s emission reduction targets on December 5 before she travelled to Katowice, and once there, signed on to the statement of the “High Ambition Coalition” , (along with    the Marshall Islands, Fiji, Ethiopia, EU, Norway, U.K., Germany,  New Zealand and Mexico), pledging to enhance their Nationally Determined Contributions under the Paris Agreement by 2020.

Regarding coal phase-out, the government’s official  statement  was issued on December 13,  highlighting  Canada’s continuing leadership role in the Powering Past Coal Alliance, which was co-founded by Canada and the U.K. in 2017.   On  December 12, Canada made good on its 2016 pledge to phase out traditional coal-fired electricity by 2030 by publishing the final regulations for that effort in the Canada Gazette .

Regarding Just Transition:  Previous WCR posts (Dec. 6  and Dec. 11  ) summarized the many Just Transition publications and events at COP24.  Canada, along with 40 other jurisdictions, was a signatory to the  Solidarity and Just Transition  Silesia Declaration  put forth by host country Poland.  In the Climate Action Network Canada  press release at the conclusion of COP24, Donald Lafleur, Executive Vice-President, Canadian Labour Congress is quoted by Climate Action Network as saying:   “Canada’s trade unions applaud Canada and other parties for signing on to the Solidarity and Just Transition Silesia Declaration. We hope to see a commitment to a just transition that is tied to human rights and helps drive a more ambitious climate action plan designed to keep global warming below 1.5 degrees.”  The Environment and Climate Change Minister joined the Canadian Labour Congress and the Just Transition Centre at the side event,  Unions in Action on Just Transition,  on December 10, yet she did not release the recommendations of the federal Task Force on Just Transition for Canadian Coal Power Workers and Communities .  Personal testimony of Just Transition came  from Roy Milne, a coal miner and the president of United Steelworkers Local 1595 in Wabamun, Alberta, who calls himself part of the first group at the first coal mine to be  phased out in Canada. “Some jobs in new energy industries come with a pay cut of $50K: coal miner” is an interview with Mr. Milne, was broadcast on CBC’s The Current on Dec. 13, in which he states that currently, “a basic operator earns $80,000-$100,000 per year, with additional benefits and a defined pension scheme. An electrician retraining as a renewable energy technician would go from that salary to $45,000-$50,000 per year.”

Other issues: The Minister’s  own Statement at the conclusion of COP24 says that “Canada also played a leading role in laying the groundwork for a global carbon market, to help mobilize the billions of dollars of investments needed to tackle climate change” and “ Canada took part in the Carbon Pricing Leadership Coalition, encouraging all countries around the world to use the most cost-effective tool to reduce emissions.”  The details of that global carbon market remain unspecified.  In another press release,  the government announced that it will support increased participation by Indigenous people in international climate talks, by  providing  $800,000 over four years to to enable the creation of the Indigenous Peoples Focal Point at the United Nations Framework Convention on Climate Change. “The Focal Point will coordinate and lead work on issues related to Indigenous Peoples and climate change, promote awareness of Indigenous perspectives on climate change, and serve as a technical expert and advisor.”

And yet, with all the pledges and announcements, it must be noted that right after COP24, on December 18, the government of Canada announced    a $1.6 billion aid package for Alberta’s oil companies.  The National Observer article summarizes this in “Sohi announces $1.6 billion to help Alberta oil patch”  and quotes Minister Sohi: “ These are commercial loans, made available on commercial terms. We have committed to phasing out inefficient fossil fuel subsidies by 2025, and we stand by that commitment.” However, as stated in a press release from Environmental Defence    “At COP24 in Katowice, Minister of Environment and Climate Change Catherine McKenna announced that Canada would increase the ambition of its targets to cut carbon pollution. Less than two weeks later, her Cabinet colleagues, Minister of Natural Resources Amarjeet Sohi and Minister of International Trade Diversification Jim Carr, are using public money to make Canada’s already-weak targets even harder to achieve.”