Alberta would have been much more likely to subsidize a big carbon capture and storage megaproject in the province’s oilpatch if the New Democrats’ Rachel Notley had been returned to power, a retired pipeline executive said this week.
But instead, while Danielle Smith’s United Conservative Party celebrated Monday’s election win in Alberta, the province’s oil and gas sector remained in the dark over how much financial largesse it can expect from the new government for its own peculiar version of decarbonization, The Canadian Press reports.
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Smith has long cast herself as a champion of Alberta’s dominant industry, a sector that already leans conservative in a traditionally conservative province, said Dennis McConaghy, a former executive vice-president at TransCanada Corporation, the Calgary-based pipeliner now known as TC Energy.
However, McConaghy said he views Monday’s election results as a “mixed bag of pluses and minuses” for Alberta fossils.
“I mean, there’s no question—in their bones, they’re UCP supporters,” McConaghy said of Alberta’s corporate oil and gas leaders, who were likely heartened by Smith’s victory speech Monday evening.
During that speech, the premier-elect once again vowed to fight the federal government’s proposed emissions cap on the oil and gas sector, which many Albertans fear threatens to curtail the industry’s growth.
“As premier, I cannot under any circumstances allow these contemplated federal policies to be inflicted upon Albertans. I simply can’t and I won’t,” Smith said.
Right now, Alberta’s fossil sector is seeking additional government support for the tens of billions of dollars in decarbonization projects it’s been pitching as its own version of helping Canada reach net-zero greenhouse gas emissions by 2050. The Pathways Alliance, the fossil consortium and lobbying shop whose six members account for 95% of the country’s oil sands production, is promising a C$24.1-billion carbon capture hub and associated new infrastructure for the province’s oil sands.
But the Alliance is steadfastly refusing to finalize those plans or more generally invest in emission reductions without more lavish taxpayer support. That’s despite soaring, record profits last year, and even after the $7.1-billion CCS tax credit announced in the 2021 federal budget.
McConaghy told CP it’s unclear whether Smith—who is widely expected to take a combative stance in her dealings with the federal government in Ottawa—will be willing to supplement that federal financial support.
“There’s no question that Notley, had she been elected, would have been much more inclined to have supported that. In the case of Smith’s government, I think it’s a more open question,” he said.
But for a vast project like the carbon capture hub to be economical—even in the very unlikely event it stayed on time and on budget—McConaghy said companies need to be confident that the federal price on carbon will continue to rise. And Smith’s victory may be seen by some as indicative of a political swing to the right in this country, which might make companies hesitant to make long-term decisions until after the next federal election.
“I do think the business risk (for investing in carbon capture) has gone up,” he said.
Simon Dyer, deputy executive director of the Pembina Institute, said he doesn’t believe oil and gas companies need more financial incentives for carbon capture. But he told CP they do need clear emissions reduction targets and appropriate regulations to encourage them to invest.
He said that’s a missing piece from the emissions reduction plan the UCP laid out earlier this spring, just prior to the campaign. While the plan commits Alberta to getting to net-zero by 2050, it sets no interim targets at all—which may serve to create investor uncertainty, he said.
“To get to 2050, there needs to be some commitment to some kind of short-term goals,” Dyer said.
Adam Legge, president of the Business Council of Alberta, whose members include the CEOs of some of the province’s largest companies, said fossils want a premier who will stand up against federal policy that “just doesn’t fit” for Alberta.
But he said industry also wants the provincial government to work effectively and collaboratively with Ottawa to come up with solutions.
He said his organization has been lobbying for provincial subsidies that can be “stacked” with the federal CCS tax credit.
That would help put Alberta companies on similar footing to those south of the border, where the U.S. Inflation Reduction Act offers significant financial incentives for companies capturing and storing carbon.
“Alberta has such a tremendous opportunity, but we do need to be competitive with the United States,” Legge said.
“I’m hoping that with the new mandate, that they (the UCP) will be more aggressive in finding some stackable contribution—working with industry and the federal government to find something that works for Alberta.”
Independent analysis has found that Canada’s CCS subsidies are already on a par with the 45Q CCS tax credit in the U.S.
The main body of this report was first published by The Canadian Press on May 30, 2023.
