Energy Minister Tim Hodgson said he is “highly confident” that Alberta oil sands companies can absorb the cost of building carbon capture infrastructure, despite their protests that Canada’s climate rules hurt their global competitiveness.
Carbon Pricing Agreement Reached
Prime Minister Mark Carney’s government reached an agreement earlier this month with Alberta on the trajectory of its industrial carbon price. This regime forces heavy polluters to pay for carbon emissions but also generates credits for cutting greenhouse gas outflows. The deal was a crucial step toward building the $16.5 billion Pathways carbon capture project for the oil sands, which Carney has said is a necessary condition for approving a new crude oil pipeline to Canada’s Pacific coast.
As the negotiations unfolded in recent months, oil companies began publicly arguing that the carbon price imposes a cost on the Canadian industry that other major oil producers do not bear. In Hodgson’s view, those companies were mainly protesting that they were not directly at the table for the talks, he told Bloomberg in an interview.
Engagement to Follow Framework
“The reality is the federal government and the provincial government had to agree on what the framework for carbon pricing was before we got them to the table,” Hodgson said. “Now that that’s been done, the engagement will happen. I am highly confident that given how we’ve structured this, that the cost of Pathways can be readily absorbed.”
The project, spearheaded by five of the largest oil sands companies including Cenovus Energy Inc., Imperial Oil Ltd., and Suncor Energy Inc., would capture carbon dioxide from multiple facilities and transport it more than 400 kilometres by pipeline to a storage hub in eastern Alberta, where it would be stored underground.
Emissions Reduction Targets
The new agreement targets 16 million metric tonnes of annual emissions reductions from Pathways — but gradually over the next two decades. The first phase, to be completed by 2035, would build enough carbon capture to remove 6 million metric tons annually. Hodgson said the hope is that technology will have substantially advanced by then, opening up more choices.
“I think you’re going to see a bunch of new technologies that are going to get cheaper and cheaper and cheaper, and that’s going to create options for the Pathways folks,” Hodgson said. He cited direct air capture and forms of pre- and post-combustion carbon sequestration as examples of how the technology may change. But he also said the emissions reductions could take the form of using small modular nuclear reactors to power oil sands operations.
“If your heat source was nuclear, you would dramatically drop the carbon intensity because you wouldn’t be burning the natural gas,” Hodgson added.
Competitive Disadvantage Concerns
Kendall Dilling, president of the Oil Sands Alliance, which represents the five companies behind the Pathways project, said the carbon price is still a “competitive disadvantage” for the Canadian oil sector — but added that a new oil pipeline for exporting to Asia does affect the calculus.
