Alberta Premier Danielle Smith did not mince words over Ottawa’s new greenhouse gas emissions cap announced Monday.
“I’m pissed — I’m absolutely angry,” Smith said at a news conference.
“We’ve been working with these guys for two years because we have a plan that would reduce emissions responsibly by 2050 and they continue to act like they are working collaboratively with us — then they come out with exactly same policy they put forward a year ago, with no changes whatsoever and then trying to mislead the public about the true intent.”
The Alberta premier said the cap violates Canada’s constitution, explaining Section 92A gives provinces exclusive jurisdiction over non-renewable natural resource development, “yet this cap will require a one million barrel a day production cut by 2030.”
Smith called the policy a “deranged vendetta” against the oil-and-gas producing province by federal Environment Minister Stephen Guilbeault.
Smith took a shot at the federal Liberals and leader Justin Trudeau at the news conference.
“They persist in this pathway which will harm our province and harm the country and that is not acceptable — not for a government that is what, 20 per cent in the polls? Not for a government that is on its way out the door.
“It cannot destroy the most important industry in the country by targeting our province with this kind of unilateral action. We just won’t stand for it.”
Smith said she plans to challenge the cap in court as soon as possible.
“I’ll get my justice minister working on it immediately and we’ll start drafting a motion under the sovereignty act,” she said.
Guilbeault announced regulations that will require oil and gas producers in Canada to cut their greenhouse gas emissions by about one-third over the next eight years.
Those regulations aren’t being enforced quite yet as they won’t be finalized until 2025.
For the Liberals, the regulations fulfil a 2021 election promise to force the energy sector to pull its weight in the fight against climate change.
Smith said the emission targets are unrealistic and will require oil and gas companies to reduce production levels. That means reduced revenue for the provincial government, she said, putting public education and social programs at risk.
Guilbeault said Conservative leaders like Smith are spreading climate change-denying misinformation.
“They will continue doing stupid things and we will continue focusing on helping Canadians,” he said on Monday in Ottawa. “Fighting climate change is difficult and it takes political courage.”
Guilbeault said production cuts won’t be necessary if existing technology like carbon capture and storage is widely implemented.
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The cap could cost 112,900 Canadian jobs by 2040, according to the Montreal Economic Institute (MEI), which calls itself a non-profit, non-partisan think tank and research organization.
MEI said capping emissions in the energy industry will cost Canadian workers while having only a negligible effect on the environment.
“This announcement has much more to do with Steven Guilbeault’s bias against the energy industry than effective environmental policy,” said Krystle Wittevrongel, director of research at the MEI.
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 to 35 per cent less than they were in 2019 sometime between 2030 and 2032.
Emissions from the sector already fell seven per cent between 2019 and 2022 — the most recent year that statistics are available — with similar levels of production.
The cap does not dictate what companies must do to meet the target, but Guilbeault said the government’s modelling suggests about half the cuts will come from reductions to methane.
Those cuts are already happening as oil producers install equipment to prevent the leaks of methane that were a major contributing source of emissions.
The rest will be divided between various technologies, including carbon capture and storage. Ottawa is expected to spend about $12.5 billion on a tax credit to encourage and assist companies to invest in those systems that trap carbon dioxide and return it to underground storage.
Under the proposed cap-and-trade system, each company will be given an emissions allowance equating to one unit per tonne of carbon pollution.
Companies that pollute less will be able to sell their leftover allowance units for profit, while companies that don’t reduce their emissions enough will have to buy allowance units from other companies to stay in compliance.
The idea is to get companies to invest in carbon-reduction technologies in order to curb their emissions without having to reduce their production.
Oil industry slams emissions announcement
However, Monday’s announcement was met with skepticism from industry stakeholders who warned such a measure would harm the sector.
Kevin Krausert worked in oil and gas for 20 years before launching clean energy transition studio and venture capital fund Avatar Innovations.
The company invests in energy transition technologies across the sector and Krausert said while the industry is under pressure to introduce more emissions reduction technologies, that is done by creating the investment case, making sure it’s globally competitive and having certainty for markets — and Monday’s emissions cap announcement will have the opposite effect.
“By removing oil and gas emissions from a functioning carbon market and potentially placing them into a new carbon market, that is cap-and-trade with an yet-undefined price, creates a whole level of uncertainty for investors.
“So the question we need to be asking ourselves is, how do we make emissions reduction technologies bankable and investable? And this has worked against that.”
Janetta Mackenzie, manager of the oil and gas program at the Pembina Institute, a clean energy think tank, said Monday’s announcement has been three years in the making and provides certainty for the industry.
“It’s a regulation based on what is technically achievable for the sector, but it will require action from the sector as well. This is not a business as usual scenario for sure,” she said.
“The idea is over time, this cap is tightened and made more ambitious until it’s aligned with net zero by 2050.”
Pathways Alliance is a consortium made up of Canadian Natural Resources Ltd. (CNRL), Cenovus, ConocoPhillips Canada, Imperial, MEG Energy and Suncor Energy. It represents about 95 per cent of Canada’s oil sands production.
President Kendall Dilling, who was previously Cenovus Energy’s vice-president of environment and regulatory, said an emissions cap gives the industry less — not more — of the certainty needed to make long-term investments that create jobs, economic growth and tax revenues for all levels of government.
Dilling said it simply makes Canada less competitive.
“The emissions cap is a misguided proposal that will drive cuts in oil and gas production and have a significant, negative impact on Canada’s economy as shown by several independent analyses,” Dilling said in a statement.
“A decrease in Canadian production has no impact on global demand — meaning another country’s oil will simply fill the void and the intended impact of the emissions cap is negated at a global level.”
Smith echoed that statement, saying the cap will hurt Canadians and hamper investment while enriching other oil-producing nations like Venezuela and Iran.
“Ultimately, this cap will lead Alberta and our country into economic and societal decline,” said a joint statement from Smith, Environment Minister Rebecca Schulz and Energy Minister Brian Jean.
MEI agreed.
“By targeting Canadian producers, the federal government has no effect on global oil demand,” said Wittevrongel.
“Ultimately, every barrel of oil Ottawa keeps in the ground here will be replaced by a barrel of oil produced elsewhere in the world.”
Pathways Alliance said Canada needs a strong economy with all sectors contributing.
“Rather than singling out oil and gas with an unworkable regulation, Pathways would invite Ottawa to continue to work with us on finding real solutions to the climate challenge without unnecessarily harming Canadians’ economic well-being,” Dilling concluded.
The Canadian Association of Energy Contractors (CAOEC) also rejected the federal government’s proposed emissions cap.
“The Trudeau government does not care about Canadian blue-collar, middle-class energy workers who rely on the industry to support their families,” said a statement from the organization that represents 95 land drilling, offshore drilling, and service rig member companies.
“It does not care about small, medium, and Indigenous energy service businesses that operate in rural and remote communities across Western Canada. And it certainly does not care about supporting our allies who are desperate for oil and gas from sources other than regimes such as Russia or Iran.”
The CAOEC said it looks forward to working with the Alberta government to oppose the federal government’s recent policies and encourage the provinces to utilize all available tools to constitutionally block implementation.
The Canadian Association of Petroleum Producers (CAPP) issued a similar scathing statement, saying the proposed emissions cap will be an unnecessarily complex layer on top of an already overly complex web of energy and climate regulations across the country, and drive away investment in Canada.
“The result would be lower production, lower exports, fewer jobs, lower GDP, and less revenues to governments to fund critical infrastructure and social programs on which Canadians rely,” said CAPP President and CEO Lisa Baiton.
Meanwhile, environmental group Sierra Club Canada praised the federal move, saying as the Alberta government “leans disturbingly towards climate denialism,” strong climate policies have never been more urgent.
The regulations won’t be finalized for months and are scheduled to come into force in 2026 — after the next federal election.
— With files from Mia Rabson and Nick Murray, The Canadian Press