The Alberta government’s political, economic and environmental stance has shifted dramatically since May 2015, and the province’s energy sector has been at the center of the change.
Last spring, the new Alberta NDP government set a course for the province aimed at gaining social license for oil exports while modernizing the energy industry and diversifying the power sector. That the Alberta environment ministry is pricing carbon and working closely with the energy ministry on methane regulations and renewable electricity development speaks volumes about how the government views the relationship between the two sectors. In the middle of it all is Alberta environment minister Shannon Phillips, who’s now little more than a year into the job. Recently, Phillips sat down with Alberta Oil to discuss how her party’s policies are reshaping Alberta’s energy sector over the long term—and what those policies mean for the province’s primary economic driver.
Alberta Oil: Your government plans to phase out coal. What does a move like that say about the future of hydrocarbons in the province?
Shannon Phillips: Coal is the single largest GHG source globally. If the world is to meet international targets, coal emissions need to be addressed. This is why the industrialized world—the U.K., Canadian jurisdictions, the U.S—are all phasing out coal. Alberta burns more coal than the rest of Canada combined. With our plan to phase out coal emissions, GHG emissions will be significantly reduced. However, we took this decision also to clean up the air and reduce negative health impacts such as asthma and health costs as well as lost productivity.
We see natural gas as being an important asset to enable Alberta to make the transition to a lower carbon economy. This is in addition to having some of the best wind and solar opportunities in North America. As we go forward, we have set a target of 30 percent renewable energy leaving a large opportunity for domestic natural gas to supply most of the remaining 70 percent.
And what’s your view on “clean coal” technologies like carbon capture and sequestration?
The government is phasing out coal-fired emissions. If a company can achieve this without government subsidies via carbon capture and storage, that’s an option available to them.
These policies have a cost. Is there a benefit to the oil industry?
There are a number of benefits including restoring Alberta’s environmental reputation. There is no best-case scenario to continue to deny that climate change is real. By being climate laggards, this only creates market and investor uncertainty, denies Alberta market access for our products and threatens the Alberta economy. We’ve seen that the approach of previous federal and provincial governments is a dead end for Alberta’s economy. The way for us to move forward is to understand that Alberta now has a solid plan to reduce our emissions while understanding that we are an energy-based economy and we must take advantage of the other resources we have.
On top of the policies we’ve already mentioned, Alberta is also planning to curb methane emissions. Can you explain your thinking on that?
Our methane commitments—a 45 percent reduction by 2025—have set the bar for North America. After Alberta took a leadership position on that, British Columbia followed suit and then the federal government had something to talk constructively about with the U.S.—and we now are working towards a harmonized North American methane approach. In a very short period of time we changed the conversation from Barack Obama saying ‘I’m going to reject your Keystone XL pipeline due to your dirty oil’—his characterization—to this position where he was cutting and pasting our policies. I’m tremendously proud of that.
Why did you choose this form of carbon pricing and not Ontario’s cap and trade or B.C.’s revenue neutral carbon tax?
Most economists generally like the concept of a price on carbon because it is known to reduce emissions at the lowest economic cost to society. In Alberta, we have a different kind of economy than Ontario or British Columbia—it’s very energy intensive. B.C. has an economy-wide price on carbon at a similar level but they’ve chosen to take the results of that and simply recycle it into tax cuts. We have made some adjustments on the small business side—lowering their tax rate by 33 percent as well as ensuring that we have a robust rebate program for lower and middle income households. But Alberta’s economy is trade exposed and energy intensive, so it requires a certain way of carbon pricing. But it will also require some investments in new technology development as well as research and development to truly bend the curve, and we want to keep those funds and investments here in Alberta. That’s why we rejected cap and trade—because the last thing we need at a time like this is capital transfer somewhere else. Given that we are an energy producer that would be the consequence. What we are able to do is provide not just adjustments, for example, to small businesses, but to invest in abatement. We need to be able to invest in innovation and technology certainly in the oil and gas sector.
Is there going to be public investment in clean hydrocarbon technology?
We are looking at tens of millions of dollars being reinvested into technology that will get the carbon out of the barrel. There are other pieces too, like industrial efficiency and transportation. Moving those pieces—such as technology investment and clean tech—is actually what this economy needs. We have a very unique set of circumstances here. As we move towards a carbon-constrained world we need to ensure that our products remain competitive including being carbon competitive.
What have you learned about the oil industry that surprised you since you started the job?
The biggest thing that I’ve learned is that there’s so much appetite for collaboration with government to find answers on climate. At the end of the day the situation we inherited was not an unwillingness to address these issues from an industry perspective; the problem was the government. And so the level of collaboration we found was an enthusiasm to work together. In November 2015, several CEOs of oil sands firms met with several of the loudest environmental voices. All were standing on the same stage with indigenous peoples and Premier Notley and me. Essentially that showed that we’ve turned a page in this province. That spirit of moving the province forward has continued.
Are you launching a renewables support program in the fall?
Yes. Dr. Andrew Leach, chair of Alberta’s Climate Change Advisory Panel, recommended a competitive process unique to Alberta’s specific electricity market. It will be a bid process. The electricity system’s operator is consulting with generators, transmitters and distributors. They have prepared a report the government is now studying. We will release our plan by the fall with an eye to having that competitive procurement launch by the end of 2016.
Comparing Ontario with Alberta, how will you keep energy costs under control?
Our two systems are very different. Ontario is dominated by nuclear power and a more centralized electricity market, whereas Alberta has a fossil fuel base with a competitive electricity market. Ontario’s program will be almost 10 years old by the time our first renewables are up and running, and prices have dramatically decreased over that timeframe. We’ve also learned a lot about what has worked in other provinces and states and what hasn’t. Our analysis shows that our target of 30 percent renewables by 2030 can be achieved at similar costs to an all-natural gas system, and will in fact protect consumers by ensuring our electricity supply is more diverse and hedges for commodity price fluctuations.
Source: AlbertaOilMagazine
