Top-emitting Canada oil sands site collects government relief from pollution payments

Athabasca Oil

08/12/2021 06:00

By Rod Nickel
    WINNIPEG, Manitoba, Dec 8 (Reuters) - For three straight
years, Alberta's government granted Canada's most
emissions-intense oil sands facility reductions in payments that
polluters are required to make for generating higher emissions
than most of the industry, a government document shows.
    From 2018 to 2020, Alberta lowered Canadian Natural
Resources Ltd's  CNQ.TO  (CNRL) costs for its oil-producing
Peace River site to comply with provincial emissions
requirements. Peace River's per-barrel emissions are triple that
of the already-high oil sands average.
    CNRL, Canada's biggest oil producer, which made C$2.1
billion ($1.66 billion) adjusted profit in the third quarter, is
one of six companies to receive financial relief under Alberta's
compliance cost containment program, which launched in 2018.
    Alberta requires high-emitting facilities that pollute more
than the industry benchmark to comply, either by buying
emissions credits or offsets from better-performing facilities,
or by paying into a government fund at the going rate for carbon
emissions, currently C$40 per tonne.
    The province's cost containment program, however, eases the
financial pain for facilities whose compliance costs are greater
than 3% of their sales or more than 10% of their profits, to
prevent "economic hardship."
    Alberta's Environment Department provided, at the request of
Reuters, a list of companies that benefited from the program.
Spokesman Tom McMillan said it would not disclose the amounts of
the cost relief the companies received, calling them
"commercially sensitive." 
    Greenfire Oil and Gas Limited and Athabasca Oil Corp
 ATH.TO , which run the second- and eighth-most
emissions-intense Alberta oil sands sites, according to
government records, also received cost reductions.
    Alberta's government also lowered CNRL's compliance cost for
its Hays gas plant in 2018 and 2019.
    CNRL did not respond when asked the financial value of the
carbon cost relief it received.
    "As we advance technologies to reduce our carbon footprint
at all of our facilities, we will continue providing local jobs
and economic benefits," CNRL said in a statement.
    Countries that produce fossil fuels face the challenge of
cutting emissions without damaging their economies. But
Alberta's policies are "particularly egregious" for prolonging
the life of high-emitting facilities, said Dale Marshall,
national climate manager at Environmental Defence.
    Emissions-intense, outdated oil facilities https://www.reuters.com/business/energy/old-small-co2-intense-why-canadas-highest-carbon-oil-sites-keep-pumping-2021-06-28
 continue to operate despite government attempts to curb
emissions.
    Environment Minister Jason Nixon defended Alberta's efforts.
    "It is a made-for-Alberta system that works with, not
against, our key industries."
    Canada is the world's fourth-largest oil producer and the
oil and gas sector is also the country's biggest emitter. That
makes it a critical challenge for Prime Minister Justin Trudeau
as he aims to cut Canada's national greenhouse gas emissions by
40-45% by 2030 from 2005 levels.
    Reductions to carbon cost obligations like CNRL's come in
two ways. First, the Alberta government can allow such
facilities to buy more carbon credits and offsets to meet their
obligations than the 60% limit in place for other facilities.
This saves companies money since credits and offsets are
typically cheaper to acquire than paying the carbon price.
    Secondly, the government can increase a facility's allowable
emissions per year. CNRL, whose C$65 billion market cap is the
highest of any Canadian oil and gas producer, received both
forms of relief annually from 2018-2020, the document shows.    
    "There's always this tension around concern for jobs, but in
this case, it's really questionable to me whether removing (the
cost relief program) would actually lead to job loss" given the
sector's strong free cash flows and dividends, said Sara
Hastings-Simon, director of the University of Calgary's
sustainable energy development program.
    A natural gas plant owned by Keyera Corp  KEY.TO , West
Fraser Mills  WFG.TO  pulp facility, and an Enerkem biofuels
plant also received relief. None of the companies, other than
CNRL, responded to requests for comment.
 ($1 = 1.2652 Canadian dollars)

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Graphic: Canada oil sands sites with highest carbon per barrel  
 https://graphics.reuters.com/GLOBAL-OIL/CANADA/lgvdwonwkpo/
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 (Reporting by Rod Nickel in Winnipeg
Editing by Matthew Lewis)
 ((rod.nickel@tr.com; Twitter: @RodNickel_Rtrs;
1-204-230-6043;))