Some Canadian oil firms await Trudeau's fate rather than cut emissions faster

Yangarra Resources

19/12/2023 11:00

By Rod Nickel and Nia Williams
       Dec 19 (Reuters) - Some Canadian oil and gas producers
say they will not rush to accelerate emissions cuts until they
see if unpopular Prime Minister Justin Trudeau survives long
enough to implement his proposed oil and gas emissions cap.
    The long-delayed framework, released this month, demands oil
companies in Canada cut carbon emissions by up to 38% by 2030
from 2019 levels. But polls show the opposition Conservatives
led by Pierre Poilievre - who oppose the cap - with a commanding
lead over Trudeau's Liberals before an expected 2025 election,
raising the prospect that plans for the cap will be abandoned.
    Canada's main oil-producing province Alberta has also vowed
to develop a "constitutional shield" against the cap.
    Some small- and medium-sized oil companies are openly asking
if the Liberals losing in the 2025 election would avert the need
to accelerate emissions cuts. Canada is the world's
fourth-biggest crude producer and the oil and gas industry is
the country's highest-polluting sector, accounting for more than
a quarter of all emissions. 
    Yangarra Resources  YGR.TO , which produces 12,500 barrels
of oil equivalent per day (boe/d), will continue cutting
emissions as long as it makes money or improves efficiency from
doing so, said CEO Jim Evaskevich. 
    "If we get to where we're having to spend a lot of money to
become way more draconian with our reductions, then we're going
to look at the federal election and go, 'yeah no we're not
spending that money, no way.' Because our fervent hope is
(Trudeau) is gone," Evaskevich said.
    Rising Canadian oil and gas production means the sector's
absolute emissions have climbed about 13% since 2005, according
to the Canadian Climate Institute, even as its emissions
intensity - the amount of carbon emitted per barrel of oil
produced - has fallen.
    A federal environment ministry spokesperson said oil
companies should comply with the cap "because it makes business
sense".
    "They are making record profits at a time where
affordability and the environment are the two most important
issues," the spokesperson added.
    
    A QUESTION OF SURVIVAL
    Resistance from small and mid-cap producers underscores the
rift between the Liberal government's climate policies, some of
which have been rejected by the courts, and a sector critically
important to Canada's economy. 
        Shannon Stubbs, the Conservative shadow minister for
natural resources, said the emissions cap represents federal
over-reach into provincial jurisdiction.
    Pathways Alliance, representing the six biggest oil sands
companies, said it would not speculate on what a future
government may look like and was committed to reaching net-zero
emissions by 2050.
    Oil sands companies account for 65% of Canada's oil
production and are relying largely on proposed carbon capture
and sequestration projects to cut emissions, although they have
not yet committed the capital to build them.
    Tamarack Valley Energy  TVE.TO , which plans to produce
about 62,000 boe/d in 2024, is already reducing methane
emissions from gas infrastructure but needs more details about
the cap before it can decide if it must cut faster, said CEO
Brian Schmidt.
    The possibilities of a government change and of courts
rejecting the emissions cap mean "nobody's putting much weight"
into the cap yet, including Tamarack, Schmidt said.
    Tristan Goodman, CEO of the Explorers and Producers
Association of Canada, said producers had made significant
progress in reducing emissions, mainly through cutting methane
emissions, and efforts would continue regardless of the
political party in power.
    Despite the emissions cap, Bonterra Energy  BNE.TO  is
looking to boost production to above 20,000 boe/d from 14,000
boe/d currently, through acquisitions, CEO Pat Oliver said.
    Bonterra is already cutting emissions by reducing gas
flaring and replacing old equipment, but is unlikely to
accelerate efforts until there is clarity on the rules and the
Liberal government's fate, Oliver added.
    "Say that we would have to spend significant capital (to
comply), we would have a look at, is this government going to
survive and what are the chances of this legislation surviving?"
Oliver said. 

 (Reporting by Rod Nickel in Winnipeg, Manitoba and Nia Williams
in British Columbia, editing by Deepa Babington)
 ((rod.nickel@tr.com; X: @RodNickel_Rtrs;))