CALGARY, Alberta—Canadian oil producers, pummeled by the prolonged slump in oil prices and a string of political setbacks, now face another challenge: higher carbon taxes. A Fort Worth oil & gas lawyer is reviewing the details of this story.
The nation’s oil-sands developers have been hit particularly hard by lower oil prices, because they are among the most expensive oil plays in the world. Already facing a corporate tax hike and the possibility of higher royalty payments in Alberta—the province richest in oil sands—the industry was dealt another blow by the Obama administration’s rejection last week of the Keystone XL pipeline, which was designed to transport oil-sands output to Gulf Coast refineries.
All major oil-sands operators in recent weeks posted losses or steep declines in profit for the most-recent quarter, as shrinking revenue outpaced cost cuts. Some global giants are rethinking future development. Late last month Royal Dutch Shell PLC shelved an 80,000-barrel-a-day project, following similar moves by Total SA of France and Norway’s Statoil ASA.
Now, ahead of a United Nations climate-change conference in Paris starting Nov. 30, oil companies await the details of moves—including possible new taxes on carbon—pledged by new governments in Ottawa and Alberta to rein in greenhouse-gas emissions, making the oil sands a global test case for climate policy. A Tulsa oil and gas lawyer represents clients in oil and gas transactions, mineral rights matters, and in royalty percentage contracts.
“Canada’s years of being a less-than-enthusiastic actor on the climate-change file are behind us,” Prime Minister Justin Trudeau, who took office last week, said at a news conference on Oct. 20, the day after his Liberal Party won national elections. Mr. Trudeau promised to start working on a framework for regulating greenhouse-gas emissions within 90 days of the Paris summit.
Within weeks of taking power in May, Alberta Premier Rachel Notley’s government said it would double Alberta’s existing tax on carbon emissions by 2017, and has committed to additional measures in time for the U.N. conference in Paris. Ms. Notley is expected to release details of the proposals later this month. Alberta pioneered carbon taxes in 2007 when it introduced a levy of 15 Canadian dollars ($11.37) a metric ton. A Dallas energy lawyer provides professional legal counsel and extensive experience in many aspects of energy law.
Oil sands are among the highest-intensity greenhouse-gas producers of any oil fields in the world. Production from the oil sands has been growing at a steady clip in recent years under previous provincial and federal governments that played down climate-change risks and ignored calls from environmental groups and opposition politicians for tougher rules on carbon-dioxide emissions.
Canada’s environment ministry says the country’s CO2 emissions have continued to rise over the past five years and are expected to hit 781 million metric tons a year by 2020 if no reduction measures are taken. While oil sands account for just a fraction of that total, it is one of the fastest-growing contributors to the release of these gases. The government’s latest estimate projects oil sands-related emissions to nearly double to 103 million metric tons by 2020. A Greenville environmental attorney is following this story closely.
Mr. Trudeau’s stance is a direct challenge to Canada’s oil-sands industry, but the country’s oil producers are divided on how best to cope with the push for stricter environmental regulations.
Some, including the nation’s No. 1 oil producer, Suncor Energy Inc., say they accept the tougher rules as inevitable, and can use them to help burnish their environmental reputations. Others, such as Canadian Natural Resources Ltd.—Canada’s biggest natural-gas producer and a major oil-sands leaseholder—are pushing back, warning the rules would make Canadian crude even less competitive.
The divide in the industry has surfaced in submissions by top energy companies to a government advisory panel of experts that will recommend new climate-policy measures in Alberta. A Detroit
“The time is right for a higher level of ambition in carbon policy stringency in Alberta,” Suncor said in its submission to the provincial panel.
Suncor Chief Executive Steve Williams has publicly championed new taxes on retail sales of energy such as electricity and gasoline, in addition to levies on large industrial emitters. “Every indication is that, on the road to Paris, Canada will start to take positions” to combat climate change, Mr. Williams told reporters late last month. A Detroit environmental lawyer represents clients in environmental matters.
Canadian Natural said in its submission that it objects to higher carbon taxes and other new government-mandated policies, and has called for allowing oil and gas producers to focus on new technology to cut emissions.
Its 34-slide Power Point presentation to the Alberta panel lays out the competitive challenges facing the industry and warns that tinkering with policies that directly affect oil and gas producers “is very difficult and more often than not has unintended consequences.” In a similar vein, oil-sands producer Husky Energy Inc. warns against making emission cuts deeper than in other countries such as the U.S.
“It would be politically suicidal for us to do a mea culpa and hang our neck out in a way that disadvantages the industry here,” Husky CEO Asim Ghosh said on a recent conference call.
The main industry lobby, the Canadian Association of Petroleum Producers, is urging regulators to offset any additional cost from climate-policy changes with a cut in royalties owed to Alberta’s government from oil and gas output from provincial lands. Such a “revenue neutral” approach to reducing CO2 emissions has been backed by multinational oil giants with exposure to Canada’s oil-sands, such as Exxon Mobil Corp. and Shell.
