Emission cap could cost oil and gas sector $75 billion in lost investment: CAPP

A new report commissioned by an industry lobby group on the federal government’s proposed emissions cap sparked sharp reactions Monday from both oil and gas advocates and environmental groups.

The report, conducted by S&P Global Commodity Insights, was commissioned by the Canadian Association of Petroleum Producers to examine the impact of various proposed emissions reduction policies on Canadian conventional (non-oil sands) oil and gas producers.

Its conclusions on Monday were used to support the industry’s argument that enacting emissions cap regulations would stifle investment and growth, even though opponents said the report’s methodology was flawed.

The commissioned report found that if oil and gas drillers were required to reduce greenhouse gas emissions by 40 percent by 2030, the industry could expect $75 billion less in capital investment over the next nine years compared to current policy conditions.

The study shows that this will translate into 1 million barrels of reduced daily oil production by 2030 compared to current projections, and 51,000 fewer jobs by 2030 compared to current government policy.

The findings align with what Canada’s oil and gas sector has long argued – that the federal government’s proposed cap on emissions from the industry would de facto equal the cap on fossil fuel production.

On Monday, CAPP President Lisa Baiton said the new report was evidence that federally imposed emissions caps “should not continue.”

“The production declines forced on industry by stringent emissions cuts will result in significant job losses for Canadians, a serious impact on the economy and our GDP, and could threaten Canada’s energy security and prosperity,” Baiton said.

However, the federal government has said all along that reducing oil and gas emissions will be aimed at reducing emissions, not oil and gas production.

The government said other provisions would be considered when designing the emissions cap, such as Canada’s commitment to reduce methane emissions from oil and natural gas by at least 75 per cent by 2030, as well as complementary climate policies from the federal and provincial governments.

The hypothetical scenarios analyzed in the report commissioned by CAPP do not use the same targets that the federal government actually proposes in the draft emissions framework released last December.

Under the proposed framework, the sector would need to reduce greenhouse gas emissions by 35-38 percent by 2030 compared to 2019 levels.

The sector would also have the option to purchase offset credits or contribute to a decarbonization fund, which would reduce this requirement to just 20-23 percent.

“CAPP commissioned an analysis of a non-existent scenario. Everything in it is based on false assumptions, which makes it so flawed that it amounts to misinformation,” Oliver Anderson, a spokesman for Environment Minister Steven Guilbeault, said in an email.

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CAPP says the study it is sponsoring takes into account the projected impact of proposed government methane regulations that would require at least a 75 percent reduction in methane emissions from oil and gas below 2012 levels by 2030, and recognizes that these policies do not have yet to be implemented finalized and remain uncertain.

Environmental groups were quick to criticize the report’s methodology. The Pembina Institute’s clean energy think tank said the CAPP report covers only conventional oil and gas drilling rigs, leaving out oil sands production, which accounts for the vast majority of the industry’s emissions profile.

The Pembina Institute added that when it comes to methane, where most emissions from conventional drilling rigs come from, significant reductions can be made by using existing, cost-effective technologies.

“Research by the Pembina Institute shows that the proposed 2030 emissions cap can be achieved in practice by the oil and gas industry, almost exclusively through a combination of methane reductions (which will come mainly from the conventional sector) and the 2030 emissions reduction plan developed by Pathways Alliance (e.g. oil sands),” the advisory team said in a statement.

Although the oil and gas sector is the largest emissions-producing industry in Canada, most of these emissions come from the oil sands sector, where increasing production is contributing to an increase in total emissions.

Emissions from the conventional sector, which is the focus of CAPP reports, have been decreasing since 2014.

Alberta Premier Danielle Smith also weighed in on Monday, issuing a joint statement with the province’s environment and energy ministers, calling the proposed cap a “reckless risk that will devastate Canadian families and do nothing to reduce global emissions.”

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