Canada’s Carbon Tax Hinders Pipeline Plans, Cenovus CEO Says
(Bloomberg) -- Alberta’s planned oil pipeline to the west coast requires Canada to shift away from stricter climate policies and toward promoting greater oil production from new projects, Cenovus Energy Inc.’s chief executive officer said.
The government of Alberta wants to build a new oil-export pipeline capable of carrying 1 million barrels a day of crude to global markets. That will require “greenfield” oil sands developments as opposed to the simple expansions of existing sites that the industry has been doing for more than a decade, Jon McKenzie said in a call with analysts Wednesday.
The higher costs of new oil sands projects mean that in order for the economics to work, they require less stringent environmental rules, he said — including a rethink of the industrial carbon tax.
“We have to be pretty thoughtful about a set of policy environments that really do allow us to grow and fill a pipeline,” he said. “We have to have a competitive market that allows for greenfield development.”
The comments come as the governments of Prime Minister Mark Carney and Alberta Premier Danielle Smith negotiate the details of a higher carbon tax for industrial emissions and a carbon storage project to reduce the environmental impact of the oil sands. The two politicians agreed last year to a memorandum of understanding that supports a pipeline along with other policies such as a carbon tax of C$130 ($95) per metric ton of emissions.
Bloomberg News reported on Monday that the two governments are negotiating on several matters, including how quickly the tax would ramp up to C$130. The longer it takes, the lower the financial burden on oil producers.
But McKenzie wants the tax gone. “The industrial carbon tax is unique to Canada,” he said, giving oil companies a stronger incentive “to invest outside of Canada.”
“It does the country no service to negligibly reduce the impact of climate change over the next century if we materially erode our social benefit network over the next 15 years.”
Asked about McKenzie’s comments at a news conference on Wednesday, Carney responded that Canadian oil is low risk and low carbon, with low marginal cost.
“From direct conversations with a series of governments across Asia, that’s what they’re looking for in the medium term,” Carney said.
He added that Canada and Alberta are “making good progress” in their negotiations, “and that’s going to make the oil sands more competitive.”
(Adds PM Carney comments in the last three paragraphs.)
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