The Canadian province will make a decision by the end of December on whether to raise its levy of C$15 ($13.29) a metric ton for large carbon emitters, while revisions on a broader range of climate policies may come at the same time, Prentice said. The drop in the price of oil, which is probably here to stay for a while, means it’s “time for caution,” he said.
“You have to be very careful how you balance the environmental enhancements with the effects on your competitiveness,” Prentice said in an interview at Bloomberg’s Calgary office on Oct. 31.
Environmental groups and U.S. and European legislators have highlighted the higher carbon intensity of Alberta’s oil sands, the world’s third largest crude reserves, as a reason for slowing construction of pipelines like TransCanada Corp.’s Keystone XL and limiting exports to Europe. Prentice said the province needs to do more on environmental protection and plans to expand partnerships with environmental groups, improve monitoring and the use of technology in the energy industry.
“It’s incumbent on Alberta as a major oil supplier to have environmental credentials and to be doing really exceptional work in the environment,” he said. “We will have to go the extra mile, for sure.”
Alberta will neither lower the C$15-a-ton levy nor eliminate it, Prentice said. Options include increasing the carbon price gradually and continuing to expand the scope of emissions it’s applied to, he said.
Oil Slump
West Texas Intermediate, the North American crude benchmark, fell 12 per cent last month and has shed a quarter of its value since touching a $107.30 high this year on June 20, closing at $80.54 a barrel last week. WTI for December delivery fell 58 cents to $79.97 at 9:39 a.m. in New York Monday.
“What I’m hearing from people is that the low-price environment that we’re in is not a temporary aberration in the market,” Prentice said. “We’re going to be in a lower-price environment for a period of time.”
For every dollar that the price of oil declines, annual provincial revenues fall by C$200 million, Prentice said.
Even before the recent decline, companies began to pull back on oilsands investments because of higher costs and transportation bottlenecks, hurting future revenue in a province whose population is expected to expand by a quarter between 2010 and 2020. European oil producers Statoil ASA and Total SA this year said they would halt plans to development some of their oilsands assets.
Continental Standards
Prentice said he favors a continental approach to regulation rather than “proliferation” of sub-national standards.
“That’s not in the interests of our North American energy system,” he said. “If you start to gum that up with a proliferation of sub-national standards in all respects, I don’t think that’s in the interest of our competitiveness or prosperity.”
Pipelines
Developers of Alberta’s oilsands can use trains to reach the world’s largest refining market on the Gulf Coast if President Barack Obama rules against the Keystone XL pipeline, Prentice said.
The Energy East conduit to Canada’s Atlantic coast that TransCanada Corp. is also proposing is another option.
Awaiting a U.S. decision on Keystone XL since 2008, Calgary-based TransCanada applied with Canadian regulators last week to build Energy East, a 4,600-kilometer (2,859-mile) link from Alberta to tidewater in New Brunswick. The C$12 billion ($10.6 billion) pipeline would be North America’s largest crude conduit, carrying 1.1 million barrels of oil a day without crossing into the U.S.
“The debate about Keystone is not a debate about whether, under the free trade agreement, Canadian crude can make its way to the Gulf Coast,” Prentice said, adding that the additional cost to ship crude by tanker from Canada’s Atlantic Coast is marginal. “It’s actually not that far from New Brunswick.”
About half of Energy East’s volumes will probably be exported from Canada to markets including the Gulf Coast, TransCanada Chief Executive Officer Russ Girling said last week. Using Energy East and crude tankers to get the oil to the Gulf will cost about $2 to $3 a barrel more than Keystone XL, he said.
Ruling Soon
Keystone XL has faced delays in the U.S. amid opposition from landowners and environmental groups seeking to block oil- sands development. The U.S. State Department, which has jurisdiction over projects that cross U.S. borders, has put off a decision while a Nebraska court weighs whether a state regulator should review the pipeline.
Prentice, who became Alberta premier in September after winning a vote to lead the ruling Progressive Conservatives, plans to travel to the U.S. to meet with legislators in the next two months. A decision on Keystone XL appears to be imminent, he said.
A ruling on the line may come soon, U.S. Secretary of State John Kerry said at a news conference in Ottawa last week with Canadian Foreign Affairs Minister John Baird.
