Varcoe: ‘Big fight coming up’: Smith throws down the gauntlet in energy spat with Ottawa

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Take a seat and get ready, the next round of the energy war between Alberta and Ottawa is about to begin.

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At the end of her victory speech on Monday, UCP leader Danielle Smith hurled some verbal grenades at Ottawa over its controversial energy policies.

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The incoming federal emissions cap on the oil and gas sector and the Justin Trudeau government’s plan for a net-zero power grid by 2035 are now squarely in the crosshairs of the newly re-elected Smith government.

“As Prime Minister, I cannot under any circumstances allow these contemplated federal policies to be inflicted on Albertans. I just can’t and I won’t,” he declared.

“I urge the Prime Minister to instead halt the introduction of these harmful policies and come to the table in good faith to work collaboratively with Alberta on an energy emissions strategy.”

Coming moments after defeating the NDP in the 2023 general election, these words will mark the next battle lines with the Trudeau government on energy: how best to decarbonise oil and gas production in Alberta this decade, and how switch to net production. -Zero electricity system within a dozen years.

These are critical economic and environmental issues for a province that contains the world’s fourth-largest oil reserves and an electrical system that relies on natural gas generation to keep the lights on.

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“It was really combative and she didn’t mention the sovereignty law, but I expect it to be used very quickly,” said Mount Royal University political scientist Duane Bratt.

“Seat belt.”

The stakes are high for both sides.

The federal government has set itself a goal of reaching net zero by 2050, but it doesn’t have much time to reach its aggressive 2030 targets.

Its emissions reduction plan projects a 42 percent cut in greenhouse gas emissions from the oil and gas sector (from 2019 levels) by the end of this decade.

Smith argues that this would effectively become a production cut.

The sector is the country’s largest emitting industry, although many companies have adopted net-zero emission targets, including the biggest tar sands producers.

Alberta needs to attract billions of dollars of investment in emerging areas of decarbonization, and federal and provincial cooperation will be required to make this happen.

Smith began his victory speech Monday night by referencing former Progressive Conservative Prime Minister Ralph Klein in 1993, declaring: “Welcome to another miracle on the prairies.”

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If we are to go back to the history books, it is worth noting the many run-ins Klein had with the Liberal government of Jean Chretien over the Kyoto agreement.

However, the Klein government also made a deal in the 1990s with the federal government to create a new tar sands tax and royalty regime.

It triggered a wave of investment in the tar sands, a astronomical $262 billion in capital expenditures between 1996 and 2015, and kicked off a development phase that generated billions of dollars in royalties and created thousands of jobs.

Business Council of Alberta President Adam Legge said the group is concerned about both the emissions cap and the net-zero electricity standard, calling them “flawed public policy.”

“What we’ve been encouraging the federal government to do is be flexible,” Legge said. “If they’re going to stand firm, then I think we’re (in) a significant battle.”

The coming months will show just how big the chasm between the two sides really is, as Ottawa pushes forward with its oil patch emissions cap and the upcoming Clean Electricity Regulations.

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In Alberta, pure gas generation accounted for approximately 60 percent of the province’s total installed generation capacity last year. Reducing emissions from such facilities will be necessary, but potentially costly.

Take, for example, city-owned Enmax Corp., which has about 1,500 megawatts of electricity generating capacity, with 1,300 MW coming from its gas-fired facilities.

The local utility is examining the feasibility of a carbon capture unit at its Shepard Energy Center. It is also looking at the financial support available from the federal government to de-risk the technology.

“If the federal government wants to meet a 2035 policy goal, that shouldn’t be on the backs of taxpayers and Calgarians,” Enmax CEO Mark Poweska said Tuesday after the annual meeting of the company.

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“We will look at how we make it affordable for our customers, while also achieving the policy goals.”

Similarly, the oil patch is not seeking a dispute over federal policy, but wants an open discussion between the industry and both levels of government in the coming months.

“The bottom line is that there is no technical way to hit that cap, the emissions cap, without reducing production,” Brian Schmidt, chief executive of Tamarack Valley Energy, said in an interview.

“I just think the cap was announced without really understanding the implications. . . The answer is collaboration.”

There are also major energy projects on the drawing board that are progressing slowly, but will likely need a joint federal-provincial incentive program to make them affordable and competitive with existing US grants.

In Ottawa, the federal Minister for Natural Resources, Jonathan Wilkinson, told reporters that he will work with Alberta to reduce emissions and build a strong economy.

“I’m not looking to fight Alberta or Nova Scotia or British Columbia, I’m interested in working collaboratively,” he said.

The proof will come when the final rules and regulations on these important policies are published and established.

The day after the election, Smith would not budge an inch.

Speaking to QR radio host Shaye Ganam, Smith said he would speak to the prime minister later in the day, but indicated that Alberta is preparing for a showdown over the net-zero grid requirement and the emissions cap.

“A big fight is coming up,” he said.

In other words, take a seat.

Chris Varcoe is a columnist for the Calgary Herald.

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