The Calgary Chamber of Commerce is warning Ottawa that its proposal to limit emissions from the oil and gas sector could jeopardize the valuation and sale of the Trans Mountain pipeline.
The business group made the argument Wednesday in an open letter urging the federal government to reconsider proceeding with the promised cap, which the government has said it intends to finalize by mid-2024.
“If there is a risk that (Trans Mountain) cannot rely on a steady, predictable flow of oil from tar sands production, it will result in a lower valuation by investors and a lower price received when sold.” the asset.,” states the letter, which was signed by Calgary Chamber of Commerce President Deborah Yedlin, as well as other Alberta-based business groups and oil and gas sector leaders.
The federal government published its regulatory framework for a proposed cap on oil and gas sector emissions in December last year and the industry has been fighting it tooth and nail.
The government has said that under its proposed plan, the oil and gas industry will have to reduce emissions by more than a third by 2030 or buy offset credits.
It has said the cap is meant to limit pollution, not production, but the industry has warned the cap will have “unintended consequences” – scaring away investment and potentially causing companies to reduce production.
“Rather than supporting investment, capping emissions would create uncertainty, unfavorable economic conditions and a punitive regulatory environment, all of which would cripple investment and innovation in decarbonization projects,” the Calgary Chamber said Wednesday.
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The House added that the uncertainty around the proposed emissions cap comes as the federal government has embarked on the first phase of what is expected to be a two-part divestment process for the Trans Mountain pipeline.
The pipeline, which is owned by the federal government, is Canada’s only oil export pipeline to the West Coast. Its expansion, which is more than 98 percent complete, has been underway for more than four years and has cost at least $34 billion so far.
The Calgary Chamber of Commerce opposes the emissions cap, saying it will hinder the sale of the Trans Mountain pipeline. #cdnpoli #TMX #abpoli
The sale of the Trans Mountain pipeline will be one of the largest commercial transactions in Canadian history. The government is already in talks with indigenous groups along the pipeline route who might be interested in buying a stake in the asset, and is expected to later consider commercial offers for the remaining stake.
But the rising construction costs of the pipeline expansion already pose a problem for the government, which bought Trans Mountain for $4.5 billion. Observers have noted that the government will likely need to sell it at a loss, as potential buyers will only offer a price that can be supported by pipeline tolls – the fees oil shippers pay to transport oil through the pipeline.
On Wednesday, Environment Minister Steven Guilbeault questioned the House’s premise that the proposed emissions cap will somehow affect the sale of Trans Mountain.
“We have not even submitted draft rules for the cap, which will trigger a new round of broader consultations,” Guilbeault said in an emailed statement.
“So unless the Calgary Chamber of Commerce knows something we don’t, the conclusions they’re drawing are extremely premature.”
The federal government has said that the limit it eventually legislates will take into account what is technically achievable, as well as projected global demand for oil and gas.
“Our proposed approach simply holds the industry accountable for what they have already promised Albertans and Canadians they will do through their massive advertising campaigns,” Guilbeault said, apparently referring to the Pathways Alliance group of tar sands companies and his much-publicized proposed plan to achieve net profits. -Zero greenhouse gas emissions from oil sands production by 2050.
Data from the Canada Energy Regulator shows Alberta’s greenhouse gas emissions rose 19 per cent between 2005 and 2020, the only Canadian jurisdiction where emissions have increased during that time.
More than half of Alberta’s emissions come from oil and gas production.
This report by The Canadian Press was first published March 27, 2024.