The exposure will be crucial as the U.S. moves to firm and implement its Clean Energy and Security Act, which will affect the cross-border trade of energy and manufacturing products.
“If we here in Calgary can build a world leadership on carbon capture and storage technology and, in a wider sense, non-conventional oil technology, we have huge opportunities,” Page said at Calgary’s Petroleum Club.
“We would then have a bargaining position because we would be a respected party at the table. That is part of what we are trying to do.”
Most Americans, politicians included, are unaware Canada supplies the bulk of U.S. energy imports, about 70 per cent of its oil and gas volumes, and treat its northern neighbour accordingly, Page pointed out. And, it behooves Ottawa and Alberta to pay close attention to the ever-evolving Waxman and Markey bill that has grown to a bureaucratic nightmare 932 pages long, from an original 600 pages at the end of March, he said.
The plan to reduce greenhouse gas emissions includes aggressive targets and segments dealing with cap and trade. It allows domestic and international offsets, and banking and borrowing credits.
The credits themselves originally were to be auctioned across the board, but intense lobbying by certain industries has seen the premise change. Despite the changes, the U.S. government stands to gain hundreds of billions of dollars in revenue from the auctions, Page said.
There also are protectionist elements in the bill that have raised fears of conflicts similar to the softwood lumber battle, which saw the U.S. impose levies on Canadian wood. Environmental protectionism could hit exports of oilsands, as well as eastern manufactured products like cement, steel and other products that have a high electricity or energy content in them.
“The implication of the U.S. carbon lobby is that we could see reduced netbacks for our Canadian producers,” former Alberta energy minister Murray Smith told the Herald.
“The real point of the matter is we can’t get out ahead of cap and trade. We’ll wait and see what comes out of it, but we can’t penalize ourselves in terms of capitalizing from that market that we deliver so much product to.”
Smith believes the West should be considering new markets in Eastern Canada, which imports more than 1.3 million barrels of oil per day, through existing pipelines and retrofitting refineries.
“If we can get the transportation of the product into that market and be competitive on a netback basis, there’s no reason we can’t put Alberta crude into those refineries,” he said.
For Greg Stringham, vice-president at the Canadian Association of Petroleum Producers, itÂ’s a waiting game to see how Canadian policies evolve in response to the U.S. carbon push.
“We’ve heard a lot of discussion about cap and trade versus carbon tax going back and forth, but from our industry’s perspective it’s all about the price of carbon, no matter how it gets set,” Stringham said. “There are pros and cons to each of those, but both of them end up in a carbon price, which then results in a price signal which allows that behaviour to happen. And that behaviour and the technologies that apply are the real key.”
Bruce March, chairman, chief executive and president of Imperial Oil Ltd., said his companyÂ’s announcement Monday that it would go ahead with the $8-billion Kearl oilsands project was made in spite of uncertainty on the environment.
“If you sat back and you looked for certainty on climate change regulations, I’m not sure when you’d make a decision. You could probably wait for years,” he said during an investor day presentation broadcast on the Internet.
“When you look at the long-term needs in our energy outlook, when you look at the depletion of conventional oil and gas, it just didn’t seem like the right thing to do to sit on our hands forever.”
He said Imperial was concerned emissions reduction targets would be hard to achieve and would reduce economic output. And on the subject of carbon capture and storage (CCS), March noted the technology “takes tremendous energy to capture and tremendous energy to store it in the ground.”
Page agreed the biggest challenge facing industry is integrating carbon costs into “absolutely everything” it does.
“If we want access to the U.S. market we must move on the environmental issues as defined by the Americans. And what that means is much more investment, taking more ambitious targets in Canada, and move part way so we’re credible in the U.S. market,” Page said.
And committing to as-yet-uncommercial technology such as carbon storage is a financial risk many corporations are grappling with.
“Technology has to be the answer,” said James Brown, director of climate change with Petro-Canada. “One of the challenges we have is any time you employ new technology like CCS or new in situ techniques, there is a risk it won’t work.”
Petro-Canada had looked at carbon capture and storage for its oilsands upgrader, but the project was put on the back burner because of costs, he noted.