Alberta Premier Smith says she's 'pissed' about oil and gas cap, eyeing legal challenge

Alberta Premier Danielle Smith claims federal draft regulations that would require oil and gas producers in Canada to limit greenhouse gas emissions by 35 per cent below 2019 levels will "lead Alberta and our country into economic and societal decline."

"I'm pissed. I'm absolutely angry because we've been working with these guys for two years, because we have a plan that would reduce emissions responsibly by 2050," Smith said during a news conference Monday. 

"They continue to act like they're working collaboratively with us, and then they come out with exactly the same policy that they put forward a year ago with no changes whatsoever."

On Monday, the federal government outlined its draft regulations, which will enforce a hard cap through a cap-and-trade system on the oil and gas sector, the biggest source of greenhouse gases in the country. 

The draft regulations come in at the bottom end of the range of what Ottawa had proposed in an earlier form — initially outlined as a regulatory framework. At that time, the rules would have required industry to cut greenhouse gas emissions by 35 to 38 per cent from 2019 levels by 2030.

In October, Alberta launched a $7-million advertising campaign in Alberta, British Columbia, Ontario, New Brunswick and Nova Scotia, urging Ottawa to "Scrap the Cap." That campaign included television, online video, print and social media ads.

The Alberta government has long argued that emissions should be reduced with incentives and technologies, and that the plan is an infringement of the province's exclusive jurisdiction over its resources.

On Monday, Smith said the provincial government was considering the use of "every legal option" to push back against the cap, including a constitutional challenge and the use of the Alberta Sovereignty within a United Canada Act.

"We're going to continue on with developing a motion in the legislature that we'll put forward that will detail some additional steps that we're doing," Smith said.

The federal government, on the other hand, says the oil and gas industry hasn't been doing its fair share to fight against climate change.

"I think most Canadians — even those that aren't my biggest fans — would agree that it's not OK for a sector to not be doing its share, and that's mostly what this regulation is about," Environment Minister Steven Guilbeault told The Canadian Press.

Oil and gas industry reaction

Reaction from the oil and gas industry came quickly after the draft regulations were made available.

The Canadian Association of Petroleum Producers (CAPP), a lobby group, said it and its members believe the draft emissions cap regulations, if implemented, would likely deter investment in Canadian oil and natural gas projects.

"The result would be lower production, lower exports, fewer jobs, lower GDP and less revenues to governments to fund critical infrastructure and social programs on which Canadians rely," reads a statement attributed to CAPP president Lisa Baiton. 

The Pathways Alliance, a consortium of Canada's largest oilsands companies, wrote in a statement that the cap was a "misguided proposal" that would drive cuts in oil and gas production and have a significant, negative impact on Canada's economy.

"A decrease in Canadian production has no impact on global demand — meaning another country's oil will simply fill the void and the intended impact of the emissions cap is negated at a global level," reads a statement attributed to Kendall Dilling, president of Pathways Alliance.

"An emissions cap gives industry less — not more — of the certainty needed to make long-term investments that create jobs, economic growth and tax revenues for all levels of government. It simply makes Canada less competitive."

Pembina Institute says regulations are feasible

Janetta McKenzie, manager of the oil and gas program at the Pembina Institute, a clean energy think-tank, noted that the draft regulations were long-awaited.

"Obviously, the government committed to designing a regulation to reduce oil and gas emissions several years ago. In our view, what has been put on the table today is quite feasible," McKenzie said.

The plan is doable through a combination of methane abatement measures in the oilsands, such as carbon capture, efficiency improvements and solvent technology, McKenzie said.

"What the federal government has done here is they've taken the time to make a regulation that is doable for industry, but we'll also begin to see emissions come down in this sector in the short to medium term," she said.

McKenzie said that, ultimately, the rules are focused on preparing for a world that is already accelerating an energy transition.

"There's an incentive for the oil and gas sector to prepare for that and to be cleaner, and that's to say nothing of the negative impacts of unmitigated climate change as well, which also have a cost to Canadians," she said. 

"They have a cost when we have to deal with fires or floods. They have a cost in the dollar amount."

Mixed reaction to cap

Kent Fellows, a professor of economics with the School of Public Policy at the University of Calgary, said the emissions cap represented a policy decision that undermined the federal Liberal government's case in its own carbon pricing regime.

"Carbon pricing was originally advanced on the idea that it was the best way to reduce emissions, a broad-based carbon price that applied to everyone, or at least all the carbon that you could price," he said. 

"And now we're seeing carve-outs from that, exemptions to that, and other regulations that pancake on top of that.

"And I think this is just the latest in one of those, where they've looked at it and they've said, 'OK, the carbon price isn't reducing emissions as quickly as we would like in this specific sector, so we're going to put something else in on top of it.'"

Richard Masson is the chair of the World Petroleum Council Canada, which hosted the World Petroleum Congress in Calgary last summer. 

He said the challenge at play is that it's unclear whether the regulations will actually ever come into force before the next federal election. 

"We sit in this twilight zone right now, where the federal government is announcing these ambitious targets, they're going to take them to the next COP meeting," said Masson, who is also an executive fellow at the University of Calgary's School of Public Policy.

"And it's unclear, I'm sure, to those investors who have to figure out what they want to do next — whether this government's going to be able to survive the next election, to implement and steward them. And so it doesn't lead to that kind of investment climate we need to see moving forward."

Ottawa said it will continue to consult on the regulations until Jan. 8, and the final version is intended to be published next year.