Redford Says Alberta Won’t Play Carbon ‘Chicken’ on Keystone

Feb 07, 2014 4:37 pm ET

(Updates with comment from Steyer group in last two paragraphs.)

Feb. 7 (Bloomberg) -- Alberta Premier Alison Redford, who has lobbied the U.S. to approve the Keystone XL pipeline, says her oil-rich Canadian province won’t toughen rules to cut carbon emissions from crude producers until the U.S. takes similar steps.

Redford’s government has considered different scenarios, including one that would raise its carbon tax for large emitters to C$40 ($36) a metric ton from C$15 now, she said in an interview yesterday in her office in Calgary. Those changes won’t happen until the U.S. regulates its own industry.

“This isn’t a game of chicken,” Redford, 48, said. “We’re not going to start introducing anything that puts us at a competitive disadvantage when other jurisdictions aren’t prepared to take any steps.”

Emissions from Alberta’s oil sands have become a focal point for those opposed to Calgary-based TransCanada Corp.’s Keystone XL pipeline, which would carry bitumen from the oil sands to Gulf Coast refineries. Opponents like billionaire Tom Steyer say the line would encourage companies to exploit the world’s third-largest crude reserves, unlocking vast amounts of carbon and accelerating climate change.

TransCanada first applied to build Keystone XL in September 2008. Producers are counting on the project to help ease a transportation bottleneck and raise the price of Canada’s heavy crude, which averaged $24.50 a barrel lower than the main U.S. benchmark last year.

Deferring Rules

Redford’s position echoes the federal government’s approach to regulating the oil-sands industry. Prime Minister Stephen Harper’s government is refraining from implementing drafted rules designed to cut greenhouse-gas emissions until the U.S. makes a similar move, according to a person familiar with the rules who asked not to be identified because the process is confidential.

Alberta currently requires companies that emit more than 100,000 metric tons of greenhouse gases a year to cut emissions per barrel by 12 percent or pay a penalty of C$15 per ton. The proceeds from the levy are paid into a fund that companies can use to develop technology to cut carbon output. It has collected almost C$400 million as of Jan. 2, according to the government.

“We did move first” to put a price on carbon emissions, Redford said. North America’s integrated energy industry requires cooperation on pipelines and carbon emissions as well as electricity, hydropower and renewables, she said. “We want to do it together.”

Revised Proposal

TransCanada submitted a revised proposal for the pipeline in 2012 after President Barack Obama initially blocked it. Nebraska residents voiced concern that an oil leak could foul the environmentally sensitive Sandhills region or the Ogallala Aquifer beneath it, which provides drinking water to 1.5 million people.

The U.S. State Department, which is studying the project because it crosses an international boundary, released a 7,000- page environmental report on Jan. 31 that reiterated that Keystone XL won’t increase carbon emissions because there are other transportation alternatives for the crude. The report says Alberta’s oil sands will be mined and refined with or without Keystone, contrary to the views of opponents who say blocking it would keep the carbon-heavy crude in the ground. Final approval rests with Obama.

New Canadian emissions targets may help Obama address environmentalists’ objections to the pipeline. Obama said in June that he wouldn’t approve Keystone if it significantly worsened carbon pollution.

Falling Short

The U.S. hasn’t imposed specific carbon emissions regulations on its oil and gas sector.

The strategy followed by Harper and Redford may not meet the climate-change test set by Obama, because Canada is on track to fall short of its promise to reduce emissions 17 percent below 2005 levels by 2020, said Andrew Leach, associate professor in the business school at the University of Alberta in Edmonton.

“They haven’t made the case that here’s our greenhouse-gas target nationally, here’s the policy we’re going to implement to meet that target, and here’s how we get closer to global climate-change goals if everyone else did what we’re doing,” Leach said in a telephone interview yesterday.

Even without new emission rules in Alberta, Redford said she expects TransCanada will win approve for its project.

“I do think Keystone gets done,” said Redford. “I’ve got a pretty good sense of how difficult this decision is for the president. It’s not for us to say this is important to you, it’s for Americans to decide that.”

‘Penalty Box’

Redford should be “put in the diplomacy penalty box” for her comments, said Chris Lehane, senior adviser for NextGen Climate Action, the group founded by Steyer.

“The president made clear that he would put America’s interests first -- and not the interests of a foreign oil company -- when deciding whether to approve the Keystone XL pipeline if it would worsen carbon pollution,” Lehane said in an e-mailed statement.

--Editors: Paul Badertscher, David Scanlan