CALGARY 鈥� The Calgary Chamber of Commerce is warning Ottawa that its proposed cap on emissions from the oil and gas sector could compromise 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 in mid-2024.
"If there is a risk that (Trans Mountain) might not be able to rely on a steady and predictable flow of oil from the oil sands production, it will result in a lower valuation by investors and a lower price received when the asset is sold," states the letter, which was signed by Calgary Chamber of Commerce president Deborah Yedlin as well as a number of other Alberta-based business groups and oil-and-gas sector leaders.
The federal government published its regulatory framework for a proposed cap on emissions from the oil and gas sector in December last year and the industry has been fighting tooth-and-nail against it.
The government has said that under its proposed plan, the oil and gas industry will have to cut emissions by more than one-third by 2030 or buy offset credits.
It has said the cap is meant to cap pollution, not production, but the industry has warned the cap will have "unintended consequences" 鈥� scaring away investment and potentially causing companies to curtail their output.
"Rather than support investment, the emissions cap would create uncertainty, unfavourable economic conditions and a punitive regulatory environment, all of which would strand investment and innovation in decarbonization projects," the Calgary Chamber said Wednesday.
The Chamber added the uncertainty around the proposed emissions cap is coming at the same time 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 per cent complete, has been underway for more than four years and has so far cost at least $34 billion.
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's route who may be interested in purchasing a stake in the asset, and is expected to later consider commercial offers for the remaining stake.
But the pipeline expansion's ballooning construction costs already pose a problem for the government, which bought Trans Mountain for $4.5 billion. Observers have pointed out the government will likely need to sell it at a loss, as prospective buyers will only offer a price that can be supported by the pipeline tolls 鈥� the fees oil shippers pay to move oil on the pipeline.
On Wednesday, Environment Minister Steven Guilbeault disputed the Chamber's premise that the proposed emissions cap will in any way affect the sale of Trans Mountain.
"We haven鈥檛 even introduced a draft set of rules for the cap, which will trigger a whole new round of broader consultations," Guilbeault said in an emailed statement.聽
"So unless the Calgary Chamber of Commerce knows something we don鈥檛, the conclusions they are drawing are extremely premature."
The federal government has said the limit it ultimately legislates will take into account what is technically achievable, as well as the forecasted global demand for oil and gas.聽
"Our proposed approach simply holds industry accountable to what they have already promised Albertans and Canadians they will do through their massive advertising campaigns," Guilbeault said, an apparent reference to the Pathways Alliance group of oilsands companies and its highly publicized proposed plan to reach net-zero greenhouse gas emissions from oilsands production by 2050.
Data from the Canadian Energy Regulator shows Alberta's greenhouse gas emissions increased 19 per cent between 2005 and 2020, the only Canadian jurisdiction where emissions have grown during that time.聽
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.
Amanda Stephenson, The Canadian Press
