A Conversation With the Honourable Danielle Smith
This week, our guest is the Honourable Danielle Smith, Premier of Alberta.
There are some important federal policies under development with implications for the province of Alberta, including Ottawa’s oil and gas emissions cap and the Clean Electricity Regulation (CER) that aims to move Canada to net-zero electricity by 2035. The Alberta government has also put a six-month moratorium, until the end of February 2024, on approvals of new renewable power projects.
Here are some of the questions Peter and Jackie asked Premier Smith: From an energy perspective, how could the Alberta Sovereignty Act be used to respond to Ottawa’s policies? What do you say to people who think the oil and gas industry is not reducing emissions fast enough, and therefore more policy is required? A cap on oil and gas emissions, asking for a 42% reduction below 2019 levels by 2030, could cause production curtailments with negative implications for provincial revenues and oil and gas companies; how will this get reconciled? What led Alberta to put a temporary moratorium on new permits for wind and solar projects? Why do you think the federal government’s proposed Clean Electricity Regulation is bad for Alberta? Why did you launch a national campaign to bring awareness to the issue with the clean electricity policy? Carbon capture and storage (CCS) project spending in Alberta is moving slower than most people anticipated; why is that, and can the province help?
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Episode 213 transcript.
Speaker 1:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Speaker 2:
This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. And welcome back.
So, Jackie, I’m not going to ask you about your weekend as I usually do, or even though it was a lovely weather here in Calgary or your camping trips or if you’ve seen any good shows because we want to get straight into our special guests today.
And while speaking of shows, I feel it’s time to reciprocate. I have been on this person’s show, I think three times, and it’s just so delightful to have her back. And maybe you’ve already guessed who it is, but it is lovely to have Premier Danielle Smith, who had her radio talk show, but now she is back as our Premier. And what better person to talk to about the policy environment here in Alberta and Canada and beyond. So welcome.
Premier Danielle Smith:
Well, thank you. And what better people to talk to about that environment than you, Peter and you, Jackie? I’m delighted to be here.
Jackie Forrest:
Great. Well, hey, before we start, a lot of people know you already, but we thought we’d ask you some questions. Tell us a bit about yourself before politics. Where did you grow up and were you the leader of the class when you were a child?
Premier Danielle Smith:
I was a bit bookish when I was a kid. I think I probably always knew I was going to go down a path going to university, so I was the kid who liked to read a lot and do essays as opposed to, there’s a lot of kids who are hands-on and want to get right in there, I was a lot more bookish. But when I went to the university it was a pretty exciting political environment because there were a lot of really interesting political characters there, like Ezra Levant, who was the leader of the Campus Reform Club and Naheed Neshi, who was the leader of the Political Science Association and Rob Anders, who went on to become a Reform MP.
And so, I loved watching them at the various debates and the model parliament. I was a little too shy to take part in that myself, but I always felt, wow, do they ever know how to express themselves? And that’s when I started working on my own speaking and my own ability to express myself publicly. And it really changed, I think the course of my career to be able to learn how to speak. It was not easy, but I had to do a lot of work at it.
Peter Tertzakian:
That cohort you mentioned with Ezra Levant, Naheed Neshi and there’s many others as well that come up in Alberta politics, I guess we want to talk about thick skin because to be able to go into politics, to be able to enter the realm of public scrutiny, whether it’s on a podcast, a radio talk show or standup as a politician, it really requires a thick skin. How do you deal with that?
Premier Danielle Smith:
You don’t take it personally, really. And maybe it’s a personality type because I’m the personality type that I’m curious. I feel like I learn more by talking to people I disagree with. Learn a lot by talking to people who are really smart and who know their areas as well. But I think you can learn a lot through that kind of engagement with people who have different ideas. And so I’ve never really taken it personally if somebody thinks I’m wrong and tells me I’m wrong.
And that’s what I think you have to have if you’re going to be in this line of work, whether it was in media, which I did, or advocacy as well. But certainly in politics you have to be prepared to take criticism and you have to be prepared to defend your ideas as well, because if you want to persuade people of a particular policy direction, if you end up backing down every time you take some criticism, you’re never going to get anything accomplished. So, for me it’s a personality type. I don’t know that everybody in politics has that.
Peter Tertzakian:
Yeah. Well, it strikes me that the skin has to be even thicker, but the need to persuade, to have critical thinking, to debate, to collaborate is more important than ever. We’re certainly going to talk about that as we talk about energy, but do you find that trying to persuade people of a certain position is more difficult today than it was in the past?
Premier Danielle Smith:
It’s one of my biggest challenges, and maybe this was something that I learned on talk radio when I had to fill three and a half hours of time, is that my approach is to stack my arguments so that I always feel like, here’s my best argument that I’m going to give you. And if it doesn’t work, I’ve got another. And if it doesn’t work, I’ve got 10 more. So I enjoy the intellectual rigor of being able to take somebody who is not necessarily an obvious person to support me on a position and trying to find that what is that one area of overlap that we have?
Because there’s been very few people that I’ve spoken with over the years that I haven’t been able to find at least one starting point of common ground. And when you can do that, then you can, through conversation, find more points of common ground. And that to me is perhaps what’s missing in the dialogue that we have now.
Peter Tertzakian:
Absolutely.
Premier Danielle Smith:
It’s part of the reason I’m a bit dismayed that we don’t have that kind of robust exchange of ideas because the public square should be the place where you scrap it out over different viewpoints, come to some common understanding so you can move forward. If you don’t have that, everybody retreats into their own echo chamber and then you never get that common understanding. So I’m trying to change that in politics. Am I going to be successful? I guess it’s too early to tell.
Jackie Forrest:
All right, well, first of all, thanks for that inspirational story. You’re such a strong speaker today. So I think a lot of people will say, “Hey, I can do anything I want to do.” A lot of young people will love to hear that story.
Premier Danielle Smith:
Can I give them a tip? It was Dale Carnegie. I took a couple of Dale Carnegie courses and this one he had was on public speaking. And there was a line I remember in there saying, “If you learn how to speak well, people will give you credit for being smarter than you really are.” And so I thought, well, I may as well put that out there because it is one of those things you have to just keep trying and trying at. And they say public speaking is something people fear more than death. So once you get over that hurdle, you really can accomplish anything. But it is so worth it to do.
And I would say it as well for women as well. When I go to seminars with women and they ask about leadership, I say the number one thing you must do is to be seen, you have to be heard. If you’re sitting in a roundtable discussion and you’ve got a great idea, don’t wait to talk to your colleague about it after it’s over so your colleague comes back and shares your idea and gets credit for it. You have to put yourself out there. You are the one who has to put your ideas on the table, because then someone will come over and the connections that that makes you have no idea how that’s going to expand your networking. So I think it’s really important for female empowerment to just speak up. You have to be seen and you have to be heard.
Jackie Forrest:
Okay, well, I agree with that. And I’m always one to speak up, so I’m already using that advice. And I agree, it does help. It helps build your network and it helps get your name out there.
Well, let’s talk about energy. Now, I’m sure a lot of people want to talk about things like pension plans, but we’re going to focus on energy today. But we’re going to start with some big picture issues to set the stage. Let’s talk about this Sovereignty Act, the first act you passed as you came in as Premier. Tell us what it means. And some people will say it’s a separatist act. How would you explain that?
Premier Danielle Smith:
It’s named the Alberta Sovereignty within a United Canada Act. And I think part of it was that I was watching for many years as the federal government kept on passing offensive legislation. It started with Bill C-48, the tanker ban, which is targeted just at our bitumen and then Bill C-69, which is targeted at our pipeline infrastructure, but pretty well anything we build in Alberta.
On top of that, during our leadership race, we were hearing that the federal government wanted to have a cap on emissions for fertilizer, reducing emissions 30% by 2030, reducing oil and gas emissions 42% by 2030, clean electricity regs, which would require a net-zero power grid by 2035, the phase-out of the sale of combustion engine vehicles by 2035. On top of that, net-zero building codes that would cause homes to be disconnected from natural gas. And I was watching all of this and it was like it getting no real awareness in the general public. And I was offended that the federal government would be announcing these things that are not in their area of jurisdiction while we were trying to sort out our leadership issues in Alberta.
So, for me it was let’s take a bold step and assert the Constitution, try to educate the federal government, educate the rest of the country about how our country’s supposed to work. It says right there in the Constitution, exclusive jurisdiction. So, I suppose I could have named it the Alberta Exclusive Jurisdiction Act or the Alberta Autonomy Act or the Alberta Get the Heck Out of Our Way Ottawa Act. I don’t know. But sovereignty seemed to encapsulate what it is that we were trying to do, that the founders recognized that the federal government had exclusive areas of jurisdiction and the provinces do too. And everybody seems to be acting like the federal government can engage unilaterally and they can’t. And we’re attempting to assert that and change the way our relationship works with the rest of the country.
Peter Tertzakian:
So, you gave a long list of things that led you to the Sovereignty Act, including the Clean Electricity Regulation, which is highly topical today. And in fact, the Sovereignty Act, we hadn’t heard much about it, but you brought it up just a couple days ago, again in the context of the Clean Electricity Regulation because there’s definitely safety issues associated with all that, and in the prairie provinces particularly where we don’t have a lot of hydropower, where we have extreme variations in temperature, low demand, population growth, the whole bit.
So, can you talk about under what conditions the Sovereignty Act would be triggered? And actually, I think some people wonder, well, how much weight does it really carry in our confederation?
Premier Danielle Smith:
In some ways I look at it as a notwithstanding clause on federal legislation that interferes in our jurisdiction. That’s sort of how I look at it. People have asked me over the years, “Why can’t we use the sovereign” or “why can’t we use the notwithstanding clause against that piece of federal legislation?” And that’s what we’re going to try to do.
If they come through with a policy that is clearly outside the bounds, and I think I gave examples of five or six that I think are, then we are going to have to put up a wall and say, no, we’re just not going to enact that legislation. We’re going to create defensive measures and it’ll end up being fought out in the court, I suspect.
But I’m prepared to go to court and say, we are defending the Constitution. We are defending our right to develop our resources. We’re defending our constitutional right to develop our own electricity system. We’re aligned with the federal objective of carbon neutrality by 2050. We’re asserting our right to be able to manage our emissions environment. We’re asserting that we have an obligation to provide reliable energy, affordable energy, and make sure that the power grid doesn’t go out in the middle of winter or in the heat of summer.
And I have to believe that the Supreme Court will say, “You know what? You are making your best effort to achieve that outcome. You’re aligned with the federal government not acting in opposition, and we recognize your jurisdiction.” But that’s the conversation that we need to have.
Peter Tertzakian:
You referred to the wall that would be put up, and I’m far from a constitutional lawyer, as I’m sure most of our audiences doesn’t, I think I might’ve read it in junior high a little bit. So, I’m trying to understand how strong this wall is or how much weight does something like a Sovereignty Act carry in terms of-
Premier Danielle Smith:
Well, I can give you a couple of examples. We had a federal government say that they wanted to confiscate firearms that had been purchased by law-abiding citizens, and it’s been pushed back against all across the country, different jurisdictions as well as by First Nations. And so, one of the things we said is, “Well, we’re not going to direct our RCMP to confiscate firearms, and we’re not going to allow municipal governments to collect firearms either. So federal government, if you want to enact that policy, you’re on your own. We are not going to be doing anything to assist.”
And I guess we’ll see what happens when it comes down to whether or not they’re going to be able to enact that. But we are under no obligation to help them achieve a goal which runs contrary to what we hear from our own citizens. And so, when I look at, for instance, what we have to do potentially on power, we have to de-risk natural gas investment. There’s no other way. Small modular nuclear isn’t available. Hydroelectric projects, even if we had the ability to do them … Look at Site C, it began in 1954. We don’t have time to wait for our hydroelectric. Solar and wind are too intermittent. It doesn’t matter if you have 60,000 megawatts of wind and solar, if the wind doesn’t blow and the sun doesn’t shine, you still have no electricity. Batteries are too expensive. It costs a million dollars per megawatt for storage. So a 200 megawatt facility would cost $200 million for storage and you’d only get an hour of storage.
I’ve thought through what are our options. Our only option, at the moment, is natural gas. We can start out saying it’ll be abated, but remember what the federal government has done. They’re using their criminal law power to try to hammer us over the head. So by 2035 in January, if some executive wakes up and finds that they’re not 95% abated, they go to jail for as long as three years, so we are going to have to de-risk that
Peter Tertzakian:
That’s under the Environmental Protection Act.
Premier Danielle Smith:
What does de-risking look like? Well, maybe we have to do a long-term power purchase agreement so that we can indemnify any company that is willing to build natural gas force because that’s our obligation. Our obligation under the Constitution is to make sure that our people have reliable, affordable power.
That’s the kind of mechanism I’m looking for is that in the event that the federal government pushes us into the corner, then we will have to find some way of de-risking the investments that we know we need to make sure we have a reliable grid.
Jackie Forrest:
Right. We’ve covered some of our concerns around the policy here on the podcast. Now last week you introduced the Tell the Feds national campaign opposing the federal Clean Electricity Regulation, and you have an advertising campaign across the country that’s been reported to cost about $8 million to tell Canadians and Albertans about the negative effects of the policy.
First of all, why did you decide to take this to a national advertising campaign?
Premier Danielle Smith:
I think part of it is that I’ve been watching around the world what happens when power grids fail. We saw it in Texas, we’ve been watching what’s happening in Europe. We feel like there’s very little awareness in provinces that are just as exposed as we are about what is coming on them at the federal level. In fact, we did some polling in New Brunswick. Only 10% of their population has even heard of the clean electricity regs, and yet they have, I think about 60% of their power grid is reliant on hydrocarbon fuels. Same in Nova Scotia, same in Saskatchewan.
We’re looking for allies on this. There are a few provinces that are going to be particularly hard hit and I think that we’re already beginning to see in Atlantic Canada there’s some tension because of the layering on of the carbon tax and then the Clean Fuel Standard. People are really feeling a pinch. We’re hearing affordability is the number one issue and the federal government keeps on putting in policies that make life less and less affordable. We know that there are some allies in this fight that need to know what is potentially going to happen to them if they don’t get a carve out? That’s what we’re looking for as well.
More broadly speaking, we don’t want blackouts in this country. People are accustomed to turning on the light switch and having their lights come on. People are accustomed when it’s -30 to being able to have their furnace working and their air conditioning working in +30. We want people to understand there is a real danger in a country that has the extremes of temperature that we do if we end up with long periods of time where our power grid fails, and that will happen if we don’t take proactive measures.
Peter Tertzakian:
I actually have read, believe it or not, the entire Clean Electricity Regulation Gazette. In there they tackle hit on the notion of reliability and affordability. What they’re basically saying is, we’ve looked at this, we’ve modeled this, we’ve run the numbers with our groups, and we think it can be reliable. We think it can be done and maybe the price of electricity, I think the number for Alberta is 4%, will go up. It basically becomes like, well, my modeling and numerical effort versus yours. How do we overcome this impasse? It seems like there’s sort of like a big gap between what we believe and what a document like this gazette believes.
Premier Danielle Smith:
Well, this is the reason why. I mean, when has the federal government ever built a power plant? When have they ever built an electrical grid? They’ve got no expertise in this. We should talk to the people who do build power plants and do build electrical grids. Our electric system operator has said, under this scenario, we’d be looking at blackouts 12 years from now. Even the Ontario electric system operator has said the same thing. I’ve talked to our energy executives, and I asked them the question, I mean, are you going to be able to get approval to build a new natural gas plant? They say, “No, our board of directors won’t approve it if there’s a danger that the executive team is going to go to jail in 12 years’ time.” So, you don’t have the investment taking place.
Who is going to invest in this province in small modular nuclear, having seen all of the difficulty of trying to get any project approved, who’s going to take the risk on a brand-new type of technology to try to get the social license to do that? Those things are going to take time. I would say that they’re hopelessly misinformed about the kind of impact this is going to have.
There’s another group, Edward Greenspan’s group, and they did an assessment. They said it would cost $1.7 trillion to do this net zero by 2035, of which we would probably be on the hook for about 200 to 400 billion over 12 years. That’s going to increase our power prices fivefold. That’s another alternative that we could be looking at. I guess the other part of it is that I’m of the view that if you give enough runway, then you have the ability to have it all. Our modeling suspects that we’ll have to spend $92 billion anyway, by 2050, to keep up with growth and under a normal circumstance. But if we were to have to reach the net-zero targets, that would add an additional $52 billion and compress all of that spending into the next 12 years. That’s why it’s so expensive.
If you allow for a natural capital turnover, people will wait until the new technology is available and they’ll plan for it. They want have stranded assets. When we look at where we’re at with coal, it costs us billions of dollars, not only to pay out the stranded assets, which we’re still paying $100 million per year for the next seven years, plus the additional build that we had to do on the replacement, which was solar, and wind and all the extra transmission lines associated with that. Plus, you need a backup to solar and wind when they’re not working, so that’s sort of a second layer of additional costs that ended up getting built in. Those are the kind of things that they just haven’t modeled or contemplated at the federal level. That’s why I don’t put any credibility in their numbers.
Jackie Forrest:
So Premier, the electric system operator last week talked about the potential for blackouts if we make no changes to the system. One idea, we’re going to come to the moratorium on renewables here in a minute, but one idea is that we need to redesign, review the whole power market here and consider potentially capacity payments. I know that was talked about with the NDP, so that these natural gas generators are going to want to stay online and get rewarded for that, even if they’re not going to be generating as much as they would’ve in the past, because wind and solar will be their other low carbon options.
Are you thinking that that might be an option?
Premier Danielle Smith:
There’ll have to be some kind of long-term power purchase agreement. I don’t know if a capacity market is the right answer. I’ve been told that our market is too small for a capacity market to work. I’ve been given some encouragement that if we do some kind of auction where we are prepared to sign a long-term power purchase agreement and then use the private sector to build it, that might be able to get us there as well. The main thing, I think, is that we want to maintain as competitive an environment as possible. That’s been one of the great strengths of the environment that we have here. I do know that if we do nothing then the only thing that will get built here will be wind and solar. Wind doesn’t always blow; sun doesn’t always shine.
I know that there’s sort of this myth, and I’ve heard the environmentalist say it, the wind is always blowing, the sun is always shining somewhere. The notion being that if you just built enough of it and interconnected enough of it, you’d be able to have that back up. It doesn’t work in Alberta when you’ve got very short days in winter, very cold days in winter and when you end up with the excess demand and sometimes you just don’t have the wind blowing at all. So, I think that there is a little bit of fantasy that we’re trying to get over because everybody had this conception that Alberta somehow would move to a 100% wind and solar market. There’s no industrialized market on the planet that is building their entire grid on intermittent power. It’s just simply not possible.
Those are the things that we’re trying to overcome. We have to figure out how to bring on base load power. Some of it might be geothermal, some of it might be abated natural gas, some of it might be hydroelectric. Ammonia being added is one thing that they’re looking at Japan to reduce the emissions profile and small modular nuclear when it becomes available. We’re prepared to work on all of those things, but we also know, and we need to be realistic, that’s not going to be an answer in 12 years.
Jackie Forrest:
All right. Well, I do understand the sun only shines so much and the wind only blows so much, but there were lots of people coming here building renewable projects and a big queue of projects still exists. However, there’s been this moratorium now, till the end of February, where we’re not going to have any more new permits for wind and solar. Are you concerned that we’re driving away investment? I think there was something like $4 billion is going to be spent on new capital projects around wind and solar, in the province this year.
Premier Danielle Smith:
There were 23,000 megawatts of wind and solar in the queue when we announced the moratorium, and virtually no gas to back it up. Now there’s 41,000 megawatts of wind and solar in the queue. We actually succeeded in letting the world know that this actually is a pretty good place to invest in wind and solar so that everybody got their applications in.
There’s a few things that we’ve got to address. We have to make sure that, at peak demand, which is about 12,000 megawatts, that we always have some kind of base load power in the event that we can’t rely on wind and solar. I’m mindful of the fact that we’ve had seven near failures of our power grid in the last year, seven level three alerts, and that’s when you have to start shedding load to be able to maintain the integrity of the grid. We’re already at that point. On two of those days, our 5,000 megawatts of installed wind and solar were producing less than a hundred megawatts of power. That’s the reality of what we face when we’re trying to manage our power grid here, is that sometimes you have to plan for zero from those intermittent sources. If I’m going to bring on more intermittent sources, I have to bring on an equivalent amount of base load. The base load just doesn’t want to invest, and that’s what we’re trying to manage.
Peter Tertzakian:
I mean, it strikes me that there almost needs to be a pause to sort of step back and kind of think about this whole thing because on one hand we hear people, and we’ve even had people here in the podcast say, “Well, we need to think about how to redesign the whole electricity marketplace in this province.” Then other people will say, “Well, if you only had the interconnects”, even that’s in the gazette, with the other provinces. “Oh, if we just got hydroelectric power all the way from Manitoba or from BZ or whatever,” the list goes on and on of all the things that we should be thinking about and considering. Yet, it just seems we get pulled into rabbit holes of debating nuances and minutiae and go head-to-head and we don’t find that one layer of common ground that you talked about at the beginning of the podcast.
What do you think about having almost like a timeout, kids. Let’s just think about the whole thing and what’s realistic and what isn’t.
Premier Danielle Smith:
We are looking at how we can create a more functional market design, because the problem with the market that we have is it was designed for a coal-fired electricity market, which was once it’s on, you can keep it on and it’s very reliable and you know from one day to the next what it’s going to be. You can’t really overlay that same system with a market that gives priority to wind and solar, which you don’t know from one hour to the next really what it’s going to look like. That’s what’s created some of the instability. That’s what the pause is about, is figuring out do we need to have a day ahead market? Because you can estimate pretty reliably what solar, and wind are going to be a day ahead-
Peter Tertzakian:
Like trading electrons one day ahead as opposed to in the here and the now.
Premier Danielle Smith:
And that we have been told might lead itself to more stability. We can talk about do we give some reward to those who can provide the reliable power? I mean capacity market is one thing, but maybe solar and wind buy their way into the reliable market by having battery backup or by having an agreement with a peaker plant, so that if they can’t supply the electrons with wind and solar, they can supply it with something else. Right now, the electric system operator is the one who’s doing all of that.
Peter Tertzakian:
Yeah. Actually, I want to come back to this notion of the market redesign because as you know, I led the royalty review. I was on the Royalty Review Panel 2015, and the royalty system dated back to 1937, and it was just a patchwork quilt of modifications in an era where horizontal drilling and hydraulic fracturing and all this new technology was coming in. And basically we just said, “Yeah, we just got to modernize this whole thing,” almost white sheet of paper and do it again. It strikes me that with the policies relating to something as vital as safety on the electrical grid and this kind of thing, we should almost think about the regulatory market infrastructure, not just physical infrastructure.
Premier Danielle Smith:
Mm-hmm. It’s been suggested to me that we need to take a look at is ISO, the Market Surveillance Administrator, the Alberta Utilities Commission. The other thing I think we need to look at is where is the right place for solar? When you think about it, I mean, if solar makes sense on rooftops of buildings and on rooftops of homes, why are we charging the same amount for distribution and transmission charges? Maybe we should actually give a reprieve of somebody who’s doing us a favor by having their own localized power generation, maybe they get a break on their distribution and transmission charges?
Peter Tertzakian:
I’d like that.
Premier Danielle Smith:
Well, because I think that may be the more sensible place to put it rather than, I mean, I saw one proposal for a wind farm where the wind farm was going to be $225 million and the transmission lines we would have to build to connect it to the grid was also $225 million and yet it’s only operating 30% of the time. Those kinds of things don’t make sense when people say, “Well, why is my distribution and transmission part of my bill so high?” That’s the reason why we should maybe think of a way to reward that localized type of power, that type of power-
Peter Tertzakian:
Distributed district. Yeah.
Premier Danielle Smith:
Oh yeah. I’ve been very heavily influenced by your book, the End of Energy Obesity, and so I’ve been thinking about if that would be a reversal of what we’ve done before we had these big coal plants that we produced power hundreds of kilometers away, single transmission line, and it was reliable. Well, now we’ve taken that away, and we’ve replaced it with a bunch of microgeneration all over all that transmission and distribution. And do we have more reliability? No, we’ve got less reliability and more cost. So, do we need to rethink, how do we begin with the smaller household or building being responsible for some of its own power generation with battery backup? Because you can talk about how you might be able to have batteries in the home and then district power.
Peter Tertzakian:
Sure. It might even be cars and trucks, right? Completely.
Jackie Forrest:
I guess the only issue with that is that it’s generally quite a bit more expensive dollar per electron than those large-scale wind and solar projects in terms of the generation.
Premier Danielle Smith:
I wonder if it would. I drive past a solar farm on my way to my riding in Brooks-Medicine Hat in the winter and its covered ice and snow. I think, “Hmm, I wonder how much power that’s generating today.” Versus if you had solar panels on your roof of your building or on your home. Maybe there’d be a different process to make sure that they were generating power more of the time. So, I don’t know that the economics are all that strong for a solar and wind project if they were to have to pay for their own hookup to the grid. I think that they’re relying on the subsidy to be able to make some of those projects work, and maybe that’s one of the other things that we have to reexamine.
The other big problem that we have is the reclamation cost, and I don’t think that we can understate how important that is. I mean, we’ve made errors in the past on oil and gas reclamation, allowing it to be paid forward and paid forward, and we still have projects from the forties and fifties that haven’t been cleaned up. And now we created a new model where energy companies have to pay down 3% of their liability each year. But I don’t want to be the person who 20 years from now someone says, why didn’t they think about that on those wind and solar projects? Because those turbines, I was just getting an estimate from a person who lays concrete how much it would cost to remove them, and he said there was one project where they poured the pad wrong, so they had to remove it right away and it was $1 million to remove the 850 cubic meters of concrete. And then you’ve got the steel on top of that for the pillar, and then you’ve got the blades.
And if you end up with those kinds of projects changing hands over and over again with no orphan well fund or orphan turbine fund like we have in the energy sector, then it’s going to be the landowner who’s left with a million or a million and a half liability at the end of life. And we’ve got to be thinking through what does that look like? How do we put an environmental bond aside to make sure that those projects get cleaned up?
Jackie Forrest:
Okay. Well, lots to get done between now and the end of February, and I’m sure everyone wants to hear that we can move forward with some of these projects. And I’m a supporter too of creating greater incentives for smaller scale. But hey, with the time left, I know our listeners will want to hear about oil and gas as well. We saw you at the World Petroleum Congress, both Peter and I, and you were giving speeches. I actually saw you getting toured around by the energy minister from Saudi Arabia, the Crown Prince, as well as the CEO of Saudi Aramco. So just what are your impressions? The world came here to Calgary, to Alberta, the oil and gas industry, what were your impressions from those discussions?
Premier Danielle Smith:
I would say, I think a lot of people were disappointed with the natural resources minister’s comments federally the night of the opening because he essentially took the IEA report and said, “We’re going to be winding the industry down, only 25 million barrels a day by the time we get to 2050, no point in investing here.” And so, I think it sucked the oxygen out of the room and I had to come back and say, “You know what? That’s only one projection about where the world’s going.” I don’t believe that we’re transitioning away from oil and natural gas. I believe we’re transitioning away from emissions and there’s lots of ways to do that. We’re doing it with carbon capture utilization and storage. The Saudis are really looking at utilization. And what I loved about their display is that they showed an alternative to rebar that was made with embedded CO2. They also have a net-zero concrete that they have on demonstration, and we’re doing that with Heidelberg too. They’re going to be the first net-zero cement plant when they’re up and running next year. We’ve got net zero hydrogen, net zero petrochemicals. They’re doing the same thing. And so, I kind of look at us being in a bit of a healthy competition with Saudi Arabia on how we can decarbonize but continue to keep on providing the energy the world needs.
So, the way I put it into context was that we have a dual problem. We’ve got to address energy poverty, and it was significant, and I think that the miss that the energy minister had in that room was there are a lot of delegations there that have a good percentage of their population that have no electricity at all. And I was thinking of Nigeria as an example, because I met with the Nigerian delegation, 200 million people, 98 million that have no electricity. And their number one goal is to try to bring their people up to a standard of living where they can cook their food and they can have that kind of security.
And I think it’s incumbent upon us as the wealthy nations to figure out how do we build the infrastructure out? And I think natural gas is going to form that backbone, and then perhaps natural gas becomes the network that we use to switch to a hydrogen economy. Maybe that’s one model. But it’s up to us to make sure that we’re doing both, that we can’t in the wealthy nations just say, “Okay, everybody stop here. That’s all we’re going to allow.” And then really entrap a large portion of the planet in poverty. So, I think that it’s a dual goal; let’s figure out how to address energy poverty as well as reduce emissions.
Peter Tertzakian:
Mm-hmm. So, I would also say that the federal minister, Minister Wilkinson was also expressing a sense of frustration that his government, and I’m going to stick my neck out and say, certainly a lot of Canadians who don’t know much about what we do here, that the oil and gas industry isn’t doing enough, isn’t spending enough like, “Come on, get on with it. It’s a climate emergency, get with the program.” So again, we’ve got a gap here, because they certainly know that there’s a lot going on in the oil and gas fields of Alberta, but there’s just this, I live and breathe it every day, because I’m so steeped in energy at large, but I’m sort of in dismay at the gaps and not trying to find that one layer of common ground again that you mentioned, like, okay, so what is the one layer of common ground that you and the federal government and the industry, if we sort of draw a three-way thing here, that we can all find to get going and to make people understand that things are happening here, like the concrete, the Heidelberg plant, the many other things that we know are going on? What can we do?
Premier Danielle Smith:
I think one of the things that we perhaps did poorly in the past was we used to say, “Yes, but,” right? The environmentalists and the feds would say, “We have to be concerned about emissions.” And we’d say, “Yes, but we need to be concerned about energy security. Yes, but we need to be concerned about energy affordability.” And I’ve changed that. I say it’s, “And.” Yes, we have to deal with energy security and energy affordability, and we can reduce emissions at the same time. And that, I think, has been what I’ve seen in the industry is that has been their message for a good five years.
There was a long period of time where a lot of the argument was, “Well, what is our percentage of emissions compared to the rest of the world?” And that’s not very persuasive. I mean, I think that because we are a large energy producer, we have an obligation to figure out how to reduce the emissions. And I think the industry has really risen to the occasion. So, you’ve got a net-zero Dow petrochemical plant that is nearing final investment decision. You’ve got them net-zero air products, which is hydrogen, which is going to be providing the hydrogen for the hydrogen vehicles that the Edmonton International Airport has just purchased. You have the Pathways Group, which has a combination of how they’re going to reach net zero, which includes carbon capture utilization and storage, and includes-
Peter Tertzakian:
But what do you say to people who say, “Okay, that’s all nice. It’s all lip service. You’re not getting anything done?”
Premier Danielle Smith:
I think the frustration is that people think things can be done immediately, and sometimes it just takes time and technology. When you think of what we’ve had to go through to build pipelines. So now we’re going to build a brand new pipeline across multiple jurisdictions with First Nations consultation, multiple levels of government, plus supply chain issues, labor issues, and we’re supposed to have that all done within 12 years? That’s pretty ambitious to think that could happen. Can you do it in 27 years? 100%, we can.
So I think the pathway that I’m seeing is that this first stage is incentivizing carbon capture utilization and storage, and seeing how we can make incremental improvements on that. As I understand it, right now, we’re somewhere between 65 and 75% able to capture the emissions. That’s great. And then the next iteration, it might be 75 to 85%, and then the next iteration it might be 75 to 95%. I don’t know how far we’re going to get down that path, but that’s one part of the solution.
The other part of the solution, I think in Alberta is hydrogen vehicles. And we’re seeing, we’ve funded a number of studies, one is $18 million to do dual fuel vehicles for long haul trucking. So you get biodiesel as well as hydrogen. I think once those get rolled out, then you start building the hydrogen fueling stations. We’ve seen that in California and BC. We want to aggressively build out fueling stations as well. I think that’s another part of the solution. I think a third part is working with Ontario and New Brunswick and Saskatchewan on small modular nuclear. The first one’s going to roll out, I believe in Darlington in 2028. If we can piggyback on the kind of regulatory regime that they have in jurisdictions that have already done that, then maybe we can accelerate the adoption of small modular nuclear. We’ve funded $7 million with Cenovus to see if that might be the first rollout. And then on top of that, all the amazing work that’s being done by Avatar Innovation for how do you do direct air capture? That might be how we get to the final mile. Plus, I’m working with British Columbia on trying to get credit internationally when we reduce emissions of more polluting fuels with our clean LNG.
And there’s a real appetite for this as well. I went to the LNG Canada conference, and when you talk to some of these nations and they’re looking at us to provide them with a secure supply of LNG, they’ll say quite frankly, “If we don’t get that secure supply, we’re going to have to expand coal. And if we’re expanding coal, then we’re increasing emissions globally, not reducing them.” So that’s the broad conversation that we need to have. And I think that we can get there by 2050 with a combination, carbon capture utilization of storage getting better and better, doing hydrogen bitumen beyond combustion, small modular nuclear, and then ultimately direct air capture to get that final mile. And I’m hoping that that’s a vision that seems reasonable to the rest of the country, and I’m hoping it’s a vision that we can get the federal government to align with because there’s no reason for the feds and us to fight. If we share the same outcome at 2050, then why are we fighting over the pathway to get there? We’ve all agreed on the outcome. Let’s just get to work on getting to that outcome.
Jackie Forrest:
So Premier, you talked about the projects that are coming, but I think most people, I think there’s only one actual final investment decision right now, which is that air products and the Imperial biofuels facility, that’s one facility. And most people, I think would’ve expected at this point, we would have more projects that have moved into final investment decision on the carbon capture storage or the clean hydrogen. And one of the issues is concerns around the stability of the carbon price and Alberta controls the carbon price. So is there anything Alberta can do to get these projects going, to get the final investment decision and give the investors the certainty they need to move forward with them?
Premier Danielle Smith:
We have to reveal our carbon capture utilization and storage tax credit. And our Alberta Petrochemical Incentive Program was really, I think, instrumental in getting the attention and the announcements of some of those projects. But what we’ve been told is that they need that final piece about how does the CCUS tax credit apply? And I think we’ve been waiting for the federal government to announce theirs. They’ve been waiting for us to announce ours. And so we’ve just said, “Okay, let’s stop the dance. We’re announcing ours at COP 28.” And we’re asking the federal government to announce theirs at the same time because there’s a real awareness that we’ve got to create an environment that gets us close to where they are with the Inflation Reduction Act in the United States.
And so I think we’re on the same page, but we feel like we want to at least try to create the catalyst by putting out there before the end of the year what that kind of framework would look like here. But the federal government does have to come to the table on it because we have a very small corporate income tax right now. It’s only 8%. And so the lion’s share of the corporate taxes that a company pays is at the federal level. So it’s the federal government that will have to give a more substantial tax relief. And that’s what we’re hoping we’ll see them do.
Peter Tertzakian:
Let’s go to the other side of the world, Alberta, is it sending a delegation to COP 28 in Dubai?
Premier Danielle Smith:
Yeah, I’m going, yeah. And I’m looking forward to getting to know the region a little bit more, finding out where some of the other energy producing nations of the world are at. I was encouraged to see that Saudi Arabia has taken the challenge of net neutrality so seriously. I think we’ll end up with a coined term at one of the events I went to a little bit of collaboratition. So we’ll collaborate and compete at the same time, and I think be encouraging and sharing the kind of technologies that will allow us to improve. There’s also a large amount of sovereign wealth that are in various funds in not just UAE, but also Qatar and also Saudi Arabia. And so, trying to find ways to have investment opportunities of some of those dollars coming here, whether it’s in green technology, whether it’s in food security too, that’s another big issue, whether it’s real estate or any other types of innovation. I think that there’s a potential for some collaboration there.
Peter Tertzakian:
Yeah. So what is our message there?
Premier Danielle Smith:
My message is going to be very much like it was at the World Petroleum Congress, that we are open for business. We want to continue producing a greener and greener barrel of oil. We want to be the best barrel out there, and we want to be at the forefront of developing technologies that others can use so they can decarbonize. For those who have a pathway that they want to eliminate energy poverty, we want to be there so that we can assist them in doing that too. So it’ll be a dual message.
Peter Tertzakian:
I think the technology transfer part is really important. That’s something we’re good at. We have lots of expertise. I remember at the World Petroleum Congress, the minister of energy from Kenya came up to me and I asked her, “Well, why are you here?” And she said, “Well, I’m here so I can learn from you.” I thought that was a pretty good validation of what goes on over here.
Premier Danielle Smith:
It’s a great validation. And part of what, having seen how Jonathan Wilkinson and Steven Guilbeault talk about our industry, they can’t be the only voice talking about the Canadian industry or the Alberta industry at an important conference like that. I just don’t think that they have the knowledge to be able to accurately reflect what it is that we’re doing here. And when we sent a delegation last year, my environment minister and deputy minister went last year, and everything that we’ve done on methane, we set an aggressive target to reduce a methane 45%, and we’ve essentially achieved that. And John Kerry was there and had a conversation with the Canadian delegation, said, “My goodness, you are miles ahead of us. We need to learn from you.” And that I think is part of the reason why we need to be there. We’ve got good stories to tell and we just haven’t been very good at telling the story.
Jackie Forrest:
Well, Premier, it’s been great to have your time. Thank you for being so generous with your time. One last question to wrap up the podcast. We have this fighting with Ottawa, and that can’t be great in terms of attracting investors to this province. What would you tell investors in terms of why they should come to Alberta to invest their dollars?
Premier Danielle Smith:
I don’t think there would be a fight if the federal government realizes that we in good faith have come to the table to try to find a way to meet the objective that they set to get to carbon neutral by 2050. There’s no games here. We just are at the table wanting to have a reasonable conversation about what we can achieve and how we can work together to achieve those targets. And I think that as long as people understand that that’s the purpose of us having this joint table, that we’re hopeful that we will get there, then I think that that should provide some comfort and security. They should also know, though, that we’re prepared to defend this industry, that we will not let the federal government just unilaterally make decisions that would just transition or shut us down or send the message to the world that somehow this is a sunset industry. It’s not. I feel really excited about the opportunity in the industry, and that’s going to be the nature of our conversation at the federal level.
Peter Tertzakian:
Is that the one layer of common ground? Again, coming back to that, because I love the stack of arguments and the persuasiveness, and the one layer of common ground is net zero by 2050?
Premier Danielle Smith:
I think so. I think that the feds should just take yes for an answer. It took a lot of effort for me to, I’ve been advocating for that for a number of years now in my podcast and on the radio in various conservative circles I’ve been in because I think it’s truly achievable. And I’ve seen that the industry has stepped up. So I felt like that was going to be a really important common ground for us to have. And so I would hope the feds would just take yes for an answer, and then we can work with the scale of when we achieve the milestones and in a reasonable way and a non-punitive way, and a way that actually encourages investment in technology. And I think if we can get to that point, there’s just no limit to what we’re going to be able to do here.
Peter Tertzakian:
Well, great. Those are great parting words, and it’s fun to be on the other side of the interview hosting table here in the studio. So Premier Danielle Smith, thank you very much for joining us.
Premier Danielle Smith:
Thank you. I hope we can do it again.
Jackie Forrest:
And thank you. And thanks to our listeners, if you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Speaker 3:
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