Two Conversations: Ottawa’s Impact Assessment Act (formerly Bill C-69) and the Pembina Institute
On October 13th, Canada’s top court ruled that Canada’s federal Impact Assessment Act (also known as Bill C-69 and sometimes called the “no-more-pipelines act”) is unconstitutional, with a 5-2 decision.
To learn more about the decision and the implications for major projects in Canada and future environmental policy, we welcome Sander Duncanson, Partner, Regulatory, Indigenous, and Environmental at Osler to the podcast. Osler is a Canadian business law firm.
Sander was one of the authors of “Supreme Court of Canada finds the federal Impact Assessment Act unconstitutional,” a briefing published by Osler the day of the ruling.
Next, on the podcast, we talk with Chris Severson-Baker, Executive Director of the Pembina Institute, a Canadian environmental organization.
Here are some of the questions Jackie and Peter asked Chris: Have affordability issues reduced the focus on climate as a top concern? Do you see scenarios, such as the IEA’s Net Zero Scenario, which assume a rapid decline in oil and natural gas demand as realistic? Do you agree with Alberta’s moratorium on new permits for renewable projects? In your opinion, does Canada’s oil and gas industry need a cap on its greenhouse gas emissions? What is Pembina’s position on developing Canada’s LNG export market? Do you view the plan for Canada to reach net-zero electricity by 2035 as achievable? What are your expectations for the upcoming COP28 meeting in Dubai?
Other content referenced in this podcast:
- Danielle Smith’s statement about the Supreme Court Ruling on X (formerly Twitter)
- Pembina’s 2023 Alberta Climate Summit on October 26 in Calgary
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
Check us out on social media:
X (Twitter): @arcenergyinst
LinkedIn: @ARC Energy Research Institute
Subscribe to ARC Energy Ideas Podcast
Apple Podcasts
Google Podcasts
Amazon Music
Spotify
Episode 214 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. Welcome back. Well, Jackie, I started off my day by spilling a cup of coffee over my shirt, as you can see, so it looks like I’ve tie-dyed it brown and white, but actually that seems incredibly trivial compared to the tragic and really unspeakably difficult and disturbing circumstances that are going on, on the other side of the world, in particular, Israel, which really is another war front in an already geopolitically charged world. So, our thoughts are with those that are enduring such tragedies on the other side of the world. But we’ll also be following it from a geopolitical perspective as it relates to energy matters.
Jackie Forrest:
Yeah, so something we’ll definitely talk about on a future show, has implications for energy as well. But today we have different topics.
Peter Tertzakian:
We do, and we actually have two guests, one on short notice because, as most of you know in our audience, the ruling on the Impact Assessment Act from the Supreme Court of Canada came out last Friday. We have with us Sander Duncanson, and he’s with the law firm Osler, and he speaks on regulatory matters. So welcome, Sander.
Sander Duncanson:
Thanks, Peter, and thanks, Jackie. It’s always a pleasure to come on your podcast.
Jackie Forrest:
Well, maybe I’ll start with some context about the decision. There has been differing views on it for sure. The Alberta government started its case against this Impact Assessment Act. This is the act to approve large industrial projects.
Peter Tertzakian:
Bill C-69.
Jackie Forrest:
Yeah. Back in 2019, just for context, it takes four years to challenge these things to go from the beginning to actually getting a decision in this case, the Premier of Alberta, Danielle Smith, who came on our podcast, had a full statement on Twitter, which I will put a link to in the show notes. And I just wanted to paraphrase a few of the things that she said. She said this was a massive win for the protection of the sovereignty of provincial rights and that this shows that policies that the federal government is proposing, like the electricity regulations and the oil and gas emissions cap, are blatantly attempting to erode and emasculate the rights and authorities of the provinces as an equal order of government. She goes on to say that the provinces and interveners are going to be pushing back against these unconstitutional federal efforts.
So, it’s not only affecting how we get big projects done, but she’s saying it’s affecting the likelihood that the federal government is going to be successful at pushing through some of these other policies that the federal government wants in terms of reducing greenhouse gas emissions. And she actually said she hopes that the federal government will learn their lesson from this decision and abandon their efforts to push forward those policies. So that’s the province’s perspective in Alberta.
Now, the federal government had a different take. They seemed to underplay the impact on Friday. Environment and Climate Change Minister Steven Guilbeault said the federal government accepts the ruling and acknowledges the bill needs to be tightened, he said, and they can quickly improve the legislation through Parliament. So he seemed to underplay the fact that this has far-reaching impacts in terms of their ability to either get involved in large projects, and he didn’t mention anything about how it affects their ability to push through some of these other policies that they’re planning.
Peter Tertzakian:
Right. So, I think we need to phone a friend to find out who is actually right. That’s why we do have Sander at Osler. So, Sander, what do you think are the impacts of this decision on Friday?
Sander Duncanson:
Before I provide my specific views, I just need to provide the typical disclaimer that nothing I say on the podcast should be construed as legal advice. But with that aside, this decision is very significant in my view. In a nutshell, the Supreme Court found that at its core the Impact Assessment Act is about deciding whether designated projects under the act should be allowed to proceed. The act uses criteria like a project’s contribution to sustainability and whether it is in the public interest to inform whether the federal government will ultimately approve or deny the designated project. And the Supreme Court found that that’s unconstitutional because the federal government does not have jurisdiction to manage resource development within provinces, generally speaking. That’s the province’s jurisdiction.
The federal government has jurisdiction to manage discrete aspects of the environment, things like fisheries, and conceptually, the federal government can require environmental assessments if they’re focused on those discrete areas of federal jurisdiction. But the federal government cannot use its narrow jurisdiction over environmental issues to assume the role of decision maker for intra-provincial projects overall. And essentially that’s what the Supreme Court found that the Impact Assessment Act did and that’s why it found it to be unconstitutional.
Jackie Forrest:
Well, let’s use some specific examples. Let’s consider projects that are within the borders of Alberta, and let’s use a specific example like Teck tried to build an oil sand mine a number of years ago. They actually decided not to proceed with that, and I think one of the concerns was, well, the federal government could just at the very end of the day say, “Hey, we don’t want this project.” There’s that political decision at the end. What would it look like now compared to what it looked like a few years ago?
Sander Duncanson:
Those are exactly the types of projects that are most directly affected by this decision. Under the Impact Assessment Act, the way that it’s written right now, there are certain types of projects, things like oil sands mines, but a variety of other things that are listed in the regulations, those are automatically subject to a federal impact assessment and the federal government has to give those projects the green light before they can proceed. As we all know, it takes years to go through this process and it’s hard to predict who’s going to be in power federally at the time the project gets its way all the way through the process and what the federal policies and priorities are going to be at the time. So, it’s very hard to predict how that process is going to unfold, and when you have to spend often hundreds of millions of dollars to get through that process, that’s a really big barrier to moving ahead with projects like that.
In addition, under the Impact Assessment Act, one of the biggest issues that investors had is, even if a project was not listed in the regulations, the federal Minister of Environment had discretion to designate the project under the act and require an assessment anyways. So even for projects like CCUS projects and blue hydrogen projects, they’re not listed in the regulations, but there was still that element of uncertainty that the federal minister could exercise discretion and require a full-blown impact assessment. So, it was a lot of uncertainty and in my view much of that uncertainty has been removed through the Supreme Court decision last week.
Jackie Forrest:
So, these would now just fall under the Alberta process, which would probably have shorter timelines and less risk associated with it for project proponents, is that a good takeaway?
Sander Duncanson:
Yeah. I expect that there will still be some form of federal environmental assessment. The Supreme Court did still preserve that area for the federal government, and certainly Minister Guilbeault seemed adamant that there still would be a role to play, but it is clear that, that needs to be focused on very narrow areas of federal jurisdiction. Again, things like fisheries, and in my experience, there are very few in-province projects that have material impacts on those types of discrete areas of federal jurisdiction. So, while we don’t yet know exactly what that federal environmental assessment process will look like after it’s been reworked, we do know that the federal government will not be able to play the same type of role as ultimate decision maker that it is assumed in the past few years.
Peter Tertzakian:
I’m still trying to reconcile. I mean, you’re arguing that this clarifies things for investors, of multinationals who are potentially coming here to spend billions of dollars. But in my experience, around the boardroom table, nobody discusses the Canadian constitution and ultimately, I’m trying to understand really from an investor standpoint what risk has been reduced. Because in your words, Sander, basically you’re saying hard to predict how things play out. Well, if it’s hard to predict how things play out, it doesn’t really clarify how I calculate risk and return in making an investment decision.
Sander Duncanson:
Yeah, absolutely, Peter. And I don’t want to suggest that this one decision from the Supreme Court is going to immediately change everything, I think we’ve got a number of issues in this country that create regulatory uncertainty, but certainly when I have clients come to me and say, “We need to understand what the rules of the game are going to be. If we want to build an oil sand mine or a blue hydrogen project, how long is it going to take? What approvals do we need? What are the key risks?” And this federal impact assessment was often cited as one of the biggest ones because it was very difficult to predict how long it was going to take, who was going to make the decision at the end of the day, and what the proponent would need to do to get a positive approval.
And for any project that had greenhouse gas emissions, like an oil sands mine, in the last few years, that was really a significant piece of uncertainty because the federal government had signaled that for certain types of projects, like oil sands mines, there was a very real risk that no matter how good of a job the proponent did, the federal government was likely going to turn it down.
Jackie Forrest:
Now, what about projects that are cross provincial? So, for example, a big transmission power line that’s going to go across B.C. into Saskatchewan and Manitoba, I know we’re not proposing those today, but under this future of cleaner electricity, those kinds of projects seem really reasonable to try to pursue. Pipelines, I know after all the drama around pipelines, I’m not sure how many more new oil and gas pipelines we may build, but let’s say a pipeline that crosses multiple provinces, doesn’t this ruling create greater uncertainty for those because now we don’t really have a process to approve them?
Sander Duncanson:
Those projects are actually largely unaffected by this decision, and despite the rhetoric that we hear from certain people around Bill C-69 being the “no more pipelines bill” and they’re talking about projects like Northern Gateway and Transmountain expansion as being projects that are caught up in this, those types of projects are actually not directly affected by the Impact Assessment Act or the Supreme Court’s decision last week. Those projects that cross provincial or international borders, they’ve always been under federal jurisdiction, and the federal government has always had the ability under the constitution to decide whether or not those types of projects should be allowed to proceed. So those projects are actually not directly implicated by last week’s decision. It’s really the projects that are entirely within provinces that are the ones that are directly affected.
Peter Tertzakian:
How does this decision impact the two big, proposed policies in the world of energy right now, the Clean Electricity Regulations and the oil and gas emission cap? Maybe start with the Clean Electricity Regulations.
Sander Duncanson:
So I think, Peter, that’s one of the biggest implications of this decision from last week. Even though the Supreme Court was focused on the Impact Assessment Act, I know myself and many others were very interested to see what the Supreme Court was going to say that might implicate some of those other federal policies. I do see the Supreme Court’s decision as having big impacts on those other federal policies. Conceptually, I actually see the proposed cap on oil and gas emissions and the clean electricity standard as quite similar. In both cases, the federal government is seeking to lower greenhouse gas emissions by singling out specific industries, and there is a disproportionate impact on certain provinces based on what industries are located within the various provinces. For the federal government to take that approach of singling out specific industries and to dictate to the provincial governments how those industries should be allowed to proceed, or in some cases stating that those certain industries will not be allowed to proceed, things like coal mining, in my view, those plans are unconstitutional based on the Supreme Court’s decision, and the federal government will need to seriously reconsider its plans to proceed with emission reductions in light of the Supreme Court case.
Jackie Forrest:
All right, and Sander, you had come on our podcast in the summer of 2022, and we talked about the concerns about the oil and gas cap policy specifically that could potentially curtail production if we had to actually meet these greenhouse gas emission reductions because it’s impossible to actually reduce emissions that quickly and maybe we have to reduce production. So, you’re saying that it’s less likely that a policy that would result in Alberta having to reduce production would be deemed to be acceptable or constitutional.
Now the question is timing. Let’s say the federal government continues to pursue these things. Now I know Daniel Smith is saying, “I hope the feds don’t push these policies through,” but we are expecting a draft policy from the feds on the oil and gas cap this fall. At least that’s the news we’ve been hearing. If that goes forward though, doesn’t it take four more years to get resolution on that if they decide to go through the same process of challenging it?
Sander Duncanson:
Yeah, unfortunately, if you resort to the courts, these things do take time. I would hope that the federal government would be looking very closely at the Supreme Court decision and really rethinking how it proceeds to make sure that it does fit within its constitutional authority. If instead the feds just decide to proceed as though nothing’s changed, I expect that there will unfortunately be many more years of litigation and that’s not good for anyone in the country. But I’m cautiously optimistic that the federal government’s going to, despite what they say publicly, that they will be reading this closely and really thinking seriously about how to proceed in the face of this decision.
Jackie Forrest:
I have a quick question too. We are hear that there’s going to be new rules around methane that are coming out that would result in a requirement of about a 75% reduction in methane emissions. We’d already achieved around a 45% reduction in Alberta of methane reductions. Do you think that type of policy could be in question as well?
Sander Duncanson:
I think it could. That’s an example of one that has not been targeted historically, but it certainly could be. Legally the issue is, what is the federal head of power that any particular act or regulation is tied to? The federal government does not have this general constitutional authority to regulate greenhouse gas emissions. The Supreme Court last week said, when it upheld the federal carbon tax, that was a very narrow decision to uphold that one instrument, the federal carbon tax. The Supreme Court stressed the federal government does not have general jurisdiction to regulate greenhouse gas emissions. So, the federal government has to tie these types of policies to specific heads of federal power, and for methane, it’s hard to see how they would do that.
Peter Tertzakian:
Well Sander, I suggest that the story is far from over. There’s going to be lots of talk about what’s policy possible and what isn’t as we go forward in the world of energy. So thanks for joining us and shedding some light on this decision. Sander Duncanson from Osler, thanks very much, and we’re going to put a link to Sander’s discussion about this ruling in our show notes.
Jackie Forrest:
Yeah, there’s definitely a lot more detail that you provided. Quite a technical read, but for those that are interested to learn more, I think it’s worth taking the time to read that.
Sander Duncanson:
Well, thanks very much Peter and Jackie.
Jackie Forrest:
Yeah, and thank you for joining the podcast.
Peter Tertzakian:
Well, C-69 and the ruling was all about environmental matters, and I think we’ll continue that discussion and move on to our special guest this week who’s more than qualified to talk about environmental matters. We’re delighted to have with us our special guest, Chris Severson-Baker, who’s the executive director of the Pembina Institute. Welcome, Chris.
Chris Severson-Baker:
Well, thanks for having me here. I’m really excited to finally be on the show. I listen all the time.
Jackie Forrest:
Oh, great. Well, first of all, I think many of our listeners may know, but it’s worth just talking about the mandate of the Pembina Institute and what you do.
Chris Severson-Baker:
Sure. Our mandate is to advance a prosperous clean energy future for Canada through credible policy solutions that support communities, the economy, and a safe climate. We used to be very focused on all environmental issues, air, land, water quality, toxic waste management. Today we’re really laser focused on climate change and helping Canada to achieve net zero by 2050.
Jackie Forrest:
So you’re an environmental organization.
Chris Severson-Baker:
We call ourselves an environmental organization, a policy advocacy organization, a clean energy think tank. It’s hard to pin us down exactly.
Peter Tertzakian:
Pembina’s been around for a long time, and I’ve known, I think, every executive director since Marlo Raynolds, which was a long time ago.
Chris Severson-Baker:
Yeah, yeah.
Peter Tertzakian:
How long you been around?
Chris Severson-Baker:
The organization started about 40 years ago, and the headquarters were in Drayton Valley when I joined, and that was about almost, well, I joined in 1996, so I’ve been there for a long period of time.
Peter Tertzakian:
Yeah, Drayton Valley is the heart of the oil and gas industry in West Central Alberta, and you come from an oil and gas family.
Chris Severson-Baker:
That’s right. Yeah. So my dad, his name was Fred Baker. He’s passed now, but …
Peter Tertzakian:
Oh my God, I worked for Fred Baker. He was at Hudson’s Bay Oil and Gas.
Chris Severson-Baker:
That’s right.
Peter Tertzakian:
I didn’t make that connection.
Chris Severson-Baker:
Yeah. He used to talk about you because he would say Peter gives great advice and sometimes, we don’t like what he says.
Peter Tertzakian:
Is that …
Chris Severson-Baker:
But only-
Peter Tertzakian:
That was on the summer students.
Chris Severson-Baker:
Well, I think he hired you when he was working … One of his last jobs was a startup oil and gas company called Milestone.
Peter Tertzakian:
Oh, sure. Yeah, yeah, yeah, yeah.
Chris Severson-Baker:
I think he sought out-
Peter Tertzakian:
Wow.
Chris Severson-Baker:
… your advice at that time as well.
Peter Tertzakian:
Okay. Okay. So there’s the connection. Wonderful.
Chris Severson-Baker:
Yeah. Yeah. I grew up in a typical oil and gas household in Calgary. I was born in Calgary and I went to the University of Alberta. My dad was in the exploration side of the oil and gas industry, which was really, he just described, or he made it sound like it was the rockstar part of the oil and gas companies at that time, and he loved what he did. He really encouraged me to seek out something that I was passionate about. So my house was filled with lots of opportunities, lots of privilege that comes from being a son of an oil and gas executive in a safe place like Alberta in Canada. I was really encouraged to follow my passion, and that’s what I did.
Jackie Forrest:
All right. Well, talking about other intersections between you two, I hear there’s a conference coming up, and Peter’s going to be speaking at it, that Pembina Institute is hosting.
Chris Severson-Baker:
Exactly. Yeah. On October 26th in Calgary, we’re hosting the Alberta Climate Summit. We’re bringing that back. We’ve done it in the past and there’ll be about 400 people there. We’re really excited to have Peter speaking at the event. The other interesting speaker is the premier of Alberta. She’ll be a keynote speaker for the session. It’s not the first time that she’s actually attended the Climate Summit, but the first time since she became premier, that’s for sure.
Jackie Forrest:
Well, it’s been a big change, right? Under Jason Kenney, ENGOs were sort of the villains in this whole thing. So it’s interesting that you’ve got the Premier there.
Chris Severson-Baker:
That’s right. It was not easy to put on an event and encourage the corporate sector to show up during the Jason Kenney era when that inquiry was going on. I’ve had a couple of interactions with the new premier, and I’m very pleased to see that she’s not perpetuating that exclusionary or we can’t work together kind of attitude that prevailed for some years there.
Jackie Forrest:
Now I think historically you had a very broad sort of in sustainability focus, but over the last decade, all ENGOs have really focused more on the climate issue in my view. We’ve got lots going on. We have these two wars, and Peter talked about that at the intro. We used to just have one with the Ukraine situation, and now we have the situation in Israel. We’ve got lots of inflation. People are really struggling with affordability. Are you finding that all of this anxiety around the cost of living is reducing people’s interest in the climate issue?
Chris Severson-Baker:
No. We certainly have a climate crisis and we certainly have an affordability crisis. I think you could also argue we have a biodiversity crisis. Canadians, I think very rightfully, expect our leaders to be able to solve multiple crises at the same time and not just focus on one or trade one off against the other.
I think the biggest change is the recognition that in many, many ways, tackling climate change can also make life more affordable for people. The biggest reason why the cost of heating and powering our homes is so high is because our buildings are really inefficient. Energy retrofitted homes that are also powered with electricity that comes from a grid that has a deep penetration of cheap, renewable energy is one way to solve for multiple crises that Canadians are facing right now.
Jackie Forrest:
But I mean higher carbon taxes and we talk about the clean electricity standard could potentially increase the cost of electricity. So I think for most people it seems it’s going to be more expensive to reduce emissions.
Chris Severson-Baker:
We’ve done the analysis for Alberta, how do you get to a net-zero grid by 2035? And we found that through a combination of gas with carbon capture and storage, battery storage, other forms of storage of electricity and a deep penetration of renewable energy, that you can actually save households money by 2035. So we don’t agree that all of these measures are going to drive up the cost for everybody.
Peter Tertzakian:
Sometimes I feel like I’m a color commentator watching sports match or watching two sides play off each other. On one side we have environmental think tanks such as yours arguing that the modeling that you have done is not going to impact affordability and so on. And then we have the other side, whether it’s utilities or oil and gas or other industries basically saying, “No, no, no, it’s going to cost a ton.” And so I guess watching all of that and not coming to any resolution, I sense that there’s a sense of a bit of exhaustion starting to set in. And given that, are you more or less optimistic about achieving net-zero by 2050? Given all this polarization.
Chris Severson-Baker:
I’m more optimistic because I see more countries making commitments and actually putting in place the kinds of policies that are needed to achieve those commitments. I see the prices or the cost of electric vehicles and batteries, heat pumps all coming down. And I see people in those countries adopting those technologies.
But it’s not just the cost of the solutions and the fact that countries are starting to adopt those solutions. There’s also pretty clear that countries are responding to security of supply of energy issues by doubling down on their climate plans rather than they just don’t want to be beholden to other countries to supply such a critical energy resource. Also, and this is an unfortunate one, the reminders about why in climate change is a problem and something that we have to address are just everywhere. You cannot get away from it. It’s touching everybody very personal ways. And that’s always, unfortunately, something that needs to happen. And then the other reason for being optimistic is in the areas where we actually have implemented climate policy in Canada, we’re starting to see the right impact. We’re also seeing areas where it hasn’t been implemented and we’re not seeing any progress. So I am optimistic that if we keep going down this track, we’re going to get there.
Jackie Forrest:
What are some specific areas you are seeing impact? Because I mean, I’m just sitting here saying, “Wow, the dollars going into this space need to be growing.” We got a situation today where, I don’t know if you’ve looked at the public equity prices of many of these clean energy companies, but they’re just falling. They’ve gone down 20 or 30% since July. We’ve got wind farms that are being canceled because the PPAs that were agreed to or the price of electricity that was agreed to isn’t enough to justify moving forward with these projects. So I feel like things are kind of moving backwards in terms of investment in this space and where we need more. But what makes you feel optimistic?
Chris Severson-Baker:
Well, I think we’ve been making a lot of progress on electricity. I think that we are seeing the whole auto sector shifting to producing fleets of electric vehicles and consumers are very excited to purchase those vehicles. I think we’re seeing places around the world adopting heat pumps and parts of Canada adopting heat pumps. These are all sort of the critical technologies that need to be in place in order for us to start to turn over buildings and the fleets to get to net-zero by 2050. And so I think we’re seeing the very beginning of it. I also think the amount of investment that we are seeing in Alberta in renewables is very encouraging.
Jackie Forrest:
Yeah, $4 billion this year. That was before the moratorium, which I’m sure is going to put a bit of a speed bump in the upcoming year. Well, I mentioned it. What’s coming as view on the moratorium?
Chris Severson-Baker:
The moratorium on new approvals for renewable energy projects, in our view, it’s completely unnecessary and it’s had a negative impact on investments in that area. And I think it’s actually hurt Alberta’s image. So I can think of lots of examples in the past where we’ve gotten to a stage in Alberta where we really needed to do some review of energy development. The example that comes to mind is the coalbed methane development that was really taking off in 2003. We found ourselves here in Alberta without rules that were designed for that kind of gas development. They were designed for a different kind of oil and gas development. So Alberta Energy at the time initiated a formal review, no pause on approvals. The process was multi-stakeholder transparent. It led to changes that apply to existing and new projects. And that’s the kind of thing that I think Albertans typically expect the government to do. And that’s what we think should be done in this case.
We actually support a review. We think that there are legitimate concerns and questions. And if we’re going to scale up renewables to the degree that we actually need to, we have to address those concerns proactively. And on reliability, specifically we want to focus on, in that review, how do you scale up renewables very quickly. So how do you bring on natural gas-fired power plants that have carbon capture? How do you scale up grid storage, taking into account the unique opportunities that exist in this providence?
Peter Tertzakian:
And do you think the review should include who should pay for it? Because I mean, these sorts of things just cost a lot of money like carbon capture?
Chris Severson-Baker:
Absolutely. Yeah. I mean it’s really like what do we want to achieve. And then take the Alberta context, the current system that we already have in Alberta, and what is the best way to do that? I think we would love to be part of that conversation. And I know a lot of other folks in the electricity sector are just dying to have input into that.
Peter Tertzakian:
So, I want to go back to the comments you made on signs of positive change that you’re seeing that make you optimistic about net zero by 2050, things like the adoption of electric vehicles, heat pumps and so on. So what I sense is that we’re in a world where selection and confirmation biases are becoming, I’ll say it, extreme. In other words, depending on who you are, you select the data and views that only reinforce your own views. For example, oil and gas people choose views that reinforce growing oil demand, whereas environmental groups such as yours choose views that speak to rapid, say, oil demand destructions, say observing the growth in electric vehicles.
The gap in beliefs is really large because both pull out one dimensional data basically, and that forms their selection and confirmation biases. It’s really quite complex. And so how do we remove cognitive biases, get back to broader context, and get some basic agreement between the groups? Because as I see it, if we don’t get broader consensus and agreement on simple things like where oil demand is and is growing over the next couple of years as one example, or that electric vehicles are growing and what is the true impact of that, how do we get rid of this cognitive dissidence and get some sense of agreement with all the stakeholders?
Chris Severson-Baker:
Well, I think the way I’ve seen it work in the past is by bringing different stakeholders together, having a direct dialogue with each other about these matters rather than sort of talking to each other through-
Peter Tertzakian:
Twitter? Or X?
Chris Severson-Baker:
… the media, through Twitter, through ad campaigns and that sort of thing. When you create those kinds of forums, you get people together in a room, you get beyond those positions and start getting an understanding of the interests that are behind those positions. The facts that people are relying on, there’s an opportunity to really dig into those facts and ideally try to get to a place where you have a common held set of information that you can base decision making on. Unfortunately, we’re not doing a lot of that these days in Alberta and we haven’t been doing it for a while.
Peter Tertzakian:
Is it just Alberta though? I mean honestly-
Chris Severson-Baker:
It’s not just Alberta.
Peter Tertzakian:
I don’t think we can single out Alberta as the only place where there’s cognitive dissonance in the world of climate policy.
Chris Severson-Baker:
Certainly not. But Alberta actually used to be a leader in these types of direct dialogues. We had a really positive track record of solving really tough problems in the energy and climate, energy and environment space anyways, by bringing the stakeholders together in this manner. I think another thing that we’ve been pointing to is that we need to look at authoritative voices like the International Energy Agency, which is saying that there is a major energy transition underway, and it could have a really big impact on places like Alberta. But we also have the Canadian Energy Regulator that put out Energy Futures 2023. And even in that report, even if the world moves slowly to stabilize warming at 1.5 degrees, we’re going to see a decline in demand for oil and gas. And so I start to think, is Alberta positioned for multiple scenarios in the world? Are we set up to prosper in a world where the world really aggressively moves ahead and implements its climate plans?
Jackie Forrest:
Well, Chris, you brought up the IEA, so I have to say that the net-zero scenario that they have that sees oil demand dropping by 25 million barrels a day by 2030 and getting down to only 25 million barrels a day from 100 today by 2050, I think it’s impossible to meet. We’ve done a lot of modeling ourselves.
At the other side, you’ve got groups maybe like Exxon that are showing it’s not going down fast enough, and it certainly isn’t going to meet some of these climate goals. Don’t you think we all just need to get realistic about what is possible? I mean, I think that’s one of the things that’s dividing us. You’ve got groups, and we even had our federal minister here, Wilkinson, back last month talking about that as not a scenario but a prediction that we are going to see demand drop that fast. And I feel like those views are creating a lot of polarization and people just can’t get on the same page on terms of what the solutions are if they’re that far apart in terms of what the future looks like.
Chris Severson-Baker:
I agree. We’re far apart on what the future looks like and what the goal is, and that is creating a lot of polarization. I bring it back to what do you do with when you have multiple scenarios. I think if you’re a place like Alberta or if you’re an oil and gas company or any kind of an energy company, you want to make sure that you’re going to be okay in a variety of different possible scenarios. I think I get nervous as an Albertan that we are focusing too much on a strategy that assumes that the world is going to fail to address climate change as opposed to preparing ourselves for that future as well as futures where the world does make significant progress on its own climate plans. And I think if you look around the world, there’s every motivation for other countries to tackle this issue. Their citizens are demanding, it avoids being reliant on other sources of energy that are imported into your country, and now we’re starting to see that these technologies are cheaper or just more efficient to adopt.
Peter Tertzakian:
I want to further the discussion on this scenario thing because it’s just, I find it very troublesome that agencies like the IEA or even the Canadian Energy Regulator or there’s multiple credible agencies that put out scenarios. A scenario is what the world may look like given a certain set of circumstances or constraints versus a prediction. And so, what’s happening further to my prior question, which is selection bias, is people who want to believe one scenario turn it into a prediction, and people who want to believe another scenario turn it into their own prediction, and then we just diverge, and as Jackie said, we can’t get any sense of consensus.
Jackie Forrest:
I want to switch topics. I think Pembina has been an advocate for this cap on oil and gas emissions in Canada. Can you tell us why you think that? Why do we need a special set of rules for one industry when the other industries in the country can get there by 2050 without it, with the existing policy? So why do you think the oil and gas industry needs a cap?
Chris Severson-Baker:
Well, the industry themselves say that an escalating carbon tax to $170 a ton isn’t enough to make them invest in solutions. It’s because they don’t think it’s certain enough. I think certainty is sort of the issue that everybody is most concerned about right now, I think. Right? So, we have lots of pledges and aspirations, but we’re not seeing companies actually implementing their plans, because they’re waiting for more information, more certainty. So, one thing I think that is affecting certainty is that the Conservative Party of Canada is not a supporter of consumer facing carbon taxes, but it hasn’t put out a plan of its own, that reassurance company and investors that the industrial carbon price regime is going to remain. So, I think that’s an area that’s affecting certainty.
Peter Tertzakian:
So, when you say certainty, I mean whether it’s the Clean Electricity Regulation or whether it’s the emissions cap, there’s this notion of carrots and sticks in public policy, and those two policies are more stick. In other words, if you don’t do this, you are going to be penalized. So, is certainty as represented by a big stick really going to change things?
Chris Severson-Baker:
I agree that it’s both. What we’ve advocated for is an investment tax credit for carbon capture at 50%. We support the Carbon Contract for Difference. So that provides certainty about what the carbon price is going to be in the future so that companies can make decisions based on that knowledge. But at the end of the day, we just don’t believe that companies are, particularly in the oil sands, are going to follow through with their commitment, even with those incentives on the table, unless there’s an actual requirement to do so. And I haven’t spoken to anybody that has been able to convince me that that’s going to-
Peter Tertzakian:
But there’s another alternative these companies have, and that’s just basically to take the money and invest it out of Canada, out of Alberta, and say, “Okay, the stick is basically forcing me to go elsewhere.”
Chris Severson-Baker:
Right. I guess what we’re-
Peter Tertzakian:
Is that what we want, to take the revenues from our valuable resources only to see it siphoned off, go elsewhere? That doesn’t seem to me to be a desirable outcome.
Chris Severson-Baker:
I think what we’re seeing right now is that what the companies have made a commitment to get to net zero and have laid out what they would do over the next 10 years, they’re not actually making any of those investments right now. The companies are increasing dividends and they’re buying back their own shares to pump up the share value, but they’re waiting until the rules are in place. And in our view, I don’t think we’re going to see those kinds of investments, even if there is an investment tax credit at 50%, possibly even if there is a Carbon Contract for Difference in place, unless there’s actually also a regulatory requirement to do it.
Jackie Forrest:
Well, let’s come back to that. If there is a cap in place, a hard cap by 2030, there have been some estimates from, for example, there was a Globe and Mail article that S&P thought we could be seeing a curtailment of production by 30% in the oil sands by 2030. If you had to meet that cap, there’s just no way we can reduce emissions that quickly other than reducing production. In the world that we live in today, when we have wars and a shortage of energy, would that make any sense at all to cut back our production and not supply oil to our partners?
Chris Severson-Baker:
So, when we looked at that, it was a real worst-case sort of scenario. It made a bunch of assumptions. The place where you would get most of the emission reductions in the short term would be on the conventional oil and gas side, and they would be methane emission reductions, which are the low-cost emission reductions. We’ve made a lot of progress on those already. Even Alberta’s climate plan calls for a 75 to 80% emission reduction in methane emissions. And so, if you have a system that enables industry to go after the emission reductions that are the lowest cost per ton, you don’t have that kind of impact that you’re talking about in the short term.
Jackie Forrest:
So, from your modeling, you don’t agree that we have to curtail production to make a 40% reduction by 2030?
Chris Severson-Baker:
No. We’ve called for, I think it’s like a 45% emission reduction from the oil and gas sector, and it’s largely based on what the oil sands companies have said that they can do by 2030, and also reducing emissions in the upstream oil and gas sector, especially focusing on methane emissions.
Jackie Forrest:
Chris, I am interested in Pembina’s position on LNG exports from Canada. Many in the industry argue that we should be really ramping up our exports of LNG because we’re going to produce more natural gas that goes to Asia that offsets the use of coal, and Asia still uses a lot of coal for power generation and using natural gas is a huge benefit in terms of reducing emissions. What’s Pembina’s view on that?
Chris Severson-Baker:
Our view is that when we look at the IEA scenarios, it shows that we have enough LNG supply to meet demand until 2050, based on the current trajectory of climate action. So, the only world in which we need more LNG is a world in which we’re going backwards on climate instead of forwards. So, we actually don’t see displacement of coal happening if Canada were to expand its LNG production. We actually see we would be displacing other sources of LNG in the world.
Jackie Forrest:
Right. It seems to me, through all of these answers, one of the big disconnects is if you believe that natural gas is going to go down, and I think the IEA’s net-zero scenario is it goes down like 80% in terms of demand between now and 2050. Of course, you don’t need those. However, I think there’s a lot of people that believe that that’s going to be nearly impossible to achieve, and we will need more LNG. So anyway, it’s just interesting. I think part of the disconnect is the views. As we said at the beginning, your views of the future are quite different, and if you view that we need more gas, then it does make sense to have more LNG from Canada. Would you agree with that?
Chris Severson-Baker:
We are building more LNG in B.C. There’s two LNG plants that are being built. We just don’t think that more is a good bet for the B.C. economy. So, the B.C. government, as I see it, has made a very conscious decision after the next wave of projects are actually built in production to pivot away from an economy based on expansion of LNG.
Peter Tertzakian:
We’ve got COP 28 coming up in Dubai in a few weeks. What do you think we’re going to hear out of there?
Chris Severson-Baker:
So, I think you’ll hear calls for fast tracking, increasing efforts to slash emissions by 2030. I also think that we’re going to hear a lot more talk about how we have to maintain affordability in the process and create sustainable jobs, so I really think that’s going to be the focus. I think we’re also going to hear a lot of, because it’s based in Dubai, in oil and gas producing jurisdiction, I think we’re going to hear a lot about should we listen to what countries or jurisdictions and companies who have a very strong and vested interest in maintaining this status quo have to say when it comes to how do we get to net zero by 2050.
Jackie Forrest:
All right. Well, we covered a lot of ground. Thank you so much. Chris Severson-Baker from the Pembina Institute. I will remind everyone their conference is next week. We’ll put a link to how to register if you are interested in going. What’s the date again?
Chris Severson-Baker:
It’s the 26th, in Calgary.
Jackie Forrest:
26th, in Calgary. Okay, perfect. Thank you for joining the podcast.
Chris Severson-Baker:
Thank you so much.
Peter Tertzakian:
Yeah, thanks, Chris.
Chris Severson-Baker:
I enjoyed this.
Jackie Forrest:
And thank you to our listeners. If you liked this podcast, please rate us on the app that you listen to, and tell someone else about us.
Speaker 3:
For more ideas and insights, visit arcenergyinstitute.com.
