Earlier this week, Alberta Premier Danielle Smith upped Alberta's insurgency against Ottawa with a threat to use the province's Sovereignty Act to refuse the implementation of a federal emissions cap on oil and gas.
On Thursday, the B.C. government was urged to join Alberta in its fight against federal and emissions caps, which will put B.C.’s growing natural gas and nascent LNG industry at risk, said Lisa Baiton, president of the Canadian Association of Petroleum Producers (CAPP).
“We need them to kill value-destroying domestic policies like the emissions cap,” Baiton said at an energy and resources forum hosted by the Greater Vancouver Board of Trade (GVBOT), which was attended by B.C.’s new Minister of Energy and Climate Solutions, Adrian Dix.
“We recommend that the B.C. government not proceed with the sectoral emissions gap on oil and natural gas, as it would significantly impact production and limit economic growth and job creation.”
Alberta has long been Canada’s energy superpower, thanks to its abundant oil. But B.C.’s clean hydro electricity, abundant natural gas and position as Canada’s Asia Pacific Gateway have positioned B.C. as a peer player in Canada’s energy powerhouse.
“British Columbia already plays an incredibly important role for the natural resources sector in Canada, not only as a resource rich province, but also as an international export hub with access to some of the world's largest markets,” Baiton said. “But we are not truly leveraging our resource advantage.”
Baiton underscored just how important energy is to Canada’s economy, noting that revenues from Canada’s oil and gas sector alone produced $45 billion last year in revenue for federal, provincial and municipal governments.
“That is a tenfold increase since the historically low commodity prices of 2020,” Baiton said.
“The industry supply chain stretches across the country, reaching thousands of businesses and supporting 900,000 jobs in every single province, from coast to coast, and these jobs are high quality and high paying.”
Natural gas has begun to supplant forestry as B.C.’s most valuable resource sector, thanks to the development of the B.C. Montney formation, which is rich not just in natural gas, but liquids as well, including light oil, condensate and propane, with propane now being exported to Asia through a new propane export terminal in Prince Rupert.
Baiton noted that B.C. is forecast to surpass Alberta and Saskatchewan to become the largest natural gas producing province in Canada in three to four years.
In 2022 and 2023, natural gas surpassed B.C.’s cornerstone resource industry – lumber – in terms of export value.
According to B.C. Stats, in 2021, the value of natural gas exports from B.C. totalled $7.7 billion, compared to $7.3 billion for lumber, and that’s before B.C. has any LNG export capacity.
Natural gas export values can be expected to increase in 2025, when LNG Canada begins exporting natural gas out of Kitimat.
“Annual provincial growth, just from natural gas production in this province, over the past decade has grown from $169 million to $684 million,” Baiton said.
Capital investment from the oil and gas industry is expected to reach $40 billion annually across Canada, she said, and that oil and natural gas – production, refining and pipelines -- contribute about $118 billion to Canada’s GDP.
“The oil and gas sector alone makes up one fifth of Canada’s balance of trade, exporting some $150 billion worth of the product annually,” Baiton said. “This year, we expect natural gas and oil producers will spend $5 billion in capital investments here in British Columbia.”
Since the completion of the expansion of the Trans Mountain pipeline, record amounts of oil are being exporting through B.C., Baiton said, “and for the first time sending significant volumes to markets in Asia, while also growing exports to refineries in the U.S. West Coast.
“The Bank of Canada estimated that this single project will provide a $7 billion annual boost to our per capita GDP,” Baiton said.
The newly twinned pipeline, which terminates in Burnaby, has also facilitated an increase in conventional oil exports, Baiton said, with light sweet crude to U.S. West Coast refineries growing from 7,000 barrels per day to 100,000 barrels per day.
“It is clear that the Canadian natural gas and oil industry is delivering significant benefits for Canadians and to British Columbians,” Baiton said. “We are just scratching the surface of our energy advantage and B.C. is central for Canadians’ potential to become an energy superpower.”
Critics of Canada’s oil and gas industry warn that, as the world weans itself from fossil fuels and decarbonizes, demand for oil and gas will fall, leaving billions of dollars worth of stranded energy assets, like pipelines and LNG terminals.
But Baiton pointed to recent International Energy Agency (IEA) forecasts that suggest global oil and gas demand may not peak as quickly as previously forecast. The IEA now forecasts demand for oil will rise to 107 million barrels per day by 2030, shrinking to 99 million barrels per day by 2035, she said.
“And this year, the IEA upwardly revised natural gas demand in all of their scenarios, showing that natural gas demand is growing out to 2050. And, importantly for B.C., international LNG trade is forecast to grow by more than 50 per cent out to 2050.
“The demand for oil and gas is not going away.”
Baiton said royalties to the B.C. government from LNG Canada alone is expected to generate $23 billion over the project’s 40-year lifespan, and noted that the Macdonald-Laurier Institute estimates a project similar in scale to LNG Canada would boost Canada’s GDP by $5 billion annually from construction and create 35,000 jobs, Baiton said.
But there are significant government regulatory hurdles holding the energy sector back, Baiton said. The single biggest challenge facing the oil and gas sector in Canada is a federal emissions cap, which are part of the Trudeau government's net zero climate policies.
Ottawa proposes to cap emissions from oil and gas at 106 to112 million tonnes of CO2. It would use a cap-and-trade mechanism to achieve a 33 per cent reduction below 2019 emissions levels by 2032.
Meeting the caps without squelching production would require aggressive investments in carbon capture and storage, methane abatement and electrification.
B.C.’s own emissions cap for oil and gas similarly would require a 33 to 38 per cent reduction in emissions from 2007 levels by 2030. Included in this cap are methane reduction targets.
“The cap, if implemented, will limit Canadian oil and natural gas production, and would threaten any ambitions we have for B.C. (exports),” Baiton warned.
No other major oil and gas producing nation has the kind of emissions cap that the Trudeau government has proposed to implement, and there are questions about whether the federal government may be exceeding its constitutional authority.
"There is a clear constitutional question mark as to whether Parliament has jurisdiction to regulate GHGs in this manner," the law firm Osler writes in a recent brief.
Conservative Leader Pierre Poilievre has said he would scrap the emissions cap, if his party formed government.
