Suncor CEO Steve Williams, a leader in Canadian energy and climate policy.

Oil sands companies are adapting to changing global energy system by supporting carbon pricing, lowering emissions

The attitudes of Albertans toward climate change were in the news again a few weeks ago after a newspaper dredged up old social media posts suggesting that Calgary UCP candidate Randy Kerr thinks climate change is a hoax. Kerr says he accepts the climate is changing, but isn’t convinced human activity is the main driver of that change. He’s also critical of carbon pricing. Those views put him offside with Alberta’s oil sands CEOs – and represent a major risk to Albertans.

The former Alberta PC political operative isn’t dangerous because he resists the new orthodoxy of climate politics and policy. In fact, as the polling data below shows, his view is fairly mainstream in Alberta.

He is dangerous – as are any UCP colleagues who agree with him – because he espouses a view of the energy sector that’s rooted in the realities of the 1990s rather than 2018.

Randy Kerr, UCP candidate for Calgary Beddington.

And while many Albertans haven’t yet absorbed those realities, there’s one important group that has: the big oil sands producers.

“We know climate change is happening. Clearly, we all have a shared interest in finding solutions,” Suncor CEO Steve Williams wrote in the company’s 2017 corporate responsibility report.

It was the oil sands CEOs who initiated discussions with environmental non-government organizations in early 2015, and those discussions led to their support for a province-wide carbon tax, carbon pricing on bitumen extraction emissions, and the 100 megatonne emissions cap that became part of the Alberta government’s Climate Leadership Plan.

For the oil sands companies, carbon is a cost in the form of natural gas used during mining or steam-assisted gravity drainage system used for in situ production. Using less gas means lower operating costs and emissions. Being “carbon-competitive and cost-competitive” is the oil sands’s new mantra.

And while it’s not quite the “drill, baby, drill” mindset of some of their American counterparts, it’s a winning strategy in a global economy where climate and carbon are increasingly important competitive concerns.

Ironically, the other oil and gas producers in Alberta (who don’t yet have to pay the carbon levy on their industrial emissions) see it differently.

Small and mid-cap exploration and production companies that target conventional oil, dry gas, and liquids rich formations across the province view emissions compliance as an unnecessary cost.

The smaller companies are “less capitalized, they’re under more duress financially, and they perhaps share a different ideological perspective, and they are probably more representative of the traditional Alberta oil patch than necessarily the oil sands operators,” says Dennis McConaghy, a retired pipeline executive with deep roots in the Alberta oil and gas industry, and author of Dysfunction: Canada after Keystone XL, which includes a defense of carbon pricing.

Dennis McConaghy.

“The non-oil sands companies don’t really relate to carbon risk. Moreover, they simply can’t afford it because it’s just another straw on the camel’s back. Which is why they are resistant to carbon pricing.”

This conflict between the champions of climate change policy and carbon pricing and their opponents plays out around CAPP’s board table, according to McConaghy.

“CAPP has never overtly supported carbon pricing. The most they’ve ever done is acknowledge that it could be a policy option,” he said in a recent interview.

“In fact, most of what they would advance as carbon policy is really no policy other than what may arise through their own legitimate desire to reduce energy input costs, which of course does lower emissions, if it can actually happen.”

For his part, Kerr says climate change is rarely mentioned during his door knocking excursions in the north-central riding of Calgary Beddington. And it’s no wonder: According to a public opinion poll from Abacus Data, Alberta is more skeptical than any other province about the importance of the issue.

In their poll, Abacus divided the 2,250 Canadians who took the survey into three groups: “climate believers” (42%), who think there is conclusive evidence climate change is man-made and government action should be a top priority; “climate leaners” (47%), who agree that climate change is caused by humans, but are more concerned about other issues, like the economy or healthcare; and “climate laggards” (11%), who believe there is no clear evidence the climate is changing.

Alberta led the country with the smallest percentage of believers (29%) and the highest proportion of laggards (22%), but was tied with BC and Saskatchewan/Manitoba for the biggest cohort of leaners (49%).

On every question, Albertans were more skeptical about whether climate change is real, whether human activity is its primary cause, and whether government should intervene to reduce greenhouse gas emissions.

For instance, when asked if the earth is warming, 46 per cent of Albertans agreed the cause was natural patterns in the environment. That was 10 points higher than runner up Saskatchewan, and it dwarfed the figures from BC (28 per cent), Quebec (18 per cent), and Atlantic Canada (27 per cent).

At the national level, only 22 per cent of Conservatives are believers (compared to 54% of Liberals and 40 per cent of New Democrats), but 25 per cent are laggards (compared to just five per cent of Liberals and nine per cent of New Democrats ). We can assume that in traditionally conservative Alberta the numbers would be skewed even more toward the leaners and laggards.

That explains why Kerr wasn’t hearing about climate change on the doorstep.

Respondents to the survey were also asked about which policy option – carbon pricing, low-carbon technology subsidies, or good ol’ rules and regulations – they preferred if government did try to reduce emissions.

Not surprisingly, in light of the unpopularity of the Alberta carbon tax, carbon pricing ranked lowest. By a long shot.

Only nine per cent of Albertan respondents ranked carbon pricing as their first preference and 20 per cent ranked as their second, figures that were far lower than those of people in other provinces. Albertans much preferred rules and regulations (ranked first by 40 per cent) and low-carbon technology (ranked first by 38 per cent).

In a note accompanying the poll, Abacus Data chairman Bruce Anderson sums up the conflict between the two sides of this debate: “Upcoming elections risk turning into, for some voters anyway, a referendum style choice between on the one hand, those who favour ambitious and rapid climate action; and those who deny the need for climate action, plus those who favour climate action but are hesitant about whether carbon pricing is a good solution, plus those who fear cost-of-living consequences of any tax, plus those who fear direct economic downsides of this policy.”

Anderson makes  an interesting point , but what happens when the province’s biggest oil producing companies are among those favouring “ambitious and rapid climate action” but public attitudes toward climate change and policy are more in line with the industry’s old guard?

Alberta voters may want to consider this reality: the oil sands, which are expected to expand production by 1.3 million b/d by to 4 million b/d 2030 while conventional production stagnates at 1 million b/d, are the future of their energy sector. And the biggest companies in the oil sands all acknowledge climate risk, support carbon pricing, and are frenetically working to lower the carbon-intensity of their oil.

Climate change skepticism and proposals to abandon lower-carbon policies like Alberta’s Carbon Competitiveness Incentive Regulation) that support the objectives of oil sands companies will only impede growth of a key pillar of the Alberta economy.

Folks like Randy Kerr probably don’t agree with that assessment, and only time will tell whether Albertans feel the same. But I’ll side with companies like Suncor and Cenovus that can see where the future is headed and get the importance of adapting to a changing energy world.