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Pace of oilsands decarbonization an open question after UCP win in Alberta

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UCP Leader Danielle Smith makes her victory speech in Calgary on Monday May 29, 2023. In the aftermath of Alberta's election, the province's oil and gas sector is facing a big unknown around the question of government support for decarbonization. THE CANADIAN PRESS/Jeff McIntosh

CALGARY — As Danielle Smith's United Conservative Party celebrates Monday's election win in Alberta, the province's oil and gas sector remains in the dark over how much financial support the new government will offer it to decarbonize.

Smith has long cast herself as a champion of Alberta's number one industry, a sector that already naturally leans conservative in a traditionally conservative province, said Dennis McConaghy, a former executive vice-president at TransCanada Corp., now TC Energy.

"I mean, there's no question — in their bones, they're UCP supporters," McConaghy said of Alberta's corporate oil-and-gas leaders, who were likely heartened by Smith's victory speech Monday evening.

During that speech, the premier-elect once again vowed to fight against the federal government's proposed emissions cap on the oil and gas sector, which many Albertans fear threatens to curtail the industry's growth.

"As premier, I cannot under any circumstances allow these contemplated federal policies to be inflicted upon Albertans. I simply can't and I won't," Smith said.

However, McConaghy said he views Monday's election results as a "mixed bag of pluses and minuses" for Alberta's largest industry.

Right now, Alberta's energy sector is seeking additional government support for the tens of billions of dollars in decarbonization projects that have been proposed with the aim of helping Canada reach its stated goal of net-zero greenhouse gas emissions by 2050. 

And it's unclear whether Danielle Smith — who is widely expected to take a combative stance in her dealings with the federal government in Ottawa — will be willing to supplement the already-announced federal financial support for some of these projects, particularly the deployment of carbon capture and storage technology in Alberta's oilsands.

“There’s no question that (NDP leader Rachel) Notley, had she been elected, would have been much more inclined to have supported that. In the case of Smith’s government, I think it’s a more open question," McConaghy said.

The largest of the decarbonization projects proposed by Alberta's energy sector is a $16.5-billion carbon capture and storage network that has been proposed by the Pathways Alliance, a consortium of oilsands companies.

For such an expensive project to be economical, McConaghy said, companies need to be confident that the federal price on carbon will continue to rise. And Smith's victory may be seen by some as indicative of a political swing to the right in this country, which might make companies hesitant to make long-term decisions until after the next federal election.

"I do think the business risk (for investing in carbon capture) has gone up," he said.

Simon Dyer, deputy executive director of the clean energy think-tank The Pembina Institute, said he doesn't believe oil and gas companies need more financial incentives for carbon capture. But he said they do need clear emissions-reduction targets and appropriate regulations to encourage them to invest.

He said that's a missing piece from the UCP's emissions reduction plan laid out earlier this spring, just prior to the campaign. While the plan commits Alberta to getting to net-zero by 2050, it sets no interim targets at all — which may serve to create investor uncertainty, he said.

"To get to 2050, there needs to be some commitment to some kind of short-term goals," Dyer said. 

Adam Legge, president of the Business Council of Alberta — which counts among its membership the CEOs of some of the province's largest companies — said oil and gas companies want a premier who will stand up against federal policy that "just doesn’t fit" for Alberta.

But he said industry also wants the provincial government to work effectively and collaboratively with Ottawa to come up with solutions.

He said his organization has been lobbying for a provincial contribution that can be "stacked" with the already announced federal tax credit to support carbon capture and storage development.

That would help put Alberta companies on similar footing to those south of the border, where the Inflation Reduction Act offers significant financial incentives for companies capturing and storing carbon.

"Alberta has such a tremendous opportunity, but we do need to be competitive with the United States," Legge said. 

“I’m hoping that with the new mandate, that they (the UCP) will be more aggressive in finding some stackable contribution – working with industry and the federal government to find something that works for Alberta.”

This report by The Canadian Press was first published May 30, 2023.

Amanda Stephenson, The Canadian Press

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