Climate change, oilsands and the carbon tax are at the heart of Alberta's 2019 battleground

On a September evening, Alberta Energy Minister Margaret McCuaig-Boyd was warmly welcomed by energy industry insiders, who applauded as she took the stage in a ballroom at the Palliser hotel.

“It’s really great to be here again,” she said. “It’s always nice to connect. Always glad to be back in Calgary. … I think I should be looking at investing in a condo here, as I seem to be spending a lot of time here.”

Calgary is the engine of Alberta’s oilpatch, home to its cultural heritage, its top executives, and the company head offices and dollars that drive development. Though born in Calgary, McCuaig-Boyd represents a northwestern Alberta riding, where bitumen, the tar-like heavy crude in the province's oilsands fields, is deeply buried, hundreds of kilometres away from Calgary’s highrises and drinks at the Petroleum Club. On this evening she addressed a crowd assembled by the World Petroleum Council.

“We took government when it wasn’t the best of times, and it’s been really tough on Calgary, especially in the last few years,” McCuaig-Boyd told them. “While it hasn’t been easy, I can tell that we’re getting through things thanks to the perseverance of you folks in the industry here, and Albertans in general. We’re a tough people.”

Audience members asked the minister questions about oil royalties and why Alberta doesn’t pull the trigger now on Premier Rachel Notley’s threat to abandon carbon pricing if Ottawa can’t get the Trans Mountain pipeline expansion back on track. Her answer to the latter: “It’s not as easy as that to do that. But at the end of the day our climate leadership plan has made a difference and we’ll stick to that and see where we get next.”

The crowd’s warmth on this evening, and gentle questions about whether she would prefer to have dinner with a NASCAR driver or an Edmonton Oiler, may not represent relations between Alberta’s New Democratic Party government and the oil industry. Despite shows of support for the Notley government's climate leadership plan in its earliest days, in recent months, oil lobbyists and companies have held community meetings where they've made clear their preferred approach to regulating and pricing pollution doesn’t align with government policy.

Meantime, opinion polls by Leger and Mainstreet Research show potential for Jason Kenney’s United Conservative Party (UCP) to beat Notley's NDP in the expected 2019 election, putting pressure on members of her government to show and tell how they are different from members of the official opposition.

McCuaig-Boyd has held the energy portfolio since 2015. That puts her at the helm of policy related to fostering renewable energy and regulating Alberta's oilsands, the third largest oil reserve in the world, and "one of the most carbon intensive oil sources on earth," according to the Pembina Institute.

It may be too soon for the minister to commit to a condo in Calgary.

Oil and climate planning in Alberta

The election of Notley’s New Democratic Party in 2015 put an end to nearly 44 consecutive years of Progressive Conservatives in power in Alberta.

Her government was immediately confronted by globally low oil prices and layoffs in the oil and gas sector. The government refers to those days as “the worst recession in a generation,” though they tout an economic turnaround on the job front and for Alberta's economy over the long term.

In August, the provincial government's economic outlook pegged GDP growth at 2.7 per cent for 2018 thanks to oil prices, investment in conventional oil drilling, and a healthy export economy, including such non-energy items as food, forestry products and machinery. It also listed pipeline capacity as a risk to the province's economic outlook: "As oil production is expected to outstrip pipeline capacity starting this year, prolonged market access issues could widen the differential, impacting incomes and investment."

Notley has vociferously championed the troubled Trans Mountain pipeline expansion as a means of expanding the international market for Alberta’s bituminous oil beyond the United States.

Earlier this year Prime Minister Justin Trudeau moved to purchase Kinder Morgan's assets in the Trans Mountain pipeline expansion in a bid to get construction underway. But in August the Federal Court of Appeal quashed approval of the project on grounds the government had failed to fulfill its duty to consult First Nations. The project is currently under a new review, which has been troubled by complaints the National Energy Board is redoing its mistakes.

Notley has changed her tune on the Texas-bound Keystone XL pipeline. Before coming into power, she told the Calgary Herald in 2015 that she saw Keystone XL as a job builder for Texas, not Alberta. But her government is very much behind the project now, as it faces a new delay ordered by a U.S. court. "We've always supported the Keystone XL," McCuaig-Boyd told reporters in Edmonton on Nov. 9.

Notley's government has also introduced a carbon tax that generates revenue for renewable energy projects, new infrastructure, and other initiatives. They plan to phase out coal-fuelled energy and under McCuaig-Boyd’s watch, Alberta has opened a competitive wind energy market that has netted low prices for consumers. On Nov. 12, the province announced it is providing higher rebates for Albertans adopting solar energy and investing $7.5 million more to support municipalities developing solar energy projects. Homeowners who install solar energy systems could be eligible for rebates as high as $10,000.

Speaking to National Observer in September, McCuaig-Boyd pointed to new investment and thousands of jobs in the renewable energy sector.

“We all agree that we don’t need to choose between environment and economy,” McCuaig-Boyd said. “We can move forward in both, and I think that’s (what) distinguishes us, you know, from our opposition, the UCP, who prefer to look backward, and huff and puff a lot and talk about the good old days.”

Kenney has said his first order of business, if elected, is to repeal Alberta’s carbon tax.

“This will be one (of), I think, the central issues in the next Alberta election campaign,” Kenney told reporters in Calgary in October. “You have three parties, the NDP, the Liberals, and the Alberta Party, who all support a carbon tax and one party, the United Conservatives, who oppose it."

Kenney was a minister in Stephen Harper's former federal Conservative government. He won the leadership of the defeated Progressive Conservative Party of Alberta in 2017 with a promise to reunite its members with those in the more right-of-centre Wildrose Party.

Kenney is prominent in a fight by Ontario Premier Doug Ford, Saskatchewan Premier Scott Moe and other provincial conservative leaders against the federal government’s policy of pricing carbon to curb greenhouse gas emissions. Maclean's magazine released a November 2018 cover story, dubbing the suit-clad pack of conservative men, including federal Conservative leader Andrew Scheer, the "Resistance" to the federal carbon price plan.

"We’re on the right side of history on this one and I think Albertans will be able to show that at the polls," Kenney said in October.

Through a caucus spokesperson, Kenney declined to comment for this story, including questions about the UCP’s plans for renewable energy and how industry has reacted to his plans to scrap carbon pricing.

The United Conservative Party’s 2018 founding party declaration uses the word “carbon” twice – in its financial plans to repeal the existing provincial levy on carbon emissions and to fight the federal government’s carbon pricing initiatives. Climate does not appear anywhere in the policy paper, adopted by members at their first annual general meeting in May.

What a Kenney win could mean for Alberta

In October, Alberta Environment Minister Shannon Phillips punctuated her comments with a smile as she laid out, for reporters in the National Press Gallery in Ottawa, what will change if the UCP takes power next year.

“I do not think that the conservatives across the aisle from me in Alberta are interested in investor confidence. They are interested in politics, they are interested in denying climate change, and they are interested in somehow finding a mythical time machine that they can travel back in, to a world that does not exist, where Alberta is not diversifying its economy or making us resilient to a carbon constrained future," she said.

"That is not what industry is looking for. Industry is looking for certainty. That’s why they stood with us three years ago, almost three years ago next month, to make sure that we had certainty in place around climate policies, and that is why we took immediate action.”

The remarks from Phillips came only a few weeks after a major international report, released by the Intergovernmental Panel on Climate Change, that warned humanity only had about a decade to dramatically reduce consumption of fossil fuels down to a level that would prevent warming of more than 1.5 degrees Celsius above pre-industrial levels. Going beyond the 1.5 degrees threshold would significantly worsen impacts of floods, droughts, extreme heat and poverty, said the report, which assessed the latest scientific evidence.

At the same time, Alberta's oilpatch finds itself punished on global markets that are paying more to buy oil from other jurisdictions than from Canada, due, in part, to a lack of pipeline exporting capacity.

In 2017, some oil companies broke ranks with the Canadian Association of Petroleum Producers because the lobby group failed to wage a strong campaign against carbon taxes. At the time, former Saskatchewan premier Brad Wall acknowledged "big oil lined up behind the carbon tax," but also pointed to companies like Royal Dutch Shell and ConocoPhillips that sold off their Alberta assets earlier that year.

At that time, Saskatchewan was the most vocal province against pricing carbon pollution; it has since been joined by a powerful ally in Ford's Ontario government.

If Kenney's UCP rescinds the NDP's carbon tax, it is likely the Trudeau government will impose carbon pricing on the province, the way it has promised to do in Ontario, Saskatchewan, Manitoba and New Brunswick. Kenney has said if he wins government, he would seek intervenor status to support court appeals by Ontario and Saskatchewan and that, "if they seek to impose an Ottawa tax on us, we will sue Justin Trudeau."

Phillips, meanwhile, said the UCP's move would lead to a failed "make-work project for lawyers" and invite a "made-in-Ottawa" plan that doesn't include energy efficiency upgrades for "churches and mosques," provide investment in Edmonton or Calgary transit infrastructure, or support solar and other retrofits in the agricultural sector.

"Our plan is specifically tailored to Alberta’s economy," she told reporters in Ottawa. "That’s one of the reasons why we have the fastest growing economy last year and this year and projected next year even within the context of carbon pricing in an energy economy, because we tailored it to work with our economy. Jason Kenney would prefer a situation where Justin Trudeau is making those decisions. I would rather a situation where we have spent the last three years consulting Albertans on what they want to see going forward, and we’ve made that plan based on their feedback.”

What Alberta's climate plan does

Trudeau has said Alberta's climate plan and his government's approval of the Trans Mountain pipeline expansion were linked. In a February interview with National Observer, Trudeau said the federal government needed Alberta's buy-in for its own carbon pricing plan to work, and Alberta's buy-in was connected to the federal government moving forward on the pipeline expansion.

Alberta's climate plan also provides funds for research and innovation to the province's oil industry.

"(The) climate leadership plan is investing $1 billion in innovation, and industry is availing themselves of those dollars to try to lower emissions," McCuaig-Boyd said in a September interview with National Observer.

"We know that there's (going to) be a demand for a long time, with fossil fuels, but we also know that we can ... work our way to a low carbon transition, you know, to innovation, and get clean and sustainably produced resources from Alberta. So you know, we're not doing the same old. We're looking to new and innovative uses for petroleum products, and we are (going to) continue to be leaders in that space."

McCuaig-Boyd said she "can't say enough (about) how we work together with the energy industry on a future ... that leverages what we traditionally know and our emerging strengths" to get to a "lower carbon economy."

But, she said, she is aware that the same industry members she talks to regularly about improving Alberta’s energy sector are also going out into local communities and contesting some of the changes her government has made to regulate and penalize polluting emissions.

It’s a healthy thing, she said, that they feel comfortable doing so.

“From Day 1 I met with industry, and you know I think in our conversations we’ve had really good relationships with them. We’ve had very frank conversations … we don’t always agree, but I think we (have) reached an understanding sometimes,” she said. “While it appears they may be going behind my back, I absolutely knew, you know, that they were going out and talking to communities, but they continue to talk to us."

One sticking point for Alberta’s oilsands industry — from its representative group, the Canadian Association of Petroleum Producers (CAPP) to individual producers like Canadian Natural Resources Ltd. (CNRL) — is methane emissions.

The provincial government attributes the majority (70 per cent) of methane emissions to the oil and gas sector, and wants those emissions nearly halved by 2025. CAPP members have said they agree with the target, but not provincial regulations that could cost jobs. They favour an industry-led approach.

The government is still developing its regulations, and McCuaig-Boyd said she credits CNRL for providing "really good data to work with."

"I think we're (going to) come up with really good regulations based on knowing ... their view point," she says. "I think at the end of the day, we all agree there’s a lot at stake and ... we're all parents, and some of us are grandparents. You know, we (want to) create a better world, all of us, you know, for our kids and grandkids, going forward."

The province, meanwhile, has promised incentive funding for small or medium-sized companies to curb their emissions. Money is also in place for research and development, and facility upgrades.

Legacy matters

Despite their differences, there are times when Notley's NDP has found common ground with Kenney's UCP regarding the energy sector.

A joint investigation by National Observer, Global News, the Toronto Star, StarMetro Calgary unearthed the potential cost to taxpayers of cleaning up unused or aging wells, equipment and infrastructure after oilpatch development: $260 billion.

The sum, shared by the Alberta Energy Regulator with a private Calgary audience earlier this year, is more than four times what was provided to the public in the past.

After the cost was made public, the regulator apologized and said the number was based on a "worst case scenario" that was used to "hammer home the message to industry that the current liability system needs improvement." The same week, it was announced the regulator's head will resign as of January.

Alberta's Liberal Party – represented in the legislature by just one member, former leader David Swann – recently proposed an emergency debate on the matter. In response, NDP MLA Richard Feehan said the government "has in fact addressed it" and the matter is not an emergency. UCP MLA Jason Nixon said there was no urgent need for such a debate.

The speaker of the legislature sided with both the NDP and the UCP, quashing Swann's proposal.

But the NDP has said its approach to the issue of liabilities is different after the issue was ignored by the Tories for decades, Phillips and McCuaig-Boyd both said in recent interviews.

Before National Observer's report on liabilities was published, Kenney's office also declined to comment on the issue or even consider reviewing the evidence and analysis included in internal documents that were released by the regulator.

“We have a number of liability questions that remain unanswered because this is a long term problem and we did not see leadership from the previous (Alberta) government for 44 years,” Phillips said in the interview with Global News, National Observer and the Star. “There’s no question that there is more work to be done.”

Editor's note: This story was updated on Thursday, Nov. 15 at 4 p.m. EST with information about changes to Alberta's solar energy programs.