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Exclusive-Top-emitting Canada oil sands site collects government relief from pollution payments

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·3-min read
FILE PHOTO: Canadian Natural Resources Limited's Primrose Lake oil sands project is seen near Cold Lake, Alberta
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By Rod Nickel

WINNIPEG, Manitoba (Reuters) - For three straight years, Alberta's government granted Canada's most emissions-intense oil sands facility reductions in payments that polluters are required to make for generating higher emissions than most of the industry, a government document shows.

From 2018 to 2020, Alberta lowered Canadian Natural Resources Ltd's (CNRL) costs for its oil-producing Peace River site to comply with provincial emissions requirements. Peace River's per-barrel emissions are triple that of the already-high oil sands average.

CNRL, Canada's biggest oil producer, which made C$2.1 billion ($1.66 billion) adjusted profit in the third quarter, is one of six companies to receive financial relief under Alberta's compliance cost containment program, which launched in 2018.

Alberta requires high-emitting facilities that pollute more than the industry benchmark to comply, either by buying emissions credits or offsets from better-performing facilities, or by paying into a government fund at the going rate for carbon emissions, currently C$40 per tonne.

The province's cost containment program, however, eases the financial pain for facilities whose compliance costs are greater than 3% of their sales or more than 10% of their profits, to prevent "economic hardship."

Alberta's Environment Department provided, at the request of Reuters, a list of companies that benefited from the program. Spokesman Tom McMillan said it would not disclose the amounts of the cost relief the companies received, calling them "commercially sensitive."

Greenfire Oil and Gas Limited and Athabasca Oil Corp, which run the second- and eighth-most emissions-intense Alberta oil sands sites, according to government records, also received cost reductions.

Alberta's government also lowered CNRL's compliance cost for its Hays gas plant in 2018 and 2019.

CNRL did not respond when asked the financial value of the carbon cost relief it received.

"As we advance technologies to reduce our carbon footprint at all of our facilities, we will continue providing local jobs and economic benefits," CNRL said in a statement.

Countries that produce fossil fuels face the challenge of cutting emissions without damaging their economies. But Alberta's policies are "particularly egregious" for prolonging the life of high-emitting facilities, said Dale Marshall, national climate manager at Environmental Defence.

Emissions-intense, outdated oil facilities continue to operate despite government attempts to curb emissions.

Environment Minister Jason Nixon defended Alberta's efforts.

"It is a made-for-Alberta system that works with, not against, our key industries."

Canada is the world's fourth-largest oil producer and the oil and gas sector is also the country's biggest emitter. That makes it a critical challenge for Prime Minister Justin Trudeau as he aims to cut Canada's national greenhouse gas emissions by 40-45% by 2030 from 2005 levels.

Reductions to carbon cost obligations like CNRL's come in two ways. First, the Alberta government can allow such facilities to buy more carbon credits and offsets to meet their obligations than the 60% limit in place for other facilities. This saves companies money since credits and offsets are typically cheaper to acquire than paying the carbon price.

Secondly, the government can increase a facility's allowable emissions per year. CNRL, whose C$65 billion market cap is the highest of any Canadian oil and gas producer, received both forms of relief annually from 2018-2020, the document shows.

"There's always this tension around concern for jobs, but in this case, it's really questionable to me whether removing (the cost relief program) would actually lead to job loss" given the sector's strong free cash flows and dividends, said Sara Hastings-Simon, director of the University of Calgary's sustainable energy development program.

A natural gas plant owned by Keyera Corp, West Fraser Mills pulp facility, and an Enerkem biofuels plant also received relief. None of the companies, other than CNRL, responded to requests for comment.

($1 = 1.2652 Canadian dollars)

(Reporting by Rod Nickel in Winnipeg; Editing by Matthew Lewis)

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