The net-zero transition includes oil and gas

Meeting Canada’s commitment to net-zero carbon emissions by 2050 will require fundamental changes to many sectors of our economy, including transportation, manufacturing, and power generation. The sector most affected by this commitment, however, is likely Canada’s oil and gas industry. For some, Canada’s commitment to net zero means there is no future for oil and gas extraction in this country. We disagree. Despite being at the forefront of often polarizing and politicized allegations, Canada’s oil and gas industry has been a world leader in improving environmental performance in oil and gas extraction for years. For example, Canada’s largest oilsands producers—representing 90 per cent of all oilsands production—formed Canada’s Oil Sands Innovation Alliance (COSIA) in 2012 to share research and collaborate on new innovations to improve oilsands performance across various areas, including water use, greenhouse gas emissions, and tailings management. It’s hard to imagine this type of collaboration among competitors in any other business sector in the world. Many of Canada’s largest oil and gas companies also actively supported the ambitious climate change strategy announced by the previous Alberta provincial government in 2015, including a carbon tax and a fixed cap on oilsands emissions. While these types of measures created significant cost pressures for Canada’s oil and gas producers, many of the leaders in this sector embraced the challenge and used it as an opportunity to make Canada a global leader in environmental performance in oil and gas extraction. The transition towards a net-zero economy is no different. Many of Canada’s leading oil and gas companies have already made their own net-zero commitments and are making significant investments in technologies such as blue hydrogen and carbon capture, utilization, and storage (CCUS) that will materially reduce their greenhouse gas emissions. For example, the Oil Sands Pathways to Net Zero Initiative—which includes many of the same organizations that are members in COSIA—have proposed a significant new CCUS project that will sequester the carbon emissions from more than 20 oilsands projects. These types of innovations require significant capital investment and are still subject to many uncertainties. Carbon capture is expensive and, at present in most circumstances, uneconomic. Carbon prices have not yet reached the levels that render most CCUS projects economically viable without government support. As well, there remain several key uncertainties in the regulatory frameworks for CCUS and blue hydrogen that pose barriers to investment. While oil and gas companies have demonstrated a willingness to commit their own capital and take on certain risks, governments across Canada have recognized that achieving net-zero carbon emissions by 2050 will also require substantial government support, including through providing certainty in regulatory and fiscal policies. The federal government has recently created multi-billion-dollar funds and programs to support businesses across Canada that implement carbon reduction measures. Yet there seems to be reluctance within some political circles in Ottawa to provide funding to carbon-reduction initiatives in the oil and gas sector. This reluctance, quite frankly, makes no sense. If we are serious about reducing carbon emissions, we should look for opportunities to reduce emissions across all industries in the country. The atmosphere doesn’t care whether a molecule of CO2 comes from a natural gas well or a cement plant. Further, as we come out of the COVID-19 pandemic as a more indebted nation than ever, we should be looking for ways to support and grow our domestic industries. Canada’s oil and gas sector has the ability to supply much more of the world’s energy needs through the most environmentally responsible, technologically advanced means, including achieving net-zero carbon emissions through the use of blue hydrogen and CCUS. This presents Canada with an opportunity to realize significant economic growth while still achieving our net-zero ambitions. Regardless of how long it takes the world to transition entirely away from fossil fuels (which is still decades away even under the most optimistic outlooks), supporting Canada’s oil and gas industry in the interim—especially if it can achieve net-zero emissions—is clearly in the country’s best interests. Canada’s oil and gas industry is willing to adopt the changes necessary to achieve net-zero emissions, and technologies appear to exist to achieve that goal. The key will be convincing governments to remove the barriers that threaten to impede a net-zero future for Canadian oil and gas. Janice Buckingham is chair of the Oil and Gas Practice and co-lead of the Energy Practice with Osler, Hoskin & Harcourt LLP. Sander Duncanson is a partner of Regulatory, Environmental, Indigenous and Land with Osler, Hoskin & Harcourt LLP. The Hill Times