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Chris Varcoe: Executive chair of CNRL says carbon capture project should be developed alongside a new West Coast pipeline
By Chris Varcoe
Murray Edwards is unequivocal — the oilsands industry wants the $20-billion Pathways carbon capture project in Alberta to go ahead.
But the executive chair of the country’s largest petroleum producer, Canadian Natural Resources, says there’s still work to do on getting the necessary environmental, fiscal and regulatory policies in place to make the massive decarbonization network in the oilsands happen.
“I sit around on a weekly basis with my peers from other companies. There is a full commitment on the industry’s part to get Pathways done. We’ve invested hundreds of millions of dollars in pre-engineering and a feasibility study and field work on Pathways,” Edwards said in an interview last week.
Yes, we want to go ahead, but we need to get the rules as it relates to environmental processes, regulatory process, fiscal process, that allow it to advance on a basis that makes economic sense.
“And we think that Pathways is the industry’s commitment to showing that we’re committed to bring carbon emissions down.”
Edwards made the comments before the company’s annual general meeting in Calgary, as negotiations on the federal-provincial memorandum of understanding on energy (MOU) are heating up.
Under a deal signed in November, the federal government committed to support Alberta’s pitch for a new million-barrel-per-day oil pipeline to the West Coast, if it’s paired with a carbon capture project in northern Alberta.
The Pathways development was first proposed in 2021 by member companies in the Oil Sands Alliance, which include Canadian Natural Resources, Suncor Energy, Imperial Oil and Cenovus Energy, but it has not received a final investment decision.
Two separate side agreements under the MOU had an April 1 deadline, but have not been reached. These include a deal to increase Alberta’s industrial carbon tax to an effective rate of $130 a tonne of CO2 emissions, and a pact between governments and the alliance to advance the Pathways carbon capture project.
Federal-provincial negotiations on reaching a carbon price agreement have taken longer than expected, although one source said this week that a deal was expected within the next 10 days to two weeks.
Meanwhile, some industry leaders question the effect of an industrial carbon tax on attracting investment to grow production, while environmental groups oppose any suggestion of removing the levy.
“The oilsands producers have never, in my view, been serious about the Pathways project,” said Keith Stewart of Greenpeace Canada.
“It has always been a delay tactic.”
On Tuesday, Cenovus Energy CEO Jon McKenzie said the “national dialogue on further development of the oilsands has been myopically focused on the climate agenda and climate policy,” and it makes the sector uncompetitive.
At this stage of negotiations on the MOU, the two levels of government and industry are pushing hard to get the best terms they can, said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission.
“Everybody is trying to stake out their positions, and that’s exactly what you’d expect to happen in a negotiation,” Masson said.
Pathways members have long contended that they needed to see more government incentives to proceed with the project.
The Alberta government established a program that offers a 12 per cent grant to carbon capture developments, while a federal investment tax credit would cover up to half of a project’s capital expenses.
Edwards, one of the most influential figures in the Canadian oilpatch, said he’s encouraged both levels of government are discussing how to maximize opportunities for the oil and gas industry, which creates jobs, generates taxes and new investment in communities.
“Where the challenge lies is that there hasn’t been further advancement about setting forth a clear pathway as to how the country — not just industry — is going to be able to move forward and develop these projects,” he said.
“I think there’s a little bit of concern — frustration may be too strong — but concern that we’re not farther advanced on that, because you’re talking about major projects will take long lead (times) and we need to get certainty from the MOU.”
As part of the energy pact, Alberta agreed to increase its effective carbon price under Alberta’s Technology Innovation and Emissions Reduction (TIER) system to reach a minimum effective rate of $130 per tonne, up from $95 – although carbon credits trade well below that level.
No timeline was set on when the higher price must be reached.
Edwards said the oilsands group is willing to co-invest in the Pathways project, but indicated it should be developed alongside a new West Coast pipeline and the ability to increase production needed to fill it.
“We think Pathways is a demonstrative project, in terms of the industry’s commitment to reducing its carbon footprint. It will be a world-scale project,” he said.
“We’re saying, if we invest in Pathways, we think that should be sufficient investment in decarbonization of the sector. And then putting an additional carbon tax on it will make the sector uncompetitive and burdened with costs that are going to reduce the ability to make further investment.”
Alberta’s premier is pushing to see the province double its oil production by 2035, and there is economic benefit in having new pipelines and the carbon capture project move ahead.
Edwards estimated the Pathways project would require a capital investment of around $20 billion to build, while a new pipeline could be around $30 billion to $35 billion.
“Those two projects alone are $50-billion plus. But to grow the million barrels to fill the pipeline … you’re looking at another $50 billion to $60 billion of initial capital,” he added.
“But once those projects are built, you’re looking at another $5 billion to $10 billion a year of capital, annually on maintenance. So, really, it’s the production growth where the big capital opportunity lies, not the Pathways and the pipeline.”
Chris Varcoe is a Calgary Herald columnist.
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