Today, I received a nice offer in my mailbox from utility company ENMAX. These offers often make me angry because I find that they prey on people’s lack of information regarding electricity units and pricing. Today was no exception.
Continue reading “ENMAX solar power – a different definition of affordable”
Today, with great praise from industry, a new report, commissioned by the Alberta Government, on oilsands GHG emissions was released. This report, by Jacobs Consultancy, assesses the degree to which oilsands GHG emissions compare to other sources of crude entering the European Union. The results are not particularly surprising, nor are they likely to significantly bolster the Alberta Government’s case.
The EU FQD, for those not familiar with it, assigns GHG ratings to EU vehicle fuel based on the feedstock from which that fuel is produced. Gasoline produced from almost any source of oil on the planet is labelled as having 87.5gCO2e/MJ of GHG emissions, while fuel produced from an oilsands (or natural bitumen) feedstock is labelled as 107gCO2e/MJ. Since the EU will require overall reductions in the emissions footprint of gasoline supplies, the FQD makes oilsands-sourced products less valuable in the EU marketplace.
First, let’s be clear – the EU’s Fuel Quality Directive as proposed singles out oilsands and allows many sources of crude with similar GHG emissions to enter the EU without facing a similar carbon penalty. In my view, that’s wrong, and Canada should oppose it on those grounds. Thing is, I don’t see how today’s report helps us to do that in ways we could not before, or changes what I think the strategy should be.
What do we learn from the report? Well, first we learn that almost all oilsands production, with the exception of some cold-flow production using Cold Heavy Oil Production with Sand (CHOPS) techniques, would have higher GHG emissions per barrel than, “the range in carbon intensity of gasoline produced from representative crude oils refined in representative EU refineries.” The shaded area in the Figure below shows that range of representative-crude oil-sourced-gasoline emissions (wells-to-wheels) while the bars show the same measure for oilsands products based on different pathways to market.
Source: Jacobs (2012) http://www.energy.alberta.ca/Oil/pdfs/OSPathwayStudyEUjacobsRept2012.pdf
There are three additional arguments made in this report – first, the one we hear often that other sources of crude such as Venezuelan heavy and Nigerian crude have emissions much higher than the average conventional oil imported into the EU, second, that oilsands emissions are not represented by a single number, but rather a range, and finally that top-performing oilsands sites with certain refining pathways have emissions lower than the benchmark of 107gCO2e/MJ, and this may improve over time. Again, this will not be news to the EU.
On the first one, the Figure below shows the argument being made – that when compared to other similar grades of crude potentially imported into the EU, oilsands are not that bad. This figure certainly suggests that treating Venezuelan heavy as though it has emissions of 87g/MJ while treating oilsands as having emissions of 107gCO2e/MJ is discriminatory, but it does not suggest that the Figure applied to oilsands is inaccurate.
Source: Jacobs (2012), http://www.energy.alberta.ca/Oil/pdfs/OSPathwayStudyEUjacobsRept2012.pdf
The second argument, that oilsands can not be represented by a single number, is also one which puzzles me. The EU FQD allows individual sources of crude to certify to a lower number if that better reflects their emissions. The Jacobs report finds that oilsands-sourced gasoline exported to the EU could range in emissions from 99-113gCO2e/MJ, while it would all be initially labelled as 107gCO2e/MJ. Well, that’s obviously good for the 107-113gCO2e/MJ facilities, since they receive a lower stamp than they would in the accurate system which the Alberta government is seeking, while those below 107gCO2e/MJ are able to certify down to an accurate level.
Finally, the argument that oilsands will improve also seems to be defeated by the fact that individual sources can certify down. In the Jacobs report, it is suggested that new innovations and improved processes could bring emissions from oilsands down by 8-10gCO2e/MJ. Great! And, under the FQD, any producer achieving these improvements will be able to certify as such, thus increasing the value of their product in the EU.
This all comes back to the same problem with the EU system – it treats all crudes in the conventional or oilsands baskets as average, even though these crudes vary widely in actual GHG emissions/bbl. In my mind, the solution remains the same – Canada and Alberta should be arguing for a benchmark at the top of each basket, which according to the new Jacobs report would imply an initial benchmark for conventional oil at 99gCO2e/MJ, and an oilsands benchmark at 113gCO2e/MJ, against which better performers can certify down. This would ensure that countries have an incentive to provide verifiable emissions data, and that the emissions labels applied to crude oil products in the EU would accurately reflect their GHG emissions. I’m not sure why either Canada or the EU would argue against that.
Here’s the challenge – if you believe that oilsands emissions will decrease with better technology, and you believe that other sources of GHG-intensive crude like Venezuela and Nigeria won’t provide verifiable data, this is a sure-fire way to get your level playing field. As a bonus, you’re actually arguing for stronger EU GHG policy to protect oilsands – how novel would that be?
The question of what, if anything, Alberta should do to encourage more upgrading or refining in the province will be an important one regardless of which party wins the election on Monday. This question is pressing as, within the next decade, the province expects to receive about 300,000 barrels per day in bitumen as royalty payments (PDF), and to date have signed a single agreement to process (PDF) for 37,500 barrels per day, with Northwest Upgrading (NWU).
Should the bitumen be provided below market prices to local refiners? Alternatively, as in the NWU deal, should the province contract with merchant upgraders and/or refiners to process the bitumen? If so, should we only consider refineries located in Alberta, or should we be prepared to look more broadly? Or should Alberta simply market the bitumen to the highest bidder?
In today’s Edmonton Journal/Calgary Herald on-line leaders debate (a great format, BTW), the leaders were asked the following question:
Do you believe in climate change? What should be the provincial government’s response to climate change, or should the provincial government wait for a plan from the federal government?
Continue reading “The #climate and GHG question I would have asked”
Tonight, I am looking for some informed opinions on a topic about which I do not know much. I spent some time this evening looking into whether a differential royalty regime for oilsands bitumen based on its eventual use would survive a challenge under either the NAFTA or the WTO. This inquiry was was motivated by a line in the Alberta NDP platform which commits to, “develop a differential royalty system on bitumen and upgraded products that encourages value added in Alberta.” While the NDP are the only party proposing a differential royalty regime, other parties are proposing various measures with the desire to drive more upgrading in Alberta.
My question is this – when, and under what conditions, would such a policy survive a NAFTA or WTO challenge? I think the answer is clear – a differential royalty rate for exports would not stand up in almost any form.
Continue reading “Differential royalties for upgraded vs. non-upgraded bitumen”
Bitumen royalties accounted for 10% of total Alberta government revenues in 2010-2011, and that is expected (according to the most recent Alberta Budget) to climb to approximately 20% of total government revenues, or $9.9 billion dollars by 2014-2015. Both royalty revenue estimates and royalty rates make for contentious subjects in Alberta, and this post is intended to provide a primer into how the royalty regime works and how it impacts investment decisions. My hope is that every Albertan will become more engaged in how this resource is managed, and the first step in that direction is understanding how it’s managed now, so here you go.
What will determine my vote on April 23rd? I suppose it will surprise no one that I will vote based on the energy and environmental policies of the parties. My key issue list includes 5 categories: 1) Savings, transparency, and accountability; 2) Market access; 3) Local environmental management; 4) Global environmental credibility; and 5) Getting the most value for our resources. Here are some of the questions I’ll ask the candidates who visit my house during the campaign, and some context for why I’m asking them. How does your party line up?
Continue reading “Questions I’ll be asking #abvote candidates”
This week, the question of whether or not and, if so, how, the Government of Alberta should encourage upgrading and/or refining of bitumen in the province is back on the front page. Much of this coverage is due to backlash over the Government’s decision to not proceed with the Alberta First Nations Energy Center (AFNEC) under the Bitumen Royalty in Kind (BRIK) program. There are as many myths as ever bouncing around this, and so I’ve spent the last little while trying to untangle them for myself. Here are some thoughts and, as always, your comments and clarifications are welcome.
Continue reading “More on upgrading and refining in Alberta”
Last night, I wrote a long post on exchange rates, and discussed the impact of the Canadian dollar appreciation on our purchasing power. As usual, the best way to demonstrate that increase in purchasing power is with a graphic, so here you go:
Data: Statistics Canada and the US EIA, Author's Figure
What you’re looking at is the relative changes in gas prices, in local currency, in the US and in two Canadian cities, Edmonton and Toronto. In the periods of late-2002 through mid-2008 and again from late 2008 through today, $US gas prices in the US rose rapidly. Canadian gas prices also rose in these time periods, but much less quickly. Why? Because Canadians pay for gas in Canadian dollars, while gas is traded as a global commodity. As the Canadian dollar appreciates, you can buy more gas with every dollar, all else equal. The same applies to just about anything we buy while outside of Canada as well as to goods which we import. In 2011, Canadians imported over $37 billion dollars worth of goods every month (our net imports were smaller, at about $2 billion per month). Before arguing for a devaluation of the Canadian dollar to make producers more competitive, Canadians should remember that any push to do so is a push to reduce Canadians’ real wages and to decrease our purchasing power.
You might be happier paying more for gas and most everything else we buy, but I can’t imagine why you would be.
Last week, BC economist Robyn Allan weighed-in on the McGuity-Redford fiasco with a post of the effect of oil extraction on the Canadian dollar, and the knock-on effects of a high dollar on Canadian industry, including the oil and gas sector. Ms. Allan makes some important points, some which surprised me, but she also makes some points which are simply not accurate. Let me start with the good, and move on to the bad.
Continue reading “On exchange rates and the importance of “net” exports”
