Carbon Corner: “If You’re Going Through Hell Keep Going”

"If You're Going Through Hell Keep Going" – Winston Churchill

The Canadian energy sector’s long, hard push through the recent extended market downturn will go down in industry lore.

When we talk about it here in Saskatchewan, one of the things we’ll surely remember is how tough and resilient our oil and gas businesses really are.

They are operated by some of the most innovative, determined and competitive people you will find anywhere; people who embody what Winston Churchill meant when he said, “If you’re going through hell—keep going.”

Our government has tried to support the energy sector during good times and bad. Our objective is to ensure that Saskatchewan can serve as a star to steer by as the industry works its way back to growth and prosperity.

In Saskatchewan, we are striving to be a place of stability for resource companies. In a 2016 global survey undertaken by the Fraser Institute, international petroleum industry executives and managers ranked Saskatchewan as the fourth most attractive jurisdiction for investment in the world, rising from seventh place, and the number one jurisdiction in Canada. But there is always more we can do.

We will do everything we can to retain our high ranking. That includes calling it like we see it when it comes to the economic course being charted for our national economy, to which the oil and gas industry is so integral. The stakes are high: this is an industry that contributes an estimated 15 per cent to Saskatchewan’s GDP, with the upstream oil and gas industry accounting for an estimated 31,000 jobs directly and indirectly.

We remain a staunch advocate for pipeline development to increase market access for Western Canadian oil. We know pipelines are the safest and most environmentally sound method for transporting oil to market. The federal government’s approval of Enbridge’s Line 3 and the recent decision in the United States to proceed with the Keystone XL project are welcome news.

Meanwhile, we remain opposed to a federal carbon tax that will disproportionately hurt the energy sector and resource producing provinces like Saskatchewan and Alberta. We believe a better way is to mitigate carbon emissions through the advancement of technology. Saskatchewan, for example, is a world leader in the development and deployment of carbon dioxide capture and storage technology (CCS). CCS is reducing Saskatchewan’s emissions, but the real benefits become apparent when you consider its potential application in the developing world. There are more than 2,000 new coal- red power plants being planned or constructed across the globe. It will not be possible to reduce greenhouse gas emissions in a meaningful way if we don’t deal with emissions from those coal-fired power plants.

Carbon Corner: “If You’re Going Through Hell Keep Going”

This is one reason why a national carbon tax is the wrong policy at the wrong time. It makes no sense for our federal government to push ahead with a carbon tax when the United States, our biggest trading partner—and our biggest competitor for investment and jobs—has no plans to. According to a federal report, a Canadian carbon tax creates the possibility of “carbon leakage”—a potentially devastating exodus of investment and jobs—with no net global reduction in greenhouse gas emissions.

With a carbon tax in place, we will see energy companies operating in the Bakken formation in Saskatchewan at a competitive disadvantage with leases just a few miles away. Potash and uranium companies operating in our province will be put at a disadvantage because their international competitors will not be subject to a carbon tax.

It’s been suggested this tax is the necessary cost in order to change behavior. Unfortunately, there’s no evidence a carbon tax at the level proposed by the federal government will do this. According to one analysis, a national carbon price would need to be set at $180 per tonne in order to reduce emissions to the level required to meet Canada’s commitment at the Paris conference, which is to cut greenhouse gases (GHG) by 30 per cent from 2005 levels by 2030.

A carbon tax levied at $180 per tonne would do severe harm to the economy. But even at the level announced by the federal government, a carbon tax will hurt Saskatchewan families. Our government estimates it will remove $2.5 billion from Saskatchewan’s economy; this includes direct costs to oil and gas, electricity producers, and the agricultural sector, as well as many prices passed on to consumers for increased costs of production and supplies. There would, of course, also be indirect costs to workers and families who rely on these sectors for their livelihood.

Saskatchewan is particularly vulnerable because we are home to emissions-intensive, trade-exposed industries that are not able to pass on the costs of a carbon price to their customers. Nearly all the output from the two largest-emitting sectors in Saskatchewan— energy and agriculture—is exported to world markets and receives a price established by world markets. If the costs of these two sectors increase due to a carbon price, their profitability will decline, and so will their ability to invest and create jobs.

It’s time Canadians had a serious discussion about the full implications of a national carbon tax. To aid in that discussion, we need an in-depth economic analysis of the impact of a carbon tax. But so far, the federal government has failed to produce such a study. This is lamentable and inexcusable.

In the discussions that have taken place, British Columbia is often held up in Canada as a textbook case of an effective carbon price. That province introduced a $10 per tonne carbon tax in 2008 and then increased the carbon tax by $5 a year until 2012, when the tax was frozen at $30 per tonne. Because of competitiveness concerns, B.C. then decided to wait for other jurisdictions to introduce their own carbon taxes and catch up to B.C. before its tax was increased further. Despite the presence of a carbon tax, B.C.’s emissions actually increased between 2010 and 2014, and emissions are forecast to climb by 32 per cent by 2030. Meanwhile, emissions in Saskatchewan without a carbon tax are forecast to drop from 76 million tonnes in 2014 to 73 million tonnes in 2030.

Even more indicative of the economic dangers and policy inefficacy inherent in the carbon tax is the recent decision of a major oil sands player to effectively exit that play through a sell off and invest in the United States.

This particular company was happy to stand behind the Alberta government and the federal government as they announced their carbon taxes and now serves as an example of carbon leakage.

Commodity markets change and fluctuate, and they always will. However, nothing has changed in Saskatchewan when it comes to our increasingly accessible resource base or our commitment to supporting the energy sector.

We will continue to provide a stable investment climate for oil and gas development that ranks among the best in the world. And we will continue to advocate for policies that make sense for your industry and, by extension, for our economy at large.

Brad Wall
PREMIER OF SASKATCHEWAN

Originally published in the

Date Published	March 30, 2017
Company	Oilfield HUB
Article Author	Brad Wall
Article Type	March 2017 Issue
Category	Articles, Carbon Corner
Tags	Carbon Corner, Carbon Emissions, Carbon Tax, E&P, Industry Innovations, Oil & Gas: Government
HUB SEARCH	OilfieldHUB

Carbon Corner: “If You’re Going Through Hell Keep Going”

Carbon Corner: “If You’re Going Through Hell Keep Going”

"If You're Going Through Hell Keep Going" – Winston Churchill

March 2017 Issue of Oilfield PULSE