From the Editor: Dysfunctional GPS on the road to net zero [Gas in Transition]

At CERAWeek in March, the global oil and gas industry began to catch on to what it will take to reach net zero and still provide affordable, reliable and secure energy to the world. A mix of fuels, a cornucopia of technologies, and all stakeholders working with the same goal in mind, providing incremental steps towards a lower-carbon future.

Somebody forgot to tell Canada, or at least its political elite.

Led by a virtue-signalling trust fund baby as prime minister and a former Greenpeace activist as environment minister, Canada’s plan to reach net zero takes dead aim at the country’s oil and gas industry – its main economic engine. A proposed emissions cap may or may not infringe on provincial rights and both Prime Minister Justin Trudeau and Environment and Climate Change Canada Minister Steven Guilbeault steadfastly refuse to admit that the country’s abundant reserves of natural gas can actually help reduce global greenhouse gas emissions.

The path to net zero nirvana, Trudeau told both Germany and Japan in recent months, lies not with Canada’s 83 trillion ft³ of proved natural gas reserves, but with a nascent hydrogen industry that is year, if not decades, away from providing meaningful, exportable energy – assuming, of course, that technology emerges that can provide that with any sort of economic sustainability.

Provincial regimes aren’t much better at seeing the forest and not the trees. As this issue of Gas in Transition was being prepared, Alberta released its own Emissions Reduction and Energy Development Plan that formalised, for the first time, the province’s goal to reach net zero by 2050, but offered no concrete plans to achieve that nor set any incremental targets – a 30% reduction in emissions by 2030 is the most common – that would provide signposts that Canada’s main source of GHG emissions was, in fact, on the right road to 2050.

“With the release of this plan the Alberta government is signalling that the province needs a credible climate plan, while recognising that it is lagging well behind much of the rest of the world,” Simon Dyer, deputy executive director of the Pembina Institute, a reasonably moderate environmental think tank, said in response to Alberta’s plan.

“Alberta needs to play a leadership role and be part of the solution to addressing climate change,” he said. “We can’t expect Canadians across the country to do more while Alberta does less.”

Quite apart from emissions reduction plans at either the federal or provincial level, Canada’s regulatory and permitting structure is woefully ill-equipped to provide certainty that any energy transition project – whether it involves fossil fuels or not – will ever get approved, much less built.

At the Canadian Gas Association’s Energy Nexus conference in Calgary – again as this edition of GiT was being prepared – Monica Gattinger, founding chair of Positive Energy at the University of Ottawa, said Canada is not able to “build enough, fast enough” to reach net zero, and cited some reasons why.

The federal government, she said, has yet to finalise a host of fundamental policy measures – like the oil and gas cap on emissions and tax credits for things like carbon capture and storage (CCS) – that would assist the natural gas industry to contribute to achieving net zero aspirations. “For gas, where a government stands on the future of natural gas will shape whether the details to come on these policies make space for gas or shut out the sector,” she said.

But the biggest challenge to certainty and predictability, she said, lies in the role of politicians in the project approval process. Regulators like the Impact Assessment Agency of Canada or the Canada Energy Regulator are charged with reviewing major projects. But their reviews and recommendations on whether a project should be approved are then forwarded to the federal cabinet, where Trudeau, Guilbeault and their colleagues make the final decision.

“This creates tremendous uncertainty and risk for proponents,” Gattinger said. “For natural gas, the size of that risk is going to be shaped by the government’s stance on the sector and how they view it in the country’s energy future. If a proposal makes it through the regulatory process with a yes, will it get the axe when it lands on the cabinet table?”

Despite all that certainty surrounding major projects, Canada’s oil and gas sector is taking incremental steps to reduce emissions – reaching net zero through a “death by a thousand cuts” game plan.

Canada’s biggest natural gas producer, Tourmaline Oil – its 2.3bn ft³/day of natural gas production last year accounted for about 13% of Canada’s total – has joined forces with California’s Clean Energy Fuels to roll out a network of 20 stations across western Canada that will provide compressed natural gas (CNG) to fuel heavy-haul transport trucks that now use diesel.

According to Canada’s latest National Inventory Report, the country’s transport sector was the second largest contributor of GHG emissions, accounting for about 22% of the 2021 total. Using natural gas produces 20% fewer CO₂ emissions than diesel, and the 3,000 natural gas trucks that the new fueling network will support will lower CO₂ emissions by nearly 73,000 metric tons/year.

“This is a way to continue to reduce emissions and to build natural gas demand,” Tourmaline CEO Mike Rose said. “Natural gas is here now and we have the technology to go and reduce emissions now.”

Observers of Canada’s energy sector got the message of CERAWeek. The oil and gas sector also got the message and is doing what it can to make it down the road to net zero.

It’s unfortunate that both the federal and Alberta governments seem to have dysfunctional GPS systems showing them the way.