As premier of Alberta, Danielle Smith has made it abundantly clear that she’s interested in reducing emissions, not oil and gas production. In what may come as a shock to her supporters, the federal government obviously agrees. Its newly released emissions cap on oil and gas activities requires only a 20 to 23 per cent reduction in field-level emissions by 2030 from 2019 levels, with the rest coming in the form of credits or contributions to a decarbonization fund. "If you're asking to be done something that simply can't be done, then what you're going to do is shut down production and simply send it to other countries," Natural Resources Minister Jonathan Wilkinson said.

If you didn’t know Smith, you might think she would call this a win. But she was determined to portray it as a loss for Alberta no matter what the cap looked like, and she didn’t disappoint. Smith pledged to protect Alberta with a “constitutional shield” that she has already admitted is just about attracting attention to her cause rather than advancing it in the courts. “Albertans will not tolerate it,” Smith said.

Her proxies (or is it patrons?) in the oil and gas industry struck a similarly overwrought tone. “It will put thousands of Albertans out of work, and a cap on production is nothing short of the NEP (National Energy Program) all over again,” Ensign Energy Services president Bob Geddes said. “It’s the single-biggest existential threat (to the sector). An emissions cap is a cap on production. It’s as simple as that.”

This is the essence of the argument being made by Smith, her environment minister and the rest of her government: any cap on emissions is effectively a cap on production. But this is, as they say, a tell — one that calls their bluff on the lofty promises they’ve made to achieve net-zero emissions further down the road.

It’s also at odds with what the Pathways Alliance, a group of the five largest oilsands producers in the province, has said it can achieve. Its members claim they can reduce emissions by 22 megatonnes by 2030 without shutting in production, a 27 per cent decline that actually exceeds what the proposed federal cap would require. When combined with the methane reductions the oil and gas industry has already said it can achieve (and gently called out the premier for opposing), that gets the oil and gas industry to 39 megatonnes of field-level reductions by 2030, which actually exceeds the proposed requirement under the federal emissions cap.

But all this talk about federal regulations and constitutional shields misses the most important part here: none of this political gamesmanship matters. Pierre Poilievre could win the federal election in 2025 and wipe these regulations off the books and it still wouldn’t matter. Why? Because countries and consumers that buy Canada’s oil and gas will be calling the shots. They’re the ones who will enforce the real emissions cap that no politician in Alberta or Canada can control.

If Alberta wants to export any oil and gas to Europe, after all, it must meet their increasingly stringent standards under the Carbon Border Adjustment Mechanism. More importantly, there’s growing support for similar legislation in the United States — by far Alberta’s largest export market — backed by both Democrats and Republicans. Take the Foreign Pollution Fee Act, a wildly complicated and byzantine piece of proposed American legislation that’s clearly aimed at China but also covers crude oil and natural gas — and potentially Canada’s high-emission exports. Donald Trump might not care at all about climate change, but there are few things he loves more than economic protectionism — and picking fights with Canada. And remember: for all the progress that industry says it’s made in reducing upstream emissions, Canada’s average barrel is actually more carbon-intensive today than it was in 1990.

Here’s the real kicker, though. Even if Alberta’s oil and gas industry finally gets religion here and manages to meet the federal government’s 2030 target, it will still have to contend with the de facto production cap that declining global demand (and declining prices) will enforce. Electric vehicles have already destroyed nearly two million barrels per day of demand for oil, and they’re still in the early stages of their adoption curve. China, meanwhile, seems determined to wean its billion-plus citizens off foreign oil imports as quickly as possible, both through the growth of its domestic electric vehicle industry and its increasingly monumental wind and solar deployment targets. If anyone in the oil and gas industry still thinks the growth of the middle-class in China or India is going to ensure decades of demand growth for their product, they have a rude awakening in store.

Rather than wasting everyone’s time with talk of “constitutional shields” and ever-increasing demand for Alberta’s oil and gas, Smith should be helping her province understand the competitive landscape. She should push the oil and gas industry to decarbonize as quickly as possible and stop enabling its efforts to slow-roll that necessary work. And she should help Albertans understand the biggest existential threats aren’t actually coming from Ottawa, especially when it’s showering the province with tens of billions of dollars for carbon capture technology and pipelines.

Contrary to what Premier Danielle Smith keeps saying, the federal government's new emissions cap on oil and gas won't force Alberta to reduce its oil and gas production. That's going to be the market's job — one it's already starting to do.

Fat chance of that happening, though. Instead, she’ll keep picking fights with Ottawa and pretend they’re the only thing standing in the way of Alberta’s economic prosperity. Ironically, that’s a far bigger threat to the province’s economic future than anything Justin Trudeau could possibly muster.

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If the Federal government gave Alberta free rein to go ahead and do whatever they want with oil production, Danielle Smith (and her equally unhinged counterpart in Saskatchewan) would oppose it just on principle. Ultimately, Max is correct in that other countries with much more rigorous climate policies than Canada will ultimately spark the demise of the Alberta oil and gas industry and that day is coming sooner than later.

Brilliant, well-supported arguments _ Max is an invaluable contributor to public discourse. Hope someone is listening...

Regarding Alberta's TBA government: There are none so blind as those that will not see.

Danielle Smith is truly unhinged. It seems sad that so many Albertans are sucked into her propaganda and incapable of fact checking anything she says. Lately it seems she has disconnected from her position with her oil & gas buddies and is just bent on her faux show against Ottawa.

Smith still hasn't figured out as the rest of the world is moving forward with capping and phasing out fossil fuels, her desire to export oil & gas to the EU. How many times does the EU have to tell Smith they don't want her dirty oil & gas, when there are cleaner sources elsewhere?

Despite the oil & gas industry trying to discourage EV use and claims sales are slumping, EV adoption around the world continues to rise. It's pretty clear Smith is ignoring the direction the world is taking or she is just blind to reality and will only continue to live in the past while the rest of the country moves forward.

Idealologically driven and seemingly living and operating in their UCP fantasy world.

An excellent piece.

Regarding "...someone else will pick up the production slack..." (paraphrased comment by federal Minister Wilkinson), while it's true that the Middle Eastern producers have slackened off production to raise the world price after Russia's war in Ukraine started, and the US concurrently ramped up shale oil to lower the price creating a yoyo on prices totally out of control of Canada, let alone Alberta, he needs to stop sitting on the fence.

Fossil fuels are heading for a quicker decline than originally anticipated if renewables and increasingly better quality batteries keep up their phenomenal growth rate. The US has had the Inflation Reduction Act in place for a little over a year and it has caused a huge shift to retooling for renewables and EVs and other industrial projects. By the time the next US president in in place in January 2025, the IRA will have effected profound, impossible to reverse change that has benefitted Republican states more than Democratic states, with a net benefit for the US economy and an "overflow" to its trading partners.

Very recently the American and Chinese presidents agreed to increase the production of renewables even more. China already produces the best quality and cheapest solar panels, wind power components, batteries and EVs, and does so at a tremendous rate.

Danielle Smith's words are irrelevant, except for selling media content. Alberta's future has already been determined by outside international economic forces beyond its control. And the feds will also be caught with their pants down, even if only halfway, as long as senior cabinet members and the prime minister continue to try to walk two paths that are splitting apart. They need to up their due diligence efforts and truly help all Canadians make the transition.

The sooner the better.

Thank you. In Canada, we keep talking Canada, as if the rest of the planet did not exist.
It's bad enough for the USA to do that, but they have dozens of times the right to it that we do.

It's a mug's game to even debate what effect our Feds have on a province's ability to sell a commodity on the world market. It's tiny. You could put three huge pipelines to all the tidewater, and it would save a few bucks a barrel off the delivered price, increase Alberta's market another 10%, maybe 20%. It's incremental.

I make post after post (it's a dumb habit, but you super-posters at the CNO can't judge) about how Putin and bin Salman crashed the price of oil in 2014 to drive frackers broke; 100,000 jobs in Alberta were their collateral damage. They go right back to blaming Trudeau, who wasn't elected at the time. Finally summed up a blog post to point to:

It's all about the world-market decisions, and one factor there I never see mentioned is that a major reason for developing a market play is to enable future market plays. You build up your own capacity for that kind project, by doing projects: get people trained, organizations organized, "administrative capacity" to, in this case, get oil to customers.

But that's no longer needed. The moment an industry is clearly a "sunset industry" on the order of 10-30 years, a single career, a single commercial-loan cycle - there's no value in the administrative capacity you build up with a 2020's oil & gas development. It's a big part of the argument for subsidizing projects, that you are also "building up an industry".

It should be appearing in the journalism.

Yeah, I've been saying roughly this for ages.

Natural Resources Minister Jonathan Wilkinson: "If you're asking to be done something that simply can't be done, then what you're going to do is shut down production and simply send it to other countries."

Given the high average emissions intensity of Canadian crude, that might not be a bad idea.
In the IEA's Net Zero by 2050 scenario, "oil and natural gas supplies become increasingly concentrated in a small number of low-cost producers. For oil, the OPEC share of a much-reduced global oil supply increases from around 37% in recent years to 52% in 2050, a level higher than at any point in the history of oil markets."

"Those companies with the highest carbon intensity in their oil & gas reserves face the greatest risk of writedowns as a result of changes in climate change policy. These include Canadian oilsands producers Suncor Energy and Imperial Oil, but also U.S. shale oil drillers Pioneer and EOG."
"The $900 billion write-off of ‘stranded energy assets’ needed to make climate targets will be one of the biggest capital shifts ever" (Financial Times, March 3, 2020)

"In a global net-zero scenario — where Canada achieves carbon neutrality by 2050 and the rest of the world reduces emissions enough to limit global warming to 1.5 degrees Celsius — the Canada Energy Regulator report projects Canadian crude oil production would fall to 1.2M bpd (76% lower than in 2022) and natural gas production would fall to 5.5B cubic feet per day (68% lower than in 2022) by 2050."
"Alberta premier's arguments on increasing oil and gas production 'logically incoherent': Wilkinson" (CBC, Dec 09, 2023)
"[Pathways Alliance] members claim they can reduce emissions by 22 megatonnes by 2030 without shutting in production."

A claim that has yet to be put to any kind of test. The industry also grossly underreports its emissions. Industry's emissions estimates are fiction.
Pathways Alliance's claim rests largely on mostly taxpayer-funded white elephants such as carbon capture (CCS), SMRs, and "blue" hydrogen. Claims for the efficacy of CCS in the oilsands, in particular, are wildly overblown.

Danielle Smith's approach is simply shortening the path to human extinction. Simple as that. Short tem geed wins!

I notice the general tone of Wilkinson and Guilbeault toward Smith has become slightly more dismissive and disparaging (and how NOT) but when Kendall Dillinger of the Pathways Alliance, a presumed supporter, also joins in she really is starting to appear more marginalized back toward the actual ideological fringe that is the TBA/UCP.
For her I suspect it's more of a utilitarian stance but of course that's how the backbone of the party views HER as well. Women are traditionally allowed into leadership when things get fractious or to smooth perceptions when a political party is perceived as having gone off the rails somewhat. (Understatement of the decade.)
So if TBA really is driving this clown car, and she's starting to blow their cover, is it possible the knives might be out again, even this soon, that Danielle becoming "Dumbyell" might have a shelf life?
That IS how momentum works when you're primarily focused on moving fast and breaking things in your impatience to get on with your long-awaited and transformative agenda. You're SO close.
Bring it on I say; let's see who you guys REALLY are, AGAIN; maybe this time it'll take?
But people have never been slower learners.

Hard to believe a thing from government especially Natural Resources Minister Jonathan Wilkinson who has a vested interest in O&G and its future.

Natural Resources Minister Jonathan Wilkinson and his staff have praised Enbridge and Shell in recent months, after his spouse invested in the two large fossil fuel companies.
The case is just one example of a broader trend of investment ties between Canadian lawmakers or their families, and the oil and gas industry.
In November last year, Wilkinson congratulated Enbridge for partaking in a federal government grant program to retrofit homes for energy efficiency. And during a June meeting involving a manager at Shell, Wilkinson was urged by his ministerial briefing note to “recognize the great leadership” of the multinational company headquartered in the United Kingdom for helping build electric vehicle charging stations.

Before Wilkinson presented the Enbridge grant program and met with a representative from Shell, he had already listed both companies in his public ethics disclosures, as investments made by his spouse.

An investigation by The Narwhal and the Investigative Journalism Foundation found 30 MPs or their spouses took advantage of these rules between 2020 and 2022 to include oil and gas stocks in their portfolios.

All told, the company that MPs or their spouses made the most investments in during this period was Enbridge, which was listed in 18 ethics disclosures.

Fortis, a utility company that distributes natural gas and electricity, had 11 investments, as did TC Energy, the company behind the Coastal GasLink pipeline. Oilsands company Suncor had seven investments, while Pembina Pipeline had six.

Very interesting information. Kudos!

I wonder if anyone half an hour of online research (start with recent IEA reports) cared to advise Wilkinson et al that these investments have a leaky fuel tank? Demand destruction in oil and gas will be the financial story in little more than six years.

The ducks have aligned, the writing is on the wall.