As part of Alberta’s Climate Leadership Plan launched in November 2015, the Government of Alberta introduced on November 1, 2016, Bill 25 - the Oil Sands Emissions Management Act (“Bill 25”). Bill 25 had its first reading on November 1, 2016 and is currently undergoing second reading. It sets out the proposed cap on greenhouse gas emissions in the oil sands sector.
Oil sands facilities are currently regulated under the Specified Gas Emitter Regulation (SGER). The SGER framework operates based on each individual facility’s historical emissions per tonnes of greenhouse gas (“GHGs”) per barrel produced or the operation’s efficiency. Oil sands operations currently emit roughly 70 Megatonnes (Mt) per year. As BLG previously discussed (in Alberta Premier Notley Tips her Climate Change Hand and All Change — Alberta Overhauls Climate Policy, Ushers In Sweeping New Requirements), the Alberta government introduced a comprehensive strategy on climate change in November of 2015. The plan includes a $30/tonne carbon price to be applied to oil sands facilities based on results already achieved by high performing facilities and legislated emissions limit on the oil sands of a maximum of 100 Mt in any year with provisions for cogeneration and new upgrading capacity.
The Alberta Government on November 1, 2016, introduced Bill 25, legislation which established an annual 100 Mt emissions limit on oil sands. The Government stated that as a cornerstone of Alberta’s Climate Leadership Plan, the cap will allow the oil sands industry to grow sustainably by driving technological progress while ensuring that Alberta’s operators have the necessary time to develop and implement new technology that takes more carbon emissions out of every barrel.
Overview of Bill 25
Bill 25 has a preamble setting out the objectives and four sections. Section 1 is the definition section. Subsection 2(1) sets the greenhouse gas emissions limit for all oil sands sites combined in any year as 100 Mt. “Oil sands sites” is broadly defined to include all the buildings, equipment, structures, machinery and vehicles that are integral to the operation of an oil sands site. Subsection 2(2) sets out the oil sands projects exempted from the 100 Mt as follows:
the electric energy portion of the total energy generated or produced by cogeneration;
upgraders that complete their first year of commercial operation after December 31, 2015, or the increased capacity resulting from an expansion after December 31, 2015 of upgraders that completed their first year of commercial operation on or before December 31, 2015, to a combined maximum of 10 Mt in any year;
any prescribed experimental scheme or any experimental scheme within a prescribed class of experimental scheme;
any prescribed primary production or any primary production within a prescribed class of primary production; and
prescribed enhanced recovery or any enhanced recovery within a prescribed class of enhanced recovery.
Section 3 provides the authority of the Lieutenant Governor in Council to make regulations in respect of specific aspects of the Bill, including among others:
prescribing specified gases as gases to which this Act applies;
defining “enhanced recovery”, “experimental scheme”, “primary production” and “synthetic crude oil;”
the administration of upgrading emissions excluded; and
establishing and governing mechanisms to keep greenhouse gas emissions from oil sands sites within the limit established, including prescribing thresholds, including limits, triggers, ranges, measures or indices, establishing a system of greenhouse gas emission allowances and governing the purchase, auction, trading or retirement of greenhouse gas emission allowances or any other matter related to a system of greenhouse gas emission allowances.
Bill 25 will not repeal the Climate Change and Emissions Management Act, SA 2003, c C-16.7. Section 4 of Bill 25 specifically provides that this Act shall be construed as forming part of the Climate Change and Emissions Management Act, and the Climate Change and Emissions Management Act shall be construed accordingly.
Bill 25 is brief and lacks details. There are no monitoring, enforcement or penalty provisions. Arguably, as part of the Climate Change and Emissions Management Act, the provisions of that existing Act will be applicable. Further, given the broad powers of the Lieutenant Governor in Council to make regulations in respect of this Act under the Climate Change and Emissions Management Act, a great deal of detail will be filled through regulations.
The actual implementation of the cap is another challenge. The application of the exemptions are lacking in scope. Bill 25 does not distinguish between mineable oil sands sites and in situ sites. The Oil Sands Advisory Group is working to provide advice to the Government on the implementation of the 100 Mt. The Alberta Government also states that it will begin immediately to seek the advice of the industry, regulators, environmental organizations and Indigenous and Métis communities on the implementation of the 100 Mt limit.
It is also not clear how the 100 Mt was arrived at. The Alberta Government states that the annual emissions limit was established by a diverse group of stakeholders and jointly recommended by Canadian and international leaders in Alberta’s oil sand industry and international environmental organizations. There seems to be no published information on how the limit was determined. Further, it is not clear how the 70 Mt per year attributable to the oil sands was measured and aggregated.
Bill 25 does not state that it binds other decision-makers and regulators or that it amends other relevant legislation in Alberta. The Alberta Energy Regulator (AER) has jurisdiction over oil sands schemes and has approved a large number of projects. Bill 25 does not provide any guidance as to whether the emissions of existing projects are grandfathered within the 70 Mt per year currently recorded for the oil sands, and if so, how it will be allocated among existing oil sands sites. It is questionable whether there may be a need to segregate between mines and in situ sites for the purposes of the allocation. Without established criteria, such allocation will likely be contentious. While Bill 25 does not expressly provide so, it is implied that such allocations may be tradeable given the regulations contemplated to govern the purchase, auction, trading or retirement of greenhouse gas emission allowances.
Further, if indeed the 70 Mt per year will be grandfathered, it is not clear how the remaining 30 Mt will be allocated to new oil sands projects. Will the AER freeze approvals when the 100 Mt cap is reached? Skeptics may infer that Bill 25 may be an implied way to limit the number of oil sands projects operating in Alberta until its gradual phase out as in the case of coal. Approved projects that received no allocation, if they are not allowed to operate, may argue that their mineral rights have been effectively expropriated de facto. The success of such argument is uncertain given the various alternatives for compliance to be provided in the regulations such as purchase, auction and trading.
Lastly, it is not clear how Bill 25 fits into the Federal Government’s climate initiatives announced in October of this year. BLG will continue to monitor Bill 25 as it progresses through the Alberta Legislature and provide updates.