The Canadian oil and gas industry’s biggest trade association and the Alberta government appear to be at loggerheads after the Canadian Association of Petroleum Producers (CAPP) released a paper July 5 calling for the streamlining of provincial policies and regulations to “rebalance the playing field and restore investment.”

The Western Canadian Sedimentary Basin has always been a high-cost place to do business, according to CAPP, but changes over the past two or three years have squeezed Alberta upstream producers especially hard. Provincial and federal policies and regulations that include methane emissions, carbon pricing, corporate tax increases, wetland policy, well liability and closure, and caribou management have all contributed to higher costs. Combined with low prices and the emergence of President Donald Trump’s “energy dominance doctrine” in support of U.S. producers, CAPP claims its members are facing “fierce competition” for capital.

“Investment decisions in our industry often take place many years before a project comes on stream. In order to continue to attract those investments with a long-term horizon, we must have a degree of policy and regulatory stability,” said Rob Dutton, chair of the CAPP board of governors.

CAPP president Tim McMillan says between the provincial and federal governments, and the various departments regulating the industry, there are “multiple policies all moving at the same time, layering costs.” He points to the example of both Alberta and Canada mandating a 45% reduction in methane emissions by 2030 from oil and gas production.

“Our industry didn’t pick a 45% reduction and we didn’t pick the timeframe, but we believe we can meet that timeframe and we even think we can do it in a cost-effective manner. But there is also a model that would mean it would be very expensive and punitive to our industry,” Dutton told Hart Energy.

“What we’re putting forward here is that we look at each of these individual incremental costs and do it in the full scope of all the changing dynamics. We look at each of them and ask, ‘How can we do this most efficiently to get the outcomes that the government has mandated?’”

To resolve the policy and regulatory issues, CAPP released “A Competitive Policy and Regulatory Framework for Alberta’s Upstream Oil and Natural Gas Industry,” which calls for more policy collaboration with the Alberta government and proposes the creation of a Sustainable Prosperity Steering Committee comprised of industry and government. The paper noted that implementing CAPP’s recommendation would be “highly reliant on political will” to empower policy and regulatory decision-makers to effect change.

Energy Minister Marg McCuaid-Boyd responded in an email on behalf of the Alberta government, writing, “We're glad to see CAPP recognize the good collaboration and results we've had on both the Climate Leadership Plan and our royalty review, which are both crucial to Alberta's competitiveness over the long term. We look forward to continuing this dialogue with the energy industry…”

But McCuaid-Boyd rejected the idea of an industry-government committee to address outstanding issues.

“While CAPP is an important stakeholder in the energy industry, they are not the only stakeholder. In order to help our businesses grow and access new markets, we need to hear from all those who have a vested interest, including municipalities, Indigenous communities and environmental groups,” the email said. “CAPP’s proposal would displace the important work and thorough consultations that are underway or already complete.”

McCuaig-Boyd points to industry successes that suggest the Alberta policy and regulatory framework are actually encouraging investment: Suncor’s proposed oil sands operation that would produce up to 160,000 barrels per day (bbl//d), Husky Energy’s Q1 earnings up $529 million year-over-year, and a third expansion of CNRL’s oil sands Horizon project.

But, the Minister adds, the government is open to making changes that make sense, which is “why we asked CAPP to outline areas where we can streamline processes or make our regulations and policies more efficient for industry.”

Political scientist Keith Brownsey says it is in Alberta Premier Rachel Notley’s best interests to be perceived as sensitive to the frustrations of the province’s economic engine—especially since her New Democratic Party will be heading to the polls in less than two years and needs to retain seats in Calgary, the home of Canadian energy company head offices.

“CAPP is a lobby group defending its members’ interests, who are trying to survive in a pretty tough international environment right now,” Browney said in an interview with Hart Energy. “If there are ways to achieve the same goals by being smarter and reducing red tape, then the Alberta government should certainly do that, even if the effort is outside the established channels with other stakeholders. The oil and gas industry is the major stakeholder, not just one of many.”

Neither CAPP nor the government appears willing to budge from their positions. Industry wants to resolve issues face to face with policy makers and regulators, while government wants more data and proof that industry is suffering cost competitiveness problems and believes most—if not all—of the issues require other stakeholders at the table.

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