Alberta gearing up for another court battle over Ottawa’s oil, gas emissions cap

Alberta Environment Minister Rebecca Schulz says the province is gearing up for another court battle against the federal government, this time over a forthcoming proposed oil and gas emissions cap that she claims will in practice be a cap on production.Schulz is scheduled to meet with her federal counterpart, Environment Minister Steven Guilbeault, in Ottawa on Monday, the same day the province will submit its formal, written feedback on the proposed cap. It outlines a cap-and-trade system that would apply to all direct greenhouse gas emissions, with the cap also regulating upstream oil and gas facilities.

The goal is to lower emissions in the upstream sector by 35 per cent to 38 per cent relative to 2019 levels by 2030, ahead of the federal government’s already-stated goal of reaching net-zero status by 2050. In a weekend interview, Schulz described those limits as “unconstitutional and devastating,” amounting to what she believes is a de facto cap on production that will negatively affect the economy while resulting in lost jobs. “There is absolutely no way that this is not going to shut-in production,” she said. “We will stand up for our province. We will make sure that not only Albertans but Canadians understand the impact that this terrible policy would have.” Schulz added the province is prepared to battle back in court to defend what it believes is its constitutional authority to address such matters. “You better believe it,” she said. “We are very clear in our submission that this is an area of provincial jurisdiction.”

The deadline to provide feedback on the proposed cap is also on Monday. Draft regulations regarding the cap are expected to be published sometime this spring, with final regulations to follow next year. Last week, a delegation of Alberta business leaders echoed those comments with Deborah Yedlin, CEO of the Calgary Chamber of Commerce, describing the cap as “unworkable, untenable” and likely to increase investment uncertainty.

Guilbeault unveiled details of the plan in early December while at the COP28 summit, including measures designed to offer some industry flexibility by allowing emitters who exceed their allotment to purchase carbon offset credits or pay into a decarbonization fund. “Canadians have always risen to the challenge of building a brighter future, and this greenhouse gas pollution cap will help Canada compete and succeed in a world that is moving to a clean-energy future,” he said in a release announcing the proposed plan. On its website outlining the proposed cap, the federal government acknowledges the oil and gas sector is a “major” contributor to the national economy but adds that it is also Canada’s largest source of greenhouse gas emissions and has “a critical role to play in meeting the country’s climate objectives.” Natural Resources Minister Jonathan Wilkinson told The Canadian Press in December that the cap “is structured in such a way that we are focused on what is technically feasible” without cutting production. “Eventually we will see declines in global demand, but that’s not happening right now, so absolutely, that is not the intent, and that is not going to be the effect.”