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Carbon-costdebate findsa ready'btage

CALGARY

}}Hiff i*'",ii:'i'fi ",il3'effect next month, are contenti-ous in Alberta, where the econo-my has sputtered as a result ofthe collapse in crude prices.Some of the calculus in proceed-ing with the policy is to showCanadians and others that theprovince is serious about clean-ing up its act as it tries toexpand markets for its mainproduct.

Meanwhile, the industry's par-ticipants have been winnoweddown, first by surging costs andcorporate pockets found to betoo shallow, then by the collapsein crude prices. Without some

moonshot technology to slashcosts and emissions, the big in-cumbent players with expeitiseand access to capital wilfincreas-ingly dominate the landscape.

Suncor Energy is a primeexample, having spent morethan $5-billion (Canadian) bulk-ing up on acquisitions in the oilsands over the past year while atthe same time building the gr5.r-billion Fort Hills mining proleit,clue to start up in about rzmonths.

Koch, owned by the conserva-tive billionaire brothers whofamously oppose regulations tolimit emissions, said Ms. Notley'scarbon tax and oil sands emis-

sions cap persuaded it to scrapthe Muskwa oil sands develop-ment plan.

But it did not release the pro-ject's supply costs - the com-plete menu of inputs that gointo the ro,ooo-barrel-a-day pro-posal.

Projected margins may havebeen razor-thin without the car-bon levy.

Under the NDP plan, the extracost of an average steam-assistedproject would be 46 cents a bar-rel, with U.S. crude at about $5r(U.S.) a barrel and otherassumptions for natural gascosts and assorted expenses.

Indeed, in the week it buried

tFhere is plenty of movementI in the oil sands all of a sud-

den, and a common theme of theapprovals, cancellations andsales of projects is Alberta's car-bon policies.

Two players,that backed Pre-mier Rachel Notley's sweePingplans last year, Cenol'us EnergYlnc. and Canadian NaturalResources Ltd., have taken majororoiects down from the shelf and'areboised to pump hundreds ofmillion of dollars into developingthem.

Koch Industries Inc. of Wichita,Kan., asked the province's energyregulator to scratch the aPProvalfor an $8oo-million develoP-ment, blaming economic uncer-tainty and costs associated withthe NDP government's moves tofisht climate change.

l.lorwav's Statoil ASA said it had"bent itS cost and emissioncurves" by striking a deal to sellits Alberta oil sands assets toAthabasca Oil Corp., and bookinga loss of at least $soo-million(U.S.) on the transaction.

There are twin messages here.'The first is that oil sands by

nature are expensive, and notevery company will invest overthe long haul if it believes it canmake quicker money elsewhere'Multinationals can pick andchoose. The second is that not allproposed projects are ofhigtt'enough quality to warrant the in-vestrnent needed to get them uPand running, especially if crudeprices languish. Some take moresteam, or other processing, to getthe bitumen out. No carbon levY,or lack thereof, will change that.,ones, Page 4

for a steam-driven pr6iecf iailedSelina that would producerz,5oob/d, even as Albertaproceeds with its carbon poli-cies.

. Statoil, 67 per cent owned by

the Norwegian government,decided to exit the oil sandsafter years oftaking flak fromenvironmentalists at home. Ithad already shrunk its ambi-tions, having mothballed amajor expansion of its produc-tion south of Fort McMurrayAlta., two years ago.

In 2olo, the companv hadpledged to reduce its emissions

M.9.sk1va, Koch, in partnershipwith Pengrowth Energy, applied

from the. oil sands z5 per cent byzozo and 40 per cent by zoz5.Now, as it trumpets the redui-tion in its carbon footprint fromselling its holdings, the projectcontrnues to operate, only undera different corporate brand.. Meanwhile, money is still flow-ing into the oil sands, as Cana_dian Natural and Cenovus haveshown by expanding their pr;--Jects.

Tfey have to deal with risingcarbon costs along with all thEother companies*but seem tohit on a formda 8f high-qualityleases, reduced costs, economiesof.scale and long-time supplierrelationships.

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Iones: Alberta's contentious carbon taxes elicit varied responses