Lexpert Magazine

48 LEXPERT MAGAZINE | MARCH 2016 | ENERGY | cubic feet per day. Under the 2015 royalty regime, that would generate $140 million per year in new revenue for Alberta because natural gas royalties are much higher than those on coal. ough the anxiety over Alberta's oil and gas royalty structure has thankfully passed, the prospect of further climate- related regulation changes, not to men- tion the prospect of more oil flooding the markets from Iran and now the US (which recently lied its 40-year ban on exporting its own crude abroad), has industry experts questioning Alberta's competitiveness on the global energy front. With the Trudeau government praising both the Paris agree- ment and Alberta's climate plan (though it has expressed concerns about job losses in the Canadian energy sector) but yet to enunciate a federal energy strategy, "it's the perfect storm," says Flaman. at storm in- tensified Jan. 27 when the Trudeau govern- ment announced new regulatory hurdles that will add, for instance, nine months to the review time for TransCanada Corpo- ration's $15.7 billion Energy East Pipeline and more time to other projects. e Liber- als, while saying they aren't trying to shut down the energy industry, said they needed to restore public faith in the assessment process and increase consultations with First Nations. In speaking with his clients and industry veterans, Flaman frets that all the factors – from low prices on oil to higher prices on carbon emissions – have already begun pushing investment and oil and gas pro- duction out of Alberta. "Why would you invest in Alberta when you can invest in Saskatchewan or BC, or even Texas and the US, where you don't have the same infra- structure and pipeline issues you see here al average temperature to below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C. Shortly before the Paris conference, on November 22, Alberta's new NDP Premier, Rachel Notley, announced the Climate Leadership Plan. e sweeping carbon-re- duction plan includes a new economy-wide carbon tax starting at $20 per tonne in 2017 (the rate was previously $15) and increasing up to $30 a tonne the following year. e plan would also phase out coal-generated electricity in Alberta by 2030 and cap GHG emissions from the oil sands sector at 100 megatonnes from its current estimated out- put of 70 megatonnes. e NDP promised the $3 billion or so raised annually by the plan will stay in Alberta, with some money spent on tech- nologies to further fight climate change. at includes development of renewable energy and green infrastructure. Some funds would also be used to help lower- income households deal with the resulting increased transportation and heating costs through a rebate program. Notley says the new climate regulations will remedy Alberta's reputation for pro- ducing "dirty oil" and thus improve market access for Alberta crude abroad. In public at least, several major oil-industry leaders, including Canadian Natural Resources Chairman Murray Edwards and the Cana- dian Association of Petroleum Producers (CAPP), applauded the climate plan, saying it would spur growth in the Alberta oil and gas industry. CAPP predicted that as clean- er-burning natural gas plants replaced coal plants, they would increase natural gas de- mand in the province by about 1.5 billion in Canada?" Or, for that matter, he adds, when you can invest outside of Alberta and enjoy better royalty treatment (at least at present) and, generally, less onerous envi- ronmental regulations. At Bennett Jones, Greenfield says his cli- ents wanted the royalty structure to be sim- pler and to recognize and reward the cost of new technological development. At least they got that. But worries abound, he says, referring to a recent survey of upstream oil and gas executives on investment percep- tions of Alberta by the Fraser Institute. It found that an increase of Alberta's corpo- rate tax rate to 12 per cent from 10 per cent, along with concern over the royalty review and the Climate Leadership Plan, had led to a dramatic 25 per cent increase in nega- tive perceptions. e authors wrote in their report: "ese negative shis may not bode well for Alberta given that the province's im- mediate geographical competitors remain attractive as jurisdictions in which to in- vest, or are improving." ey pointed out Saskatchewan as a strong competitor that could steal development and investment away from Alberta. Greenfield and other lawyers inter- viewed say they're already seeing evidence producers deferring investment in Alberta, or, worse, of so-called "carbon leakage" — the industry term for business migrating from one jurisdiction to another. Last No- vember, for instance, Encana CEO Doug Suttles said his company was deferring in- vestment in a gas plant in Alberta's Duver- nay formation until aer the royalty review and legislation surrounding carbon-pricing and GHG emissions has been completed. Yet not everyone fears carbon leakage will vacuum investment and jobs out of Alberta and deposit them in places such as Saskatchewan, North Dakota or Texas. In Sarah Powell's estimation, as Alberta phases out coal and caps emissions on the oil sands, investment in renewable energy will grow significantly. Powell, a Toronto partner in Davies Ward Phillips & Vine- berg LLP's Environmental, Aboriginal and Energy practices, is one of Canada's leading environmental lawyers. She's worked ex- tensively with industry and government in such areas as hydro and wind energy. While she acknowledges that initially some investment may trickle out of Al- CHIP JOHNSTON STIKEMAN ELLIOTT LLP "I THINK THE opportunity for innovation is pretty big right now for everybody [in the industry]. I think that thinking has been disrupted and that causes people to look at things in a different way."

• cover
• Masthead
• ProfessionalOpportunities
• People On The Move
• Big