Pumpjacks draw oil out of the ground near Olds, Alta., in July, 2020.Jeff McIntosh/The Canadian Press
For oil patch executives of a certain age, the opening of the Alliance gas pipeline 25 years ago qualified as a career-defining experience.
The 3,848-kilometre link between Alberta and distribution hubs near Chicago gave Canadian energy companies access to new customers in the U.S. Midwest. It closed the gap between the posted price for natural gas and what domestic producers received, and boosted royalties flowing into provincial coffers.
The project set the stage for massive growth in domestic natural gas production, and minted millionaires in Calgary. And a young Goldman Sachs investment banker named Tim Hodgson earned his spurs in finance as an adviser to Alliance’s builders.
Last Friday, Mr. Hodgson, now the federal Energy Minister, walked into a ballroom at Calgary’s Fairmont Palliser hotel and won over a skeptical crowd by saying working on the Alliance pipeline remains one of his proudest career achievements.
An audience of oil patch executives – including chief executives at Cenovus Energy Inc., TC Energy Corp., Imperial Oil Ltd., Suncor Energy Inc. and former Alliance owner Enbridge Inc. – nodded their heads in agreement when Mr. Hodgson highlighted the project’s impact.
“I joined this government because I believe in public service that delivers results,” the Energy Minister, two weeks into his political career, told the Calgary Chamber of Commerce crowd.
Then he challenged CEOs in the crowd to work with him and deliver on long-promised projects such as the Pathways Alliance’s $16.5-billion carbon capture and storage (CCS) facility.
As The Globe and Mail reported on Monday, the issue of who pays for what has stalled the Pathways Alliance’s plans to dramatically reduce oil sands emissions by trapping carbon at refineries and sending it through a 400-kilometre pipeline to an underground storage site near Cold Lake, Alta.
With Justin Trudeau as prime minister, the oil patch credibly blamed the federal government for bottlenecks on major energy projects. That’s no longer the case: Prime Minister Mark Carney has pledged money and rapid approval on that front.
But the six oil sands producers behind Pathways Alliance are now the blockers of CCS, as they are refusing to commit cash to it. If the industry still believes in the project, it is time to kick-start participation from the industry association’s owners: Cenovus, Suncor, Imperial Oil, Canadian Natural Resources Ltd., ConocoPhillips Canada and takeover target MEG Energy Corp.
If the energy companies refuse to fund Pathways Alliance directly, despite generous support from taxpayers, the provincial and federal governments should increase oil sands royalties to pay for the project.
How generous is government support for CCS initiatives? Back in October, the federal and Alberta governments presented Pathways Alliance with offers that would see Ottawa picking up half the bill for the CCS project and the province covering 12 per cent of the cost. The six Pathways Alliance members would need to pay the remaining 38 per cent.
Prior to last month’s federal election, the association’s members could be forgiven for dragging their feet, on fears a change in government would result in sweeping changes to energy policies.
With the federal Liberals re-elected, there is a degree of certainty on policies such as industrial carbon pricing. The Conservatives planned to scrap the concept. Putting a price on carbon helps Pathways Alliance members tap financing from agencies such as the Canada Growth Fund.
Partnering with government to build major projects, including CCS facilities, is accepted practice in the oil patch. Last July, Calgary-based Strathcona Resources Ltd. landed the Canada Growth Fund’s backing to build a $2-billion CCS project, with the fund picking up half the cost.
Strathcona is not a member of the Pathways Alliance, but may soon join the club. Two weeks ago, the company launched a hostile takeover bid for MEG Energy.
The largest member of the Pathways Alliance, Canadian Natural Resources, is a pioneer in CCS technology. In 2015, the Calgary-based company and Shell Canada opened the Quest CCS near Edmonton, after received roughly $860-million in government investments. The $1.35-billion project opened on time and under budget, words seldom heard in energy circles.
Mr. Hodgson’s speech in Calgary made it clear the federal government plans to get things done in every corner of the energy market – oil and gas, nuclear, electric – and develop critical minerals and mining.
“This is not a time for half-measures or slow steps. It is a time for bold action, clear decisions, and a renewed spirit of building,” he said to nods of approval.
Like the Alliance pipeline a generation back, the Pathways Alliance CCS project is a test of oil and gas producers’ willingness to stop nodding their heads while sitting on their hands, and start spending on plans that build the county’s energy future.