Jason Kenney’s resignation creates more uncertainty for Alberta’s oilpatch

Disruption comes just as companies look to province for carbon capture incentives Following a 51.4 per cent approval rating from the leadership review, Jason Kenney stepped down as leader of the United Conservative Party on Wednesday evening. Photo by JIM WELLS/Postmedia Alberta Premier Jason Kenney’s bombshell announcement that he will resign as leader of the…
Jason Kenney’s resignation creates more uncertainty for Alberta’s oilpatch

Disruption comes just as companies look to province for carbon capture incentives

Following a 51.4 per cent approval rating from the leadership review, Jason Kenney stepped down as leader of the United Conservative Party on Wednesday evening. Photo by JIM WELLS/Postmedia

Alberta Premier Jason Kenney’s bombshell announcement that he will resign as leader of the United Conservative Party added a layer of uncertainty for investors in Canada’s oilpatch at a time when they were already unsure about the province’s commitment to contribute to decarbonization.

The news comes as companies operating in Alberta are looking to the provincial government to clarify its plans to incentivize and regulate the creation of carbon capture and storage projects, which involve the sequestration of carbon dioxide deep underground. The federal government promised a tax credit that would cover as much as 75 per cent of the cost for some projects, but oil companies have been holding out for a top-up from the provincial government, arguing the financial risk remains too great without additional offsets.

Hundreds of millions of dollars depend on how they’re going to treat these investments

Richard Masson, chair of World Petroleum Council Canada

Alberta has already approved six carbon storage hub projects near Edmonton and is in the process of reviewing dozens of other applications. But questions persist about how the province is determining which proposals are approved and leaders in the sector have complained about a lack of transparency.

“I don’t think it’s going to be easy to get decisions out of the provincial government on this kind of stuff for months now because of the potential for change of ministers and deputies and all the things that come with a change of a premier,” said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission (APMC) and current chair of World Petroleum Council Canada.

“Hundreds of millions of dollars depend on how they’re going to treat these investments.”

Kenney announced his resignation on May 18 after winning only 51.4 per cent of the votes in a review of his leadership. While the UCP has since clarified that Kenney will stay on until a new leader can be chosen by party members, political watchers said they expect it could be a tumultuous few months as a politically diminished Kenney oversees a restless caucus.

In the meantime, companies and investors are urging the province to streamline the process for granting underground pore space rights for carbon capture to more closely resemble existing rules for the approval of new oil and natural gas wells.

“We remain frustrated that there’s not a broader ability to access pore space in Alberta,” said Tristan Goodman, president of the Explorers and Producers Association of Canada. “The approach the province is taking has far too much government control and it should really allow the market to drive those decisions similar to what happens in Saskatchewan, for example.”

Driving the concern over the province’s regulations is the need for companies to begin moving quickly to deploy carbon capture, utilization and storage (CCUS) technology if the sector hopes to meet its own net-zero emissions targets. The nascent technology is still viewed as the industry’s best hope of decarbonizing.

And while oil and gas companies have enjoyed a profit bonanza this quarter, fuelled by high energy prices, many of them are facing questions about how they plan to deploy capital beyond basic debt repayment and shareholder returns — including questions about capital spending on carbon capture technologies.

“Companies are trying to sort out what they are going to do next,” Masson said. “They’ve got all this cash flow coming from high prices and the next question is, OK, what are we going to do with it?

“As we go into this fall’s planning cycle and set capital budgets, those are front of mind questions for everybody. And with the government probably not making many decisions over the next few months, it’s going to make it a little bit more difficult for them to say: ‘I want to invest in Alberta’.”

More On This Topic

  1. Alberta Premier Jason Kenney resigns as UCP leader after getting 51.4% support in leadership review

  2. Canada’s regulatory hurdles on major projects ‘causing problems’ for investors: Enbridge CEO

  3. Alberta premier says Canada could boost oil export capacity to U.S. by up to 900,000 bpd

Kenney’s announcement also came on the heels of a high-profile appearance before the U.S. Senate’s energy and natural resources committee, where Kenney championed Canadian energy and called for a new pipeline between Alberta and the United States.

Proponents of the sector said they hope Alberta’s next premier continues to advocate for oil and gas.

“We were pleased to see the premier go down to Washington and represent the interests of Albertans down there and we certainly would hope the next premier does something similar with other provinces, with the federal government and with governments around the world that are our natural markets,” Goodman said.

• Email: [email protected] | Twitter: mpotkins

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