Canadian oil producers may face increased carbon taxes on top of the prolonged slump in oil prices.
The development costs for Canada’s oil-sands reserves are among the highest in the world. This coupled with the potential higher carbon tax as well as President Obama’s rejection of the Keystone XL Pipeline (designed to transport oil-sands production to the United States) last week have a negative impact on Canadian producers.
The new taxes are designed to rein in greenhouse-gas emissions. There is a United Nations climate-change conference in Paris, France beginning November 30. Canadian and other multinational oil companies operating in Canada are watching the conference to see what recommendations come from it that might influence the Canadian government, which has come out publicly placing climate change on the forefront with the election of Prime Minister Justin Trudeau.
Production from the oil sands reserves is considered by some as one of the higher-intensity greenhouse-gas producers of any oil fields. Production from the oil sands has been increasing steadily in the past several years under previous provincial governments as well as the Canadian federal government that played down climate-change risks and ignored calls from environmental groups and opposition politicians for tougher rules on carbon-dioxide emissions.
The main oil and gas industry lobby, the Canadian Association of Petroleum Producers, is urging regulators to offset any additional cost from climate-policy changes with a cut in royalties owed to Alberta’s government from oil and gas output from provincial lands.