The heads of two of Canada's largest oilsands producers say the federal government's emissions strategy for the energy sector needs more carrots with its sticks.
For one, Cenovus Energy (CVE.TO)(CVE) CEO Alex Pourbaix and Suncor Energy (SU.TO)(SU) interim CEO Kris Smith say Canada's Emissions Reduction Plan is too aggressive. Ottawa's roadmap calls for a 42 per cent drop for oil and gas emissions from current levels by 2030.
"Forty-two per cent by 2030 is just not feasible by any stretch," Pourbaix told Yahoo Finance Canada on the sidelines of the CERAWeek S&P Global energy conference. "I think it was probably based on some very, very optimistic assumptions about how quickly we could move and what kind of technology we could implement."
He and Smith are among the top Canadian oil and gas executives speaking at the event in Houston, TX. The role of government - specifically U.S. President Joe Biden's Inflation Reduction Act - is a hot topic of discussion. The US$370 billion spending bill is seen as an oasis of financial support at a time when oil prices and quarterly profits are high enough to lower public sympathy for the costs companies face to cut emissions.
Cenovus and Suncor, along with Imperial Oil (IMO.TO)(IMO), Canadian Natural Resources (CNQ.TO)(CNQ), ConocoPhillips (COP) and MEG Energy (MEG.TO), are members of the Pathways Alliance. The group aims to reduce greenhouse gas emissions from oilsands production by about 22 million tons per year by 2030, and ultimately hit net-zero emissions from production by 2050.
The Pathways Alliance is proposing a carbon capture and storage hub that will gather and store emissions from 14 oilsands projects in northern Alberta by 2030. The plan is expected to cost $16.5 billion by 2030. However, a final investment decision has not been made.
Pourbaix and Smith warn that Biden's IRA has put Canada behind the United States on incentives for major decarbonization initiatives, like carbon capture. Smith calls the investment tax credit for carbon capture and storage announced in last year's federal budget "necessary, but insufficient." According to BMO Capital Markets, it would cover less than 15 per cent of the proposed Pathways Alliance carbon capture project's total costs by 2050.
"As we look to the IRA, or even other jurisdictions like Norway, we're typically seeing governments provide two-thirds to 75 per cent on capex and operating costs, and for a sufficiently long time because of the length of these investments," Smith said in an interview on Tuesday.
Pourbaix says while rising dividends and record cash flows are the norm today, Canadians need to remember the boom and bust nature of the oil and gas business. The industry must ensure it can afford its carbon capture investments when the price of oil inevitably falls, he says.
"We need to have certainty so that we can make this unbelievably massive investment," Pourbaix added.
"The next time oil goes to US$40 per barrel, and it will, we don't have the luxury of saying, 'Stop that. The oil price is low.'"
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.