Energy
Canada creates a brand new fossil fuel subsidy – Awkward: Etam
From the Frontier Centre for Public Policy
By Terry Etam
Upon hearing about the federal government’s decision to roll back the carbon tax on heating oil, I rolled up my sleeves. The point of writing about energy at all is to try to illuminate some aspect of an energy topic from a viewpoint inside the energy sector; to explain some energy nuance that the general population, which cares little for the nuances of energy, may find valuable. Energy is not simple, and there are a lot of loud storytellers out there, selling magical beans and wishful thinking.
To me, the carbon tax rollback was an annoyingly flagrant bit of vote-buying, yet another irritant from the federal government but one that, on centre-stage, seemed to have far less potential for cross-country histrionics than, for example, the time the prime minister threw his talented and principled First Nations minister under the bus. Now that was a shockwave.
This carbon tax vote grab? Ha. SNC Lavalin, Jody Wilson-Raybould, the WE Charity scandal, foreign interference… a heating oil subsidy doesn’t even crack an annual top-ten list of federal governance dirty diapers.
Or so I thought. Hoo boy. The Hail Mary scheme has blown up, blown up real good. Critics are everywhere, from across the political and environmental spectrum. Liberal heavyweights are attacking Trudeau; economists that love the carbon tax for its ‘efficiency’ are declaring the carbon tax dead. Incredulously, premiers have voiced a unanimous opinion that the entire country needs to be treated consistently.
Upon further thought, it shouldn’t be a big surprise that even the hard core climate crowd is displeased. The federal government has been lavish with announcements and proclamations about eliminating fossil fuel subsidies, that they would do so faster than imaginable, that, well, read their words for yourself: “Canada is the only G20 country to phase out inefficient fossil fuel subsidies ahead of the 2025 deadline. We are the first country to release a rigorous analytical guide that both fulfills our commitment and transparently supports action.”
“What the hell is this?” appears to be the consensus among a disparate group of voices that reaches consensus on nothing.
Be very clear why there is outrage: this is a shallow, obvious vote grab that crumbles the pillars of this government, and it most definitely is a creation of a brand new fossil fuel subsidy – so much for international credibility after all the hectoring this government has done globally. (If you have any doubts that this is anything but a political maneuver, consider that almost exactly a year before, in October 2022, the Conservatives tried to pass a motion to exempt home heating oil from the carbon tax, and all Liberal MPs save one brave Newfoundlander voted against it.)
Since the whole topic of the carbon tax has now come up though, here is a critical point that warrants some thought.
Canada and the US have chosen two different strategies to reduce emissions. Canada has, of course, the carbon tax – if you use or burn hydrocarbons, you’re going to pay (certain rural maritimers temporarily notwithstanding). Governmental, and government friendly, economists contort themselves into pretzels to demonstrate that the rebates handed back by the federal government “more than compensate” for the carbon tax, but every citizen that goes to a grocery store and realizes that every item in the industrial chain that handled any of those products in this country paid their own carbon tax, and that all that is rolled into the end product, has a very strong real-world suspicion that the government’s equation is laughable.
Beyond that, there is a big problem with Canada’s ‘stick’ approach to carbon reduction. Canadians can choose to limit the impact of the carbon tax by switching to something less carbon intensive, or spending to otherwise limit emissions. You don’t want to pay the carbon tax, you or your business? “No problem!” Says the federal government; just spend some exorbitant amount of capital, based on frameworks and guidelines that are not yet even ready.
In the US, the government long ago (2008) introduced something called 45Q, a carbon credit which was recently beefed up significantly under the Biden Inflation Reduction Act energy policy. 45Q is a carrot. If you are a carbon emitter, well, no one likes the emissions, but go ahead and carry on with your business.
If you choose to reduce your carbon emissions however, the government will hand you a cheque (sorry, check) for doing so – $85 per tonne CO2e, to be precise. You can start a new business that generates emissions credits, and if you can do it for less than $85/tonne, you have a new profit centre. There is a companion credit called 45X; credit revenue can be generated from it by manufacturing components that go into various energy technologies including structural fasteners, steel tubing, critical minerals, pretty much any battery component, etc.
In short, an existing business can carry on as before, or embark on a new venture with a guaranteed revenue stream from carbon credits generated.
In Canada, the stick is, like, really big, and for real. If you exist and consume conventional energy, you will pay, and pay dearly, and the amount will go up every year until either 2030 or until you cry uncle, whichever comes first.
Want to avoid paying the tax? Again, you will pay dearly, but differently; you will pay for capital expenditures on whatever means are available to you, using whatever policies are worked out by governments at all levels (Not a secret: a great many of the regulatory bugs are not yet worked as to potential solutions to limit emissions, capture/store carbon, etc.).
In Canada, either way, you pay through the nose. In the US, you have options to go into another line of business, or to find potentially unrelated ways to reduce emissions, with a ‘guaranteed revenue stream’ in the form of credits.
Guess in which direction businesses will thunder?
Economists love Canada’s carbon tax because it is ‘efficient’. Well, yes, that is true in an oddball sort of way, just as I can guarantee you that I can ‘efficiently’ reduce local vehicular traffic by blowing up every bridge and overpass. How’s that for efficient? I could cut traffic levels by greater than 50 percent within hours of delivery of the ACME Dynamite.
At the end of the day, the federal government’s backpedaling on the carbon tax is symptomatic of a cornerstone of the entire movement failing, because it was made of styrofoam and the building upon which it was constructed will only work with carefully engineered cement.
Europe is no different, celebrating emissions reduction successes while not wanting to talk much about how the industrial sector has been hollowed out. “Stick” taxes force companies to shut down and/or leave, and just plain punish citizens for things like heating their homes.
The carbon tax is a solution to the extent that there is readily-trimmable fat in the system. But it has to be designed to go after that fat, not after everything that moves. Autos are a perfect example. The federal government could have mandated a switch to hybrids, and banned sales of 500-hp SUVs and whatever (don’t yell at me free marketers; I’m pointing out real-world pathways that are possible). They could have mandated a rise in corporate average fuel economy in one way or another.
That is trimmable fat. Attacking home heating fuels is not.
This isn’t to say the US’ program is sheer genius. However, it is worth noting that 45Q has been around for fifteen years; what has happened recently is that it has been beefed up in a way that makes sense. (The US is also doing nonsensical things like forcing companies into carbon capture and sequestration, at the same time that, as US Senator Joe Manchin points out, “CCUS and DAC developers have submitted more than 120 applications to EPA [Environmental Protection Agency] for Class VI well permits to sequester carbon since the IRA passed, and there are 169 total pending applications, and not one approval has been made by the Biden Administration.”)
The energy transition as envisioned by the ‘climate emergency’ crowd was doomed to fail because it was based on a ‘too fast, too soon’ transition game plan – which was actually not a plan at all, more of a command – and, equally as relevant, was based on the tenuous fear instilled in citizens by bad weather (an entire generation is now being raised to 1) be terrified of the weather, and 2) be convinced that their actions can influence it. Stop it.).
Our entire world is built on oil, natural gas, coal (in some parts of the world) and hydrocarbon energy systems in general. Sue ‘Big Oil’ all you want; that won’t change anytime soon.
Energy illiteracy is the slow-moving black plague of our time.
Canada’s efficient carbon tax pits citizens against their heating needs, against their business interests, and against inescapable realities.
Here’s the sad part: All the federal government is doing here is facing reality, or starting to. Europe did the same last year, spending hundreds of billions in brand new fossil fuel subsidies to shield consumers from rocketing energy prices. When push comes to shove, governments will wilt under pressured voter pocketbooks.
Boneheads will at this point insert the oft-heard refrain “So you’re saying we should just do nothing.” I’ve heard that so often it sounds like mosquitoes in summer. It’s the only attack some people have.
It is actually an amazing time to see new energy technologies take shape, with the best minds in the entire energy industry pushing in that way. We are seeing the creation of hydrogen hubs, development of new technology like fuel cells, greater use of methane capture from landfills, etc. A great many great minds are making significant progress.
But even those geniuses can’t change the laws of reality. Eight billion people are now alive at the same time due to a certain system, and it will take a very long time to change that system if all of those people stay alive and try to live like the west does.
Energy wise, we need better, much better. Canada’s government is paying the price for heedlessly listening to ideological cheerleaders. Just like Canada’s citizens have been.
Terry Etam is a columnist with the BOE Report, a leading energy industry newsletter based in Calgary. He is the author of The End of Fossil Fuel Insanity. You can watch his Policy on the Frontier session from May 5, 2022 here.
Energy Talking Points by Alex Epstein
Alex Epstein
This is the kind of integrity we need from industry—and from Congress.
Dear Chairman Smith and Chairman Crapo:
We, the undersigned American energy producers and investors, write to voice our principled support for full repeal of the Inflation Reduction Act’s (IRA) energy subsidies, including subsidies that would appear to be to our firms’ and industry’s benefit. This is the only moral and practical path forward if we are to truly unleash American energy.
In recent weeks, Congress has been embroiled in battles over which, if any, of the IRA energy subsidies to cut. Lobbyists representing every corner of the energy landscape, including trade groups that many of us are part of, are jockeying to preserve their own piece of the pie, claiming that it is uniquely valuable.
We have oil lobbyists fighting to keep carbon capture and hydrogen subsidies, solar and wind lobbyists fighting to keep solar and wind subsidies, biofuel lobbyists fighting to keep biofuel subsidies, and EV lobbyists fighting to keep EV subsidies.
If this continues, we will likely preserve most if not all of the subsidies, which, deep down, everyone knows are not good for America.
The fundamental truth about subsidies is very simple. For any product, including energy, a subsidy is just a way of taking money from more efficient producers—and from taxpayers—and giving it to less efficient producers. The result is always less efficient production and therefore higher costs or lower quality for Americans.
The most egregious example of subsidies’ destructiveness is the IRA’s solar and wind subsidies, which pay electric utilities to invest much more money in solar and wind than they otherwise would, and thus much less in coal and gas than they otherwise would. Ultimately this means higher electricity prices and certainly less electricity reliability for Americans.
The IRA subsidies’ devastating harm to American energy is more than enough to compel us, as energy producers, to oppose them.
But their harm goes far beyond energy, as they will dramatically increase our debt and ultimately undermine every aspect of our economy.
A central Congressional priority is to curb the national debt during the upcoming budget reconciliation exercise. But according to credible estimates, the IRA will cost over $1 trillion over the next decade and trillions more after that. Worse, the IRA subsidies are expected to misallocate, into uncompetitive business and jobs, $3 trillion of investment by 2032 and $11 trillion by 2050. That’s a disaster for our economy, and for real job opportunities.
Clearly, the right thing to do is to eliminate all these subsidies. When lobbyists say that these subsidies are essential for America, what they’re really saying is that their backers have made investments in projects that have no near term cost-effectiveness and that are totally dependent on indefinite subsidies to sustain themselves.
Most people know the truth, but are afraid to say it due to institutional pressures. Too many Congressmen are afraid of alienating trade groups. Too many trade groups are afraid of alienating their large and vocal members who have made investments hoping for indefinite subsidies. All the while, too few are talking about freedom.
That’s why we invite our colleagues to do the right thing: level with the American people, say that we made a mistake, and that those who built subsidy-dependent businesses took on the kind of risk that we do not want to reward.
Keeping the IRA subsidies—despite all the evidence that they benefit only special interests at the expense of America—risks making our nation ever more like Europe, where industries do not succeed by providing the best value to consumers, but by providing the best favors to politicians. That’s not the America we want to work in.
Sincerely,
Bud Brigham, Founder, Atlas Energy Services and Brigham Exploration
David Albin, Managing Partner, Spectra Holdings
Adam Anderson, CEO, Innovex International
Thurmon Andress, Chairman and CEO, Andress Oil
Don Bennett, Managing Partner, Bennett Ventures LP
Greg Bird, CEO and President, Jetta Operating Company
David de Roode, Partner, Lockton
Andy Eidson, CEO, Alpha Metallurgical Resources
Matt Gallagher, President and CEO, Greenlake Energy
Mike Howard, CEO, Howard Energy
Justin Thompson, CEO, Iron Senergy
Ed Kovalik, CEO, Prairie Operating Company
Thomas E. Knauff, Executive Chairman, EDP
Lance Langford, CEO, Langford Energy Partners
Mickey McKee, CEO, Kodiak Gas Services
Mike O’Shaughnessy, CEO, Lario Oil and Gas Company
D. Martin Phillips, Founder, EnCap Investments LP
Karl Pfluger, midstream executive
David Rees-Jones, President, Chief Energy
Rob Roosa, CEO, Brigham Royalties
Bobby Shackouls, Former CEO, Burlington Resources
Ross Stevens, Founder and CEO, Stone Ridge Holdings Group
Kyle Stallings, CEO, Desert Royalty Company
Justin Thompson, CEO, Iron Senergy
Mike Wallace, Partner, Wallace Family Partnership
Ladd Wilks, CEO, ProFrac
Denzil West, CEO, Admiral Permian Operating
Bill Zartler, Founder and CEO, Solaris Oilfield Infrastructure
Additional signatories (email [email protected] to add yours):
Jimmy Brock, Executive Chairman, Core Natural Resources
Ted Williams, President and CEO, Rockport Energy Solutions LLC
To make sure as many politicians as possible see this letter, help us by sharing on Twitter/X and tagging your Congressmen! Congress is currently undecided about what to do about the IRA subsidies, so now is the moment to make your voice heard.
“Energy Talking Points by Alex Epstein” is my free Substack newsletter designed to give as many people as possible
access to concise, powerful, well-referenced talking points on the latest energy, environmental,
and climate issues from a pro-human, pro-energy perspective.
From the Canadian Energy Centre
Q&A with Mike Verney, executive vice-president, McDaniel & Associates
New analysis commissioned by the Alberta Energy Regulator has increased the province’s natural gas reserves by 440 per cent, bumping Canada into the global top 10.
Alberta’s oil reserves – already fourth in the world – also increased by seven billion barrels.
The report was conducted by Calgary-based consultancy McDaniel & Associates. Executive vice-president Mike Verney explains what it means.
CEC: What are “reserves” and why do they matter?
Verney: Reserves are commercial quantities of oil and gas to be recovered in the future. They are key indicators of future production potential.
For companies, that’s a way of representing the future value of their operations. And for countries, it’s important to showcase the runway they have in terms of the future of their oil and gas.
Some countries that have exploited a lot of their resource in the past have low reserves remaining. Canada is in a position where we still have a lot of meat on the bone in terms of those remaining quantities.
CEC: How long has it been since Alberta’s oil and gas reserves were comprehensively assessed?
Verney: Our understanding is the last fully comprehensive review was over a decade ago.
CEC: Does improvement in technology and innovation increase reserves?
Verney: Technological advancements and innovation play a crucial role in increasing reserves. New technologies such as advanced drilling techniques (e.g., hydraulic fracturing, horizontal drilling), enhanced seismic imaging and improved extraction methods enable companies to discover and access previously inaccessible reserves.
As these reserves get developed, the evolution of technology helps companies develop them better and better every year.
CEC: Why have Alberta’s natural gas reserves increased?
Verney: Most importantly, hydraulic fracturing has unlocked material volume, and that’s one of the principal reasons why the new gas estimate is so much higher than what it was in the past.
The performance of the wells that are being drilled has also gotten better since the last comprehensive study.
The Montney competes with every American tight oil and gas play, so we’re recognizing the future potential of that with the gas reserves that are being assigned.
In addition, operators continue to expand the footprint of the Alberta Deep Basin.
CEC: Why have Alberta’s oil reserves increased?
Verney: We discovered over two billion barrels of oil reserves associated with multilateral wells, which is a new technology. In a multilateral well, you drill one vertical well to get to the zone and then once you hit the zone you drill multiple legs off of that one vertical spot. It has been a very positive game-changer.
Performance in the oil sands since the last comprehensive update has also gone better than expected. We’ve got 22 thermal oil sands projects that are operating, and in general, expectations in terms of recovery are higher than they were a decade ago.
Oil sands production has grown substantially in the past decade, up 70 per cent, from two million to 3.4 million barrels per day. The growth of several projects has increased confidence in the commercial viability of developing additional lands.
CEC: What are the implications of Alberta’s reserves in terms of the province’s position as a world energy supplier?
Verney: We’re seeing LNG take off in the United States, and we’re seeing lots of demand from data centers. Our estimate is that North America will need at least 30 billion cubic feet per day of more gas supply in the next few years, based on everything that’s been announced. That is a very material number, considering the United States’ total natural gas production is a little over 100 billion cubic feet per day.
In terms of oil, since the shale revolution in 2008 there’s been massive growth from North America, and the rest of the world hasn’t grown oil production. We’re now seeing that the tight plays in the U.S. aren’t infinite and are showing signs of plateauing.
Specifically, when we look at the United States’ largest oil play, the Permian, it has essentially been flat at 5.5 million barrels per day since December 2023. Flat production from the Permian is contrary to the previous decade, where we saw tight oil production grow by half a million barrels per day per year.
Oil demand has gone up by about a million barrels a day per year for the past several decades, and at this point we do expect that to continue, at the very least in the near term.
Given the growing demand for oil and the stagnation in supply growth since the shale revolution, it’s expected that Alberta’s oil sands reserves will become increasingly critical. As global oil demand continues to rise, and with limited growth in production from other sources, oil sands reserves will be relied upon more heavily.
Chinese Narco Suspect Caught in Private Meeting with Trudeau, Investigated by DEA, Linked to Panama, Caribbean, Mexico – Police Sources
Doug Ford needs to ditch the net-zero pipedreams
Brookfield’s Deep Ties to Chinese Land, Loans, and Green Deals—And a Real Estate Tycoon With CCP Links—Raise Questions as Carney Takes Over from Trudeau
Flu Vaccine Exposed: The Shocking NIH Discovery They Don’t Want You to Know
-
Brownstone Institute1 day agoThe New Enthusiasm for Slaughter
-
Catherine Herridge1 day agoHow ‘Woke’ Broke The FBI
-
MxM News1 day ago“Keeping Men Out of Women’s Sports” Executive Order doesn’t go far enough: Second place finisher
-
Business1 day agoA Look at Canada’s Import Tariffs
-
Energy2 days agoNext federal government should close widening gap between Canadian and U.S. energy policy
-
Bruce Dowbiggin1 day agoThe National Freakout Over The 4 Nations Drama Still Resonates
-
Carbon Tax1 day agoDon’t be fooled – He’s Still Carbon Tax Carney
-
Bjorn Lomborg1 day agoClimate change isn’t causing hunger