From food and fuel to cow crap: How 9 federal climate change policies will suck Saskatchewan dry over the next 12 years

If the current Liberal federal government’s climate change policies are fully enacted between now and 2035, the average cost to Saskatchewan will be more than this province current spends on its entire health care budget, plus the operational cost of its K-12 education system.

Put another way, following nine federal climate change policies and programs will cost this province an average of $8.8 billion each year, more than half of its current $17.6 billion provincial budget. The total by 2035 will be $111 billion.

The impacts would be felt across our economy and populace, but the greatest impact will be on our number 2 and number 1 industries – oil and gas, and agriculture, in that order for impact.

Speaking to the Battlefords Chamber of Commerce on Oct. 11, Premier Scott Moe released a white paper entitled “Drawing the Line: Defending Saskatchewan’s Economic Autonomy.”

But what is a “white paper? The Canadian Encyclopedia says, “A government white paper is a Cabinet-approved document that explains a political issue and proposed legislation to address it.”

Drawing the Line takes pains to make the case, but does not provide a lot of details on that proposed legislation. It goes into the historical context of how Saskatchewan and Alberta initially did not have control over their resources, but the Natural Resource Transfer Act, 1930, granted resources to the provinces.

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“The current government through back-door environmental policy, has intruded into this space, reviving the natural resource question once again,” it stated. “That is, how and where we as a province can draw a line in the sand to defend and uphold Saskatchewan’s economic autonomy within Confederation and by default, within the confines of the constitution.”

The white paper notes, “The various federal policies that focus on emissions should not discount the many efforts Saskatchewan has done to achieve meaningful, sustainable solutions to our emission challenges. The issue, however, is that a failed approach to working with provinces and imposing top-down federal policies remain incompatible with the sustainable growth Saskatchewan is trying to achieve. At its core, it has been and is a conflict whereby the federal government views our province’s natural resource industries as a problem related to greenhouse gases. And the current federal government’s perceived solutions disregard economic and human consequences at the expense of our energy and agricultural sectors.”

Through 18 pages, Drawing the Line explains how the federal government, through its numerous and various environmental policies focused on reducing anthropogenic (manmade) climate change will strangle Saskatchewan’s most significant industries, and could even result in us turning off the lights. Literally.

“The draft terms of the Clean Electricity Standard would effectively prohibit the use of fossil-fuel related electricity generation, including natural gas to power facilities. According to SaskPower, that means the federal standard, if implemented, will effectively turn off 65 per cent of Saskatchewan’s electricity supply.”

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In fact, that’s an understatement, as that only reflects nameplate capacity. Since Sept. 21, SaskPower has been releasing daily power production numbers. On Oct. 9, fully 82 per cent of Saskatchewan’s power came from coal (44 per cent) and natural gas (38 per cent), a much higher proportion than the nameplate capacity that is usually referenced. That’s because on that day, wind power only contributed an average of 83 megawatts of its 615 megawatts nameplate capacity, making up a total of only three per cent total generation for the day. Hydro made 11 per cent at 312 megawatts, and solar was negligible at three megawatts. As such, the white paper notes Saskatchewan’s efforts to build small modular reactors.

Watch for future legislation from Saskatchewan

Pipeline Online spoke to Moe at length by cellphone during his trip back to Regina, which you can read here. Moe would not say what specific legislation would be coming until it is introduced in the House. But it draws upon Moe’s prior statement, “Saskatchewan needs to be a nation within a nation.”

The white paper speaks of:

• Provincial legislation to clarify and protect constitutional rights belonging to the province.
• Pursue greater autonomy over immigration policy to ensure Saskatchewan has the people it needs.
• Better recognize Saskatchewan industry contributions to sustainable growth – for example, develop a carbon credit market to support our natural resource industries.
• Prepare to take legal actions, legislative or otherwise, to maintain control of electricity, fertilizer emission/use targets and oil and gas emissions/production.

Supporting the white paper was a five-page document prepared by the Ministry of Finance called “Direct Compliance Costs of Federal Climate Policies in Saskatchewan.” It outlined the nine federal environmental programs and policies and broke down their costs for Saskatchewan and its people. It also brought to light an apparently new issue that has received little to no press to date – one that Crown Investments Corp. and SaskPower Minister Don Morgan referenced when Pipeline Online asked him in mid-September about the prospects of future carbon capture projects on coal-fired generation. The document noted, in bold, “Most notably, this direct compliance costs analysis does not include the impact of the federal government’s proposed Clean Electricity Standard, which would require the elimination of conventional fossil fuel produced electricity in Saskatchewan by 2035. SaskPower has stated it is not possible to meet this target, given the sources of electricity generation available at a commercial-scale in the province by 2035.”

 

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Moe referenced this in some depth in his interview referenced above.

So that key part of the energy equation was specifically left out of the costing document. As for what was left in, much of it focused on energy production, but it also delved into another new development – the possible reduction of fertilizer emissions and its impact on agriculture.

So many billions

Direct Compliance stated:

“The nine federal climate change policies outlined in this analysis are estimated to have a total cumulative direct compliance cost to Saskatchewan households and industries (including Crown Corporations) of $111.3 billion from 2023 through 2035.

“The annual direct cost of complying with federal policies in 2035 is $16.0 billion or approximately 14 per cent of Saskatchewan’s forecasted economy of $111.1 billion in 2035 (Real GDP). For context, this represents a cost of roughly $11,023 per resident, in 2035 alone.

“The cumulative direct compliance cost impact by household and select sectors from 2023 through 2035:

• Households: $24.5 billion
• Agriculture sector: $32.6 billion
• Transportation sector: $19.8 billion
• Upstream Oil and Gas sector: $15.5 billion

It added, “The annual direct compliance cost impact by household and select sectors in 2035:

• Households: $3.4 billion
• Agriculture sector: $4.5 billion
• Transportation sector: $3.4 billion
• Upstream Oil and Gas sector: $2.3 billion

These are the federal nine program and policies listed as having an impact on Saskatchewan over the next 12 years. Moe pointed out this does not include other federal moves, like the Impact Assessment Act (also known as the “No More Pipelines Bill”) or the tanker bank for British Columbia’s northern coast.

Federal Carbon Tax

The federal carbon tax is anticipated to go up to $65 per tonne of carbon dioxide equivalent (CO2e) in 2023, with annual increases of $15 per tonne until it hits $170 per in 2030. But Saskatchewan expects it to go much higher, “then continuing up by $15 per year to $245 per tonne in 2035.”

“The Federal Carbon Tax targets households and small to mid-sized businesses.,” it said. The direct compliance cost from 2023-35 is expected to be $24.7 billion, with an annual average of $1.9 billion. However, while the document explains the escalation, it does not expressly state that the average doesn’t really apply, as the carbon tax will be a much lighter burden now, and a much heavier burden in later years, as it will be multiple times higher than the $65 per tonne pegged for next year.

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Oil and Gas Methane Mandate

Direct Compliance notes, “The federal government has pledged to reduce national oil and gas methane emissions by 75 per cent from 2012 levels by 2030. There are three main paths to reach compliance:

• Leak Detection and Repair (LDAR);
• Deployment of combustors at sites currently venting methane; and
• Conservation (methane capture for use/sale).

It says that there will be a need for significant capital investment in combusters, “required on a scale never before undertaken in the province. For example, the maximum number of combustors installed in one year, in Saskatchewan, is 253 – while analysis results require peak installations of nearly 2,200 combustors in one year.”

This is also the first reference to federal “Output-Based Pricing System (OBPS),” and it is far from the last.

The direct compliance cost is pegged at $6.3 billion cumulatively until 2035, with an annual average of $487 million.

Federal Output-Based Pricing System

Saskatchewan has submitted its own OBPS proposal to the federal government, seeking equivalence “while significantly reducing compliance costs for Saskatchewan industries,” the report said.

Under the federal system, “If a facility’s emissions intensity exceeds the regulated level, a compliance payment is applied to excess emissions for that facility in that year, assuming no performance credits are used instead. Alternatively, where emissions intensity is sufficiently below the regulated level, performance credits can be earned for that facility in that year to be used for future compliance.”

A credit trading scheme is part of the program.

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And in this one, the federal hammer comes down hard on the oil and gas sector. The report notes, “The price schedule for OBPS compliance payment is harmonized with the Federal Carbon Tax increasing by $15 per tonne annually until it reaches $245 per tonne in 2035; however, after 2030, the carbon price for the oil and gas sector increases at $30 per tonne in order to drive compliance with federal government sector-specific announcements and policies.”

The average annual cost is expected to be $1 billion, with a direct compliance cost of $12.5 billion from 2023-35.

Oil and Gas Emissions Cap Mandate

At COP26 in Copenhagen last October, Trudeau stunned the oil and gas industry in Canada by declaring his government would cap emissions from that industry.

Direct Compliance says, “The federal government has announced the intention to create a national cap on oil and gas emissions set at 110 million tonnes (Mt) CO2e in 2030. The federal government reports total national emissions from the sector in 2019 were 203Mt CO2e.

“Assuming the province maintains a constant share of oil and gas production, Saskatchewan’s upstream oil and gas emissions will be capped at 13.5Mt CO2e in 2030 and 10.1Mt in 2035.”

Downstream refining and natural gas distribution were excluded from this analysis.

Getting to the 2030 cap, a lot of the emissions reductions are expected to be covered by the aforementioned Oil and Gas Methane Mandate. Beyond that, the report notes compliance payments via a cap-and-trade system or an increased OBPS per tonne.

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The report subtly refers to its industry-killing nature, noting, “Premature shut-in of lower productivity wells is also anticipated.

“The Oil and Gas Emissions Cap and the federal government’s Oil and Gas Methane Mandate will likely prevent Saskatchewan from realizing the provincial Growth Plan target of 600,000 barrels of oil per day production by 2030.”

Saskatchewan produced an average of 444,000 barrels per day in 2021, according to the white paper.

The total cost of this cap is expected to be $2.6 billion by 2035, with an annual average of $433 million per year.

A sidebar notes that a loss of investor confidence would be inevitable. See below:

Clean Fuel Regulations

This is the biggest line item, larger than even the Federal Carbon Tax.

The Clean Fuel Regulations, also referred to in the past as the Clean Fuel Standard, crosses the lines between agriculture and oil and gas. It’s the driving force behind the current wave of canola crushing plants being built in Saskatchewan, and one of reasons for higher canola prices going forward. It’s why Federated Co-operatives Limited is building a renewable diesel refinery beside the Co-op Refinery Complex in Regina.

That’s because the Clean Fuel Regulations call for “Replacing standard diesel with hydrogenation-derived renewable diesel (HDRD),” the report noted. It also calls for increasing ethanol blending from 7.5 to 10 per cent, and doubling bio-diesel blending from 2.5 to 5 per cent. Compliance credits can be purchased, where available.

Fuel consumption is expected to go up due to lower energy content of higher biofuel blends.

The analysis takes into account reduced fuel demand because the federal government is enforcing a Zero Emission Vehicle (ZEV) Mandate.

The direct compliance cost is pegged at $34.9 billion from 2023-35, with an average annual cost of $2.7 billion.

 

Zero Emission Vehicle Mandate

In the 2022 federal budget, it was decreed that in the future, Canadians will not be able to buy gasoline or diesel-powered light vehicles.

“The federal government is developing a light-duty ZEV sales mandate for new vehicle purchases. The mandate will set annually increasing requirements towards achieving 100 per cent ZEV sales by 2035,” the report notes. “Compliance with the ZEV mandate implies that 40 per cent of Saskatchewan’s vehicle fleet will be electric by 2035.

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There’s also an expectation that medium-heavy duty vehicles will be next targeted for zero emissions.

The Direct Compliance report estimates there will be an average $18,500 premium per vehicle. There will be a cost for installing charging infrastructure in homes, new charging stations, and reinforcing the electrical grid to support all that.

In total, Saskatchewan expects ZEVs will cost $10.3 billion from 2023-35, averaging an annual $789.6 million.

 

Fertilizer Use Mandate

The agricultural community got up in arms this year when it became known that the federal government is now seeking to reduce greenhouse gas emissions for the fertilizers used in growing crops.

“The federal government has announced a fertilizer emissions reduction target of 30 per cent below 2020 levels by 2030,” the report says.

“The National Inventory Report indicates that direct and indirect synthetic fertilizer emissions in Saskatchewan were 3.9Mt CO2e in 2020. A 30 per cent reduction below 2020 levels by 2030 would reduce absolute emissions by 1.18Mt CO2e in 2030.

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It notes an MMP study said, “this could cost Canadian farmers nearly $48 billion between 2023 and 2030.” That could mean a loss of $4.6 billion for Saskatchewan canola and spring wheat growers.

Direct compliance costs are set at $19.3 billion from 2023-35, an annual average of $1.5 billion.

Agriculture Methane Initiatives

Quite literally, the federal government is interested in crap. As in, controlling the methane emissions from it. The report notes, “For enteric fermentation – seeding legumes into tame pastures is the most viable practice. For methane from manure, the most viable practices are solid-liquid separators and synthetic manure covers.”

Perhaps befitting its crappy nature, this program is expected to average $38.5 million per year, for a direct compliance cost of $501 million from 2023-35.

Landfill Methane Mandate

While animal waste is one thing, the dump where your kid’s diaper goes is another to be regulated.

“Approximately 15 landfills in Saskatchewan may be subjected to federal requirements assuming the threshold is sites with over 100,000 tonnes CO2e annually. Compliance will occur through the deployment of methane conservation and methane-to-power facilities.”

Two of these facilities already exist in Saskatchewan.

The average annual cost is expected to be $14 million, the lowest of them all, with a direct compliance cost of $182 million from 2023-35.

 

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