Alberta mulls tougher carbon rules on oil -report

Thu Apr 4, 2013 11:14am EDT

* Report says levy could rise to C$40/tonne from C$15

* Minister looking a range of options to meet targets

* Analyst calls amount "not inconsequential"

CALGARY, Alberta, April 4 (Reuters) - Alberta is considering a major increase in the carbon levy it charges oil producers as it seeks to show Washington it is serious about meeting emission-reduction goals, while promoting the contentious Keystone XL pipeline to Texas refineries.

Alberta Environment Minister Diana McQueen offered the proposal at a meeting in Calgary last week with oil executives and federal Environment Minister Peter Kent, the Globe and Mail newspaper said on Thursday.

Such a move would be in line with comments that the Canadian province's new envoy to Washington made in a February interview with Reuters. David Manning said Alberta may adopt more stringent environmental policies to help producers in the province's oil sands increase access to lucrative markets such as the U.S. Gulf Coast.

Wayne Wood, McQueen's spokesman, did not rule out the possibility of a higher carbon levy, but he said no decision has been made.

"The minister is looking at any number of options, and it's really premature to speculate on any kind of option that might be settled on," Wood said.

Speculation on new moves by Alberta to improve its record on meeting emission reduction targets has increased since U.S. President Barack Obama named John Kerry, seen as a supporter of tougher climate policy, as secretary of state.

His department is responsible for ruling on TransCanada Corp's 830,000 barrel a day Keystone XL pipeline from the oil sands to the Gulf Coast, which has been under regulatory review for more than four years.

The Keystone plan has met with staunch opposition from U.S. environmentalists, who say it will encourage more carbon-intensive production in Alberta's vast oil sands, the world's third largest crude deposit.

Alberta has faced big problems in recent months as a shortage of spare export pipeline capacity has pressured prices for the bitumen produced from its oil sands, lowering the province's revenue take, and as the Obama administration has pushed back a decision on whether to approve the $5.3 billion pipeline.

Alberta currently charges its oil industry C$15 per tonne for carbon emissions above limits and puts the money into a technology fund. Environmental groups have said the levy is far too small.

The Globe and Mail said McQueen proposed an increase in that levy to C$40 a tonne, as well as a requirement to cut per-barrel emissions by 40 percent over time.

In a note to clients, TD Securities analyst Menno Hulshof estimated that such new regulations would add less than $2 per barrel to the cost of producing a barrel of oil sands-derived crude, an amount he called "not inconsequential".

Wood said Alberta is looking at a range of options to meet carbon reduction targets as part of a review that began earlier this year. He had no timing for the results of the review.

"There are any number of options that are being studied now, and the minister is just waiting for the recommendations to come to our office," he said.

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