Madam Speaker, I am happy to speak this afternoon on Bill C-262, a measure that proposes to provide tax credits for the capture, storage and use of carbon dioxide put forward by the member for Calgary Centre. Under this bill, companies that capture carbon, for instance, at a coal power plant or oil refinery would get a credit equal to the amount of carbon dioxide stored multiplied by the current carbon tax price.
Off the top, I will say that I am not against carbon capture and storage in general. Many experts, including the Intergovernmental Panel on Climate Change, say that some form of carbon capture will be essential in the long run for the world to keep the global rise in temperature below 1.5°C, but the problem with carbon capture in this case is that it will almost entirely involve using that carbon dioxide storage for enhanced oil recovery. That is to say that the carbon dioxide that is captured will be stored by forcing it underground into underperforming oil wells, forcing oil to the surface that would otherwise not be recoverable.
Once again we are faced with the rather Orwellian view that we cannot fight climate change without subsidizing the oil industry. It is like the Liberal Party's line that the Trans Mountain pipeline is an essential part of a climate action plan, when it is a pipeline project designed to significantly increase oil production in Canada. We have to shake our heads because enhanced oil recovery is very profitable for the oil industry: more oil from the same well, more profits. On top of that, as I will expand on later, the oil produced through EOR will produce more carbon dioxide when it is burned than if it is stored underground to produce it. It is one step forward and two steps back.
The tax credits the bill proposes are similar to the 45Q tax credits given industry in the United States, so it is useful to look at their experience. First, I will point out that one difference between the U.S. credits and the proposal before us today is that the U.S. tax credits for carbon capture projects that do not involve enhanced oil recovery are $50 per ton, while those that involve enhanced oil recovery are given credits of $35 per ton. In Bill C-262, there is no difference for the two processes in the credits proposed.
Oil production in some parts of the U.S. oil patch have been using carbon dioxide for 50 years to get more oil out of the ground. Findings there show that these operations are carbon negative, i.e., that they store more carbon than they produce for the first few years of production, but within a few years go carbon positive. There is a good article in Vox online written by David Roberts in 2019 that I think presents all sides of the enhanced oil recovery debate very well and I will read a lengthy quote from it. It states:
...this kind of analysis depends on quantifying exactly how much new EOR oil will displace other, dirtier forms of oil — versus simply adding to the amount of oil consumed. Those kinds of predictions are notoriously dodgy; no one truly knows how much boosted oil supply from EOR might simply increase the world’s oil addiction.
Until [life cycle analysis] becomes more standardized and reliable, policy crediting EOR for [carbon dioxide] reductions involves a fair amount of hope and faith.
He goes on to say:
But the core of the climate case against EOR is simple: Climate change is an emergency. We need to bury lots of carbon, but it is crazy to let the oil and gas industry set the pace and the terms. EOR under certain rarified circumstances may be carbon negative, but you know what’s always carbon negative? Burying CO2 without digging up a bunch of oil to burn.
Sooner or later, we’re going to have more carbon to bury than EOR can handle anyway. We’re going to have to figure out how to bury it in saline aquifers. From a climate perspective, it makes sense to figure that out, and start doing it, as soon as possible.
Rather than slowly luring private capital into the enterprise by subsidizing oil and gas production—putting one foot on the accelerator and one on the brake—we should just cough up the public money necessary to do [carbon capture and storage] at scale, just like we did with public sewer systems to dispose of a different kind of waste.
Blending carbon capture and storage and enhanced oil recovery is basically another narrative that to fight climate change, we have to pump more oil out of the ground when actually that added oil will put more carbon dioxide into the atmosphere when burned than the amount put underground. Let us look at that in more detail.
According to the International Energy Agency and other expert analysts, between 200 and 600 kilograms of carbon dioxide is stored in enhanced oil recovery per barrel of oil produced. In Canada, an average barrel of oil produced and burned results in roughly 600 to 750 kilograms of carbon dioxide in total emissions. If we consider that, it is clear that the full life-cycle budget of carbon dioxide for enhanced oil recovery will always be negative.
There is a strong opposition in Canada to any proposal that subsidizes enhanced oil recovery. Last month, 47 groups sent an open letter to the Minister of Finance asking the government not to subsidize this technology. The groups included Environmental Defence Canada, The Council of Canadians, the Canadian Public Health Association, Canadians for Tax Fairness, Équiterre, the Canadian Association of Physicians for the Environment, Amnesty International, the Wilderness Committee, the West Coast Environmental Law Association and many more.
The letter cites an analysis of the impact of enhanced oil recovery tax credits on the environment and the cost to American taxpayers. It could result in at least an additional 400,000 barrels per day of carbon dioxide enhanced oil production in the United States in 2035, which would directly lead to as much as 50.7 million metric tons of net carbon dioxide emissions annually, and possibly far more. The portion of the bill that benefits the oil industry could alone cost American taxpayers as much as $2.8 billion U.S. every year.
Furthermore, the fossil fuel industry has attempted to gain the tax credit in the U.S., where 87% of the total credits claimed, amounting to nearly $1 billion U.S., were found not to be in compliance with the Environmental Protection Agency, according to an investigation by the U.S. Internal Revenue Service. Meanwhile, oil companies in the U.S. have successfully pushed back against monitoring, reporting and verification, making it impossible to know which companies have claimed credits and to what extent.
Enhanced oil recovery is obviously a benefit for the oil and gas industry. More oil means more revenue. Using captured carbon dioxide in enhanced oil recovery is indeed a way to reduce the carbon intensity of Canadian oil. It works out to about 37% per barrel. However, do we need to subsidize the oil industry to accomplish this?
If we are going to spend Canadian taxpayer dollars to incentivize carbon capture and storage, we should stick to projects that simply put carbon dioxide into the ground and store it forever. There are projects in Canada that are doing this. Norway is planning to do this on a big scale with its Northern Lights long ship project. It will provide the infrastructure to take carbon dioxide from European industrial sources and store it safely underground. When asked whether enhanced oil recovery would be a similar solution, a proponent of the Norwegian project said that enhanced oil recovery is not carbon capture and storage; it is just oil business 101.
Canada's price on carbon dioxide pollution is scheduled to rise to $170 per tonne by 2030. With that significant price on carbon, industry will have real incentive to cut down on carbon emissions. We should not have to spend more taxpayer dollars to add to the profits of fossil fuel industries in an initiative that could easily simply delay our climate actions.
Successive federal governments have consistently failed to eliminate inefficient fossil fuel subsidies. The present government has yet to even define what an inefficient subsidy is. The proposal in the bill would be yet another taxpayer subsidy for the oil and gas industry. For that reason alone, I will not be supporting the bill.