Alberta unveils $4 billion climate plan

Vowing not to let others determine Alberta's future, Premier Ed Stelmach committed on $4-billion from this year's expected budget surplus to fight climate change – including setting up a $2-billion fund to kick start carbon capture and storage projects that will help the image-challenged oil sands industry.

With the move, which Mr. Stelmach said is unprecedented in scope and scale, Alberta is taking a "responsible" and "practical" approach to climate change that doesn't involve increasing taxes, feeding inflation or ratcheting back development of the oilsands.

The investment, he said, will help keep energy affordable.

"We can't wait for others to act," Mr. Stelmach said. "We won't wait for others to determine Alberta's future.

"This bold move further demonstrates Alberta's commitment to global leadership in environmentally responsible energy development."

Industry, which only a year ago was at war with Mr. Stelmach over major royalty increases that will become effective in January, applauded the carbon capture fund, which it has been promoting for years.

"We are pleasantly surprised at the sum," said David Price, vice-president at the Canadian Association of Petroleum Producers. "It demonstrates that people recognize how significantly huge the projects are going to be and we need to put big dollars into that."

The province and its oil industry have been under attack at home and abroad for producing "dirty oil" – a reference to the large amount of greenhouse gases generated by energy-intensive oil sands extraction.

The image has resulted in a flurry of anti oilsands strategies in recent months by various levels of government in the United States that could shrink the market for Canadian crude.

In Canada, the latest attempt to penalize the oil sands industry came from Liberal Leader Stephane Dion, whose carbon tax plan would collect money from producers and redistribute it mostly in Eastern Canada.

Alberta's commitment marks "an important signal to that U.S. or other groups that do have that perception of Alberta's oilsands... that they need to take a close look at it and see how significant this is," Mr. Pryce said.

Alberta's plan has two major component, which would reduce greenhouse gas emissions by more than five million tonnes a year, or the equivalent of taking a million vehicles off the road.

Some $2-billion would be allocated to reduce energy consumption by funding public transit initiatives across the province, such as the purchase of transit vehicles, commuter rail systems and new park-and-ride facilities.

Mr. Stelmach said proposals will be evaluated on a merit and competitive basis based on cost and the amount of CO2 reductions involved.

The remaining $2-billion would fund, in partnership with industry, three to five large scale carbon capture and storage projects, which involve capturing greenhouse gases from large sources like oilsands plants or coal fired power plants and piping it into empty oil and gas reservoirs or using it to enhance the recovery of oil from mature fields. The amount is the largest anywhere dedicated to the new technology, which Alberta hopes to market elsewhere.

The province expects a significant surplus once again this fiscal year as a result of higher than expected oil and gas prices.

Mr. Stelmach said the initiative, in addition to providing sizeable funding, would give industry policy certainty.

Mr. Pryce said industry is under a tight deadline to come up with ideas.

Expressions of interest are due in September, requests for proposals in November, and successful projects will be identified early in the new year.

Jim Schultz, senior vice president at Enbridge Inc., a large oil pipeline company that is leading a 32-company consortium proposing a carbon capture and storage project, said he is very pleased the province is taking a leading role.

"I think there are a lot of projects out there that may look at this now and move forward."