Ottawa hails nuclear energy for oilsands
Jason Fekete and Mike de Souza
Calgary Herald and CanWest News Service
Thursday, January 18, 2007
Ottawa set its sights on the oilpatch Wednesday, as one minister said he's "very keen" on using nuclear power in the oilsands while another questioned the wisdom of retaining tax incentives to develop Alberta's massive bitumen deposits.
Energy experts quickly questioned the federal government's ringing endorsement of using nuclear power for the oilpatch, arguing there are better alternatives for slashing greenhouse gas emissions.
Natural Resources Minister Gary Lunn told reporters Wednesday in Ottawa that nuclear power is an option worth pursuing as petroleum producers look to decrease reliance on natural gas and slash greenhouse gas emissions from oilsands operations.
"As we see the potential increase in (oilsands) production, moving from a million barrels a day up to four or five (million), we need to do better. I think there's great promise in the oilsands for nuclear energy," Lunn said.
"There's a great opportunity to pursue nuclear energy -- something that I'm very keen on."
Whereas oil companies burn vast amounts of natural gas to extract the molasses-like bitumen from the oilsands, nuclear energy is emission-free and doesn't spew greenhouse gases, Lunn argued.
Lunn's comments came as he announced $230 million in federal funds will be invested over four years into research on clean energy, which could look at such options as clean-coal technology, carbon capture and storage, and "next-generation nuclear."
Details of where the new investments will go won't be released until this spring. The announcement was the first of three new climate change initiatives to be unveiled this week, replacing billions in energy programs scrapped or frozen when the Conservatives took office.
While nuclear power was hailed by Lunn, experts are skeptical about its future in the oilsands.
David Keith, Canada research chair in energy and the environment at the University of Calgary, said nuclear is "really not a very good fit" for the oilsands.
Rather, carbon dioxide capture and storage is the most likely technology to be used in Alberta to curb emissions, he said.
"If we want to do sensible policy instead of just get driven by sound-bite foolishness, we need to back off on forcing the oilsands companies to do this," Keith said, "and instead push where it's more cost-effective on the electric utilities."
Alberta would be better suited eyeing nuclear energy as an option for replacing coal-fired electricity plants if the aim is to reduce greenhouse gas emissions, he said.
Premier Ed Stelmach predicted this week the nuclear power debate will only heat up in coming months and years.
Meanwhile, federal Environment Minister John Baird -- who joined Lunn for the research announcement -- seemed to question tax incentives introduced in the 1990s to boost oilsands output.
Baird said he couldn't understand why Liberal Leader Stephane Dion was part of a government that introduced the incentives, and was puzzled by the federal assistance in the booming sector.
"I cannot explain why the Liberal government of Mr. Dion made these changes," Baird said, speaking in French. "I'm not here to defend the policies of Stephane Dion and the Liberal party. It was his cabinet with Stephane Dion that created this program. (Finance Minister Jim) Flaherty is in the middle of listening to the needs of Canadians from coast to coast and he will present the budget not this morning, but in the coming weeks and months."
Environmentalists and the NDP and Bloc Quebecois have repeatedly called for an end to programs introduced in 1997 that allow oil companies to write off their startup costs with breaks on taxes and royalties. While it helped kick-start development in the 1990s -- when oil prices languished below $15 US per barrel -- critics say the industry now makes record profits.
Stelmach has promised a review of the oilsands royalty regime. The deal charges companies one per cent royalties of a project's gross revenues until their investment is paid off. Then the rate jumps to about 25 per cent of net revenue.
Pierre Alvarez, president of the Canadian Association of Petroleum Producers, noted Prime Minister Stephen Harper promised weeks ago not to adjust the tax structure that's been so successful at drawing investment into the northern Alberta oilsands.
"He said there would be no changes to the oilsands fiscal regime as part of the budget -- those are the prime minister's words," Alvarez said. "We have not heard that there would be any fiscal changes and we are proceeding on that basis."
Former Edmonton Liberal MP Anne McLellan, who helped negotiate the federal/provincial oilsands deal now in place, said energy companies have come to rely on the agreement and appreciate the certainty. There are more than $100 billion worth of oilsands developments on the drawing board.
"It's been absolutely key to the prosperity of this province," said the former deputy prime minister. "I find it very interesting if this Conservative government is suggesting that we were somehow mistaken when we did that."
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