COP26 and Canadian energy | S1 EP7

A natural follow-up to our conversation on climate change disputes, in this episode, we talk about what happened in Glasgow last month, connecting key points from COP26 to current efforts in Canada to reduce emissions and develop sustainable technology. Hosts Ailsa Bloomer and Andrew McCoomb welcome guests from our Calgary and Vancouver offices: Alan Harvie, senior partner with over 30 years' experience with regulatory, operational, and environmental issues in the energy, oil and gas, and chemical industries; and Matthew Keen, partner with a practice covering energy law, environmental assessment, and issues concerning Indigenous peoples. 

Norton Rose Fulbright was onsite at COP26 this year. For additional commentary on the day-to-day conversation in Glasgow, check out our blog, Inside COP26.  

CPD credits: This episode qualifies for 0.75 hours of Substantive credit in Ontario and 0.75 hours of Substantive credit in British Columbia.

Transcript

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Transcript:

Matthew  0:02  
I think it's okay for us to say that. 

Alan  0:03  
It's one line, you know? But-- 

Matthew  0:05  
Say that!

Andrew  0:06  
We're pretty into you feeling like you can say that. This podcast is a place for you to say that if you feel like-- 

Matthew  0:12  
I want to build pipelines.

Ailsa  0:14  
Yeah, I'm excited-- 

Matthew  0:16  
I want clients to know we want to build pipelines.

Ailsa  0:17  
I think it's very refreshing for listeners to hear that, as well, because-- 

Andrew  0:20  
Hot takes are welcome on this podcast. 

Alan  0:22  
Okay. 

Andrew  0:32  
Hi, you're listening to Disputed with Andrew McCoomb from Toronto and Ailsa Bloomer from Calgary. In this episode, we're talking about COP26 and Canadian energy.

Ailsa  0:42  
So, in our previous episode on climate change disputes, we mentioned COP briefly, but we didn't have a chance to take a deep dive into what happened at Glasgow and how it relates to what Canada is already doing to reduce emissions and develop sustainable technology. So, we start this episode by recapping the key points that were agreed at COP26 and taking our guests' candid views on the significance of the conference.

Andrew  1:04  
For listeners who want more detail on specific discussions at COP26, Norton Rose sent a team to Glasgow for the conference who published a blog about each day's activities. The link to the blog is in this episode's description. But for this podcast episode, we use COP26 as our springboard for talking about key developments in Canadian energy, in particular, how it overlaps with new technologies and innovations taking place in Western Canada. That means talking about methane emissions, carbon capture and storage, and hydrogen development.

Ailsa  1:34  
And our guests are two energy regulatory lawyers from Alberta and BC. Alan Harvie is a senior partner in our Calgary office and has over 30 years' experience with regulatory, operational, and environmental issues in the energy, oil and gas, and chemical industries. Alan has also worked with the BC government in reforming the province's regulation of oil and gas activities, and he advises on carbon emission reduction, credit trading, and carbon capture projects.

Andrew  2:03  
And Matthew Keen is a partner whose practice spans both our Vancouver and Calgary offices. Matt's practice covers energy law, environmental assessment, and issues concerning Indigenous peoples. He has extensive experience with industrial facility applications, including upstream hydrocarbon developments and downstream LNG infrastructure, and has acted for pipeline shippers, major industrial electricity customers, and energy trading companies.

Ailsa  2:27  
Very small point just before we get started. We apologize if you hear the occasional Outlook email alert in the background of this recording. No surprises, recording a podcast with people across the country isn't without its logistical challenges, so thank you very much for bearing with us as we work through them. And with that disclaimer, here is our conversation with Alan and Matt.

Alan, Matt, thank you very much for joining us, and welcome to the podcast. 

Alan  2:59  
Pleasure to be here.

Matthew  3:00  
Absolutely. Thanks so much.

Andrew  3:02  
So, guys, our last episode, we talked about climate change litigation issues with Cara Dowling and Michael Manhas, and we covered a lot of ground, including what's happening on the international stage, and at various points, Cara referred to COP26, but we didn't have the opportunity to do a deep dive, and that's what we're hoping to do with you guys today. So, let's start at the highest level with-- with background and what just happened in Glasgow. What are we talking about when we talk about COP26?

Matthew  3:36  
Well, let me jump in there before Alan gives you the goods. COP stands for Conference of the Parties, and 26-- it's not a terribly complex naming system-- it's the 26th Conference of the Parties. So, it's the 26th time that countries have come together to meet and talk about the UN Framework Convention on Climate Change. And that's the founding document for global climate action. It started with the Kyoto Protocol in 1997. And you'll remember, listeners will no doubt remember subsequent iterations of the Paris Agreement, Copenhagen Agreement, and that sort of thing. So COP26 here wasn't about-- in the way that the Paris Agreement was, it wasn't about trying to come together with a new document. It's more the messy implementation steps that came after-- after that meeting.

Alan  4:27  
I find the best way to think about COP is to break it into four COPs, really. There's four distinct sort of groups or functions, and the first one is the politicians who show up, and make pledges, and try to make themselves sound as good as they can, and they're there really speaking to their home audiences. So, the Canadian Prime Minister was speaking to Canadians. We didn't hear what the Norwegian president said, or the Brazilian president, or the Indonesian one. That wasn’t covered. Each of those people who was there at a political level was speaking to their own audience. So that's the-- sort of, the politicians show up and put a spin on it, and they all try to make themselves look as best they can, and we as Canadians think, wow, there's our Prime Minister addressing the world, which is not really true. He's really just addressing a Canadian audience, and that's sort of a lot of the spin. The Canadian delegation had 19 media handlers accompany our delegation, which was the largest of the G7. So, there's those guys who show up, they make some statements to get on national news, and they leave. In fact, our Canadian Prime Minister suggested that COP was a great success on the Tuesday, which was about three or four days into a two-week conference, which kind of amazed me how you can say it was a great success from the negotiations. We still have days and days and hours and hours to go. The second COP is the actual negotiators locked in a room, 190 countries, and they're trying to deal with the messy details. They're generally put into blocks. Like, there's the Saudi Arabian block, and there's the least-developed countries block, and there's the EU, and, you know, they sort of negotiate together. And that's a long, arduous process. The COP I went to, they would lock themselves in the room till two in the morning, and there'd be filibusters, with certain groups trying to delay and just talk, and talk, and talk, and talk. And when you think of it, if you ever negotiate an agreement with multiple counterparties, this is 190 people at the table trying to figure out where to put commas in a document. And that's-- that's a really messy process. It's a slow process. And what they're trying to do is flesh out the Paris Accord, the Paris Agreement, and come up with the actual, you know, detailed, fine-print rules, and this was the sixth time they've tried to get together to do that since Paris, was six years ago. So- and they haven't really gotten that far, but it's not surprising when you consider how messy it kind of is. The third COP is, it's sort of a giant trade show and convention, where industry groups, environmental groups, consumer organizations, academics and so forth, attend various conferences and side events, and those are-- it's a tremendously great conference for that. It's nothing to do with the actual negotiations, but you get everybody under one big-- into one big conference centre, and that sort of runs all day like your typical conference. And then the fourth COP is the-- the protesters outside aren't accredited to come inside. So, when you hear people talking about COP, I always try to think it useful to think of, is it a politician, is a negotiator, is it someone at a conference who's providing some intelligent comment or showing off some new technology they have? It's like a trade show, frankly. Or is it a protester? And those four get all jumbled together in our media. So, COP is a-- it's a multifaceted event that is trying to-- what I really pay attention to is the actual negotiations and what those results are showing. 

Ailsa  8:10  
Yeah, I think it's interesting, two points that you mentioned. First, the logistical complexity of how on earth you negotiate an agreement in apparently two weeks with 190 parties putting input, and then also the opportunity it presents for the networking between-- and the trade sector all coming together, and I think one of the things that was interesting, you hear a lot about the COP26, was that there was an unprecedented attendance from private sector, and industry, and financial institutions. So, to that point, how is COP26 different to previous COPs?

Alan  8:50  
I'm not sure it's that different. Yes, you may have more participation. You might have had even more if there hadn't been for COVID. I mean, I participated virtually on a lot of the COP sessions through the International Trading Association, ITA, which is where most of the business interests sit. It's got all the large energy companies, the large chemical companies, large transport companies, the airlines, you know, and natural resource industries. So, I think it would have been even bigger, but you see the same people at previous COPs. There's something in the Paris Accord in Article 6 that deals with, essentially, private sector investment, or as they call it, you know, voluntary carbon trading, and about 90% of the countries in their pledges are relying on that as a fundamental part of meeting their net-zero goals. One thing I found very interesting is that the news seemed to be full of modelling. Well, first off, it was full of commitment by politicians, and the Secretary General of the UN called all those-- he described it as a deficit of credibility and a surplus of confusion. Those were his words, the head of the UN, on what net zero is and who's measuring what.

Ailsa  10:02  
So just to pause you there, net zero, we hear a lot of talk about getting to net zero, which means the amount of greenhouse gas emissions going into the atmosphere are balanced out by their removal out of the atmosphere. So, Alan, in your view, what are the issues globally with getting to net zero?

Alan  10:21  
I mean, net zero is a pretty-- everybody throws the phrase out, but what exactly is net zero, and how do we get there? Well, it's obviously reducing our emissions down from some sort of a base year, and the base years are not settled. Some countries are using, you know,  2000. Some are using 2005. Some are using earlier. They're basically using whatever makes them look the best. There's no standardization on where you're measuring from. There's no standardization on what's actually included in your net zero calculation. There's a lot of confusion over what credit do you get for your forests that suck up carbon dioxide, and how do you measure those? One African country claims its forest sucks up more carbon dioxide than all of-- that's emitted from all of Russia. Libya, it has no emissions if you ask them. It's the larger-- it's an OPEC member. It's an oil producer. It says it has no methane emissions. It has none. It's never reported them. Russia itself last reported in 2010. Malaysian-- I think it was Malaysia, claims its forest sucks up four times as much carbon dioxide is a similar type of forest in Indonesia. Brazil says, "Well, we have this great rainforest that sucks up carbon. We're getting credit for it." But that was from a measurement a decade ago, and it doesn't-- they don't then subtract off of that the amount of forest that they've lost to deforestation, so there's a lot of wishy-washy kind of numbers out there, and some countries simply do not include certain emissions. So, there's got to get agreement on what are you actually measuring, how much is it, how are you reporting it, and what is actually net zero? Net zero we tend to think of is that-- is that through offsetting one, for each ton of carbon I put into the air, I'm going to get a renewable energy credit to offset it. Microsoft's very interesting. It's gone-- as it's doing this, it's gone and calculated all the carbon it's ever emitted since the company was formed, and it's done that calculation, and it's actually going to go and, through investment in new technologies, suck carbon dioxide out of the air and sequester it. So, it's not just offsetting its emissions. It's actually going to be a true net zero so that by 2050, it'll be able to claim that it actually has no emissions, and it has not emitted a bit of carbon, and any carbon that did emit, it's gone back and captured. So, net zero means many different things to people. It also doesn't address your upstream suppliers and your downstream customers, or is it just your operation? What-- what exactly is it? And that is a fundamental question I think people are beginning to think about.

Ailsa  13:04  
I just-- I find it hard to believe that there isn't a universal framework for assessing emissions and measuring net zero, and that it's still possible for certain states to submit, as you suggest, a potentially misleading picture of their emissions. And so, I guess this is what Article 6 is about, right? Like, one of the key developments from COP26 that we heard about is finalization of the terms of Article 6, with guidance for emission trading between nations, and rules for an international carbon market and carbon trading. Can you explain the progress that was made on Article 6 at Glasgow last month?

Alan  13:40  
Everybody agreed we should have a standard. So that was an agreement that was reached. I think they almost all agreed that we should report every five years, and that everybody should be using the same standard, but they didn't set it. They've left that for other groups. It's very technical. And part of the problem, of course, is capacity. Some countries don't have the expertise. They don't do the measurement. They don't do the calculations, such that we might do in Canada or in the Western world. They just don't have the resources to know exactly what their emissions are and where they're coming from. And so, a lot of it was an ask-- or part of this process was an ask by those countries to help fund us to give us resources so that we can-- we can measure these things, because frankly, I think a lot of them are just guessing. It's also tied up that-- I mean, this is the United Nations. This is tied up in trade. Certain countries send, you know, trade delegations to this environmental negotiation. It's not just Environment Canada at the table. We saw Chrystia Freeland there. We saw, you know, people who are involved with trade. I know, for instance-- sorry, I was told that the Australians when they're modeling it and negotiating at the table, they can in real time calculate how much of the coal industry they're going to lose if they agree to some certain number, and so forth. So, it's really part of a broader trade deal, and people are recognizing that carbon is a commodity, and it will be a commodity. The head of Barclays Bank has said that carbon will be the largest commodity in the world. In fact, it will be bigger than all of the other commodities put together, wheat, coal, potash, so on and so on. So, it's a huge thing that's happening, and people are beginning to realize the value in how you count this. One of the key things that was done was the parties agreed to essentially go to a technical board to come up with some of those rules on measurement, and what's included, and so forth. I mean, it is a-- it's an engineering often calculation to challenge, and to come out with rigorous and transparent standards. So, they chipped away at Article 6. They didn't solve everything. They've agreed-- as I see it, some of their positions really haven't changed over the last six years, and they've kicked some of it down the road to further meetings.

Matthew  16:05  
I'll talk a little bit about the idea of net zero and where different countries are in moving towards targets. We heard about the going into the weeds of exactly what that is, but in terms of the broad national target for net zero, we've heard from Canada both before and after COP26, about 2050 as a target for net zero. And in all of the different provincial regimes in Canada that are managing climate change compliance, 2050 is the broad target. Other countries at COP26 talked about different years as a target. China, for example, established 2060 as its target. But they had a side deal that was interesting, that came out mid-conference with the US about things that it could do to accelerate its transit-- its energy transition towards 2035, a process that would establish benchmarks and thresholds moving towards 2035. So, in addition to China establishing 2060 as the target, Saudi Arabia did as well. Brazil adopted 2050 as a net zero target, which is ambitious. And then India, India established 2070 as its net zero target.

Ailsa  17:12  
Okay, so we've talked about different countries' net zero commitments and the difficulties in determining what's actually included in a net zero calculation. We've considered Article 6 briefly and attempts to reach a universal reporting standard. Briefly, before we move on to talking more specifically about Canadian energy, what other points were agreed in the Glasgow Climate Pact this November?

Alan  17:38  
Sure. The Glasgow Climate Pact is a collection of decisions. It's an 11-page document that, you know, it deals with a variety of topics, and some of them are the-- deal with forest and land use. There's a methane pledge to work hard to reduce methane emissions. They've established a Beyond Oil and Gas Alliance to look at alternative energy, a Just Energy Transition Partnership. There were some developments on aviation, you know, setting climate ambitions. There's the Financial Alliance for Net Zero, a Breakthrough Agenda, clean coal, the US-China Joint Declaration on Enhancing Climate Action in the 2030s. So, the Glasgow Declaration was very really a series of other decisions, some industry specific. In each of those, sort of sub-decisions were separately negotiated at separate tables. From COP, we're now up to 90% have now an ambition to reduce their emissions to net zero. But of course, those are all just words. They're going to need the policies to back it all up and make it actually happen, which is the hard part, and how they're actually going to meet all of these ambitious statements is going to be the hard work and going to take years, and years, and years. It's going to take ‘til 2050, easy.

Ailsa  19:00  
One final element that was agreed at Glasgow was the International Sustainability Standards Board, or the ISSB framework, which established a kind of baseline sustainability reporting and disclosure standard. What are your thoughts on that and how it links to the broader ESG reporting frameworks that we're seeing and developments in that area?

Alan  19:21  
Yeah, great question. The International Financial Reporting Standards Foundation, which looks after national accounting, establishes its new board. It's just getting going, so it hasn't actually set standards yet, but they've agreed that that's what their goal is. And in ESG reporting, we have, certainly in the Western world, a number of different almost competing standards that companies use, or can use, each slightly different, and there's clearly-- someone once told me there's 600 different standards, but there's really only two or three really important ones. And this new board is going to work with those key standards organizations to come up with a common standard. So, there's-- they're really just kicking off the process. I understand those boards have said, "Yes, we'll work with the ISSB." I believe it'll be headquartered in Switzerland with an office in Montreal. It's something to watch, because it is going to hopefully, eventually create one standard for ESG reporting, what data you collect, how do you report it, what are the metrics? So right now, with all these different standards, it's very difficult to compare companies if they're using different standards, measuring different things, and reporting different ways. Further, some of the existing standards may not be applicable to a particular industry as well as a customized one. So, they need to come up with, for instance, for oil and gas reporting, you know, some of the questions they get asked by some of the standards setters in Europe, they're completely irrelevant. They don't really show what is-- what is happening, or they say, "We don't have that information," and they get a low mark under standard. So, you need to have it customized. We need-- we need a global standard on this ESG reporting. I think investors, shareholders, and the public are all demanding it.

Andrew  21:18  
So how does what was agreed in the Glasgow Climate Pact compared to what we're already doing in Canada? How many new obligations is this creating for Canadian industry?

Matthew  21:31  
It's tempting, Andrew, to say none. There's a couple things there, I guess. One, 2050 isn't going to be easy for Canada. We're in a better spot than a lot of the world, but it's not going to be easy, and it's going to be expensive. But that said, 2050 is something that we've been talking about for a while. In terms of phasing down coal, to use the language that was inserted by India towards the end of the conference, that's something that's already being done very broadly in Canada, and was already the, as I mentioned, the-- one of the low-hanging fruits of decarbonizing the economy. Ontario has moved off of coal. In days, perhaps months, Alberta is going to be off coal. Saskatchewan has a ways to go, and we've got other, more carbon-intensive forms of generation out East in terms of Nova Scotia and New Brunswick. But largely speaking, the COP commitments to phase down coal aren't going to dramatically change things in Canada. Likewise, deforestation, reduction, and reversal initiatives in Canada, are not a new thing. That's something that governments have been committing to for a while. So, the fact that we've got commitments within COP to do that, it's great, but it doesn't change a lot of the way spending is going to happen to-- to tackle climate change here. Same thing for the methane commitment. That, again, is low-hanging fruit. It's been a focus on the upstream-- in the upstream petroleum sector for a while. And so, the fact that other countries are doing that as well, or as Alan mentioned, aspirationally committing to do, doesn't change the fact that dollars are being spent here to deal with that, to that low-hanging fruit, or I guess at this stage of the game, lower hanging fruit. It's not necessarily easy or cheap, even here.

Alan  23:02  
Yeah, Canada already has methane reduction regulations in place for certain industries, notably oil and gas, and companies are spending a lot of money and effort in meeting those. The federal regulation has been relaxed in Alberta, British Columbia, and Saskatchewan, because each of the provinces has got their own methane reduction legislation that meets the federal requirements. So, we've got our own system, and that's well in place, unlike many, many other jurisdictions in oil and gas, so we're well ahead on that, and methane emissions are a large source of our climate issues. One thing that was announced or re-announced was a cap on oil and gas emissions in Canada. That was part of the Liberal Party's election platform, so we knew something was coming. The same statement was made by our Prime Minister that they will have this, but there's a lot of issues in fleshing it out. You know, again, what-- you know, how will net zero be defined? Is it all scope of emissions for the oil companies? Will it apply company-by-company or region-by-region, gas, natural gas versus oil? Will there be trading? How will it fit into the existing trading system? You know, what are the actual rules that are going to-- and those haven't been put out yet. I don't think anyone knows what they are. You know, will there be litigation by the provinces and others, saying you can't cap our emissions? We're already seeing some signals from our Alberta premier that that's probably on the table. Is it going to apply to pipelines? Is it going to apply to storage? Is it going to apply to railroaded sulfur near the coast? You know, is there any credits if you're also creating hydrogen, or exactly how it's going to work? Who's going to verify all this? What's it going to cost? How does it fit into the provincial tier system, our existing cap on oil and gas emissions? Now, it's on an intensity basis. This sounds like it's going to be an absolute cap.

Matthew  24:57  
Just to unpack that last bit, Alan, you talked about the tier framework – that’s the Alberta Climate Change and Emissions Management framework, which operates on an intensity basis. And then when you refer to the cap, I assume that you're talking about the oil sands cap, the absolute cap on emissions.

Alan  25:11  
Yes, I am talking about that, but the federal government announced at COP26, as was in their election platform earlier in the year, that there'll be an absolute cap on the oil and gas industry. 

Matthew  25:21  
Right, and so that would apply to things like LNG in BC, in addition to oil sands projects in Alberta, or oil production in Saskatchewan.

Alan  25:29  
Presumably yes, or offshore Newfoundland. We don't know the scope of it and what exactly is included. And, you know, will it include the companies-- on a company basis, or an industry basis, or a regional basis, and will oil companies have to look at emissions upstream from their operations and downstream from their operations? There's a lot of-- there's a lot to get through there and how this will fit into what we've already got in terms of programs to reduce emissions.

Ailsa  26:00  
I just want to focus on the methane emission reduction point, because it is highly relevant to several Canadian industry sectors and principally oil and gas. In September, the US and the EU announced the Global Methane Pledge, which I think nearly 90 countries signed up to at COP, and Canada is obviously a signatory. But as you mentioned, Alan, Canada already has methane reduction regulations in place and has announced additional reduction targets for 2030. So why is reduction of methane emissions so important, and why is it so challenging?

Matthew  26:35  
I guess two things. It's not a new initiative in Canada in terms of trying to combat climate change, or even just general management of the oil and gas industry. The impact of methane emissions on climate change is disproportionate relative to carbon dioxide. Just as a substance, natural gas, methane, CH4, traps more heat than does carbon dioxide, I think by a factor of seven, if I remember correctly. And so, efforts to-- Alan, you're making a face. Am I wrong on seven?

Alan  27:10  
Well, I've always sort of agreed either 19, 20, or 21. So each methane molecule you destroy, it's the equivalent of destroying 19 or 20 CO2 molecules, but I might be wrong on that. But the point is, if you can reduce methane emissions, you're reducing a lot of CO2 equivalent emissions.

Matthew  27:29  
Right, the CO2e that you see everywhere is the CO2 equivalent. And when you're trying to reduce methane emissions, you've got to spend money and capital on infrastructure that captures them. You've got to build a compressor that takes those atmospheric pressure methane emissions, pressures them up, injects them into a pipeline and takes them somewhere, so that they can be usefully used. You've got to build an extra pipeline or piping that goes along a pipeline. You've got to put that pump in place. You've got to get the control devices in place, electronically, chemical sensors, that sort of thing. That's-- that's not cheap stuff. Even if you've got a good  and valid climate objective to chase, putting the infrastructure in place to do that takes time, and it's got to be regulated. And so that's why the industry has been chasing that target. That's why you've got increasing-- increasingly tight frameworks in Canada and to a lesser degree in the US.

Alan  28:27  
Yeah, methane's, you know, certainly from the oil and gas perspective, it comes from a variety of operations, from drilling wells, fracking wells, leaky pipes, fugitive emissions, intentional vent, venting out of tanks. I mean, our systems were designed, especially with liquid hydrocarbons that would emit methane gases-- it's dangerous. It's natural gas. You don't want an explosion, so you vent it away, or you flare it away, and that's how these systems were originally built. It was with safety in mind. Let's get rid of this stuff. No one was saying, "but don't put it in the atmosphere because it's bad for climate." They're saying just, you know, "Make sure this tank doesn't have too much methane buildup in it – we’ll have an explosion." The other challenge with methane is measuring, monitoring, and verifying, when you've got literally tens of thousands of sites, well sites. This is not typically a situation where you can go to, you know, one factory and, you know, look at all the stacks and say, okay, you know, in this city block, here's how much methane is going. You know, you might have a thousand wells at companies, spread from Lloydminster, Saskatchewan, to southeastern Alberta. Some of those wells are on at different times or off at different times. So, it's a very complicated and very much data-driven process to figure out what your emissions are, where is the cheapest place to make reductions, and then actually how to make those reductions. Right now, companies are in-- I think, Matt, you said the, you know, the low-hanging fruit, and that is-- traditionally the natural gas that comes up out of an oil or gas well is used to help power some of the instruments just through pressure, and then that methane is released.

So, every time they do a reading, there's a little "pfff" of methane that's released, and getting those, all that instrumentation changed out into some other form of instrumentation that's not releasing methane has been a very popular program, and companies putting in small solar panels and running their instruments off solar power and batteries. There's literally companies that some of them have done this at three, four, 500 different sites. Those are some of the easy fixes, you know, some of the compressor leaks and so forth, and there's always questions, how often should you measure and monitor to see if you're having fugitive emissions from your wells, your pipelines, and your facilities? And then how long-- how long until you need to fix it? You know, if you discover a leak, do you shut the whole system down just to-- just to capture some tiny, tiny methane in a hole that you need to fix? Or can you wait until you're doing your next general turnover of the facility, where you shut everything in, and you do your yearly maintenance on it? Can you leave it ‘til the? Those are sort of the practical issues with methane that make it challenging, and, you know, can we find the spots where we have the greatest emissions of methane and focus in on them, rather than necessarily the easiest ones to fix, which are relatively small, like the well site instrumentation?

Andrew  31:40  
So, you guys, as regulatory lawyers, you're obviously very engaged in everything that was happening with COP26. I mean, what's your takeaway? Was this a success?

Alan 31:49
I think it was. It's part of the nitty gritty process of negotiating international agreements. They don't happen overnight. You know, clearly, there's issues, there's details. They've got technical working bodies figuring out things. There was definite progress made, and there was certainly more pledges made, but no matter how successful or unsuccessful you might view COP, it is really up to each country now to-- who's made a pledge-- to go back and implement laws and policies that will get them to their pledge. So, you know, COP in and of itself is not the answer. It's what actions countries take in the years ahead to meet the promises they made at COP.

Matthew  32:33  
Yeah, I'll say, I guess, two further things. One, I agree with Alan, 100%. This is-- this is a necessary step of implementing the Paris Agreement. You have to go through conferences and steps like this, where you talk about the messy details of implementation. But in terms of what we're implementing, collectively, I thought the broad industry involvement at COP26 was a real positive. There's a widespread consensus among the financial community and among leading-- leading producers in energy companies that net zero is the future, and we have to move in a measured way towards that target. And so, seeing that action outside of national targets, that'll surface in leading jurisdictions, I think was a positive thing.

Ailsa  33:15  
Okay, I want to move direction slightly and talk a little bit about carbon capture. So, at the end of COP, there was a last-minute change concerning the use of coal. So initially, we had talks about phasing out coal, and then I think the wording was changed to phasing down coal. And the references were also made to unabated coal emissions, which refers to coal-fired facilities that don't have carbon capture and storage systems. So, can you talk a bit about the discussions around coal at COP and how they're relevant to carbon capture storage in Canada?

Matthew  33:51  
Yeah. So, I guess two things on that that were controversial. One was looking at phasing down as opposed to phasing out coal, on the premise that there's a way to generate electricity using coal that can still be sustainable and accord with net zero targets. And then related to that was the introduction of the idea of unabated emissions, which again refers to the idea of mitigation after the fact, carbon capture and storage-type stuff. And we've seen that in different jurisdictions around the world. It's taking place in Canada at a pretty high-- and by high, I mean successful level. It's being developed in Alberta, where you've got carbon emissions being captured using well-understood, you know, aiming-type technologies, transported by way of pipeline and then injected into depleted reservoirs. That's what other countries around the world are looking at. Historically among the environmental movement, carbon capture and storage has been described as greenwashing and something that isn't reliable, and it shouldn't be pursued. And what you saw at COP26 was larger countries insisting that this is something that should be part of the mix, and it's an interesting counterpoint to Canada's experience. That conversation at COP was about coal generation. In Canada, we're doing that in the context of natural gas generation and still moving towards net zero. Alberta's presently auctioning off its pore space in developing a regulatory framework to really implement that. British Columbia's hydrogen strategy that came out in July of this year also talks about developing a regulatory framework for British Columbia's pore space to do exactly the same sort of thing. And it's not a new concept. When I started practicing, crystallizing rights to pore space was very topical. I think 2003 is when the legislation came out. And here we are nearly two decades later, and it's something that's being implemented. Going back to one of the earlier questions, was this a success? This is the sort of thing that you have to do. Two decades ago, post Kyoto, in response to that threat, Alberta said, we need to legislate around pore space and the concept of carbon capture and storage. We've got a thousand years of coal. We’ve got baseload coal generation. We better get our heads around this. Here we are, we're decarbonizing, we're moving towards natural gas generation, but we're still going to use carbon capture and storage to get towards net zero.

Alan  36:11  
Yeah, carbon capture and storage is interesting, and there's I think about 70 projects around the world, so I'm told, so it exists. It's known. The challenge is in actually the capture. Injecting things into the earth, we know how to do that. We know how to monitor it once it's down there. Transporting carbon dioxide by pipeline, we know how to do that. We push things all over the place through pipelines. That's well-known technology. It's the actual capture and compression, and different facilities will have a stream of carbon dioxide in either flue gases or chemical offtake processes that may have other mixtures of substances in them, and you've got to clean that up. And that's where it gets expensive, using different chemical technologies. So, part of the challenge is, how do you carbon-- how do you capture carbon dioxide off an aluminum plant versus cement plant, versus an oil sands plant? It's all different technology, and sometimes no one's actually done it with respect to certain types of emissions. And the other challenge is, is scale. It's okay to capture carbon dioxide, and it can be captured, as Matt said, you know, off a coal-fired generation plant. That's done. We're doing that in Saskatchewan with the Boundary Dam Project. But how do you do it off an oil sands facility? And how do you do it off of numerous sites? It's not like you can easily capture from 100 different sites all at once. You know, you can't capture off our tailpipes from our cars, for instance. So, its application is technology limited in the sense of what we can do so far. There's lots of people working on all the solutions, from what I understand. It is limited in the sense of where we can actually deploy this technology. And then third, you have to have a place for a carbon capture plant. You know, these things are-- they're big. You need to have some space in your facility where you can actually go and install one on an all existing. Most new facilities that are large have been built with the carbon capture ready, in the sense that in their design, they've left a potential space available that if one day capture technology is coming to that facility, they've got room to put it in, and they make quite a big deal of the carbon capture ready scenario. But those are some of the challenges. My view on the carbon capture ready scenario is a bit like saying my driveway is Maserati ready. You can park a Maserati there. I just don't have one yet. But I've got a driveway for it. I'm Maserati ready. So those are part of the challenge, and obviously the cost is tremendous. It needs large government support. The United States recently came up with their very favourable Income Tax Credit. Norway has the same, running around 75%, and, you know, we're waiting to see what the Department of Finance in Canada's going to put forward over the next few months, realizing we just brought in a new cabinet. So, I really don't think we're going to see much until probably the new year before they're going to be ready to really talk about what government funding is going to be involved with the carbon capture in Canada.

Andrew  39:19  
And taking a step back on the periodic table, what about hydrogen? That was another topic at COP. What can you tell us about where those discussions at COP compared to what's going on in Alberta and BC?

Matthew  39:32  
The same answer as before, Andrew. I don't think the COP discussions in terms of setting policies or standards are going to drive things forward in Alberta, BC, and other jurisdictions in Canada more than is already going on. That net zero target by 2050 is what's driving things. Where I think you'll see more pressure from COP, or as a result of COP, is the interest in the financial community in financing these sorts of projects. And there you've got gathering momentum, still-- still early, but certainly gathering in both provinces. To give you a sense of the-- this side of things in BC, its government has announced relatively modest investments, you know, in the tens of millions of dollars, in the next few years, but with a relatively ambitious policy framework, designed to explore not just introducing hydrogen into the existing natural gas distribution infrastructure, but really looking at large-scale electrolysis and the possibility of exporting hydrogen or ammonia to consuming countries down the road.

Alan  40:32  
Yeah, hydrogen was clearly in the mix, and there will be hydrogen projects. Alberta has put out its hydrogen roadmap, the Alberta Government, and it contemplates a number of different things, specifically, and I think this will actually happen is, it's already happening now, it's partially already built, is hydrogen hubs. We'll see that in the Fort Saskatchewan area, maybe down near Medicine Hat also, maybe around, also around the City of Edmonton or Prentiss, Red Deer area where there are chemical facilities that have both emit pure streams or near pure streams of hydrogen, and there's industrial processes that are looking for hydrogen through the refining complexes. There are hydrogen pipelines already that run in the Fort Saskatchewan petrochemical area. So, I think we'll see a greater expansion of that and a greater focus on that, and that's where really the action all proceeds. Hydrogen-powered vehicles, I think they've lost to electric batteries. I don't think we're going to see a lot of hydrogen gas stations out there. And hydrogen is a much smaller molecule, so you can blend it in with your existing natural gas up to a point, and I don't know what that point is. That's an engineering question. So, you would blend in hydrogen and we would burn that. The question really is where does that hydrogen come from? And there's a whole rainbow of colours. You can get hydrogen from burning coal, that's black hydrogen, all the way up to, you know, green hydrogen, which is hydrogen created using, you know, no emission renewables, and every colour in between, I recently heard of white hydrogen, as a matter of fact. I thought that was interesting. So, you have to look at where the hydrogen is coming from. If you really wanted to export hydrogen-- and one of the places where you can get hydrogen is natural gas, and Alberta's got a lot of natural gas. I think that's the real strategy behind our hydrogen strategy, is how can we, you know, how can we use our natural gas? So, we would be creating a blue hydrogen, where we would be using natural gas to create the hydrogen. It's not the greenest, that's for sure, but it would involve a lot more drilling. It would really be natural gas production.

Ailsa  42:39  
How easy is it to transport hydrogen? To what extent can we do that within our existing pipeline infrastructure?

Alan  42:45  
Because it's such a small molecule, our existing pipelines wouldn't work for exporting hydrogen. So, we'd have to build entirely new pipelines. The Alberta strategies, it recognizes that, but the question really is, who's going to build, and can they successfully build a pipeline in this country that's going to, you know, take hydrogen that derives itself from natural oil and gas and export it to markets? I think that's a really, really long shot that that's actually going to happen. The answer is yes, you can transport hydrogen to an extent in the existing networks, but to have a pure hydrogen line, you'd need an entirely new system.

Matthew  43:23  
So, Alan, there, you're talking about not just the risk of embrittlement from a very pure stream of hydrogen. You're also alluding to the regulatory challenges of building and permitting a pipeline from hydrocarbon-producing regions like Alberta to export locations on the coast, right?

Alan  43:41  
That's correct. You can also create ammonia, and you can ship ammonia to solid. We do it all the time. It's fertilizer. So, you could, you know, railcar it to the coast, put it on a boat, send it overseas, and they could then turn into hydrogen fuel, and a lot of people are looking at that technology, including people in Western Canada that take the natural gas, turn it into ammonia, transport it as ammonia, and then essentially reconvert it into hydrogen. It could be used as fuel.

Matthew  44:13  
There are pilot projects, both on the coast and I think in Fort St. John, that are looking at doing exactly that, taking ammonia produced by either natural gas or from the electrolysis water, and shipping that West to Japanese markets.

Ailsa  44:25  
And what about BC? What's BC's approach to hydrogen development and carbon capture?

Matthew  44:31  
The BC strategy is interesting. Just touching on a few of the points that Alan mentioned. BC is looking at investing in fuel cell technology. It's long been an industrial strength in British Columbia. It's still part of the hydrogen strategy. How do we get vehicles powered by solid fuel cells that rely on hydrogen for that-- for that technology? And then when it comes to the different colours of hydrogen, BC has a lot of natural gas in the northeast, but reducing the emissions associated with the production of natural gas and the conversion into blue hydrogen, that's where you see BC's interest in carbon capture and storage. And then on the other side of things, when it comes to green hydrogen, it's very attractive when you've got things like surplus hydroelectric electricity and large wind resources to try and take that renewable power and renewable intermittent power and convert that into a hydrogen fuel source. The challenge, of course, is that it's really, really expensive. So, to take that back to the COP question, lots of interest, lots of finance, it takes time, and we've got to work through the details.

Andrew  45:31  
So, you guys have both talked about pipelines. It is a useful jumping-off point, a discussion about pipelines to talk about a related topic, and I know, Matt, that this intersects sometimes with your practice, is issues raised by Indigenous peoples. The transitions you guys have been discussing, they're well-intentioned projects, but they do still mean substantial disruption to the landscape, in some cases, with the potential for impacting indigenous communities and rights associated with those communities. How are entities going to balance consultation and impact assessments with building the infrastructure for this low-carbon economy? 

Matthew  46:10  
Well, two quick answers. One, from a rights perspective, from a consultation and accommodation perspective, no differently. It's the same set of rights that are affected by development, irrespective of the nature of development. And then going forward, how do you-- how do you develop projects that touch on the exercise of Indigenous rights, or that take place on Indigenous land? You do that again no differently than you see presently, which is an increasing move towards commercial participation, equity investment options. There's a lot of interest across Western Canada on the part of Indigenous communities in participating in energy projects, both large scale, and we've seen that in terms of equity interest in pipelines, and in the small scale, where you've seen renewable power projects that have had communities buy and operate, or get involved in buying and operating, renewable power projects. So, I don't think that developing a hydrogen resource is going to be any different than that. And if we can add on, I think proponents are well advised to explore commercial partnerships and financing arrangements with communities that show an interest in renewable and sustainable energy developments.

Andrew  47:24  
That's fantastic. 

Ailsa  47:25  
With that, thank you very, very much. That has been a hugely fascinating discussion, and I feel I've learnt a considerable amount, both technological and regulatory. So, thank you very much for your time and for joining us on the podcast.

Matthew  47:41  
Thanks, both, for having us. I've had a really interesting and pleasant morning, and, Alan, always great to chat.

Alan  47:45  
Yeah, thank you very much. 

Ailsa Bloomer 47:47
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