Oil-Sands Producers Vulnerable to Cap, Rubin Says

Oil-sands projects are among the most vulnerable if Canada follows the lead of some U.S. states to reduce gas emissions linked to global warming, according to the Canadian Imperial Bank of Commerce.

Rising output and energy-intensive extraction processes mean projects that produce oil from Alberta’s tar-like deposits will be a “prime target” if Canada adopts a market-based cap and trading system for greenhouse gases, said Jeff Rubin, chief economist for the Toronto-based bank.
“Next to coal-fired utilities, oil-sands producers rank the highest on our vulnerability index,” he wrote in a Feb. 12 report. “Improvements in emission intensity have been overwhelmed by increases in daily production.”

Oil output in Canada, the biggest crude supplier to the U.S., is forecast to rise 9.1 percent this year partly on increased oil-sands production, the country’s energy regulator predicted earlier this month. As much as C$125 billion ($107.3 billion) will be invested over the next decade to almost triple daily oil output from the tar sands and capitalize on high prices, the National Energy Board said last year.

Companies representing about 40 percent of the market capitalization of the Toronto Stock Exchange, such as utilities, oil producers and steelmakers, would be affected and “the vast majority will be adversely affected” if an emissions plan is implemented in Canada, Rubin said in the report. A call to his office today was not returned.

Bloomberg