New federal regulations to reduce greenhouse gases are being called the most stringent on the planet by representatives of Canada’s oilpatch who, nonetheless, took comfort in the absence of hard caps on emissions such as those in the Kyoto Accord.

“These targets are the toughest targets the oil and gas industry is (going to) face anywhere in the world,” said Pierre Alvarez, president of the Canadian Association of Petroleum Producers.

One of the biggest areas of concern for the oilpatch – focused mainly in Western and Atlantic Canada – was that it would be singled out by a federal government hungry for votes in Ontario and Quebec.

The Conservative government was careful to introduce regulations that would apply to all sectors and industries, with a promise to reduce greenhouse gas emissions by 20 per cent over 2006 levels by 2020.

Greenhouse gas emitters will face a 26-per-cent reduction by 2015 with targets based on production levels. Reductions of smog-producing emissions such as sulphur oxide require a 55-per-cent cut within eight years.

“So these are very, very significant targets and they’re higher than we’re facing anywhere else in the world,” said Alvarez.

The energy industry had been fighting hard emissions caps, preferring “intensity targets” which it says focuses more on efficiency.

Alvarez also said more certainty over the rules was important for the energy industry, which has been warning that unknown extra costs triggered by new emissions regulations, and an ongoing royalty review in Alberta, was shaking investors’ confidence in the sector.

Alberta regulations tabled earlier this year include plans to level financial penalties as of July 1 against big industrial emitters who don’t cut emissions by 12 per cent. Those that don’t meet the target will have to pay fines or invest in Alberta projects that help reduce emissions.

Alvarez said while the new regulations appeared to focus more on large projects, he warned that there would be an unknown “economic cost” that companies will have to factor in when they make decisions on new projects.
Charlie Fischer, chief executive of oil and gas producer Nexen Inc. (TSX:NXY), said it was critical that the oilpatch not be singled out.

“Most people today, if they’re unhappy with our sector it’s because they don’t like paying $1 per litre for gasoline and would like more supply so they could pay less, which would be exactly the wrong thing in a world that’s worried about carbon,” he said.

“So it’s not just industry that needs to deal with these issues. All of us have to deal with these issues.”

Along with the oilsands industry in northern Alberta, the electricity sector – particularly those with coal-fired power plants – will also be affected by the plan.

Steve Snyder, chief executive of TransAlta Corp. (TSX:TA), one of Canada’s largest independent power companies, said that the new federal regulations “appear to be tough measures with aggressive targets.”

Snyder said that while it was too early to crunch numbers, there was no doubt the emissions reductions would lead to power-price increases.

“In our industry, for coal, we don’t have any technology today to achieve reductions,” he said.