Irving Oil’s refinery in Saint John, New Brunswick, faces some difficult headwinds due to climate change policies. Peter J. Thompson/ Natoinal Post

A new report that looks at the future of oil refining in Atlantic Canada says Ottawa and New Brunswick must come up with better policies if they want to ensure a smooth economic transition to net-zero emissions by 2050.

The Atlantic Economic Council, an independent research organization, spells out the challenge for politicians and policy makers: While oil refineries in New Brunswick, Nova Scotia and Newfoundland created high-paying jobs and fired the region’s economy for decades, one of them has since shuttered, another is being converted and the biggest – the Irving Oil Refinery in Saint John – faces an uncertain future.

The federal government and all four Atlantic provinces have committed to net-zero emissions within a quarter century. That means one of the biggest local contributors to greenhouse gases that warm the planet, threatening life as we know it, must drastically reduce its emissions or trade them off somehow.

“As we pivot towards a net-zero future, the industry must navigate a complex landscape of diminishing global demand for fossil fuels, stringent net-zero regulations, and the need for substantial investment in clean technologies, cleaner fuels, and energy efficiency,” said Fred Bergman, the report’s author and the organization’s senior policy analyst, in a news release.

The report emphasizes how the industry has been a cornerstone of economic activity in New Brunswick for decades. The industry’s total economic impact in the Atlantic region was $1.5 billion and 4,300 jobs in 2019, with six out of 10 of those jobs at Irving Oil. It operates the only remaining oil refinery in Atlantic Canada.

And that’s only one important facet. Irving Oil’s supply chain was valued at $250 million in New Brunswick, plus another $150 million in the rest of Canada in 2022. Irving Oil’s latest turnaround project investment of $190 million created more than 2,300 jobs alone in the fall of 2023.

The Come-by-Chance refinery in Newfoundland and Labrador closed in 2020 and recently reopened under new ownership to produce renewable diesel. The Imperial Oil refinery in Nova Scotia was mothballed in 2013, a loss of about $140 million in economic output and 265 direct jobs.

The Saint John refinery, with a capacity of 318,000 barrels of oil a day, also faces significant headwinds.

According to the report, Canadian fuel demand is projected to decline over time, as Ottawa will no longer allow the sale of new motor vehicles with fossil-fuel engines beginning in 2035.

Global demand for road transport fuel is forecast to decline from 41 million barrels per day in 2022 to less than two million barrels per day by 2050 under the International Energy Agency’s net-zero emissions scenario, as countries push to reduce emissions and save the planet.

The report says the Irving Oil refinery will need to make significant investments to comply with net-zero policies, including investing in low-carbon fuels, energy efficiency and renewables.

The biggest refinery in the nation, it accounted for half of the value of Canada’s international refined oil exports in 2021.

The report noted that Irving Oil has made environmental improvements.

New Brunswick’s refined oil emissions declined by 1.2 megatonnes or 28 per cent, since the peak in 2010.

But to take it a step further, greater investment would be needed, the report warns, citing the 128-year-old Phillips 66 Rodeo refinery in San Francisco that recently invested $1.2 billion to convert it to renewable fuels.

“Irving Oil’s refinery opened in 1960, which suggests a net-zero transition is viable but at a significant cost.”

The number of refineries in Canada declined from 40 in the 1970s to 15 in 2023, and the author predicted more would shutter by 2050. World oil demand is forecast to fall almost 80 per cent within a quarter century relative to 2022 levels, based on the net-zero scenario, according to the International Energy Agency.

“Global emissions from the energy sector are expected to peak within the next decade due to the rapid pace of investments in clean energy technology and eventual decline in global oil demand,” the report states. “This may slow the rate of investment in new oil supply. However, ongoing demand for refined petroleum will continue beyond 2050, including low-carbon fuels.”

To ensure the viability of the refinery and provide the region energy security, the report makes a number of recommendations. Rather than put the refinery out of business and depend on costly imported fuel that doesn’t necessarily meet the same emission standards, the council suggest putting in a carbon border adjustment, a tariff on international imports of emissions-intensive products, to level the playing field.

It also says governments should look for opportunities to streamline policies, rather than have different sets of rules aimed at achieving the same net-zero outcome.

Ottawa, it says, should consider expanding clean economy tax credits to include biofuels, pointing out that the introduction of the U.S. clean fuel production tax credit and the extension of second-generation biofuels incentives pose a risk to Canadian competitiveness.

Lastly, the think-tank says New Brunswick should consider providing support for hydrogen, biofuels and carbon capture and storage, like Alberta, British Columbia and Saskatchewan do.

By John Chilibeck, Local Journalism Initiative Reporter

Original Published on Mar 14, 2024 at 07:03

This item reprinted with permission from   The Daily Gleaner   Fredericton, New Brunswick

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