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Carbon price won’t be determining factor for oilsands development: report

A dump truck works near the Syncrude oilsands extraction facility near the city of Fort McMurray, Alta., on June 1, 2014.
A dump truck works near the Syncrude oilsands extraction facility near the city of Fort McMurray, Alta., on June 1, 2014. Jason Franson, The Canadian Press

A new report says putting a price on carbon won’t likely affect oilsands development plans if the price of oil rises above US$60 a barrel.

TD Bank economist Dina Ignjatovic said that’s the estimated minimum price oilsands companies need to go ahead with their projects, and if it’s reached then the extra cost of a carbon tax likely won’t sway a decision.

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If the price of oil stays below US$60 a barrel then the picture becomes murkier, said Ignjatovic, as advances in productivity and cost reduction would also need to be achieved and factored into any decision.

Ignjatovic noted that Alberta’s proposed carbon tax system would reward low-emissions oilsands producers and penalize high-emission projects, with Alberta Environment and Parks estimating most projects would see costs per barrel getting between 50 cents cheaper and 75 cents more expensive with carbon pricing.

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The announcement of a federally mandated carbon tax brings more uncertainty, since it pushes the price of carbon higher than what Alberta’s proposing by 2021, said Ignjatovic.

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But even still, she said if the structure of the province’s carbon tax is followed, it shouldn’t be a driving force in rejecting a project, with the price of oil, more pipelines and greater efficiencies the key factors for project approval.