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Addressing Climate Change in Challenging Times

A conversation with Gord Lambert, Suncor's vice president, sustainable development

More than a decade ago, Suncor launched a comprehensive climate change action plan that reduced the carbon intensity of its business. Today, Suncor continues to seek reductions in greenhouse gas (GHG) emissions by investing in technology and renewable energy and by looking for new ways to conserve energy.

Stakeholders have asked how the recent global financial crisis would affect Suncor's efforts to address the climate change challenge. They also wanted to know how we are responding to public policy proposals that could impact the oil sands industry. Gord Lambert, Suncor's sustainability point man, provides some answers.

Given the economic circumstances of the day, is Suncor rethinking its commitment to addressing the climate change challenge?

LAMBERT: If by “rethinking” you mean “abandoning,” then the answer is an unequivocal “no.” We're proud of the fact Suncor was one of the first major energy companies to recognize this challenge back in the early 1990s—and to take proactive action. Nothing about the recent market turmoil diminishes the task at hand. In fact, it's the opposite: more than ever, how investors judge the competence of corporate managers will depend on the long-term plans companies have to deal with their carbon footprint.

But if by “rethinking” you mean considering new ways of achieving some of our long-standing objectives, then the answer is “yes.” Suncor's vision of sustainable development has always been based on a “triple bottom line” that emphasizes the reality that a strong economy, a healthy environment and social well being are interdependent. So for a company like Suncor to be able to invest in technologies and other innovations that improve environmental performance and social well-being, it must first be economically viable enough to do so.

The global financial crisis forced us to make some tough choices. Like most of our competitors, we put our major growth projects on hold. We also took a hard look at spending priorities across our existing operations.

But even in these challenging times, I'd argue there are new opportunities opening up. For example, the general slowdown in the oil sands industry means we will not see absolute GHG emissions rising as much or as quickly as previously forecast. That gives us all a chance to collectively use this breathing space to look at solutions that will make our operations more sustainable—both today and when the time comes to resume our growth projects.

Okay, but let's look at some specifics. Suncor, like many other energy companies, has long pointed to the potential of carbon capture and storage technology to significantly reduce industrial GHG emissions. Where do you stand on that now?

LAMBERT: We remain committed to the development and ultimate deployment of carbon capture and storage (CCS) technology. For the past three years, Suncor has been a founding member of the Integrated CO2 Network (ICO2N), a group of 19 major companies that is looking at large-scale CCS solutions. Suncor has also been researching ways to capture, purify and compress CO2 from its operations as part of the CO2 Capture Project (CCP), a partnership of some of the world's leading energy companies and government organizations. The CCP recently launched its third phase, which will run from 2009 to 2012 and is expected to include several pilot plants and demonstration projects.

CCS has been recognized as an important potential tool by the International Energy Agency and by governments around the world. At the same time, we have all faced a recent “reality check” when it comes to the costs of implementing CCS on a broad scale. Earlier estimates had pegged the cost at between $50 and $80 per tonne, depending on the facility and technology. But the latest estimates put it in the $150 to $200 per tonne range. At that price, it's simply not a cost-effective proposition. And that's especially true at a time when governments and industry are far more economically challenged than they were just a year ago.

So the biggest immediate goal is to find ways to drive down the costs of this proven technology. Suncor will continue to do its part in this effort through our work with ICO2N and the CCP.

Still, the message for all of us is clear: while CCS promises to deliver some significant long-term benefits, it's no silver bullet. We need to be moving simultaneously on several fronts.

What about renewable energy? In last year's Climate Change Report, Suncor said it planned to spend $500 million on renewable energy projects over the next five years—in addition to the $250 million it had already committed to the sector this decade. Is that still on?

LAMBERT: We remain committed to a “parallel path” of energy development—building today's oil sands industry while also helping to bring along new sources of energy for tomorrow. The industry-leading investments we've already made in wind power and biofuels were only possible because of the success of our core business in the oil sands. We're now acting prudently to protect the economic viability of that core business—and thereby ensure we have the financial flexibility to continue investing in renewable energy and environmental technologies. So that five-year investment timeframe may have to be stretched over a longer period. But our overall vision and objectives have not changed.

Beyond CCS and renewable energy investments, where do you see the biggest potential for reducing GHG emissions?

LAMBERT: Our single biggest opportunity is to improve reliability and energy efficiency across our existing operations. We know we've fallen short of the mark in this regard lately, and that's one of the reasons we are making operational excellence our top priority. Using less energy for each barrel of oil produced will reduce our emissions intensity. Achieving more reliable production rates will do the same thing. Because when we produce below our potential capacity, much of our plant infrastructure must keep running—drawing energy without generating as much finished product. By 2015, we are committed to improving our energy efficiency by 10 percent.

We also continue to invest in new technologies that hold the potential to significantly reduce energy use and GHGs. For example, Suncor is investigating gasification technology to turn petroleum coke (a by-product of the oil sands upgrading process) into synthetic gas while also sequestering CO2. That synthetic gas could then generate power and hydrogen, thereby reducing our reliance on natural gas to run our operations.

Suncor is also working with other companies to examine the possibility of tapping geothermal energy buried deep within the ground to produce heat and steam needed to extract bitumen from the oil sands. This could again reduce our dependence on natural gas.

On the regulatory front, the Obama administration is expected to introduce a major cap-and-trade initiative. And the Canadian government appears to favor a continental approach on climate change policy. What's Suncor's view of all this?

LAMBERT: When it comes to climate change regulations, we've always argued in favor of clarity and certainty (i.e., our investors want to know what the rules are up-front), fairness and competitiveness (i.e., no one industry or region should be unfairly targeted or punished) and as much harmonization as possible.

It's too early to say how things will turn out on the fairness front—the devil will be in the details. But we welcome the moves toward greater clarity and harmonization. We've never been happy with the prospect of a patchwork quilt of regulations coming at us from various federal, provincial and state legislatures. For a company like Suncor, with operations in several jurisdictions, that means dealing with multiple compliance regimes and reporting requirements. So, in principle, a harmonized North American approach makes a lot of sense, or at least a national Canadian system linked to a U.S. system.

We continue to have some reservations about relying solely on a cap-and-trade system to reduce GHG emissions. That's because it can involve a lot of volatility when it comes to setting a market price for carbon. And shareholders are not going to support the huge investments that will be needed in emissions-reducing technologies if the per-tonne price for CO2 fluctuates too much. For this reason, we are encouraged that Canadian plans include a fund to support clean energy technologies as one means of compliance. Having said that, Suncor is well-positioned to play in the emissions marketplace. We did the very first cross border trade in 1997 with Niagara Mohawk Power—a bit ahead of its time, but we did see the possibility of a North American market 12 years ago.

How concerned is Suncor by moves in several jurisdictions—in particular, California—to introduce low carbon fuel standards (LCFS) for transportation fuels?

LAMBERT: We are concerned. California is a strong potential market for us and the executive order that's set to take effect in 2010 presents a potential barrier to oil sands crude. That order establishes a goal to reduce the carbon intensity of transportation fuels sold in California by 10 per cent by 2020. The objective is laudable. It's the means we question.

You know, industry detractors have been very successful in depicting the oil sands as so-called “dirty oil.” They are often quoted in the media repeating the claim—as if it were fact—that the carbon footprint of oil sands crude is three to five times higher than conventional crude. It's simply not true.

The fact is about 75 per cent of all GHG emissions from a given barrel of oil come from combustion emissions when you and I drive our vehicles fuelled by gasoline or diesel. The rest comes from the production phase and from transporting those fuels to market. When people talk about oil sands crude being three times more carbon intensive they are focusing solely on the relatively small portion of total GHG emissions attributable to production—and neglect to talk about the much larger role that all of us play as transportation fuel consumers.

That's why it's so important to assess the footprint of hydrocarbons on a full, life-cycle “wells-to-wheels” basis. This kind of analysis is the subject of much study right now and the results are not yet definitive. But one thing is already clear: when you look at life cycle emissions, the difference in carbon footprint of oil sands crude and other sources of crude is not nearly as big as many industry critics contend.

Now, life cycle analysis is a complex business and difficult to explain in a sound bite. But the bigger point is this: whatever gap may exist in the carbon footprint of various sources of crude can and should be addressed through a variety of mechanisms—including harmonized cap-and-trade systems and investments in emissions-reducing technologies. But it doesn't make sense to me—especially at a time when energy security is such a key concern—to erect potential market barriers between Canada and the United States, as the California LCFS would appear to do. We are much better off working together on potential solutions to produce and use energy in ways that will reduce our collective environmental footprint over the long run.

You mentioned the “dirty oil” campaign. Hasn't it been quite successful in discrediting the oil sands industry?

LAMBERT: Frankly, I have to give the detractors their due. They have done a superb job of, shall we say, tarring an entire energy sector with the same dubious brush.

Now, I want to be clear—there are many legitimate concerns about the environmental impact of oil sands development. At Suncor, we recognized these early on and that's why we made sustainable development a core part of our business strategy long before it became the popular thing to do. And we've made some progress—the GHG emissions intensity at our oil sands plant is nearly half of what it was in the 1990s. But obviously much more needs to be done.

If you listened solely to some of the most vocal industry detractors, you'd be left with the impression that Canada's oil sands industry is the number one culprit when it comes to GHG emissions. But the facts are otherwise. Canada is currently responsible for two percent of global GHG emissions. Our industry, in turn, is responsible for five percent of Canada's GHG emissions. Put those numbers together and you get about 1/10th of one percent of global emissions—a small fraction of the emissions from the transportation sector and coal-generating plants, among others. Shut down the oil sands industry—and Canada's refinery industry for good measure—and you will not see a significant difference in global GHG emissions.

Does that mean the status quo is acceptable? Absolutely not. All of us—industry, governments, non-governmental organizations—have tremendous opportunities to improve current performance and to advance the technology and innovation that will reduce GHG emissions over the long run. But we need to do that work collaboratively and in an atmosphere of respect—for each other and for the facts. If we do, I'm convinced we can accomplish great things.

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