Premier hoping to build Keystone support with small carbon levy

Miles of pipe ready to become part of the Keystone Pipeline are stacked in a field near Ripley, Okla., Wednesday, Feb. 1, 2012. (AP / Sue Ogrocki)

WASHINGTON -- A modest levy on the oil-and-gas sector might be a good idea if it helps buy some goodwill in Washington, Saskatchewan Premier Brad Wall said Wednesday during a trip to the U.S. capital.

Any such penalty would need to be small, he stressed.

"I think you start slow and see what impact it has on the economy," Wall told a group of Canadian journalists at a roundtable discussion.

"I don't think you want to kneecap your economy with a carbon tax."

He pointed to Alberta's initial $15-a-tonne levy on greenhouse gas emissions as a guide. The amount is deemed insignificant by environmentalists and Alberta's own provincial government has signalled a willingness to nearly triple the fee.

But Wall said that kind of rate would be a start, and would help win powerful American support. He said it would help create the political "elbow room" President Barack Obama needs to approve Keystone XL.

He said there's now a political window for Obama to approve the Keystone XL project, and create some jobs, before this year's midterm elections. He said it might be easier to get that approval from the president, who is under pressure from his left-wing base, if he can point to some Canadian action on the environment.

Both Obama and the Canadian government have expressed a willingness to work together on new greenhouse-gas initiatives, and a presidential decision on Keystone is expected within months.

Wall offered his take on what the new regulations might look like.

He said he hopes the federal government sets targets for greenhouse-gas emissions, harmonizes them with the U.S., then gives each province the flexibility to establish its own financial penalty for going over the limit.

Wall added a defiant caveat, however: He can't believe the Keystone discussion has come to this.

While environmental concessions might make sense now, Wall said, Keystone should never have required what he called a "trick" -- meaning new GHG actions -- to get approval in the first place.

Some 75 pipelines already criss-cross the border under the "nose" of activists like actress Darryl Hannah, said Wall, adding he was stunned to see Keystone XL become such a rallying point for environmentalists seeking to pressure the administration.

He admitted that Canadian leaders were caught flat-footed when environmental concerns stalled the project. He said everyone -- the Harper government, provincial governments, and industry -- all share some of the blame.

"We could beat ourselves up over what we could have done. But who would have thought (this would happen)?" Wall said.

"We've got people with really big megaphones and not a lot of technical ... credibility influencing a bunch of people on this thing."

Wall is in Washington to meet with pro-Keystone lawmakers, as well as a White House official, in addition to selling the merits of Saskatchewan's carbon-capture technology that he says could benefit both the coal and oil industries in the U.S.

On new regulations, however, one environmental economist said Wall's logic defeats itself.

If the whole point of introducing rules is to convince the Americans you're doing something on climate change, and then you insist on weak rules so the oil industry isn't affected, he said, isn't there a conflict there?

"In some ways those arguments feed into the opposition," said Andrew Leach, a professor at the University of Alberta and a former federal official. "Then you're essentially saying exactly what the (Keystone) opponents are saying."

Leach said that kind of mixed messaging has been typical of the Keystone debate.

He said it's been similar with the Alberta government, which went from calling the pipeline indispensable to the expansion of the industry to now suggesting it won't really make a difference.

A State Department environmental review actually backed up the latter assessment, saying the Canadian oilsands would likely keep growing at a similar rate -- with or without KXL.

However, environmental groups have questioned the credibility of the study. They drew attention to one news report Wednesday that suggested the State Department had wildly overestimated the use of rail to transport oil from Canada.