Category Archives: oil

Oil tanker ban: Bill C-48 and environmental hypocrisy

Kinder Morgan tanker at terminal

The House of Commons Standing Committee on Transport, Infrastructure and Communities is reviewing Bill C-48, the Oil Tanker Moratorium Act.

This Act would ban tankers carrying more than 12,500 tonnes (about 90,000 barrels) of crude oil or persistent oils (things such as fuel oils, partly upgraded bitumen, synthetic crude oils and No. 6 bunker fuel) from stopping, loading and unloading at any ports along B.C.’s north coast.

There is no similar ban on any oil tanker traffic along any of Canada’s other coastlines. Even on the West Coast, more than 95 per cent of tanker traffic carrying crude and other persistent oils happens along the southern part of B.C.’s coast – not the north.

This proposed ban is loaded with hypocrisy.

In acting for all Canadians – as it should – the committee must ask some basic questions.

Why a ban on specific tanker traffic along a specific section of Canada’s West Coast, when there are no similar bans on any traffic along any other Canadian coastline? What differentiates the northern West Coast from other Canadian shores? For example, both the north and south sides of the entire St. Lawrence River, where tankers travel regularly to bring oil from Saudi Arabia, Algeria and Nigeria? Is it because that oil means important jobs for refinery workers in Montreal, Sarnia and Quebec City?

What of the coastline of New Brunswick, along which oil tankers travel regularly to deliver oil from Saudi Arabia ($1.6-billion worth last year alone) to the Irving Oil refinery? Ah yes – much-needed jobs in New Brunswick.

How about the ruggedly beautiful coast of Newfoundland, with significant oil rigs operating offshore? Of course – they have meant the difference between poverty and prosperity for many Newfoundlanders.

Consider Vancouver – it is a bustling city, but why is it any less deserving of environmental protection than any other part of the coastline? There is wildlife, there are residents and there is tourism, all of which would be affected by a spill. Except that the city of Vancouver would not exist as it is without being a major port. As for Vancouver Island, including Victoria, all of the gas, oil and other fuels used by the people there – who elected all three of B.C.’s Green Party MLAs – get there by barge.

The northern West Coast is beautiful and pristine, but it does not have a monopoly on either of those qualities. All of Canada’s coastlines, ocean as well as inland waterways, deserve protection, which is why we must do all we can to mitigate risks and invest in oil spill containment and remediation. But with all of our other coastlines, we recognize the need for marine transportation, without which our economy, and our society, would not exist as it does.

The federal government’s commitment to spend $1.5-billion on an ocean protection plan is a big step in this direction. We have a responsibility to all of our shorelines. But we also have a responsibility to ensure Canadian economic prosperity, and to ensure fairness across the country.

The main problem with this ban is that it would prevent Canadian oil from getting to Asian markets via, for example, the deep-water ports of Kitimat or Prince Rupert – and thus directly hurt the Albertan economy and Alberta jobs. It is, in large measure, the work of an anti-oil sands lobby run amok.

If we really want to be honest, and fair, about addressing the environmental concerns around an oil spill, anywhere on Canada’s coastlines, we have two choices:

1. Ban all shipping traffic along all of Canada’s coasts. After all, the greater likelihood of a spill comes not from the now-required double or triple-hulled tankers, but from ships travelling these routes with fuel in their bunkers and their bilges.

2. Acknowledge that marine transportation is critical to our economic prosperity, across the country – but develop and implement the best ways to prevent spills, to contain them, and to clean up when they do happen – because one can never guarantee 100 per cent no risk.

The first option, a total ban on shipping, is clearly not possible. Canada’s economy would grind to a halt.

But we must not pick and choose where and when we exercise our environmental conscience – particularly when doing so favours jobs in some parts of the country but kills others. Notwithstanding incredible developments in energy technology and renewables, the world will continue to need oil for at least several decades to come. Why prevent Canada from selling what we have to the world – a concept that built this country with every other resource we are blessed with?

The irony is that Canadian oil is now being produced with less GHG emissions per barrel than some that we import, and with much more stringent labour and other environmental regulations. On that basis alone, we should be encouraging the sale of Canadian oil to the world, not discouraging it.

So let’s focus, not on a politically motivated and selective ban that will unfairly hurt some Canadians, but on how to ensure the best environmental protection on all of Canada’s equally deserving coasts while ensuring our economic prosperity.

Martha Hall Findlay is President and CEO of the Canada West Foundation.

Growing interest in Canada’s liquids-rich natural gas helps bump up 2018 drilling forecast

Oh, and WTI is over $55/barrel this morning – the highest we’ve seen in over 2-years.
Eric

_______________________________

Growing interest in Canada’s liquids-rich natural gas helps bump up 2018 drilling forecast

By Deborah Jaremko|

Oct. 31, 2017, 5:10 p.m.

http://www.jwnenergy.com/article/2017/10/growing-interest-canadas-liquids-rich-natural-gas-helps-bump-2018-drilling-forecast/

mark salkeld

PSAC president Mark Salkeld. Image: Pipeline News

The cautious optimism and uptick in activity that led two increases in Canada’s drilling forecast for 2017 is carrying through to 2018, according to the Petroleum Services Association of Canada (PSAC).

PSAC released its projections for next year on Tuesday, forecasting a total of 7,900 wells to be drilled in Canada in 2018 compared to its revised estimate of 7,550 wells for 2017.

The 2018 forecast is based on crude oil prices of US$53/barrel (WTI), average natural gas prices of C$2.50/mcf (AECO), and the Canadian dollar averaging US$0.82.

“Budgets set with initial optimism for a gradual climb in prices by year-end continue with their plans as drilling and completion efficiencies improve,” PSAC president Mark Salkeld said in a statement.

“Due to pressure to stay low, costs for services continue to be suppressed, affording better margins for producers. For 2018, confidence that oil will stay in the low-to-mid US$50 range as markets tighten and inventories reduce, along with growing interest in Canada’s vast liquids rich natural gas, should support a 4 – 5 per cent increase in activity levels.”

PSAC noted that while activity is expected to increase next year, it will still be down about 30 percent from 2014.

“The cancellation of TransCanada’s Energy East pipeline is another blow to investor confidence in Canada and so PSAC will continue to advocate hard for market access and a competitive environment,” Salkeld said.

“The world’s energy needs are growing and polls show that countries would prefer Canadian oil and gas that is responsibly-developed and working to reduce carbon emissions through innovation.”

Foreign oil into eastern Canada graphic

Foreign oil into eastern Canada

Sask. carbon reduction plan coming by end of year, says minister

Sask. carbon reduction plan coming by end of year, says minister

Feds have given provinces until 2018 to decide on their preferred option

Dustin Duncan

CBC News Posted: Oct 26, 2017 1:07 PM CT Last Updated: Oct 26, 2017 1:31 PM CT

The Saskatchewan government says its own tailored plan for how to reduce carbon emissions will be unveiled in the next month and a half.

But little else is confirmed about the highly-anticipated plan.

Environment Minister Dustin Duncan gave a brief update on the plan Wednesday, following a throne speech that doubled down on the province’s staunch opposition to the carbon-tax-or-cap-and-trade demand the federal government issued to provinces.

Duncan suggested that industry members will be warm to the Saskatchewan proposal once it’s released before the current session of the legislative assembly wraps on Dec. 6.

“We want to build in a great deal of flexibility for how industry is going to achieve the standards that we put in place,” said Duncan.

“We’re still working that through the process in terms of what type of flexible mechanisms will be in place.”

Duncan also said that the plan will “build on” the climate change white paper released by the province a year ago.

Besides calling on the federal government to redirect more than $2 billion earmarked for climate change measures in developing countries to research and innovation programs in Canada, the white paper also proposed charging a levy on large emitters.That money is to be used for new technology and innovation to reduce greenhouse gases.

Deadline looming

Duncan went on to refer to the plan as “a much more fulsome, well-rounded plan” than either a price on carbon or a cap-and-trade system.

Saskatchewan is cutting it close: the federal government has given provinces until 2018 to decide on their preferred option.

Duncan said Saskatchewan expects to hear from Ottawa about its tailored plan before the deadline.

The throne speech highlighted other ways the province has looked to cut its emissions, such as SaskPower’s intended aim to expand renewable power to 50 per cent of its total generating capacity by 2030.

The utility’s Boundary Dam 3 project, which the province poured $1.3 billion into, has cut the province’s carbon dioxide emissions by 1.6 million tonnes, taking the equivalent of 400,000 cars off the roads, according to the government.

 

 

 

Which industry best creates wealth and reduces poverty in Canada? Resources (as usual)

Which industry best creates wealth and reduces poverty in Canada? Resources (as usual)

Mark Milke: What’s in the ground helped produce a dramatic increase in living standards over the last decade

Special to Financial Post

October 24, 2017
7:30 AM EDT

oil project

With the recent cancellation of TransCanada’s Energy East pipeline — after the company spent $1 billion in attempts to jump through ever-changing regulatory and political hoops — it is time to remind ourselves as Canadians where much of our country’s recent economic uptick originated.

Answer: In resource exploration and extraction.

This was illustrated again recently, just before the TransCanada announcement, with Statistics Canada’s recent release of key census data. The data revealed how median Canadian household income rose to $70,336 by 2015, up almost $6,900 from $63,457 in 2005 or nearly 11 per cent.

The provincial breakdowns are even more revealing than the national figure. Median income went up by $20,161 in Saskatchewan (37 per cent), $18,151 in Alberta (20 per cent) and $15,068 in Newfoundland and Labrador (29 per cent).

In contrast to these booming provinces, manufacturing in Central Canada took a hit

As Statistics Canada noted, “An important factor in the economic story of Canada over the decade was high resource prices.” The agency further observed how “that drew investment and people to Alberta, Saskatchewan and Newfoundland and Labrador, boosted the construction sector, and more generally filtered through the economy as a whole.”

In contrast to these booming provinces, manufacturing in Central Canada took a hit. Incomes there barely rose: Quebec saw a modest $4,901 rise (8.9 per cent) and Ontario was a national laggard with incomes increasing by a paltry $2,753 between 2005 and 2015 (only 3.8 per cent higher).

Which is where a caveat should be added to the Statistics Canada commentary that “high resource prices” explain significantly increased incomes. High resource prices — be they for oil, gas, lumber or minerals — help, but only if a province or region allows its resources to be explored, extracted and then shipped to market.

The Maritimes mostly sat out the boom in resource prices

The Maritimes mostly sat out the boom in resource prices because, for example, Nova Scotia and New Brunswick banned onshore exploration and extraction of natural gas. That was unlike Saskatchewan, Alberta and northern British Columbia.

Unsurprising then, New Brunswick’s median income in 2015 was $59,347, the lowest among all provinces. It did record 15-per-cent growth over the decade, but that statistic looks less impressive given New Brunswick’s low point in 2005 and its still-lowest ranking today. As a comparison, New Brunswick’s median income in 2015 was almost $8,000 lower than in Newfoundland and Labrador, where incomes soared by almost double that of New Brunswick. A lack of private sector investment in a profitable energy resource sector will do that.

Quebec provides other examples, both of foregone opportunities and the potential for income growth, when governments say “oui” to Canada’s comparative advantage in resources instead of “non.”

Quebec missed much of the benefit of higher resource prices because of political opposition to oil and gas

Quebec missed much of the benefit of higher resource prices because of some local and political opposition to oil and gas development. But of note, when the resource sector was allowed to thrive in Quebec, it did. As Statistics Canada observed “several metropolitan areas in resource rich areas had relatively higher income growth.” They include Rouyn-Noranda (+20.4 per cent), Val D’or (+18.0 per cent) and Sept-Îles (+13.4 per cent). That’s more “green” in the pockets of workers.

The lesson should be obvious: One comparative economic advantage for Canada is in natural resources. And this matters not just for faster-growing median incomes but also for drops in poverty. For example, resource-friendly Newfoundland saw the St. John’s low-income rate fall to 12 per cent from 16 per cent. Saskatoon’s low-income rate fell to 11.7 per cent from 15.2 per cent.

In contrast, Ontario, affected by the loss of 300,000 manufacturing jobs, recorded dramatic increases in poverty rates. That includes London (where low-income rates rose to 17 per cent by 2015 from 13.3 per cent in 2005) and Windsor (up to 17.5 per cent from 14 per cent).

It is clear from the data that resources are a critical driver of employment and incomes

Some people would still respond to all this with the old line that Canadians should seek to be more than “hewers of wood and drawers of water” (a phrase that wrongly depicts the forestry and hydro sectors as backward). That notion makes little sense because Canadians can and do invent, run and expand businesses in every sector, from hi-tech, to green sectors to tourism and finance, in addition to resources. But it’s clear from the data that resources are a critical driver of employment and incomes in Canada.

Insofar as politicians overlook resource advantages and hobble the sector with endless, ever-changing regulation, they ignore how what’s in the ground helped produce a dramatic increase in Canada’s living standards over the last decade.

To belittle or even attack Canada’s comparative advantage in resources is to neglect the positive effect this sector has on Canadian living standards. Snubbing opportunities in developing natural resources comes at the expense of additional jobs and better incomes for the poor and the middle class.

Mark Milke is an author and energy analyst.

 

 

 

BHP presents united front against activist Elliott at AGM

 

BHP presents united front against activist Elliott

Reuters Staff

OCTOBER 19, 2017 / 11:23 AM / UPDATED AN HOUR AGO

By Barbara Lewis and Zandi Shabalala

LONDON, Oct 19 (Reuters) – The new chairman of BHP , the world’s biggest miner, threw his weight behind his CEO on Thursday after attacks from activist investor Elliott Advisers prompted speculation that the end of Andrew Mackenzie’s tenure was imminent.

Pressure has mounted on BHP and its chief executive since Elliott went public in April with its criticisms of the miner’s strategy.

“Any suggestion there is a set timeline around Andrew’s tenure is simply false and without merit,” Chairman Ken MacKenzie told reporters after his first AGM since taking office at the start of September.

Asked by a shareholder whether it was Elliott or the BHP board that was running the company, the chairman replied that “MacKenzie and Mackenzie” were running BHP, though he did not specify the order of the pair who share the same names but with slightly different spelling.

At least five representatives from Elliott Advisors, which holds 5 percent of BHP, attended the London meeting but did not ask questions from the floor.

Elliott declined to comment on Thursday, though it has welcomed the new chairman’s appointment.

Chairman MacKenzie said he had met more than 100 shareholders across eight countries, which he said gave him confidence, though he added that there are areas where the company needs to sharpen its focus.

He reiterated that work is in progress to sell shale assets, which is one of Elliott’s main demands, and that further action would take place to refresh the board of directors.

SKILLS REVIEW

“We recognise that the board needs to continue to evolve to take into account the rapidly changing environment in which we operate. So we will undertake a review of the board’s skills and experience requirements during this financial year,” he said.

BHP’s London share price has risen nearly 7 percent since the start of the year, about half as much as that of its main rival Rio Tinto.

Both the chairman and the CEO said they were striving to maximise shareholder value and that meant that shale assets would be sold only at the right price.

“We will be both urgent and patient as we examine all the options,” CEO Mackenzie said. “We have to get the timing right to maximise shareholder value.”

BHP’s big rival Rio Tinto suffered a setback this week when the U.S. Securities and Exchange Commission (SEC) charged the company and two of its former executives with inflating the value of coal assets in Mozambique and concealing critical information. The company said it would defend itself vigorously against the allegations.

Chris LaFemina, a mining specialist at Jefferies bank, said he had preferred Rio over BHP for the past two years.

“While our preference has not changed, BHP’s competitive position has modestly improved,” he said in a note.

“New chairman Ken MacKenzie seems willing to push for significant strategic changes at BHP … after years of unacceptable underperformance of its share price versus Rio‘s.” (Editing by Elaine Hardcastle and David Goodman)

Husky gets approval from Saskatchewan to restart pipeline after oil spill

Husky gets approval from Saskatchewan to restart pipeline after oil spill

Husky spill clean up
Crews work to clean up an oil spill on the North Saskatchewan river near Maidstone, Sask., July 22, 2016.

JASON FRANSON/THE CANADIAN PRESS

REGINA

THE CANADIAN PRESS

OCTOBER 12, 2017

The Saskatchewan government has given Husky Energy the OK to restart a pipeline after a major oil spill along the North Saskatchewan River in July 2016.

The government says in an e-mail to media that testing, inspection and evaluation of the repairs to the line have been done.

The pipeline leaked 225,000 litres of heavy oil mixed with diluent onto a riverbank near Maidstone and about 40 per cent of the spill reached the river.

Husky’s own investigation concluded that the pipeline buckled because of ground movement.

The government says measures have been taken to mitigate the risk of a future failure at that spot, including thicker pipe on a sloped portion, ground movement monitors and gauges to measure strain along the replaced sections of pipe.

Saskatchewan’s Justice Ministry is still reviewing Husky’s response to alarms before the spill to decide whether charges should be laid.

 

 

 

TransCanada kills controversial Energy East Pipeline project

TransCanada kills controversial Energy East Pipeline project

neb energy east
TransCanada President and CEO Russ Girling announces the new Energy East Pipeline during a news conference in Calgary, in this August 1, 2013 file photo.

TODD KOROL/REUTERS

OCTOBER 5, 2017

TransCanada Corp. is killing its controversial Energy East pipeline project.

Also dead is its Eastern Mainline proposal, the company said Thursday.

“After careful review of changed circumstances, we will be informing the National Energy Board that we will no longer be proceeding with our Energy East and Eastern Mainline applications,” chief executive officer Russ Girling said in a statement.

“We appreciate and are thankful for the support of labour, business and manufacturing organizations, industry, our customers, Irving Oil, various governments, and the approximately 200 municipalities who passed resolutions in favour of the projects.”

TransCanada added it will focus on its $24-billion capital spending program, which should boost earnings and cash flow, and support dividend increases of 8 to 10 per cent a year through 2020.

It will take a hit in its fourth-quarter earnings.

“As a result of its decision not to proceed with the proposed projects, TransCanada is reviewing its approximate $1.3-billion carrying value, including allowance for funds used during construction (AFUDC) capitalized since inception and expects an estimated $1-billion after-tax non-cash charge will be recorded in the company’s fourth quarter results,” it said.

“TransCanada stopped capitalizing AFUDC on the project effective Aug. 23, 2017, as disclosed on Sept. 7, 2017. In light of the project’s inability to reach a regulatory decision, no recoveries of costs from third parties are expected.

Canada keen to see Trans Mountain pipeline built, get more oil to China – Federal Minister Carr

Canada keen to see Trans Mountain pipeline built, get more oil to China: Carr

By The Canadian Press

Oct. 3, 2017, 3:15 p.m.

Jim Carr

Jim Carr. Image: Government of Canada.

Canada will continue to produce oil and ship it across the country whether or not new pipelines are built, says the federal minister of natural resources.

Building pipelines just means it can be shipped more safely, Jim Carr says in a recent interview with The Canadian Press.

Next week, Carr will play host to a major conference in Winnipeg looking at how Canada can and will adjust to a low-carbon energy world.

However, he says, even as Canada adapts to that new world, oil resources will be extracted and will continue to be shipped.

Getting more oil to the West Coast so it can be loaded on tankers and sold to China will be better for the country and getting it there on pipelines rather than rail cars is better for everyone, he says.

The federal government’s approval of the Trans Mountain pipeline is under a legal microscope this week as Indigenous and environmental groups and British Columbia cities argue the process was incomplete and failed to take into account the impact the pipeline could have on everything from killer whales to waterways.

The $7.4 billion pipeline project is being built by Trans Mountain, a subsidiary of Kinder Morgan, to more than double the capacity of an existing line between Edmonton and Burnaby, B.C.

The federal Liberals gave the green light to the project last fall, after making changes to the review process that Carr said included more Indigenous engagement.

“We approved it because more than 15,000 jobs will be created,” Carr said. “We approved it because we don’t feel comfortable sending 99 per cent of our oil and gas exports to one country, the United States.”

Whether there was enough Indigenous engagement is one of the key questions that will be answered by a court case underway in B.C. this week.

Carr said the government remains keen to have the line built. He said the judge will decide whether it can proceed, but the government believed the project was in the national interest when it approved it last fall and still thinks so today.

“Nothing has changed that would alter our judgment on why it was approved,” Carr said.

Next week’s Generation Energy conference in Winnipeg is a key moment for Carr in his tenure as natural resources minister, as his mandate letter calls for the creation of a national energy strategy. That includes working on energy security and making it easier to produce and transmit cleaner energy across the country.

Carr said many key policies and solutions in Canada have come from similar conferences. He also said there is no battle between moving to a low-carbon economy and continuing to produce oil in Canada.

“There are examples around the world where the production and distribution of conventional sources go hand in hand with investment in renewable sources of energy and that’s happening more and more now in Canada,” he said.

 

 

 

Is the Canadian energy industry approaching a tipping point?

Is the Canadian energy industry approaching a tipping point?

By Ron Wallace

Oct. 2, 2017, 3:03 p.m.

http://www.jwnenergy.com/article/2017/10/canadian-energy-industry-approaching-tipping-point/

Kinder Morgan pipe

Can Canada afford to be unique among energy producing countries and not use, or export for its own benefit, its hydrocarbon resources? Such questions and challenges extend to the very heart of the Canadian national interest.

In announcing the final federal cabinet decision on the Northern Gateway Pipeline project—after years of consultations and hearings and hundreds of millions of dollars expended by the proponent and court rulings that effectively excoriated the federal government’s role in aboriginal consultations—Canada refused to permit a 1,200-kilometre pipeline.

The decision favoured environmentalists’ arguments to protect the westernmost reaches of the Great Bear Rain Forest and make permanent a tanker moratorium along the northern coastline of B.C. It also overruled the science, evaluations and conditions previously set by the joint National Energy Board (NEB)–Canadian Environmental Assessment Agency panel in approving the project.

The decision to reject Northern Gateway sent shock waves through industry and investor boardrooms while the parallel approvals of Enbridge’s Line 3 and Kinder Morgan’s Trans Mountain Expansion were, in turn, met with dismay by many environmental activists.

Such a convoluted decision process was the culmination of changes made by the previous Conservative government that gave the cabinet the final decision on major pipeline projects. Under this system created in 2012, the NEB recommends a course of action after its environmental and regulatory process, and the cabinet has full discretion to accept, reject or modify that recommendation. Inevitably, this process has led to the politicization of a quasi-judicial, fully integrated environmental and regulatory process designed to adjudicate the national energy applications. Accordingly, one would be right to question if this history, and the subsequent decisions made by successor cabinets, constitutes balanced decision making that reflects the national interest and provides clear rules for proponents and the public.

Canadian political attentions will now turn to Kinder Morgan’s $6.8-billion Trans Mountain Pipeline expansion. Current political leaders in BC after the narrowest of election victories have vowed to use “every tool available to stop” the project, starkly in the face of project approvals by the NEB and the Federal Cabinet.

These are not just political or regulatory issues; they extend into material questions of constitutional rights and the rule of law. The latest unique decision by the novice NEB Energy East panel to require a review of upstream greenhouse gas emissions associated with the project may yet lead to a fundamental re-examination of constitutional powers for resource development between provincial and federal governments.

It may also lead to further questions about the NEB’s mandate. In such circumstances, many would consider it unlikely there could be any regulatory certainty or even determinations of the national interest in a house so divided. The regulatory and political certainty required by international investors for major projects has been significantly eroded just when Canada’s energy industry is struggling to maintain its competitiveness in an era of reduced prices and limited exports.

Is it possible for Canada and its energy sector to become greener and more innovative while enduring lower profitability, restrictions to market access, significant capital flight and major project cancellations?

The regulatory authority of the NEB, previously affirmed by the Supreme Court, has been undermined to the extent that a host of jurisdictions, ranging from the federal government down through to municipalities, now presume, if not demand, a final say in Canadian energy development and transportation. The consequential erosion of the pre-eminence of the regulatory powers of the NEB is creating fundamental uncertainty and makes problematic any determinations that reflect the national interest. The federal government’s initial intentions to restore public confidence in the NEB by modernizing the regulator has increasingly been eclipsed by far more pressing concerns of the economy, the national interest and, perhaps, the ability of the Canadian energy sector to survive such disparate, concerted regulatory assaults from so many sectors.

The Supreme Court has been thrust into the mix as a direct result of a federal government that has consistently demurred from issuing clear rules for aboriginal consultation and accommodation. Worse, governments appear content to hide behind the skirts of the NEB when issues related to consultation are concerned.

While the Courts have been forced to balance individual and aboriginal rights in arbitrating contested developments, Ottawa appears unable, or at least unwilling, to address the uncertain regulatory environment that has arrived. Fortunately, the latest ruling by the Supreme Court suggests that it does not equate the constitutional duty to consult with a veto over development—a useful legal clarification, but it perhaps constitutes one in a long series of decisions that may be viewed by some as being too little and far too late.

The real casualties of this regulatory morass are investors, shareholders and Canadians.

Proponents have expended hundreds of millions of dollars in a complex Canadian political, legal and regulatory environment only to find that final decisions are made at the political level behind closed doors using rules and standards previously undisclosed. Such decisions made so late in the regulatory process fundamentally affect how investors view Canada and this directly influences future corporate investment decisions.

Previously, while corporations may have voiced concerns about the length of time of Canada’s regulatory approval processes, many were prepared to invest millions, if not billions, of dollars to complete balanced, fair regulatory processes. The development of the intense fractionation of Canada’s regulatory processes has been paralleled by a staggering flood of capital out of Canada’s resource development sector. Competing claims and demands from numerous levels of government, unresolved aboriginal claims and the outright hostility from well-organized opponents have undermined even the most determined efforts of applicants.

The subsequent collateral damage to Canada includes aboriginal communities who have negotiated benefits agreements in their favour. Can Canada truly afford such a callous disregard of the capital markets and ignore the realities of a highly competitive international natural resource marketplace?

There are other ironies. Proponents are subjected to gruelling regulatory and public examinations of their project proposals. By contrast, the political decisions and policies advanced by the cabinet are not subject to any substantive analysis of their regulatory impacts. Instead, single-issue determinations of policy are unveiled by governments with little or no apparent understanding of the social or economic consequences of the long-term impacts of these policies. The developing attitude appears to be that Canada is prepared to accept virtually any cost or penalty to save the globe. This is a remarkable situation whereby Canadians are increasingly subjected to the global aspirations and ideologies of the elected establishment, which may be far more attuned to the expectations of international agreements than to the immediate interests of its own citizens.

Recall that, historically, the energy sector has ranked first as a contributor to Canada’s overall positive trade balance. The energy industry is estimated annually to contribute $15 billion to government coffers. However, Canada has no choice but to export oil and gas to U.S. buyers at greatly diminished prices, handicapped by a captive-market discount that has been estimated to provide a daily subsidy of $US38 million to U.S. producers who are free to sell or export that same oil at international market prices. These forces explain the Canadian Association of Petroleum Producers’ recent forecasts that Canadian oil and gas capital expenditures will decrease to $44 billion in 2017—half the $81 billion expended in 2014.

These Canadian political and regulatory uncertainties arrive precisely when the U.S., rightly or wrongly, has set out to undertake significant rollbacks to the Obama administration’s legacy, including material changes to Environmental Protection Agency (EPA) regulations and the the Clean Power Plan, a withdrawal from the Paris Agreement, and a renegotiation of the North American Free Trade Agreement.

Canada’s largest single-energy market is increasingly becoming its biggest competitor as it implements measures to diminish federal regulatory authorities and restore sweeping powers to individual states. Such aggressive measures are evidence of a controversial determination by the U.S. to reduce regulatory and tax burdens just at a time when Canada appears headed in a significantly different direction. In short, the U.S. political and regulatory environment has swung wildly from the Obama era of heightened regulatory intervention to the Trump era of deregulation. At the same time, Canada has taken a markedly divergent path from the U.S., its largest single market and one that is changing dramatically.

Scott Pruitt, the EPA’s administrator, recently remarked “the regulatory assault [on the mining industry] is over.”

Irrespective of political or environmental views, especially in light of continuing Canadian regulatory commitments, clearly Canada and the U.S. have diverged in their approaches to the regulation of their resource industries—and in their respective competiveness in the global marketplace. The Canadian Chamber of Commerce recently warned that the federal climate change plan combined with regulatory measures for emissions and a minimum carbon price could seriously undermine Canada’s competitiveness.

In response, Catherine McKenna, the minister of environment and climate change, asserts that “the strongest economies of the next century will be those that nurture business transition and attract companies that want to invest in climate-committed jurisdictions.” She adds that she speaks with those “who don’t see this global shift as a competitiveness problem, but rather a cutting-edge responsibility.”

While many Canadians may prove willing to endure the 83 years until the next century to confirm McKenna’s highly ideological, largely unsupported assertions, it is doubtful that the energy industry or its investors will be so patient. Using as an example the massive energy policy interventions in Ontario, the real costs of such unilateral policy and regulatory commitments may increasingly be marked by few tangible environmental gains but be accompanied by material negative economic, financial and social consequences.

China constitutes another example of the global shift in energy policy. China aggressively stepped in to the void created by the U.S.’s withdrawal from the Paris Agreement and has trumpeted its determination to become a major exporter of solar panels and wind turbines with accompanying construction initiatives such as the Quaid-e-Azam Solar Park, one of the world’s largest, in Pakistan.

China, with much credulous international environmental acclaim, has been forced to halt the construction of 100 new in-country coal-fired power plants—driven not so much by international concerns for global warming but by national concerns over severely diminished air quality from local smog and pollution. It is less reported that China will be responsible for the construction of almost half of the new international coal generation coming online in the next decade.

The New York Times cites reports of 1,600 coal plants currently under construction or planned in 62 countries. This will result in a 43 per cent expansion in the global coal-fired power base. Developing countries are relentlessly being drawn into a cycle of coal-generation dependency. Chinese firms have plans to construct coal-fired power plants internationally with a capacity of 6,285 megawatts—almost 10 times the 660 megawatts planned within China. The China Development Bank and the Export-Import Bank of China have provided in excess of US$43 billion for overseas coal financing. This investment is paralleled by the National Power Corporation of India’s plans to build 38,000 megawatts of new coal capacity in Bangladesh and India.

Simple mathematics probably provides the best guide to understanding the political rhetoric and international posturing associated with the climate debate. With burgeoning international emissions that effectively defeat even the most stringent Canadian national efforts at emissions control, one could question if Canadians should be subjected to the monumental economic burdens resulting from a plethora of carbon-reduction strategies. The recently announced plans to implement a Canadian national carbon tax and to phase out coal-fired power is estimated to achieve respective 18-megatonne and five-megatonne reductions in emissions by 2030—figures that are dwarfed by the growth in international emissions. In sum, Canadian hydrocarbon production will quickly be filled by other international producers, as will any reductions in Canadian greenhouse gas emissions.

Canadians need to understand comprehensively just what is at stake. Decisions that will determine the future social and economic well-being of the country surely require a balanced, informed debate that builds a coherent national strategy for energy and natural resources. Regrettably, many are increasingly concerned that we eroding the rule of law and political unity within the Canadian federation to a degree that will make objective definitions of the national interest unattainable.

What is certain is that Canadians are faced with the immediate consequence of a significantly altered energy future with a rapidly diminished international investment capital base.

When a federation dissolves into narrow definitions of federal, provincial and local government interests the number of hands in the pot increases the complexity of issues for everyone. Such jurisdictional complexities also expand the amount of time needed to navigate all the interconnected issues through competing jurisdictions that increasingly include First Nations and local governments. The result is a complex, often contradictory and competing web of legislative and regulatory tools whose resolution should not be achieved by continuous references to federal courts. The urgent responsibility for resolving these challenges is with all Canadians, especially its leaders, who may soon be confronted with undesirable economic and social consequences of current actions and decisions.

 

 

 

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