CAPP to Ottawa: ‘We need pipelines, not barricades’
For nearly four years, Canada’s oil and gas sector has kept a low profile while managing two devastating blows — the collapse in oil prices and the barrage of environmental policies by new governments keener to jump on the green energy train than getting controversial pipelines built.
It also refrained from being too adversarial while waiting for Prime Minister Justin Trudeau to deliver on his grand bargain — pipeline approvals for a climate change plan that could constrain its future growth.
On Monday, the Canadian Association of Petroleum Producers switched to a new approach, issuing an urgent call for a course correction after sustaining such heavy damage energy investors are dumping Canada for Iran and Brazil among other places. It’s that bad. The sector’s struggles, by the way, are in stark contrast to the rosy picture of the national economy painted by the federal Liberal government, which is tabling its budget Tuesday.
“Rising government costs, the burden of inefficient regulation, lack of energy infrastructure, are moving Canadian investment further and further behind,” Tim McMillan, president and CEO of CAPP, said at a press conference in Ottawa to launch a year long-campaign to propose a new energy vision. “In Canada we need pipelines, not barricades, to supply the world with more energy. The time to build is now.”
CAPP’s vision has four key components: global connection for Canada’s oil and natural gas resources; globally competitive policies; a climate plan that is comparable to other jurisdictions competing for the same global capital; and government policies that encourage and accelerate innovation and technology in the oil and natural gas sector.
Instead, Ottawa’s energy vision prioritizes transitioning the country to renewable energy and off fossil fuels to meet aggressive greenhouse gas reduction targets, while supporting some new pipelines to diversify markets. It looks increasingly like a massive failure of policy to achieve the desired results.
Meanwhile, opponents of pipelines have hardened their positions rather than accept any pipelines at all (see British Columbia’s continuing campaign against Trans Mountain). As well, international investors are switching to jurisdictions with far worse environmental impacts and less regulation, Canadian energy companies are moving spending to the U.S., the world is not getting off oil and gas any time soon, and no pipelines have been built.
More specifically, McMillan said: Two export pipeline projects have collapsed (Energy East and Northern Gateway) and three approved pipelines (Trans Mountain, Line 3 and Keystone XL) are stuck in regulatory and legal battles; 50 policy initiatives to improve environmental standards at the provincial and federal governments are fuelling uncertainty and increasing costs; the window is closing yet again to build liquefied natural gas export terminals in Canada.
While investment in oil and gas globally is increasing to take advantage of higher prices, spending on Canadian oil and natural gas, at $45 billion in 2017, was down 19 per cent from 2016 and down 46 per cent from 2014.
In the U.S., Canada’s biggest competitor, spending on oil and natural gas last year increased by 38 per cent to US$120 billion.
“It’s taken Canada 150 years to grow its oil and natural gas production to current levels and only eight years for the U.S. to accomplish the same,” McMillan said.
That’s not the only way the Americans are taking advantage of Canada’s lack of competitiveness. Discounts on Canadian oil due to lack of pipeline space are costing Canada as much as $100 million a day, while subsidizing U.S. refineries and consumers, McMillan said.
He suggested Ottawa may have to go farther than simply re-iterating that it supports pipelines like Trans Mountain because “there is a well-organized opposition of well-funded activists out of the U.S. to keep Canada boxed in.”
McMillan said Canada has become an outlier on climate policy because no one is following its lead among major energy producers.
“When it comes to a price on carbon … we really stand alone,” he said. “If you look at the world’s top 10 energy producers, none of them have a price on carbon … If we put policies here that are so inconsistent with our competitors, we will achieve nothing other than loss of jobs and investment in Canada, only to see that production increase in Iran and Venezuela and Saudi Arabia. We are not talking about what could happen, we are talking about what is happening.”
Policies based on the assumption that the world will use less oil and gas in the future are “irresponsible, because no credible organization is putting forward a model that sees anything other than a substantial growth,” he said.
The International Energy Agency forecasts that oil and natural gas will continue to make up the largest part of the total energy mix with increased urbanization and population growth, accounting for 52 per cent of the total energy demand by 2040, and Canada should positioning itself as the supplier of choice because of its higher environmental standards, he said.
Canada can still be back as an environmental leader, just do what’s best for its economy.
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