Kevin Lynch is vice-chairman of BMO Financial Group.
Despite having massive unconventional energy reserves, and repeated rhetorical assertions of being an energy superpower, Canada faces an energy security conundrum – one of demand, not supply.
Fatih Birol, chief economist of the International Energy Agency, likens today's global energy sector to a long-running Broadway play, where suddenly the roles of many of the main energy actors are being reversed. The biggest role reversal is that of the United States, which is being propelled toward net energy self-sufficiency, and energy security, on the tide of the shale-gas revolution. The other key actor switching roles is China, which will soon overtake the United States as the world's largest energy consumer and inherit its script of insecurity of energy supply.
Canada, whose energy role has been long tied to the U.S, its single export market, will have to edit its script or miss the new energy season.
The new Canadian energy narrative is easy to sketch out, but much harder to write. Canada needs to diversify its energy exports to new markets, particularly fast-growing energy consumers in Asia and possibly the increasingly energy-insecure countries of Western Europe. But achieving this involves many plot twists, since Canada lacks the transportation capacity to ship energy, oil or gas, to these potential markets. And getting the audience onside for the required new pipelines, new port facilities, new volumes of shipping and new environmental risks will necessitate clearer dialogue and better audience participation.
First, we have to shift the script from a parochial debate on "projects and private interest" to a national dialogue on "diversification of our energy markets and the national interest." Without creating a shared sense of our energy future, it will be difficult to align all the actors and interests. It is difficult to envisage building such a shared vision without either active federal and provincial government leadership or vibrant and informed public discussion.
Second, we need to move away from the current winners-and-losers plot line and introduce the national interest, with its shared benefits and mutual risks, into the script. A national-interest framework of how best to achieve energy diversification would recast the current squabbles about "licensing rights." The multiple licensing challenge should be to align commercial licence (a project must make economic sense) with social licence (a project that impacts indigenous lands or raises environmental or community issues must make public sense) with policy licence (a project must make policy and regulatory sense) and with innovation licence (a project can alter the risk-return balance through technology, which has the public trust as a problem-solver).
Third, we need some innovation in policy thinking. Continuing as we're going, repeating the same thing over and over again and expecting different results, is coming dangerously close to that famous definition of insanity. Given the enormity of the change we're contemplating – pivoting from a single energy export market that has dominated Canadian energy strategy for more than 70 years, to multiple markets on several continents – will require enormous investments and complex planning. Can and should we expect individual firms and projects to efficiently and effectively align the multiple licensing requirements to accomplish this?
One possibility is a public energy transportation corridor, stretching from coast to coast, which could include pipelines, electrical grids and other forms of energy transport. It would be established by government in the national interest. In turn, government would set the rules for those operating within the corridor, to be determined after appropriate public consultation and reflect the multiple licensing objectives. Given this certainty, the private sector would compete to build, own and operate energy transportation facilities within the corridor.
How Canada shapes its energy future will significantly influence our long-term growth prospects and prosperity across the country. We should be clearer about our national interest in the crucial area of energy market diversification.