It’s the revenge of the national energy program.
The federal government approved two massive oil patch takeovers Friday but is banning virtually all future takeovers of oil sands companies by foreign state-owned enterprises.
The new rules thrust Ottawa back into the debate over Canada’s energy future, challenging the foundation of three decades of energy policy – namely, that the free market alone determines who owns what in the oil patch, and where the energy flows.
No one is advocating another NEP, least of all Prime Minister Stephen Harper. Speaking to reporters on Friday, he lamented that Ottawa has spent decades exiting the oil business only to see an ominous trend of foreign governments buying in. He said the new rules are aimed at ensuring that a free-market industry doesn’t fall under the sway of foreign governments and the companies they control.
The new restrictions come as Ottawa and the provinces are facing growing pressure to put aside their differences and forge a common energy plan for the country.
Alberta Premier Alison Redford has been rallying support for a “national energy strategy.” Interim federal Liberal Leader Bob Rae wants one too. Many experts say such a move is long overdue.
“CNOOC is part of a much bigger strategic question for Canada,” argued Fenn Hampson, director of Carleton University’s Norman Patterson School of International Affairs. “There is going to be new competition in the North American market and it requires diversification.”
The U.S., which consumes more than 90 per cent of Canadian energy exports, is on the road to self-sufficiency. If Canada wants to escape that trap and make the most of its resource birthright, it must quickly move much more oil and gas to the customers who want it and are willing to pay top dollar – namely China and the fast-growing markets of Asia. “That does argue for not allowing things to just follow the invisible hand of the market,” Prof. Hampson said. “If you simply leave it to the market, you’re not going to be a winner.”
New shale oil discoveries in the U.S. and pipeline bottlenecks are threatening to depress the value and the demand for Canadian crude. To overcome the challenge, Canada will need new pipelines to move energy east and west, expanded domestic refining capacity and new liquefied natural gas terminals on the West Coast.
There are plenty of sound public policy reasons for Ottawa and the provinces to get much more involved in decisions about who gets to buy our oil and what limits to put on resource ownership. Until now, Canada’s outdated foreign investment rules didn’t reflect the fact that non-market players – massive state-owned enterprises and sovereign wealth funds – dominate the global energy industry.
Government has a vital role to play in putting an appropriate value on Canada’s energy wealth, managing the resource for the long haul, thinking about climate change and evaluating the impact on relations with both China and the U.S., suggested Mel Cappe, a professor at the University of Toronto.
“We need a national strategy because we need to consider the public interest and the non-market implications of these decisions,” Prof. Cappe said. “… This is not something that we should just let the market decide.”
But it’s hardly a unanimous view. Mr. Harper has been reluctant to advocate a more strident federal role – beyond streamlining the environmental review process for energy projects and prying open new foreign markets through free-trade deals. Natural Resources Minister Joe Oliver has said there’s no need for a new Canadian energy strategy because Ottawa already has one.
It’s also been rejected by various conservative intellectuals and think tanks. The Ottawa-based Macdonald-Laurier Institute and the Frontier Centre for Public Policy in Winnipeg have attacked Ms. Redford’s national strategy call.
But prominent business leaders, even in western Canada, say it’s time for governments to develop a more coherent plan to ensure Canadians get the most from their resource endowment.
The industry is simply too important for the country not have a clear plan, argued Jock Finlayson, executive vice-president of the Business Council of British Columbia.
“I’m a believer in the need to develop a more national approach to energy policy and developing energy resources,” Mr. Finlayson said. “It’s not about the federal government coming to seize jurisdiction. It has to be much more collaborative than that.”