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CNOOC Ltd., a Chinese government-controlled company, has struck a $15.1-billion (U.S.) deal to buy Calgary-based Nexen Inc. The deal is now facing a “net benefit” review by the federal government, but CNOOC is unlikely to be the last Chinese buyer to come looking, writes Barrie McKenna (HANDOUT/Reuters)
CNOOC Ltd., a Chinese government-controlled company, has struck a $15.1-billion (U.S.) deal to buy Calgary-based Nexen Inc. The deal is now facing a “net benefit” review by the federal government, but CNOOC is unlikely to be the last Chinese buyer to come looking, writes Barrie McKenna (HANDOUT/Reuters)

BARRIE McKENNA

Lacking a clear vision, Ottawa’s energy strategy is in crisis Add to ...

Canada is in the throes of an energy identity crisis.

The Northern Gateway pipeline project is in trouble in B.C. and the Chinese are stalking Alberta’s oil patch.

In the East, Quebec and Newfoundland are sniping over oil and hydro reserves, and Ontario’s dream of being a green energy leader is fading.

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It’s hardly what you would expect from a country that aspires to be an energy superpower.

With still untapped potential in oil, shale gas and hydro, energy can drive the Canadian economy for decades to come. A recent University of Calgary School of Public Policy study estimates the potential economic boost at nearly $10-billion a year between 2016 and 2030.

Or not.

There’s been a lot of talk, but so far little evidence of a long-term plan or a strategy at work. That’s unfortunate.

Fast-tracking environmental reviews isn’t a strategy on its own. Nor is blocking the oil sands’ access to world markets, as many environmentalists want. Handing over large swaths of Canada’s oil patch to the thirsty Chinese, without conditions or reciprocal access in China, seems equally short-sighted.

Alberta Premier Alison Redford has pushed for a pan-Canadian energy strategy. And 12 of 13 provincial and territorial leaders agreed to work on one at their meeting last month in Halifax. But the concept remains murky and ill-defined. The recent spat with B.C. Premier Christy Clark over the $6-billion Northern Gateway pipeline is a reminder of the tricky and competing regional interests that inevitably arise as concepts move closer to reality.

At the federal level, policy seems to be driven by external events, rather than the other way around. A year ago, Prime Minister Stephen Harper called the Northern Gateway pipeline a “no-brainer” – a vital outlet to Asia for oil sands crude if new pipelines to the U.S. are blocked. Now, with opposition to the pipeline hardening in B.C., Mr. Harper is distancing himself from the project, suggesting “science” would determine the project’s merits.

More troubling is the foreign ownership question. The voracious Chinese are forcing Ottawa’s hand before it’s had a chance to lay down clear foreign ownership rules.

Ottawa clearly wants China to buy Canadian oil. But how much of the oil patch should Chinese state-owned enterprises own? CNOOC Ltd., a Chinese government-controlled company, has struck a $15.1-billion (U.S.) deal to buy Calgary-based Nexen Inc. The deal is now facing a “net benefit” review by the federal government, but CNOOC is unlikely to be the last Chinese buyer to come looking.

There are a host of other unanswered energy policy questions. Does it make sense for Newfoundland to develop the Lower Churchill hydroelectric project and then transmit the power circuitously to Nova Scotia and U.S. markets?

And what about green energy? Ontario had aspirations of becoming a major player, but its efforts to nurture a home-grown industry have been costly and ineffective. Ottawa, meanwhile, has cut off new financing for its clean-tech fund, Sustainable Development Technology Canada.

Canada’s electricity market remains fragmented and inefficient. In a rational world, Quebec would use abundant natural gas to heat its homes and sell more of its clean hydro power factories in Ontario. Instead, Quebeckers heat their homes with cheap hydro and shun natural gas.

There is another way. A new report by the Energy Policy Institute of Canada (EPIC), funded by a broad array of business groups, argues for a comprehensive approach to energy decision-making, including better managing carbon emissions, promoting innovation, streamlining regulation and diversifying export markets. Canada should also find ways to export oil and liquified natural gas to Asia, boost electricity trade between provinces and increase pipeline capacity to move more oil west to east.

“Energy has become the great currency of the modern age,” EPIC president Doug Black says in the introduction to the report. “The world depends on energy and Canada’s pursuit, production and technical leadership of many energy forms provides an opportunity to enrich every individual’s quality of life.”

Canada risks losing out on that opportunity if it continues to muddle through without a clear vision of where it’s going.

Follow on Twitter: @barriemckenna

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