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Derek Burney was Canada’s ambassador to the United States from 1989 to 1993 and served as a director of TransCanada Corp. from 2005 to April 2018.

Alberta’s energy sector is hurting severely but few in the rest of Canada seem to care. What had been a locomotive for growth both in the province and the country is reeling under the combined pressure of collapsing oil prices and policy paralysis. What limited amounts of oil Alberta is able to export sells at roughly US$13 per barrel, 40 per cent below the world price and well below the costs of production. With world prices at US$40+ the lost revenue from the “Canadian discount” is about US$100-million per day or US$36-billion per year. Cuts are being implemented by energy producers on capital spending, on work forces and on production and are prompting demands by some for OPEC-style production quotas that would help stabilize the market.

All this at a time when global demand for oil and gas continues to grow. Oil production in the United States alone has increased by two million barrels a day, to 11 million, which, along with increased global production, is squeezing Canadian supply even further. Transportation costs, especially by rail, for lengthy supply chains are an additional burden.

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The major problem is the chronic lack of pipeline capacity in Canada that would enable shipments to markets south, east and west of our borders. Plans have either been delayed, discarded or rejected outright by policy gridlock in Ottawa, regulatory delays and erratic, judicial activism. The only plan that is still alive is the extension of the Trans Mountain line in British Columbia. When the owner (Kinder Morgan) backed away because of political and regulatory uncertainties, the government nationalized the project at a cost of $4.5-billion to taxpayers. Yet, there is still no guarantee that this pipeline will ever be built.

Earlier, the federal government had rejected the Northern Gateway pipeline, which has been conditionally approved by the National Energy Board, leaving Trans Mountain as the only option to tidewater on the west coast.

A circuit judge in Montana, who had been appointed by former U.S. president Barack Obama, recently overruled President Donald Trump’s approval of Keystone XL contending that the approval had been "political” while ignoring the fact that Mr. Obama’s rejection had itself been “political” and not supported by any environmental analysis.

Energy East was abandoned by the proponent (TransCanada) due to the excessive regulatory burden imposed on the project and lukewarm political support from Ottawa. Meanwhile, hundreds of tankers carry oil from Saudi Arabia and other countries up the St. Lawrence River free of regulatory restrictions on “upstream emissions.” (A curious bonus for Saudi Arabia these days).

Absent pipelines, shipments by rail have doubled to 400,000 b/d increasing carbon emissions if not risks substantively. New startups for refining capacity in Canada would help but only marginally.

Strong pressure from environmentalists and some Indigenous groups prompted the government to attempt a compromise allowing for a pipeline (Trans Mountain) in exchange for a commitment to a carbon tax. But the attempt at a Solomon-style balance did not work. According to polls, environmentalists represent a minority view on the issue of pipelines but that minority has major, political influence, notably in British Columbia and Quebec. Several other provinces are now resisting implementation of the carbon tax. However, Bill C-69, now before the Senate, will only add further complexity to an already stultifying process for regulatory approval.

Major shifts downward in the pump price for gasoline will challenge any government attempt to manage supply and demand with carbon taxes or “prices on pollution.”

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It should not be a binary choice between one or the other but there is a pressing need for a realistic balance between the two. Given the availability and demand for relatively low-priced supplies of oil and gas, the global carbon-reduction targets inspired by the Paris Accord are unattainable by any measure. Not one G20 country, including Canada, is currently compliant so a major recalibration is in order, preferably one that re-engages the United States.

There is no easy solution to the self-made conundrum. Even if pipelines were approved quickly, it would take three to four years to make them operational.

The hard reality is that Canada is losing vast amounts of revenues and curtailing its oil production while the rest of the world profits.

The principal challenges for any Canadian government are national unity, prosperity and security. Given the gross dysfunction throttling Alberta energy, the first two are now in jeopardy. Calls for Western separation from frustrated Albertans are gathering steam. Speaking in Calgary on Thursday, the Prime Minister acknowledged the crisis, described the oil price as “unacceptable” adding the market factors were “complex.” But “I feel your pain” empathy is not sufficient. The problem affects Canada as a whole, not just Alberta, and cries out for bold leadership that will break the logjam and serve the national interest.

Editor’s note: An earlier version of this column incorrectly stated the length of time Mr. Burney served as a director of TransCanada Corp. This version has been updated.
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