Adam Pankratz is a lecturer at the Sauder School of Business, University of British Columbia. He is on the board of directors at Rokmaster Resources.
This week, a small but significant anniversary passed without much fanfare.
May 29 marked the three-year anniversary of the National Energy Board’s approval of the Trans Mountain Pipeline expansion project (TMX). Modern convention dictates crystal or glass for a third anniversary and a more disturbingly symbolic gift could not have been chosen; confidence in Canada’s energy sector is shattered. Under normal circumstances, the TMX pipeline would have already been operational for six months, but circumstances are anything but normal for Canada’s energy industry.
Vision and leadership for the future of energy projects in Canada are currently in serious doubt. We need a clear and definitive way to approve or deny large resource infrastructure projects with the most rigorous of environmental and social standards, without unnecessary delays caused by moving regulatory and legal targets. Canada can be a world leader: This is our moment.
Much has been made of the need for Canada to cut fossil fuels production as part of a transition to greener energies. This is a laudable goal that should be pursued. However, another reality also exists: The world demand for energy is increasing and green energy can’t fill the gap. Exxon Mobile, BP and Shell all plan to increase their oil production in the future, with Exxon planning a 25-per-cent increase in production by 2025 over 2017 levels. Oil and gas will be a part of the equation for years to come and Canada has a unique opportunity to lead the world in demonstrating what responsible, balanced natural-resource extraction looks like.
Environmental groups need to look more broadly at what is at stake. Oil and gas will be extracted, but where it is pumped matters. The provincial government in B.C. does not seem to understand this, either. Despite the B.C. Court of Appeal’s recent unanimous 5-0 ruling against the government’s proposed legislation restricting bitumen flow on the TMX – owing to it being a project of federal jurisdiction – John Horgan’s government is determined to appeal, wasting more time and tax-payer dollars. To block Canadian infrastructure projects is merely to push the pumps and pipelines to countries that have far less stringent environmental regulations than we do. These countries also don’t have rigorous consultation with Indigenous peoples and generally hurt the environment far more than Canadian projects ever will. Venezuela is the most obvious case in point at the moment.
Industry needs clarity to operate. Constantly moving political and regulatory goalposts, shifted by a minority of vocal opponents, is not a viable economic environment. As trust erodes, investments fall, leading to fewer deals, less tax revenue and fewer impact benefit agreements with First Nations communities. The oil and gas industry is broadly supportive of strict regulation and the carbon tax because it knows the value of the Canadian brand of responsible resource extraction. This should be a reason environmental groups are encouraged to work constructively with industry on such infrastructure projects.
The lack of clarity and vision is a serious problem that hurts both sides of this debate as well as all Canadians. The energy industry contributes 10.6 per cent to Canada’s GDP and well over a third of that is directly attributable to oil and gas. Indeed, oil and gas shipments contribute more to Canada’s balance of payments than any other industry – approximately $160-billion over the past three years – far exceeding more heralded industries such as the auto sector. Canada needs to get its oil and gas exports to market and large infrastructure projects such as the TMX and other pipelines are a key part of that equation, opening up both U.S. and Asian markets.
If Canada’s heavy oil sands crude could reach the right refineries and markets, the steep price discount it suffers today could be overcome. Canadians are giving away $20-billion because of this factor, which is caused by pipeline capacity constraints.
Canada has been a resource extraction leader not only because of our natural bounty, but also, and very importantly, because of our stringent environmental and regulatory standards, our respect for First Nations communities and our commitment to a global reduction in emissions. This matters. The LNG Canada project in Kitimat, for example, will produce 100 million fewer tons in carbon over the project lifespan than the Golden Pass LNG project in Texas. Such emissions leadership is driven by the incredible innovation that the energy industry requires to remain competitive. If our government wants to promote Canada as a technology and innovation leader to the world, one can think of few industries that highlight this innovative spirit more so than oil and gas.
The Canadian energy industry needs a future of balance and reason. By failing in this we hurt both our economy and environment while ceding control to positively influence the future to countries that do not share a progressive and responsible view on resource development.
Despite the current tension, there are signs of consensus among Canadians on many of these difficult issues. Let’s not wait for the next three-year anniversary to create a solutions-driven approach that benefits us all.