William Lacey

I view the recent announcements by the Government of Canada as window dressing, and not addressing the fundamental issue which is that projects are drowning in bureaucratic red tape and regulatory overburden. We don’t need them picking winners and losers, a fool’s errand in my opinion, but rather make it easier to do business within Canada and stop the hemorrhaging of Foreign Direct Investment from this country.

Changes are afoot—reportedly, carve-outs and tweaks to federal regulations that would help attract investment in a new oil pipeline from Alberta. But any private proponent to come out of this deal will presumably be handpicked to advance through the narrow Bill C-5 window, aided by one-off fixes and exemptions.

That approach can only move us so far. It doesn’t address the underlying problem.

Anyone in the investment world will tell you a patchwork of adjustments is nowhere near enough to unlock the large-scale energy investment this country needs. And from that investor’s perspective, the horizon stretches far beyond a single political cycle. Even if this government promises clarity today in the much-anticipated memorandum of understanding (MOU), who knows whether it will be around by the time any major proposal actually moves forward.

With all of the talk of “nation-building” projects, I have often been asked what my thoughts are about what we must see from the federal government.

The energy sector is the file the feds have to get right. It is by far the largest component of Canadian exports, with oil accounting for $147 billion in 2024 (20 percent of all exports), and energy as a whole accounting for $227 billion of exports (30 percent of all exports).

Furthermore, we are home to some of the largest resource reserves in the world, including oil (third-largest in proven reserves) and natural gas (ninth-largest). Canada needs to wholeheartedly embrace that. Natural resource exceptionalism is exactly what Canada is, and we should be proud of it.

One of the most important factors that drives investment is commodity prices. But that is set by market forces.

Beyond that, I have always said that the two most important things one considers before looking at a project are the rule of law and regulatory certainty.

The Liberal government has been obtuse when it comes to whether it will continue the West Coast tanker ban (Bill C-48) or lift it to make way for a pipeline. But nobody will propose a pipeline without the regulatory and legal certainty that they will not be seriously hindered should they propose to build one.

Meanwhile, the proposed emissions cap is something that sets an incredibly negative tone, a sentiment that is the most influential factor in ensuring funds flow. Finally, the Impact Assessment Act, often referred to as the “no more pipelines bill” (Bill C-69), has started to blur the lines between provincial and federal authority.

All three are supposedly on the table for tweaks or carve-outs. But that may not be enough.

It is interesting that Norway—a country that built its wealth on oil and natural gas—has adopted the mantra that as long as oil is a part of the global economy, it will be the last producer standing. It does so while marrying conventional energy with lower-carbon standards. We should be more like Norway.

Rather than constantly speaking down to the sector, the Canadian government should embrace the wealth that this represents and adopt a similar narrative.

The sector isn’t looking for handouts. Rather, it is looking for certainty, and a government proud of the work that they do and is willing to say so to Canada and the rest of the world. Foreign direct investment outflows have been a huge issue for Canada, and one of the bigger drags on our economy.

Almost all of the major project announcements Prime Minister Mark Carney has made to date have been about existing projects, often decades in the making, which are not really “additive” to the economy and are reflective of the regulatory overburden that industry faces en masse.

I have always said governments are about setting the rules of the game, while it is up to businesses to decide whether they wish to participate or to pick up the ball and look elsewhere.

Capital is mobile and will pursue the best risk-adjusted returns it can find. But the flow of capital from our country proves that Canada is viewed as just too risky for investors.

The government’s job is not to try to pick winners and losers. History has shown that governments are horrible at that. Rather, it should create a risk-appropriate environment with stable and capital-attractive rules in place, and then get out of the way and see where the chips fall.

Link to The Hub article: Large-scale energy investments remain a pipe dream

Formerly the head of institutional equity research at FirstEnergy Capital Corp and ATB Capital Markets. I have been involved in the energy sector in either the sell side or corporately for over 25 years

New passenger compensation rules under review could end up harming passengers as well as the country’s aviation sector by forcing airlines to pay for delays and cancellations beyond their control, warns a new report published this morning by the MEI.

“Air travel in Canada is already unaffordable and inaccessible,” says Gabriel Giguère, senior public policy analyst at the MEI. “New rules that force airlines to cover costs they can’t control would only make a bad situation worse.”

Introduced in 2023 by then-Transport Minister Omar Alghabra, the proposed amendment to the Air Passenger Protection Regulations would make airlines liable for compensation in all cases except those deemed “exceptional.” Under the current rules, compensation applies only when the airline is directly responsible for the disruption.

If adopted, the new framework would require Canadian airlines to pay at least $400 per passenger for any “unexceptional” cancellation or delay exceeding three hours, regardless of fault. Moreover, the definition of “exceptional circumstances” remains vague and incomplete, creating regulatory uncertainty.

“A presumed-guilty approach could upend airline operations,” notes Mr. Giguère. “Reversing the burden of proof introduces another layer of bureaucracy and litigation, which are costs that will inevitably be passed on to consumers.”

The Canadian Transportation Agency estimates that these changes would impose over $512 million in additional costs on the industry over ten years, leading to higher ticket prices and potentially reducing regional air service.

Canadians already pay some of the highest airfares in the world, largely due to government-imposed fees. Passengers directly cover the Air Travellers Security Charge—$9.94 per domestic flight and $34.42 per international flight—and indirectly pay airport rent through Airport Improvement Fees included on every ticket.

In 2024 alone, airport authorities remitted a record $494.8 million in rent to the federal government, $75.6 million more than the previous year and 68 per cent higher than a decade earlier.

“This new regulation risks being the final blow to regional air travel,” warns Mr. Giguère. “Routes connecting smaller communities will be the first to disappear as costs rise and they become less profitable.”

For instance, a three-hour and one minute delay on a Montreal–Saguenay flight with 85 passengers would cost an airline roughly $33,000 in compensation. It would take approximately 61 incident-free return flights to recoup that cost.

Regional air service has already declined by 34 per cent since 2019, and the added burden of this proposed regulation could further reduce connectivity within Canada. It would also hurt Canadian airlines’ competitiveness relative to U.S. carriers operating out of airports just south of the border, whose passengers already enjoy lower fares.

“If the federal government truly wants to make air travel more affordable,” says Mr. Giguère, “it should start by cutting its own excessive fees instead of scapegoating airlines for political gain.”

You can read the Economic Note here.

* * *

The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.