Alberta
The Conventional Energy Sector and Pipelines Will Feature Prominently in Alberta’s Referendum Debate
From Energy Now
By Jim Warren
Like it or not, the supporters of conventional energy production in the West, even those who bleed maple syrup, will be best served by a substantial leave vote. A poor showing on the part of the leave camp would weaken the bargaining power of the producing provinces and the conventional energy sector in their dealings with Ottawa.
The political dust-up between the leavers and the stayers is about to commence.
The petition calling for an Alberta referendum on separation will get the required signatures. And, the Moe government in Saskatchewan may yet decide to do something similar.
And, there is a good chance the federal Liberals and their allies in the environmental movement will launch an anti-separation/anti-oil campaign in response. The Liberals need merely to reinvigorate the flag waving campaign they ran during the federal election. All that needs to change for that tactic to work is the name of the boogeyman—from Donald Trump to alienated Westerners. Government subsidized environmental organizations will help do the rest.
This will present something of a dilemma for some supporters of the conventional energy and pipeline sectors. Should they lay low, stay quiet and perhaps avoid becoming part of the controversy? Alternatively, should they face reality and admit oil and pipelines will feature prominently in the debate whether they like it or not. The federal assault on oil, gas and pipelines is after all one of the principal motivations inspiring many who wish to separate.
And, whether we like it or not, the supporters of conventional energy production in the West, even those who bleed maple syrup, will be best served by a substantial leave vote. A poor showing on the part of the leave camp would weaken the bargaining power of the producing provinces and the conventional energy sector in their dealings with Ottawa. This is one of the immutable laws of the negotiating universe. A union that gets only 20% of its members voting in favour of strike action knows it is impotent should management call its bluff.
This is not to say the leave side will need a majority vote to produce a win for the energy sector—a large minority could do nicely. The Parti Québécois’ goal of “sovereignty association” in the 1980 Quebec referendum was supported by just 40.4% of those who voted. Yet, it nevertheless added leverage to Quebec’s extortionate demands on Ottawa and the rest of Canada. Although, after the separatists garnered 49.4% of the vote in the 1995 referendum (aka Canada’s near death experience), Quebec did even better.
True, the two producing provinces on the prairies lack the electoral power of Quebec. In combination with Ontario, Quebec has been integral to Liberal success in federal elections for decades. The power of the West lies in its ability to generate a large share of Canada’s export revenues. That’s mainly why Quebec is able to count on $14 billion in annual equalization welfare. Threatening separation turns the economic importance of the West into a political weapon.
We can expect a highly divisive referendum debate–potentially far more fractious than the federal election campaign. Signals coming out of Ottawa suggest federal-provincial negotiations over conventional energy and emissions policy are about to take a nasty turn. We could be facing a perfect storm of disunity with Westerners bashing Ottawa while Ottawa denounces separatists and resumes its assault on oil, gas and pipelines.
Chances for lowering the political temperature don’t look good. The prime minister has been distancing himself from his initial pre-election pro pipeline position. Early in the election campaign Mark Carney said he would employ the emergency powers of the federal government to get new export pipelines running from the prairies to tidewater. The next week he told reporters Quebec would have the power to veto the approval of any pipeline crossing its territory. On May 14, Carney presented reporters with a word salad that seemed to be saying he would include evaluation of the potential for new pipelines along with other energy policy ideas being discussed. And, if a consensus favouring pipelines emerged, one might be built.
This is not comforting. These statements cannot all be correct at the same time. At least two, if not all three, of them, are disingenuous.
Exactly who will be included in the consensus building discussions is unclear. Will they involve meetings with the premiers of the provinces that generate huge export revenues for Canada. Will they be restricted to the emissions reduction zealots who dominate the cabinet and the Liberal caucus? Or, is it something Carney will work out at Davos when the World Economic Forum next convenes?
The Liberals and their media allies put a lot of stock in the polls once they showed the Liberals in the lead during the election campaign. They briefly acknowledged election period polling that showed 74% of Canadians support the construction of new export pipeline including 60% of Quebecers. But reporting on the growing popularity of pipelines ended after about a week when Carney’s unqualified support for a pipeline to the Atlantic coast evaporated.
Furthermore, the popular vote totals from the federal election demonstrate that Canadians’ support for the Conservatives and the Liberals was divided fairly evenly, 41.3% for the Conservatives and 43.8% for the Liberals. A slim 2.5 percentage point spread. It seems reasonable to assume many Conservative supporters outside of the prairies shared Pierre Poilievre’s strong and consistent support for conventional energy production and pipelines. The fact people in the producing provinces are not alone in seeing the wisdom of new export pipelines strengthens our position.
If the thumping the voters of Alberta and Saskatchewan gave the Liberals in the April 28 election didn’t convince the government its energy and pipelines policies have caused a national unity crisis, maybe a high vote in favour of separation will. Many people will figure this out and will vote strategically to ensure the leave side wins a respectable portion of the vote. Who would want to try to negotiate a good deal for the producing provinces and the conventional energy sector following a weak performance by the leave camp? The Liberals will claim that a big win for the stay camp shows that Albertans are happy with the status quo.
The anti-pipeline misinformation campaign is already underway. Steven Guilbeault was already at it last week. According to Guilbeault, since the Trans Mountain pipeline is not operating at full capacity we obviously don’t need any more pipelines.
Guilbeault knows full well the pipeline is running under full capacity. The reason being the residual fall-out from the $38 billion in cost overruns the government chalked up, which was in turn due to its own regulatory morass and system pains associated with issues like the poor design features built into the Burnaby terminal. The government expects oil producers to pay exorbitant shipping rates designed to rapidly recoup the embarrassing cost overruns. Producers are not prepared to lose money bailing out the government. Guilbeault also knows most producers making use of the Trans Mountain today had negotiated much lower rates with the pipeline prior to its completion.
We can expect the flow of this kind of misinformation to become a gusher in the days ahead.
One hopes there will be adults in charge of both the leave and stay camps. The cause of Western separation can be expected to attract enthusiasts from the fringes of the political spectrum. There will be crackpots and mean-spirited people cheering for both sides. Unfortunately, we need to prepare for the fact the mainstream media will focus on any loosely hinged eccentrics they can find who support separation. Radical environmentalists and climate change alarmists will be treated like selfless planet saving prophets.
Alberta
Alberta Premier Danielle Smith Discusses Moving Energy Forward at the Global Energy Show in Calgary
From Energy Now
At the energy conference in Calgary, Alberta Premier Danielle Smith pressed the case for building infrastructure to move provincial products to international markets, via a transportation and energy corridor to British Columbia.
“The anchor tenant for this corridor must be a 42-inch pipeline, moving one million incremental barrels of oil to those global markets. And we can’t stop there,” she told the audience.
The premier reiterated her support for new pipelines north to Grays Bay in Nunavut, east to Churchill, Man., and potentially a new version of Energy East.
The discussion comes as Prime Minister Mark Carney and his government are assembling a list of major projects of national interest to fast-track for approval.
Carney has also pledged to establish a major project review office that would issue decisions within two years, instead of five.
Alberta
Punishing Alberta Oil Production: The Divisive Effect of Policies For Carney’s “Decarbonized Oil”
From Energy Now
By Ron Wallace
The federal government has doubled down on its commitment to “responsibly produced oil and gas”. These terms are apparently carefully crafted to maintain federal policies for Net Zero. These policies include a Canadian emissions cap, tanker bans and a clean electricity mandate.
Following meetings in Saskatoon in early June between Prime Minister Mark Carney and Canadian provincial and territorial leaders, the federal government expressed renewed interest in the completion of new oil pipelines to reduce reliance on oil exports to the USA while providing better access to foreign markets. However Carney, while suggesting that there is “real potential” for such projects nonetheless qualified that support as being limited to projects that would “decarbonize” Canadian oil, apparently those that would employ carbon capture technologies. While the meeting did not result in a final list of potential projects, Alberta Premier Danielle Smith said that this approach would constitute a “grand bargain” whereby new pipelines to increase oil exports could help fund decarbonization efforts. But is that true and what are the implications for the Albertan and Canadian economies?
The federal government has doubled down on its commitment to “responsibly produced oil and gas”. These terms are apparently carefully crafted to maintain federal policies for Net Zero. These policies include a Canadian emissions cap, tanker bans and a clean electricity mandate. Many would consider that Canadians, especially Albertans, should be wary of these largely undefined announcements in which Ottawa proposes solely to determine projects that are “in the national interest.”
The federal government has tabled legislation designed to address these challenges with Bill C-5: An Act to enact the Free Trade and Labour Mobility Act and the Building Canada Act (the One Canadian Economy Act). Rather than replacing controversial, and challenged, legislation like the Impact Assessment Act, the Carney government proposes to add more legislation designed to accelerate and streamline regulatory approvals for energy and infrastructure projects. However, only those projects that Ottawa designates as being in the national interest would be approved. While clearer, shorter regulatory timelines and the restoration of the Major Projects Office are also proposed, Bill C-5 is to be superimposed over a crippling regulatory base.
It remains to be seen if this attempt will restore a much-diminished Canadian Can-Do spirit for economic development by encouraging much-needed, indeed essential interprovincial teamwork across shared jurisdictions. While the Act’s proposed single approval process could provide for expedited review timelines, a complex web of regulatory processes will remain in place requiring much enhanced interagency and interprovincial coordination. Given Canada’s much-diminished record for regulatory and policy clarity will this legislation be enough to persuade the corporate and international capital community to consider Canada as a prime investment destination?
As with all complex matters the devil always lurks in the details. Notably, these federal initiatives arrive at a time when the Carney government is facing ever-more pressing geopolitical, energy security and economic concerns. The Organization for Economic Co-operation and Development predicts that Canada’s economy will grow by a dismal one per cent in 2025 and 1.1 per cent in 2026 – this at a time when the global economy is predicted to grow by 2.9 per cent.
It should come as no surprise that Carney’s recent musing about the “real potential” for decarbonized oil pipelines have sparked debate. The undefined term “decarbonized”, is clearly aimed directly at western Canadian oil production as part of Ottawa’s broader strategy to achieve national emissions commitments using costly carbon capture and storage (CCS) projects whose economic viability at scale has been questioned. What might this mean for western Canadian oil producers?
The Alberta Oil sands presently account for about 58% of Canada’s total oil output. Data from December 2023 show Alberta producing a record 4.53 million barrels per day (MMb/d) as major oil export pipelines including Trans Mountain, Keystone and the Enbridge Mainline operate at high levels of capacity. Meanwhile, in 2023 eastern Canada imported on average about 490,000 barrels of crude oil per day (bpd) at a cost estimated at CAD $19.5 billion. These seaborne shipments to major refineries (like New Brunswick’s Irving Refinery in Saint John) rely on imported oil by tanker with crude oil deliveries to New Brunswick averaging around 263,000 barrels per day. In 2023 the estimated total cost to Canada for imported crude oil was $19.5 billion with oil imports arriving from the United States (72.4%), Nigeria (12.9%), and Saudi Arabia (10.7%). Since 1988, marine terminals along the St. Lawrence have seen imports of foreign oil valued at more than $228 billion while the Irving Oil refinery imported $136 billion from 1988 to 2020.
What are the policy and cost implication of Carney’s call for the “decarbonization” of western Canadian produced, oil? It implies that western Canadian “decarbonized” oil would have to be produced and transported to competitive world markets under a material regulatory and financial burden. Meanwhile, eastern Canadian refiners would be allowed to import oil from the USA and offshore jurisdictions free from any comparable regulatory burdens. This policy would penalize, and makes less competitive, Canadian producers while rewarding offshore sources. A federal regulatory requirement to decarbonize western Canadian crude oil production without imposing similar restrictions on imported oil would render the One Canadian Economy Act moot and create two market realities in Canada – one that favours imports and that discourages, or at very least threatens the competitiveness of, Canadian oil export production.
Ron Wallace is a former Member of the National Energy Board.
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