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

From the Fraser Institute

By Annika Segelhorst and Elmira Aliakbari

Canada’s most timely opportunity to lower overall global emissions is through expanded exports to regions that rely on higher-emitting fuel sources.

The COP30 climate conference in Brazil is winding down, after more than a week of discussions about environmental policy and climate change. Domestic oil and natural gas production is frequently seen as a fundamental obstacle to Canada’s climate goals. Yet the data shows that Canadian energy production is already among the world’s cleanest, generating lower greenhouse gas (GHG) emissions per barrel-of-oil-equivalent produced, among major producing countries. Expanding the role of Canadian oil and gas in global markets can replace higher GHG-emitting alternatives around the world, driving down global GHG emissions.

Prime Minister Carney’s first budget highlights Canada’s “emissions advantage” in a chart on page 105 that compares the amount of GHG emissions released from producing oil and natural gas across 20 major producing countries. Compared to many other top-producing countries, Canada releases fewer GHG emissions per barrel of oil and gas produced when considering all phases of production (extraction, processing, transport, venting and flaring).

For oil production, Canada has an advantage over most major producers such as Venezuela, Libya, Iran, Algeria, Nigeria, China, Russia and Qatar. Canada’s emissions per barrel of oil produced are below the global average, making Canada among the lower emitting producers worldwide.

Similarly, Canada’s natural gas production has an emissions per barrel equivalent that is lower than the global average and is below major producers such as Turkmenistan, Uzbekistan, Nigeria, Indonesia, China, Argentina, Malaysia, Australia, Algeria, Iran, Russia, India and the United States. The chart below reveals countrywide average GHG emissions per barrel of oil or natural gas produced in 2022.

Source: International Energy Agency (2023), The Oil and Gas Industry in Net Zero Transitions 2023, IEA, Paris, p. 69 

Canada’s emissions advantage stems from years of technological innovations that require less energy to produce each barrel of oil along with improvements in detecting leaks. From 1990 to 2023, Canada’s total production of crude oil rose by 199 per cent, while emissions per barrel of oil produced declined by 8 per cent, according to Environment and Climate Change Canada (ECCC). In the oilsands, since 1990 emissions per barrel have fallen by nearly 40 per cent while emissions from natural gas production and processing have decreased by 23 per cent.

Canada has already implemented many of the most practical and straightforward methods for reducing carbon emissions during oil and gas production, like mitigation of methane emissions. These low-hanging fruits, the easiest and most cost-effective ways to reduce emissions, have already been implemented. The remaining strategies to reduce GHG emissions for Canadian oil and gas production will be increasingly expensive and will take longer to implement. One such approach is carbon capture, utilization, and storage (CCUS), a technology which traps and stores carbon dioxide to prevent it from reaching the atmosphere. Major infrastructure projects like this offer potential but will be difficult, costly and resource intensive to implement.

Rather than focusing on increasingly expensive emission reductions at home, Canada’s most timely opportunity to lower overall global emissions is through expanded exports to regions that rely on higher-emitting fuel sources. Under a scenario of expanded Canadian production, countries that presently rely on oil and gas from higher-emitting producers can instead source energy from Canada, resulting in a net reduction in global emissions. Conversely, if Canada were to stagnate or even retreat from the world market for oil and gas, higher-emitting producers would increase exports to accommodate the gap, leading to higher overall emissions.

As Canada’s climate and energy policy continues to evolve, our attention should focus on global impact rather than solely on domestic emissions reductions. The highest environmental impact will come from enabling global consumption to shift towards lower-emitting Canadian sources.

Annika Segelhorst

Junior Economist

Elmira Aliakbari

Director, Natural Resource Studies, Fraser Institute