Cory Morgan: Canada Must End Self-Defeating Policies Opposing Energy Development

The Energy East pipeline’s proposed route is pictured as TransCanada officials speak during a news conference in this file photo. The Canadian Press/Jeff McIntosh

Commentary

Canada’s vulnerability as an energy exporter came into acute focus when President Trump began musing about applying tariffs to Canadian goods.

Canada could exert strong leverage in a potential trade war with the USA if it had a diverse customer base for its petroleum products. However, with 97 percent of its oil exports and 100 percent of its natural gas exports going to the United States, Canada can’t withstand tariffs or curtailment of exports for very long. Canada must diversify its customer base for petroleum products and do it soon.

With a buyer’s monopoly on Canada’s energy exports, the USA has enjoyed discounted oil from Canada for decades. In 2018, Canada was estimated to lose $50 million per day due to being forced to sell at a discount. That figure has grown as energy prices have climbed. Canadian oil and gas producers have long been trying to bring attention to these losses and highlighting the need for pipeline access to deepwater ports. But their pleas fell on deaf ears, as an ideologically driven federal government shut down pipelines, banned tankers, and regulated other energy projects out of economic viability.

It’s estimated that $150 billion worth of energy projects had been scrapped by 2020 due to Canada’s regulatory environment. Many projects were designed to export LNG and oil products to Asian and European markets. If even half of those projects had been completed, Canada would be in a strong position to withstand a trade war with the United States as exports to other nations were ramped up.

Nothing could be constructed quickly enough to impact the trade dispute of today. Resolution of the issues with President Trump will happen, but Canada will likely take it on the nose with new trade agreements. Canada must come away from this dispute with a new attitude toward oil and gas pipelines and the importance of constructing them.

Canada will have a new prime minister within months and likely an entirely new government within a year. This presents an opportunity for a new approach to encouraging pipelines and LNG terminals. A new government can spur a construction boom for pipelines and bring Canada out of its dependence upon a single customer for energy exports. The government must act quickly with resolve, and unapologetically.

To begin with, Canada’s ridiculous regulatory environment must be completely revamped. The Energy East pipeline project was never formally cancelled by the government. What the federal government did instead was constantly move the regulatory goalposts for approval until TransCanada Pipelines Limited (TCPL) threw up its hands and walked away from the project. TCPL spent nearly a billion dollars on Energy East and never even managed to get out of the starting gates. All that money was spent on trying to jump through the regulatory hoops the government put before it. It’s an absurd level of regulation and it chills energy investment across the country.

Kinder Morgan was watching the Energy East debacle closely. It surely inspired their decision to give up on the Trans Mountain pipeline expansion. The fedearl government realized it had overplayed its regulatory hand and bought the Trans Mountain project. It then managed to take a project that was supposed to be done in a few years for less than $5 billion and finished it years behind schedule at a cost of over $34 billion.

The solution to getting pipelines built to reach Canada’s coastlines is not through government-constructed projects. The private sector must construct these lines, and they won’t do it unless they are confident the government has their backs.

To begin with, the federal government must exert its authority on interprovincial energy infrastructure. The provinces of Quebec and B.C. both hindered pipeline construction, but constitutionally they have no authority to do so. Just as a province can’t block a highway or rail line from another province, it can’t do so with pipelines. The law must be laid down by the feds.

The regulatory process must be streamlined and fast. No company is willing to gamble investing in a project that could be delayed for years and ultimately cancelled. There’s no reason a project can’t go from conception to shovels in the ground in less than a year. This must be guaranteed.

The government must also demonstrate a will to protect the construction of new lines from protests and eco-terrorism. The Coastal Gaslink line faced chronic delays and threats from eco-extremists while the government remained reticent in cracking down on illegal protests. This can’t happen again.

Despite claims that there is no business case for LNG exports from Canada to places like Germany, the world is hungry for Canadian oil and gas products. If we build it, they will come.

With pipeline access to deepwater ports on all coasts for both oil and gas products, Canada will become a true energy powerhouse for the world. The nation will no longer suffer from discounts in selling to a single customer and won’t be vulnerable to being pushed around in trade disputes. Canada must come out of today’s clash with the U.S. president wiser and act to protect its sovereignty as an energy producer through market diversification.

The window of opportunity will close quickly, though. The government must act immediately to end the self-defeating policies opposing energy development and get export infrastructure in place.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.