The greatest Canadian success story is that of the oil sands, a marvel of technological advances both in surface and underground production.
Handout/Imperial Oil Limited The greatest Canadian success story is that of the oil sands, a marvel of technological advances both in surface and underground production. .
While the oil and gas industry moves ever onwards and upwards, producing an endless series of stunning technological advances that have powered the Canadian economy and filled government coffers, too often they have to do so despite policy rather than because of it. Politics often seems stuck in a lower circle of hell, either recycling perennial bad ideas, such as industrial strategy, or glomming onto rationalizations for greater levels of state control, from economic nationalism to alleged threats to that infinitely flexible concept “the environment.”
That thought, among others, came to mind on Thursday morning at the opening session of this year’s oil and gas investment conference in Toronto sponsored by the Canadian Association of Petroleum Producers (CAPP) and Scotiabank, National Post is media sponsor.
This is not to single out two well-respected Energy Ministers who appeared on the conference panel I chaired, Diana McQueen of Alberta and Tim McMillan of Saskatchewan. Both their provinces’ policies are relatively sensible. Indeed, most Canadian jurisdictions are a good deal more market-friendly than they were forty years ago, but, as the supposedly right-wing federal Conservatives recently demonstrated with their Ayn-Rand-villain moves on grain transportation, we are never safe from bad policy.
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Over the past forty years, since the first OPEC crisis, the industry has constantly confounded the nationalists, doomsters and peak oil fanatics. The greatest Canadian success story is that of the oil sands, a marvel of technological advances both in surface and underground production. More recently, innovations in hydraulic fracturing and horizontal drilling have unlocked a bonanza of shale gas and tight oil. Those developments have contributed to a mid-continent oil glut, and also driven down natural gas prices, forcing producers to display other characteristics essential to those who want to thrive in competitive markets: flexibility and ingenuity.
There are now a raft of schemes proposed to export gas in liquefied form – yet another marvel technology – to parts of the world, principally Asia, where the fuel fetches three or four times the North American price. As the conference heard on Thursday, and will hear again today, new oil pipelines and LNG facilities offer enormous potential for investment, profits, growth and jobs. Which is where we come back to that other half of the development dance: politics.
It is possible to divide the past forty years of energy policy into two parts: the age of economic nationalist insanity, and the age of environmental fear and loopiness.
Although environmental loopiness was certainly lurking in the background at the time of the first OPEC crisis, policy entrepreneurs and corporations saw more advantage in wrapping themselves in the Maple Leaf flag. Great companies such as Imperial Oil, the Canadian subsidiary of Exxon, were demonized and portrayed as dark forces that didn’t really “care” for the Canadian people the way interventionist bureaucrats did. So we got a national champion, Petro-Canada, then the National Energy Program, and then a government-promoted takeover binge – at the height of the market — of those wicked foreigners who had dared to invest in Canada, be successful, and create wealth and jobs.
The hangover lasted through the 1980s, with Alberta also suffering as delusions of government-mandated diversification came home to roost. It took until the early 1990s finally to privatize national champion Petro-Canada, whose total cost to taxpayers ran into the billions.
But power-hunger and policy pretension never die, and both found a new home in the burgeoning environmental movement and the existential scare over climate change.
The big new political development was that the now-global power-seekers found – and promoted – allies amid environmental NGOs, who effectively became the shock troops in a campaign of anti-capitalism, anti-development, and anti-jobs, all in the name of protecting Mother Earth.
The peculiarly Canadian angle on this global phenomenon lies in the personage of Maurice Strong, the most important man of whom most people have never heard. It is no accident that Mr. Strong was both the first chairman, president and CEO of Petrocan and the man who organized and ran the 1992 U.N. Rio summit at which the climate scare took policy flight.
The Chretien Liberals agreed, under Kyoto, to slash Canadian CO2 emissions without a clue how they would do it. They couldn’t, and didn’t. Prime Minister Harper has been manfully “ragging the puck” on climate for eight years. One province, Ontario, drunk deep of the green Koolaid and its electricity users will be paying massive wind and solar subsidies for years, but no province has dared to question the renewable wisdom, or express doubt about “the science” behind it.
Because both industry and governments failed to get ahead of the UN/ENGO axis of alarmism, and the power of celebrity activism, the Canadian energy boom is now held hostage to a White House whose occupant is both beset by delusions of personally controlling sea levels, and fearful of braying activists outside his wrought iron gates. And Canada must play along out of fear of green trade sanctions.
The presidential decision on Keystone XL hangs over the Canadian oil and gas investment scene – and the Canadian economy more broadly — like the sword of Damocles, not least for the damage it will do to U.S./Canada relations (at least until the next presidential election).
Canadian companies have yet again shown flexibility and ingenuity in shifting oil to rail, but new pipelines are essential, and ENGOs, who have skilfully exploited aboriginal discontents, stand across them, despite Mr. Harper’s commitments to streamlining regulatory hearings.
While it’s easy to become depressed when viewing the history of North American energy and environmental policy over the past four decades, its difficult not to be optimistic when you compare the industry’s stunning record of innovation and ingenuity, and above all its ability to survive any number of bad policies.