Our $38-million-a-day gift to Americans
Donald Trump says Canada’s energy exports are unfair to the US, but he’s clearly unaware that we’ve given Americans the biggest trade gift ever...
Oil & Gas
President Donald Trump has said Canada’s energy exports are unfair to the US, but he’s clearly unaware that we’ve given Americans the biggest trade gift ever because of our self-inflicted inability to access offshore markets.
After almost a decade and more than $1 billion spent on planning and regulatory filings, five major oil-export pipelines remain unbuilt, leaving us with no choice but to sell our oil to US buyers at below world prices. The captive-market discount has been as much as US$10 per barrel on the 3.8-million barrels per day exported to the US.
That’s a $38-million daily gift to Americans, who then export their oil at the full international market price.
Meanwhile, interminable regulatory delays have stymied more than $100 billion of proposed liquefied natural gas export projects aimed at Asian markets as discounted Canadian natural gas finds it way to newly-constructed US LNG export facilities to be exported at the full international price.
It gets worse. While the Trump administration streamlines regulatory approvals for the construction of American oil pipelines and LNG export facilities, Canada has done the opposite. This has led Canadian oil and gas producers, including my former company Encana, to move tens of billions of investment dollars and many jobs to the US. And Enbridge’s recent $37-billion acquisition of Houston-based Spectra Energy demonstrates that Canadian pipeline companies are also looking to the US for regulatory-friendly growth.
During 30 years of building Encana into the largest Canadian-based energy company, tens of billions of dollars were invested, creating thousands of high-quality jobs across the country; and billions of dollars in government royalties and income tax were paid.
Scores of other companies also made the oil and gas industry an economic cornerstone, thanks to our country’s laws and regulations, and the governments responsible for enforcing them.
When Encana wished to build a pipeline or a processing plant, it worked with communities to minimize negative impacts and paid fair compensation where appropriate. Regulatory authorities examined projects carefully, the hearing process was conducted with an awareness of the economic cost of unnecessary delay and it included consideration of the views of those directly impacted.
As I prepared to retire in 2006, the term “social licence” began to enter the regulatory lexicon, eventually coming to mean that almost any person or group could claim a voice about a project with a legitimacy equal to that of the people directly impacted by the project.
These voices now include anti-fossil-fuel zealots, multinational environmental groups, aboriginal bands claiming control over huge tracts of “traditional lands,” among others.
Regulatory proceedings that would have previously taken weeks are now multiyear events with skyrocketing costs that either delay or kill projects. Enbridge’s Northern Gateway oil-export pipeline is a lamentable example. The original application was filed in 2010.
After four years and $500 million of expenditures, the project gained conditional federal approval from the Harper government in 2014. A year later Justin Trudeau’s government implemented a moratorium on oil tankers along BC’s northern coast which, if fully implemented, would stymie the project.
Then in November 2016, Trudeau announced a reversal of the federal government’s approval, stating that “the Great Bear Rainforest is no place for an oil pipeline.”
Besides this political betrayal of Canada’s regulatory laws, TransCanada’s Keystone XL project was rejected by then-US President Barack Obama, also for purely political reasons. And the proposed Energy East Pipeline faces opposition from municipal and provincial governments, plus aboriginal groups in Ontario and Quebec, as both provinces continue to hold their hands out for equalization grants funded by the oil revenues they oppose.
That leaves Kinder Morgan’s Trans Mountain project, which miraculously made it through the whole social-licence gauntlet to gain full approval in late 2016. Yet the recent BC election has delivered an NDP/Green Party coalition vowing to use “every tool in the toolbox” to stop Trans Mountain.
The Canadian Constitution gives the federal government the unequivocal right to approve the project, but it will require unwavering determination from of Trudeau and his cabinet to enforce that right.
This is the final chance to end the ruinous giveaway of billions of dollars to the Americans while giving the beleaguered oil industry and its millions of employees their first glimmer of hope.
If this project fails, why would anyone invest in our oil and gas industry again?