From coast to coast Canada is known for its overwhelming richness as it pertains to a variety of different natural resources. Yet there often seems to be an almost apologetic stance from Canadians when it comes to delivering those resources to international markets for domestic economic gain. It’s a mindset at least two of our Canadian premiers are aggressively seeking to alter.
Saskatchewan Premier Brad Wall and New Brunswick Premier David Alward are two leading proponents of having the country spend more time and energy promoting the resources sector to the rest of the world. The Canadian Business Journal had an opportunity to speak directly with the provincial premiers who have made the topic of energy one of their primary mandates in an effort to secure enduring economic growth.
Balancing the essential contribution that oil and gas provides to the Canadian standard of living alongside environmental and social responsibility is no easy feat. Within the next two years, executive decisions need be made on landmark projects, including the future of Keystone XL, which may again be stalled by U.S. politicking until after the November midterm elections. Also to be looked at are: oil transportation by rail, East-West pipelines and improving our environmental performance while increasing our economic growth. The choices will help mold the Canadian economy for decades to come.
What is at stake for Canada is hundreds of thousands of jobs, billions in tax revenues and enormous other economic benefits. The cost of inaction is huge, and we all need to work together — work together now, quickly and effectively to secure the future.
One of the primary concerns facing the resources industry in Canada is having the ability to balance the essential contribution that oil and gas makes to the standard of living for its citizens while at the same time meeting expectations both domestically and internationally regarding corporate social responsibility. It’s a tricky manoeuvre that is not easy to achieve without explosive bursts of criticism from various circles, political or otherwise. Added to that are key government regulatory decisions, (ironically more so in the U.S. than Canada) that need to be made over the next couple of years, not the least of which will be determining the fate of the Keystone XL pipeline project. This project has been shunted to the side most often due to ongoing American political gamesmanship between U.S. President Barack Obama’s Democrats and Republicans, who can’t seem to agree on the day of the week, let alone more important matters pertaining to financial and economic matters.
If nothing else, the continued discord between rival political parties in the United States has further opened the eyes to the inherent need for expanding the Canadian base of trading partners beyond the traditional comforts of dealing with the U.S. While America also has been Canada’s largest, most important trading partner, the voices for international expansion are becoming louder with each passing day and it hasn’t gone unnoticed by Canadian companies or its federal government.
Global Demand is Increasing
The weight of global natural gas demand is shifting to eastern nations such as Japan, South Korea, China (and Taiwan) and India. North America’s shale gas revolution is transforming the United States, which is currently Canada’s only international customer, into a competitor for Asian markets. Concern has been expressed from some nations, including the Chinese, as to whether Canada will have the infrastructure in place in time to allow us to get to market.
“The message we got from the Chinese was abundantly clear, and it’s that we’re not the only game in town,” notes Canadian Chamber of Commerce President and CEO Perrin Beatty. “If we are serious about wanting to serve that market we have to demonstrate that we can deliver product and do it effectively and on time.”
“Within the next two years Canada will choose whether to keep our energy bottled up in North America, with the United States essentially as our only customer, and with American demand potentially declining, or to serve a diverse and growing market across the world,” Beatty declares.
Additionally there are now reports indicating the United States will soon overtake Saudi Arabia as the world’s largest oil producer. The potential has always been there, but now the sleeping giant appears ready to take action. The vast reserves in Texas and Alaska alone dwarf that of most Middle Eastern countries.
In more stark terms, Canada will have to decide whether we as a nation desire to achieve a new level of prosperity through the auspices of our plentiful energy opportunities.
“The status quo is not an option for the future,” Beatty states bluntly. “Our one customer is becoming our competitor.”
The expanding role of New Brunswick in the energy picture is becoming more evident with each passing day and it’s believed the eastern province has only begun to scratch the surface when it comes to potential opportunities down the road.
“As premiers we have the opportunity to lead trade missions around the globe and the world as we know it is changing very quickly,” notes Premier Alward. “Over the last year I’ve been to Asia and Africa and what is clear to me more than ever before is that prosperity is not a right and that prosperity we’ve come to know is very much at stake today if we don’t step up to the plate as Canadians.”
“When I was first elected (as premier) back in the late ’90s Bernard Lord had been premier, and at that time we measured our success as a province by how Saskatchewan was doing,” Alward reveals. “If you were to go back into the late ’90s it was a tale of pretty similar provinces in terms of the challenges that we had going on at the time. Less than two decades later you have seen a huge switch in Saskatchewan in terms of economic development.”
Now that New Brunswick is on a mission to capitalise on its own natural resources, the fortunes of the country’s eighth-largest province have changed for the better. The mandate hasn’t just been about developing the untapped natural resources but to also reinvest in key priorities, be it education or healthcare research and development and innovation. Success breeds success; optimism breeds optimism.
“Fifteen to 20,000 New Brunswickers are making the fly-ins and outs to and from the west to provide for their families, including my son who is a pipefitter in northern Alberta,” Alward says. “New Brunswick has similar opportunities as those in Saskatchewan. We believe we’ve got as much natural gas as Alberta does. We have the second-largest amount of potash globally after Saskatchewan and the potential, because we have tidewater, to provide access to Canada’s natural resources and energy resources from the west to South America – to the eastern seaboard of the U.S; to Europe, western Asia and a big chunk of India, which can provide not only huge opportunities for New Brunswick but also for the rest of Canada.”
Developing such natural resources in a responsible manner and to succeed in diversification throughout the international marketplace is at the very core of garnering ongoing success. If the various levels of government, in conjunction with private industry, are able to reinvest back into the country Alward believes the prosperity will then take care of itself.
“If we don’t, we’re going to go backwards as a country – as an economy,” Alward adds. “As a government, we are doing everything we can do to control our expenditures. We are the only government in Canada holding healthcare to zero increase this year, and that’s not an easy thing to do. My message collectively to the leaders across the country is that this is not an issue only for New Brunswick or Saskatchewan, this is an issue for every Canadian – literally; and our very future as a country depends on it.”
Exploration for shale gas is not an easy task either socially or politically, but as Alward tells us, saying no to moving forward is not an acceptable option. He fears it not only would say no to current generations, but also future generations as well.
The energy revolution also holds tremendous potential for the prairie province of Saskatchewan as well. Premier Wall is a staunch supporter of tapping into these natural resources for the betterment of all Canadians, and that includes the development of pipelines to transfer oil from coast to coast and on to other countries.
“Pipeline capacity in general should concern all of us but the pipeline he (Alward) and Premier Redford (Alberta) have been working on together with industry actually involves Saskatchewan and some investment in our province in moving light sweet crude from the Bakken to our east coast. It also provides a much more economical source of oil for fellow Canadians, which just makes a lot of sense.”
Western Canada, exclusive of offshore oil or even what we know exists in terms of shale, is among the top 10 regions in the world in terms of oil production, with the third-largest reserves, trailing only Venezuela and Saudi Arabia.
“Do we act like that?” Wall asks, in reference to our being ranked third in worldwide oil reserves. “Do we act in this country like the energy power that we are? The answer is ‘no’ – we just don’t by any reasonable measure. It’s almost as if we’re embarrassed of it. It seems in a Canadian way we are apologising for the fact we have this resource. We have nothing to apologise for. We should always be making commitments to work harder to make sure that oil development is more sustainable.”
Wall also bemoans the fact we haven’t properly communicated our successes in corporate social responsibility within this sector. He notes that Canada has gone to the U.S. armed with economic benefits to both countries, but has come up short on the environmental issues and it’s much of that specific aspect that can at least be held partially responsible for major projects such as Keystone getting stuck in the mud, amidst all the added political gamesmanship south of the border.
“Some groups don’t seem as interested in the ends of a lot of sentences as perhaps they should be… because that’s where you’ll find a lot of the facts in terms of what we’re doing in oil and gas and what’s possible going forward,” Wall says in an aggravated tone, evidently making a veiled statement towards certain fringe environmental factions. “We all hailed – and rightly so – the trade deal with the EU. That particular deal could increase our GDP by $12 billion. Expanding the TransMountain Pipeline, Kinder Morgan, building the Keystone XL and Northern Gateway pipelines together have the potential for $1.3 trillion in economic output for the country.”
In addition to that astronomical figure would result in 7.6 million person years of employment while providing Canadian governments with about $280 billion in tax revenues. Even although these projects would not be transporting Saskatchewan oil, Wall makes it clear that his province and all Canadians should be very supportive of such endeavours.
“We need to be sure we are translating our support into something more kinetic, into some sort of action, so that we don’t lose this opportunity,” he declares. “Other countries are coming hard and countries are wondering when we are going to step up and act like the energy power that we are. Frankly, I think the globe could use Canada because, comparatively speaking in terms of other oil producing nations, nobody has a better record on stable democracy, human rights and the environment than we do.”
“There are a lot of things we ship across this country every single day,” Wall begins. “Some are manufactured, some are in their resource state, including uranium; sensitive goods travel the world over. Now if there’s going to be some sort of a risk payment for that, it doesn’t sound like a country to me. It sounds like a series of thiefdoms that have individual systems set up and I just really worry about our ability to get anything done to approve any pipeline, if that’s where we’re headed.
However, Wall does say if a case can be made for some form of business tax or levy to the companies involved, he sees that as more of a fair compromise. It is part of business and it’s transparent with full disclosure and is applied evenly.
Transporting western oil to refineries in New Brunswick would actually mean substantial amounts of revenue for both Ontario and Quebec in addition to Alberta and New Brunswick. A lot of it has to do with previous policies that were put in place by astute leaders in Ontario and Quebec and also due to the well-established manufacturing sector in the two provinces. But Alward cautions against regions focusing too much on financial gain and little else.
“The pipeline is going to run across much of New Brunswick,” he notes. “The greatest part of New Brunswick that will benefit will be the southern part of the province but literally every square inch and every individual in our province will see greater prosperity because of it.”
Alward’s main message is that such a project will allow governments from coast to coast to share wealth, which in turn means more funding for better healthcare and education.
Right now Canada ranks in the top 10 in terms of resource production but is third in reserves. Both Wall and Alward want to see a stronger push to developing those resources for greater economic gain. There’s also a danger of pitting region against region within our own country. Manufacturing has suffered in recent years due in large part to a stronger Canadian dollar and companies opting to find cheaper regions for production. When we balance all the pros and cons, are we looking at a zero-sum gain?
“If we look at each province or region individually then we’re all going to lose because of it,” Alward responds. “If we’re able to look upon our resources collectively as a country we’re all going to benefit. It’s no different than the free trade agreement with the EU. Ultimately there is a net-sum gain for the country. There are some sectors that will gain more than others. Collectively as Canadians when you are able to diversify market access we’re going to gain no matter what part of the country you are from.”
Shale Gas and Social Licence
Discussion on shale gas exploration has been heated and highly controversial regardless of what region it’s taken place in. It most often brings up the question of social licence and how assurances can be made to affected communities of energy development. It’s essential they feel a part of the process and buy into the plan, opining that it is to their benefit as a community and a region. Nowhere has this been more contentious than New Brunswick. Alward was asked about his government’s attitude about the development of shale gas and the issue of social licence.
“If I go back to the election campaign of 2010 we were very clear that we would develop, in a responsible way, natural gas in New Brunswick,” Alward responds. “I believe more New Brunswickers support development than don’t; but those who are against – it’s very easy to stand up and send something across social media where there’s no filter between what’s true and false. But those who support it tend to get a target put on their chest. We need to explore what’s there. It’s often hard because government and business respond at the speed of sound and others are responding at the speed of light so you’re always behind the eight-ball.”
New Brunswick is home to Canada’s only LNG plant. It was built just prior to natural gas being found on the eastern seaboard of North America. Today, it’s barely being used. The potential is to see billions of dollars of investment go into that plant, which means countries such as Germany and India are open for business because of all the potash; right now it’s all being exported raw.
“If we have our own natural gas reserves then we’ve got companies from places like India and China that are prepared to come to New Brunswick to build fertiliser plants and create prosperity,” Alward says. “We’ve also got potential for petro chemicals and increased manufacturing competitiveness if we have access to our own gas reserves.”
The added incentive for seeing such progression within his province is directly aligned with the ability to allow many New Brunswick natives the opportunity to return to work in their home province in some of the same sectors where Canada is already active in other regions.
Because Ontario, Quebec and Nova Scotia have all said ‘no’ to shale gas development, it means much of the focal point – good and bad – is targeted towards New Brunswick.
“We need support from across the country from organisations like the Chambers that see and understand the value of developing natural resources,” Alward states. “To think that we have the same potential reserves and resources as Saskatchewan does, but we’re not prepared to develop them really leads to other questions about sharing of wealth and revenue across the country and who we are as Canadians.”
Liberal MP and former astronaut Marc Garneau endorses the idea of increased exploration of our natural resources and getting them to tidewater. He believes the stumbling block at the moment is the obvious lack of infrastructure, and more specifically, pipelines. The Keystone pipeline could be sidelined because U.S. President Barack Obama may believe Canada is not being sufficiently responsible with the environment. In the case of Northern Gateway it becomes even more complicated because we add the Aboriginals and the province to the equation.
“The federal government wants to create prosperity in this country, but has it done sufficient work to also those who have reservations about it that we are serious about the environment? – because the two can be done well,” Garneau says. “It’s in our interests for all of Canada if we’re going to enjoy this prosperity. On the one hand we have this potential prosperity, while at the same time it’s being held back by the perception that this country is not doing sufficiently on the environment.”
Premier Wall believes Keystone has gotten caught up in an entanglement of environmental issues, and it will require a different focus from Canada to convince the United States government that the project is worthy of implementing. With strong support of trade unions, Republicans and many Democrats, the project initially seemed like a certainty. But times have changed. The economic validity of the pipeline has never been questioned, but the environmental portfolio has been a much bigger factor than most could have imagined.
“During our last mission we went down there (to the U.S.) and didn’t talk much about jobs or GDP but rather a $1.4 billion clean coal project that we’re doing in partnership with the federal government and how we’ve sold the CO2 and used for enhanced oil recovery and then we store it – something we’ve done in the province for 15 to 20 years as the result of a joint U.S.-Canadian initiative,” Wall says.
As for Keystone, the Saskatchewan premier is not nearly so optimistic about the project being approved as he was previously.
“We came out of our mission in March and felt good based on what we were hearing on the Hill on both sides of the aisle and we did meet with U.S. administration officials,” Wall reveals. “But then there was the interview with the president in the New York Times where he talked about it being ‘a couple hundred jobs’ and not a very big deal. I then became very concerned. If I was a seven or eight on the optimism scale, I’d be about half that right now.”
The U.S. State Department is expected to soon finalise an environmental assessment that will focus on the pipeline’s climate impact and a final decision on Keystone XL is expected sometime next year.
Procuring an enhanced level of industry involvement is something both Premiers Alward and Wall openly declare as vitally necessary in order to fully maximise potential opportunities, both those now on the table and the ones coming down the pipe(line).