Access to global markets and less regulatory red tape? Yes. But a Canadian energy strategy? Maybe not

Almost all Canadian oil and gas executives agree that access to international markets is a good thing in order to capture full value of their products. One buyer—even the United States, arguably the biggest market in the world—just isn't enough.

Images in this article

Those same executives have also, on many occasions, called for less red tape and more timely regulatory reviews. And as far as cooperation and pooling of resources for the development of environmental technologies, most would say it's a smart way to advance innovation and help the industry earn its social licence to operate.

But not everyone in the oilpatch is convinced a national energy strategy is needed to achieve these benefits.

"Call me suspicious, but as any good Albertan, I don't forget the past easily," says Darren Gee, president and chief executive officer of Peyto Exploration and Development Corp., referring to the National Energy Program (NEP) of the early 1980s.

Gee is among those who find it difficult to imagine how the involvement of the federal government plus multiple provincial governments in energy regulation and marketing will streamline anything. He would prefer instead to work with the regulations that are already in place and allow entrepreneurs to drive expansion to new markets.

"Government can get in the way of that or they can get out of the way of it," he says. "As long as they're not trying to deliberately get in the way of entrepreneurs, then entrepreneurs are going to make it happen."

At the other end of the debate are large oil and gas companies such as Suncor Energy Inc., Cenovus Energy Inc. and Talisman Energy Inc., which have much to gain from a successfully rendered national energy strategy.

"The critical issue that must be addressed sooner versus later is that Canada must export gas to premium markets," writes Talisman's president and chief executive officer, John Manzoni, in an email to Oilweek. "We are at the wrong end of the pipeline in an oversupplied North American market, while natural gas is commanding prices over $10 per mmbtu [million British thermal units] in Southeast Asia."

Suncor, which is selling its bitumen at a discount into the North American market, has been an early and vocal advocate for a national sustainable energy strategy. Suncor's president and chief executive officer, Steve Williams, writes in an email: "As a country, we need to assess our likely energy requirements 10, 20 and even 50 years down the road, and identify the mix of proven and potential energy sources that can best meet those requirements. Governments and industry each have a critical role to play."

For those in the industry who lived through that time, like Brian McLachlan (now president and chief executive officer of Yoho Resources Inc.), the idea of federal government involvement in Alberta's energy resources will always conjure up the exodus of service and supply equipment queuing at the Alberta border.

"I hate to be cynical, but after 34 years of doing this, every time the government tries to fix something it seems like it just tends to make it worse," McLachlan says.
Good intentions only go so far. He doesn't doubt Alberta's new premier, Alison Redford, wants the best for the province in advancing a national energy strategy. But so did former Alberta premier Ed Stelmach when he rolled out the Our Fair Share royalty restructuring that sent producers running for friendlier jurisdictions.

As Peyto's Gee notes, if Canada gets it wrong, as the province did then, money could leave Canada as a whole. "A bigger picture has bigger ramifications," he says.
In an industry run largely by guys old enough to remember the NEP, this kind of suspicion can't be overstated. It's something the Canadian Association of Petroleum Producers (CAPP), which supports the effort towards a national energy strategy, refers to as a "hangover from the National Energy Program."

"When you talk about a Canadian energy strategy, some people relate it back to the negatives we saw in the NEP three decades ago," says David Collyer, CAPP's president. "But this isn't at all what we're talking about here. This is much more broad-based and a much more all-inclusive process, and certainly not a dictum from Ottawa—although the federal government will clearly need to be engaged."

"The FTA [free-trade agreement] didn't happen overnight. It required a vibrant, analytic and inclusive conversation and, ultimately, everyone understood why it was in our best interest. This is as important a pivot point, and we need the same kind of conversation," Lynch said in June.

A growing urgency is added when pundits suggest that unless Canadian producers get their energy products to Asia soon, other producing countries will fill the demand and potentially shut out Canadians down the road.

At about the same time, federal New Democratic Party leader Thomas Mulcair was blaming Ontario's economic malaise on Alberta's oilsands developments, which he said were driving up the Canadian dollar and making life hard for other Canadian exporters.

Then Vancouver Mayor Gregor Robertson responded to Kinder Morgan Energy Partners, L.P.'s plan to expand its pipeline capacity to the port city by raising the spectre of oil-fouled Vancouver beaches, resulting in a quadrupling of oil tanker traffic. He called the plan "wrong-headed."

"I am fiercely opposed to the expansion of tankers in Vancouver's harbour and we are gearing up as a city to deal with this, working with other local governments in the region and around the southern coast," Robertson told media.

Could these be the auspicious beginnings of a national energy strategy dialogue?

Jack Mintz, who heads the University of Calgary School of Public Policy and sits as a director with Imperial Oil Limited, thinks so.

"To try and build consensus between 10 provinces is difficult because they all have their own special interests and will probably oppose one another," he says. "An example is the Premier's Council five years ago. They had a general strategy laid out. They agreed in principle. But the question is, how do you do the trade-offs?"

Another concern for Mintz is governments picking winners and losers.

"So when you start talking about a Canadian energy strategy, then the high-tech people will say we should have a Canadian innovation strategy, and then you have the autoworkers saying, we should have a Canadian automobile strategy which, by the way, will want to hammer the oilsands in order to lower the Canadian dollar," he says.


And while the federal government and many of the provincial governments currently share similar objectives, what happens if a Thomas Mulcair gets into power?
"You want a Canadian energy strategy? A guy like Mulcair will give you a Canadian energy strategy!" Mintz says.

"No matter where you are in Canada—whether it's a gas-producing province, or a province with hydro production, or one that's focused on renewables—energy production of one kind or another is important," he says. "And we're all consumers of energy, so this is something that has to engage everyone across the country."

CAPP sees a national energy strategy as a forum for a broader discussion of energy issues. All Canadians need to understand how they fit in and how they benefit from the country's energy resource wealth.

Interestingly, CAPP almost downplays the policy initiatives that could pay the biggest dividends for the oil and gas industry—favourable policies that facilitate the building of pipelines and international export permits. Instead it talks a lot about hearing out other national interests, aligning those interests and allowing policies to emerge out of that process.

"If we can get to some broader alignment," Collyer says, acknowledging the uncertainty inherent in this process, "it will mobilize activity and Canadian initiatives, but also, very importantly, it will help to indicate to people outside Canada where this country is going on energy and environment, which I think would serve our interests much better internationally."

That kind of alignment may be difficult to achieve even within the wider oil and gas industry. Oil and gas exports clearly will benefit service and supply companies, but some service and supply companies are already exporters of products in their own right.

Packers Plus Energy Services Inc. is an example, and its president, Dan Themig, advocates a wider context to the discussion, suggesting that government should work toward providing international market access for all Canadian products—energy, lumber, minerals, technology—and not just Alberta oil and gas, or Alberta products.

"That should be the key role for our federal government in my opinion. To that extent, it should a national industrial policy, rather than a specific policy for energy," he says.

"In my view, no," says Doug Black, founding president of the Energy Policy Institute of Canada (EPIC), a non-profit organization concerned about Canada's energy future. Its members are largely a roster of big oil and gas companies such as Cenovus, which says its interests in a national energy strategy are represented by the group, but also include utility, human resources, mining, engineering and construction concerns across Canada. In light of this member base, EPIC doesn't consider itself an advocacy group.

"I don't doubt for a second that there are divergent points of view, but nobody says [formulating a national energy strategy] is easy," Black says. "In fact, I would tell you, this is as complicated a political file as would exist in Canada. But it's my view and the views of the members of EPIC, that's not a reason to not try and advance."

This September, EPIC will release the results of two-and-a-half years of effort across five working groups and five projects. Its recommendations for a national energy strategy will come on the heels of two important political meetings this summer: a meeting of first ministers in Halifax, N.S., and a meeting of Canadian energy ministers in Charlottetown, P.E.I.