As Prime Minister Mark Carney’s new government takes shape in Ottawa, the potential for conflict with the Government of Alberta and Canada’s oil and gas sector is high.
All parties have expressed a desire to grow the country’s energy sector and expand market access. But the list of demands issued by Premier Danielle Smith and various energy executives are seemingly at odds with significant portions of the Liberal Party’s campaign commitments and messaging.
In March, the chief executive of TC Energy Corp., Francois Poirier, described his company’s investment decision-making process as follows:
“The very first question we ask ourselves in our assessment is, what do we think the odds are of getting our permits in a timely manner, with a reasonable set of conditions, in a cost-effective manner?” Poirier said in Houston at CERAWeek, the world’s largest energy conference.
“That is the starting point of our assessment of the viability of a project.”
Poirier was subsequently one of 38 energy company executives to sign an April 30 post-election letter to Carney, calling for action in five areas.
Similarly, Premier Smith has articulated eight demands to be met to renew Alberta’s relationship with Canada. Energy development features prominently.
The executives’ and premier’s demands diverge significantly from Liberal campaign positions, suggesting there could be many areas of dispute:
1. Simplify regulation
Industry leaders have suggested the Impact Assessment Act (Bill C-69) be overhauled and simplified as part of a broader streamlining of regulatory processes. They also want to see the West Coast oil tanker ban (Bill C-48) lifted to allow oil shipments from northern B.C.
Smith cited C-69 and the tanker ban explicitly when saying, “The federal government must end all federal interference in the development of provincial resources.” She wants both to be scrapped.
During the election campaign, Carney laid out three objectives for energy policy: security, trade diversification and competitiveness.
A campaign press release says the party’s proposed policies can achieve these objectives and be implemented using “efficient processes under the Impact Assessment Act.” This suggests the party does not plan to repeal the act.
The party did not comment on the tanker ban during the campaign.
2. Commit to firm deadlines for project approvals
Canada’s burdensome and lengthy project approval process has put the country at a disadvantage relative to competing jurisdictions, something the CEOs hope to see addressed. They have proposed major projects be approved within six months of application, instead of the multi-year timeline currently in place.
The Liberals promised to establish a Major Federal Project Office to “move forward with One Project, One Review.” The party said this office would deliver decisions within two years, something the CEOs call “a positive step, but insufficient.”
The CEOs also suggested that government provide “additional clarity with regards to provincial jurisdiction” to expedite project approvals. Such a change would no doubt be welcomed by Smith, who has advocated for increased provincial autonomy.
3. Grow production
Industry and the premier are opposed to the Trudeau government’s proposed cap on oil and gas emissions. Alberta has said it would challenge the cap in court.
The law would limit total industry emissions by limiting emissions on a project-by-project basis. The government would establish a trading system where companies that exceeded their individual caps could purchase credits from companies whose emissions fell below their caps.
The oil and gas sector is responsible for about 30 per cent of Canada’s emissions. The government has not detailed its plans to cap any other industrial sector.
Carney has voiced his support for the cap. “I’m focused on getting emissions down from the production and transportation of conventional oil and gas,” he said at a campaign press conference. “There is a role for an emissions cap.”
4. Attract investment
The energy executives also identified Canada’s carbon pricing system as an impediment to investment.
As one of his first acts as prime minister, Carney effectively cancelled the consumer carbon tax by setting the rate to zero. However, the charge on industrial emitters — which was introduced in 2019 — remains.
“The current federal price … results in uncompetitive costs compared to those we compete with,” reads the industry leaders’ letter.
The executives believe the industrial price at the federal level “should be repealed to allow provincial governments to set more suitable carbon regulations.”
Smith has called for an end to federal action that “purports to regulate industrial carbon emissions, plastics, or the commercial free speech of energy companies.”
The new Carney government plans to preserve industrial pricing. They would also consider “applying Border Carbon Adjustments on imports of steel, cement, aluminum and other emissions-intensive industries, similar to the European Union’s approach,” the party’s platform says.
Such a mechanism would be designed to protect Canadian industry from foreign competitors not subject to carbon pricing by applying a carbon levy to imports.
Only Manitoba, P.E.I., Nunavut and Yukon are enrolled in the federal system for large emitters — defined as emitters of more than 50,000 tonnes per year. The remaining jurisdictions have applied their own regimes, which the federal government has deemed equivalent to its own.
5. Incent Indigenous co-investment opportunities
One area of agreement is over Indigenous ownership of resource projects. In their letter, industry leaders called on the government to make more capital available to First Nations communities.
There are already federal and provincial programs in place that support Indigenous ownership of projects such as current and proposed liquified natural gas facilities.
The Liberal campaign promised to “double the Indigenous Loan Guarantee Program from $5 billion to $10 billion to support Indigenous-led infrastructure, transportation and trade projects.”
The commitment was welcomed by industry, with the caution that, “Indigenous loan guarantee programs are only effective if Canada fosters a competitive investment environment.”
Challenges ahead
In a May 5 provincial address, Smith was critical of Ottawa’s attitude and behaviour under former prime minister Justin Trudeau. But she showed cautious optimism when referring to Carney.
“We have a new prime minister. And I will say that in my first conversation with him since the election, he had some promising things to say,” she said. She then added, “Until I see tangible proof of real change, Alberta will be taking steps to better protect ourselves from Ottawa.”
TC Energy’s Poirier had advice for both levels of government.
“We need leaders that are prepared to spend the political capital to make sure [development] happens, provide developers with the certainty they need, and provide capital providers with that same certainty.”
With opposing starting positions on material issues, Canada’s new government may struggle to establish such certainty.
