Let’s be clear about one thing. We are no fan of Canada’s new Major Projects Office.
The agency is tasked with getting “nation-building” projects built faster by accelerating regulatory processes and helping coordinate financing.
It is the wrong solution to the right problem.
Canada’s problem is that our regulatory landscape impedes the development of wealth-creating infrastructure projects.
It is one likely reason, for example, that LNG Canada — the largest private sector investment in Canada’s history and a critical hub for getting our natural gas to global markets — is owned entirely by foreign companies.
“One is tempted to say that maybe Canadian companies know too much to bother taking the risk,” economist Jock Finlayson told Canadian Affairs in March. “They’d rather take the capital and deploy it in the U.S. or somewhere else.”
LNG Canada received regulatory approval in 2015, but only became operational this year. In the same period, the U.S. went from having zero LNG export facilities to having at least eight, and being the world’s largest LNG exporter.
And LNG Canada’s timeline looks speedy compared to Ontario’s Ring of Fire. That region, which was discovered in 2007, is rich in critical minerals and considered one of Canada’s most promising development opportunities. Yet, it has seen little development in the intervening 18 years due to legal and infrastructure challenges.
So there is indeed a real problem. But as some critics rightly noted this summer, the right solution would be to fix the regulatory landscape for everyone.
This would require not only reforming statutes but also judicial processes, as the courts have become a key impediment to timely project development. The point, though, would be to prioritize the rule of law — ensuring the same set of rules applies to all.
Quite simply, this is an essential precondition for economic prosperity.
Last year, Daron Acemoglu, Simon Johnson and James Robinson won the Nobel Prize in Economics for their sweeping historical analysis of the conditions that lead countries to prosper or stagnate over time.
Their key findings, documented in the book Why Nations Fail, are that countries prosper when they have “inclusive institutions” — that is, systems that uphold the rule of law, protect property rights, encourage innovation and facilitate broad participation in economic opportunities.
Conversely, countries struggle with stagnation, inequality and poverty when they have “extractive institutions” — where power is concentrated in elites who exploit resources and stifle competition.
We do not want to overstate things; Canada’s institutions are not “extractive” by most metrics. But it is alarming that the Major Projects Office’s very mandate is to pick winners and losers. The risk of politics, optics and industry capture influencing its decisions is worryingly high.
Meanwhile, project proponents spearheading smaller projects — or projects that have not received the MPO’s blessing — will be left facing the same sclerotic regulatory landscape as before.
So our first wish is that the Major Projects Office be merely temporary; that it helps get some important projects off the ground while Ottawa undertakes more laborious reforms.
Our second wish is that we see project proposals come forward that play to Canada’s natural strengths. (Sorry, Premier Ford, we do not mean a tunnel under Toronto’s Highway 401.)
Here are a few that come to mind:
Uranium enrichment: Globally, demand for nuclear energy is surging as countries seek out low-carbon, easily dispatchable energy solutions.
Canada is home to the world’s third largest repository of uranium. But we do not currently have any uranium enrichment facilities, which make uranium safe and usable in most nuclear reactors.
This is a missed opportunity. Why not become a leader in both the extraction and production of this resource?
Aluminum refining: Canada often bills itself as a leader in aluminum production — and in a way we are. Canada is home to 10 primary aluminum smelters, which use our abundant and cheap hydroelectric power to turn alumina into aluminum.
But Canada currently has no aluminum refineries, which process raw bauxite into alumina. Rather, Canada imports alumina from abroad, making us vulnerable to, say, a trade war.
If the trade war with the U.S. continues, “it may become profitable to open refineries here, but you would still need government assistance to make it happen quickly,” Julian Karaguesian, a McGill University lecturer and former finance ministry official, told Canadian Affairs in March.
That would be one form of government assistance we could get behind.
National pipeline: Canada should have the capacity to not only export its oil to global markets, but to also meet domestic demand. Do Eastern Canadians who oppose a transnational pipeline appreciate that much of the oil they use is currently imported from abroad?
That’s right, Canada — the world’s fourth largest oil producer — imports about a fifth of the oil it consumes from other countries, mostly the U.S., but also from Nigeria and Saudi Arabia.
Given how politically charged pipelines have become, it would take great political leadership to make energy independence a reality in Canada. But if ever there was a moment to do it, it would be now. And if ever there was a project worthy of federal backing, this would be it.
The Carney government is in a hurry to nation build. In its haste, it risks losing sight of its most important role: to create the conditions for flourishing; not to handpick who builds.
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