CANADA’S OIL AND GAS: AN ABUNDANT RESOURCE WITH HIGH POTENTIAL ON THE WORLD STAGE

As energy consumers, we often take the oil and gas industry for granted. As Canadians, we shouldn’t. In 2014, oil and gas directly and indirectly represented 10.6 per cent of GDP and 4.1 per cent of all employment. With the support of Canadian citizens and policymakers, a robust oil and gas industry can continue to support our economy, and compete internationally, while demonstrating environmental leadership.

“We need a ‘ Team Canada’ approach to keep Canada’s oil and natural gas industry — and the Canadian economy — healthy,” says Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers (CAPP). “Our dream team includes all of the industries that benefit from oil and gas, multiple levels of government and our own citizens uniting to advance the economic interests of Canadians.”

While the U. S. remains Canada’s largest customer for oil and gas products, it’s also our largest competitor. The two countries can benefit from close co- operation to help ensure mutual energy, economic and environmental success. The recent approval of the Keystone XL pipeline by the U.S. State Department is a great example. But there’s a caveat. “We need to recognize that we will be competing to sell oil and natural gas to world markets,” says McMillan. “Canada must continue to diversify its market for both products.”

In China, for example, demand for liquefied natural gas (LNG) is growing rapidly. However, proposed Canadian LNG projects require timely political and regulatory decisions to fend off fierce global competition to secure such markets first.

“Only with up- t o- date delivery infrastructure can we receive fair value for our products in i ncreasingly competitive international markets,” says McMillan.

Canadians must al s o stand firm to support the oil and gas industry against potential U. S. threats to competitiveness.

A border adjustment tax is just one policy the U. S. government says it might pursue as it aims to renegotiate NAFTA and other economic agreements.

Under a border adjustment tax regime, U. S. crude refineries would likely prefer to use domestic crude, since they could deduct the cost of domestic input from their taxable income.

“As a result, U. S. demand for imported crude may decline, and we’re concerned about the potential for aggressive pushback on Canadian crude oil by U. S. refin- eries,” says Jonathan Stringham, manager, fiscal and economic policy, with CAPP. “We need our federal government to lobby strongly against any new cross- border tax.”

Canadians can also take pride in the fact that, among global oil suppliers, the country leads in energy security, regulatory stringency and environmental protection, including action on climate change.

Of the top five suppliers of oil to the U. S. ( including Mexico, Nigeria, Saudi Arabia and Venezuela), only Canada has greenhouse gas regulations in place.

“We support the goals of the Pan- Canadian Framework on Clean Growth and Climate Change,” says Alex Ferguson, vice- president, policy and performance, with CAPP. “However, we believe we must continue to balance climate commitments with economic opportunity. The government can help maintain our competi- tive advantage while making progressive change on climate.”

CAPP is also seeking assurances that any carbon pricing mechanism can ensure both compatibility with major economic partners and growth of the Canadian economy. Since the U. S. is our largest competitor when it comes to oil and natural gas development, Canadian carbon pricing mechanisms must focus on maintaining our competitiveness.

A carbon policy should also stimulate and support investment in the technologies necessary for significant reductions in greenhouse gas emissions.

“Canada leads on methane reduction, technological innovation, venting and flaring, and business practices,” says Ferguson. “Innovation and technology will continue to be the keys to breaking the

link be- tween energy growth and emissions growth. Effective government policy can assist us in getting there.”

Any approach to controlling greenhouse gas emissions should provide clarity and certainty, while permitting the responsible development of oil and natural gas resources and energy infrastructure. Canada can achieve that by focusing on a variety of issues that improve our competitive advantage. Those include tax reform, continued focus on international relations, the foundation of trade for our natural resources, and Aboriginal relations.

“Working with government, public and industry stakeholders, we should be able to strike a balance between environmental, economic and energy- security considerations,” says Ferguson. “By crafting predictable policy built on stable principles, we can support longterm capital investment in the upstream oil and gas sector and continue to create jobs and opportunities for Canadians.”

We need to recognize that we will be competing to sell oil and natural gas to world markets.