Canada needs better energy plan: CAPP
Taxes and inefficient regulation hurting capital investment and competitiveness, petroleum producers say
The production and use of renewable energy globally will continue to increase over the next 20 years, but in order to keep pace with a growing global population, so too will other forms of energy.
In its most recent World Energy Outlook, the International Energy Agency (IEA) forecasted that oil and natural gas will continue to lead the way, accounting for 52 per cent of total energy demand by 2040.
The Canadian Association of Petroleum Producers (CAPP) says in order to capitalize on Canada’s wealth of oil and natural gas resources — the third and sixth largest reserves, respectively, in the world — the nation needs a better energy strategy.
“We need to make responsible decisions for Canada and when we have these complex issues, our industry is making the commitment to do the work, to do the analytics so that we aren’t making oneoff decisions that aren’t tied to this broader picture,” says CAPP president and CEO Tim Mcmillan.
On Monday, CAPP published the first report of a seven-part economic series tackling solutions and making policy recommendations to the federal government to ensure Canada not only maintains its position in the global energy hierarchy, but improves upon it.
“What we’re putting forward in our comments and asks of government isn’t new, but it is a new approach,” Mcmillan says. “Some of these issues are complex and we live in a world where often soundbites are driving agendas. The reason we’re putting out a seven-part series is we need to ground some of these issues and build from there.”
The first report, “A Global Vision for the Future of Canadian Oil and Natural Gas,” tackles the notion that the country is falling behind in attracting investor confidence as a result of lack of energy infrastructure, rising government costs and inefficient regulation.
Among the 50 or so policy and regulatory initiatives currently in federal and provincial hands, the biggest nut to crack is the recently announced proposed changes to the how and by whom environmental assessments are conducted.
To this point, Mcmillan says industry reaction to the changes would indicate that Canada is not positioned for success.
“There are pieces in there that we asked specifically that the government would maintain, that there be a designated project list so we knew what was on and what wasn’t on. We asked that timelines be legislated and maintained, but we also see a lot of uncertainty,” he says, noting there’s still more concrete information to come about the changes.
“I hope at the end of this we can all take a deep breath and say, ‘I think we’ve really positioned Canada for success and there’s a streamlined, clear process that everybody understands and is comfortable with.’ At this point I’m not comfortable that we’re there, but I’m committed to working with the government to get us there.”
In terms of the federal budget coming down in Ottawa today, CAPP is hopeful the federal government “change the narrative” that was born from a budget 2017 budget item that identified certain tax provisions around exploratory development as subsidies, when in fact they are not.
“That sent a terrible signal to the world on Canada’s approach to our resource sector,” says Mcmillan.
“I won’t pre-judge what narrative the government will have, but that would be very helpful at a time where investment banks are putting out literature that largely says that Canada is not a place to invest today. That’s damaging and will be damaging to jobs and opportunity in our country.”
Mcmillan says it’s also essential that Canada begin to look at tax changes to address the capital investment attraction gap with the United States, where capital spending on oil and natural gas increased 38 per cent last year. Canada’s, meanwhile, declined 19 per cent, and is down 46 per cent since 2014.
“We’ve seen other countries announce that — in light of the tax changes just recently in the U.S. — China, Japan and Russia are going to look at their tax policies to ensure they’re competitive. “I think no country is closer to or more challenged with competition with the U.S. than Canada.”