MINISTER ‘LISTENING’
O’regan lands in Alberta
Give federal Natural Resources Minister Seamus O’regan credit for coming to Alberta in the middle of another political firestorm over energy development, when tempers are hot and there are many questions about the future.
Just don’t expect a lot of answers.
Teck Resources pulled its federal application for the $20.6-billion Frontier oilsands project this week. Anti-pipeline protests are continuing across the country.
What does the turmoil mean for the energy sector and the province?
Can the oilsands continue to grow while the federal government focuses on climate policy? Will investors avoid Canada in the wake of the Frontier failure?
Speaking to O’regan by phone while he stopped in Edmonton, it’s clear he’s on a listening tour.
He talks about the investment climate shifting in the world and the importance of Canada achieving net-zero greenhouse gas emissions by 2050.
He speaks about the fact there is no plan for getting there, yet.
He discusses the need for sitting down with people in the provincial government and energy industry, knowing anger in the province is rising.
“People are frustrated and the first thing you have to say is, ‘I’m here,’ this is a government that is listening to that frustration and I am determined to find a way to allay those fears and anxieties by demonstrating we’re serious about this industry,” he said.
“You cannot get to net zero without Alberta, you cannot get to net zero without the Canadian oil and gas industry.”
Alberta does have the highest emissions in the country, growing since 1990 as the economy expanded and oilsands production increased. In 2017, the oil and gas industry accounted for about 27 per cent of all emissions in Canada.
But Ottawa can’t overlook the economic importance of the sector to the entire country.
According to his own department, the energy industry comprised more than 11 per cent of Canada’s gross domestic product in 2018. It supported more than 500,000 jobs.
The Trudeau government talks about striking a balance between economic growth and environmental protection, yet the net-zero target has no concrete details.
“We don’t have a net-zero plan,” he said. “We have got to work on it, that’s for sure.”
Yet, the uncertainty about the federal government’s goals — and the obvious struggle it was having grappling with a project that had gone through the regulatory process — has had real-world consequences.
As Teck CEO Don Lindsay wrote in a letter to the federal environment minister on Sunday, international capital markets are looking for places with a framework that can reconcile resource development and climate change efforts.
“This does not yet exist here today,” Lindsay noted.
Does the government’s climate target mean oil and gas production can grow?
Yes, said the MP for St. John’s South-mount Pearl, citing the potential of carbon sequestration and electrification of the industry.
Even under the most ambitious international climate targets, a lot of oil will still be consumed in the world, “so it’s a matter of who is going to occupy that space.
And I firmly believe that Canada can occupy a heck of a lot of it,” O’regan said.
“But it is very important that it grows in a way that it attracts investment, and in order to attract investment, you have to show you are committed to climate change.”
Companies such as Canadian Natural Resources, Cenovus Energy and MEG Energy have already adopted aspirational goals to get to net zero by 2050. They are investing in technology to reduce emissions per barrel, as are others.
Institutional investors are increasingly demanding companies have strong environmental, social and governance performance.
But they are also seeking a fair return on their investment. If companies spend $1.1 billion and take nine years — as Teck did
— to go through the regulatory process, they want some certainty at the end.
“They didn’t want to get caught in carrying the weight of all of the policy decisions,” said energy consultant Greg Stringham, a former vice-president at the Canadian Association of Petroleum Producers.
“The policy uncertainty right now is the biggest problem.”
Alberta Energy Minister Sonya Savage insisted Tuesday the oilsands will continue to grow in the years ahead, but the turbulence over Frontier has added more uncertainty for investors.
“Ottawa just can’t get their heads around these projects,” she said, after meeting with her federal counterpart.
“They can’t reconcile what role oil and gas development would have in their climate plan ... and they have never been able to reconcile any of that with the fact the provinces own the natural resources and have the right to develop them.”
As for Teck, O’regan said he was surprised by the company’s decision. He said it’s conjecture the federal government was going to defer the approval decision — as Premier Jason Kenney said Monday — because the cabinet hadn’t made a decision.
And when asked if Ottawa played any role in the project failing, he referred to Lindsay’s letter, saying “it’s incumbent on governments to get their act together.”
He was on point about the mood of many Albertans after the contentious Frontier debate. The province, the industry and Indigenous communities that backed Teck are frustrated.
“It’s an emotional moment because it began to symbolize a lot,” the minister said.
“I didn’t come out here saying I had all the answers. I came out here saying let’s chat and
I’m going to spend a lot of time listening … These things take on a life of their own.”
Frontier did take on a life of its own. Now it’s dead.
At some point, the listening tour must stop and real collaborative action is required to address the legitimate concerns of investors, the industry and the province.
Ottawa... can’t reconcile what role oil and gas development would have in their climate plan.