Last Tuesday RBC’s Dave McKay and Enbridge’s Al Monaco appeared together at a Canadian Club Lunch in Toronto to address the state of the energy industry in Canada and offer some solutions. The main theme of the talk as they explained was that Canada is at risk of squandering its energy advantage if it does not come together to tap the potential of its energy industry.
McKay offered that business leaders need to become stronger advocates for this sector. The key is for governments to take the political risk away from moving forward. The demand for energy produced in Canada is expected to grow, but Canada must be ready to take advantage of that demand.
Monaco explained that Canada has the advantage of proximity to major markets and we need to develop an energy strategy that utilizes the competitive advantages we have. The argument is that policies on climate, energy and Indigenous reconciliation and other related policy matters should be settled at a high level, not when individual projects are being reviewed.
As Monaco stated, once policies are set and we know the rules as investors, then we can say “I got the game plan” and I know I can build a project within the policy context.
McKay noted that energy makes up 10% of GDP and could add 1.1% to annual GDP if oil and gas get access to the right markets and investments. He argued that it would be the “equivalent of putting a new auto sector in Canada right in front of us.” It would result in $200 billion coming in revenue as well as tax revenue over the next 10 years. He said “we risk ceding that dividend to others instead of taking control of it and building the world around us that we envision.”
They noted that Canada is losing players in the energy field over too much regulation and lack of infrastructure. The exit of Devon Energy in the last two weeks from the oil sands is an example. Monaco said “we’re squandering an opportunity here to really drive our economy and supply energy in the most sustainable way.”
If Canada doesn’t step up and provide the supply of energy, others will step in to fill the void. No one is sitting around waiting for Canada to get its act together. The development, and export of LNG by the U.S. and Australia is proof of that.
Almost a decade ago, there was a movement by the energy industry, some think tanks and some environmental groups to develop a Canadian Energy Strategy that would form the policy basis for the development of all types of energy in Canada. While it was championed for a time by a number of provinces, it never caught on with the federal government.
McKay and Monaco are right when they say that investors and project proponents should know the rules before a project is submitted for approval. Bill C-69(no more pipelines bill) is an example of legislation that has a number of hurdles for developers to jump over, but the hurdles could change depending on political interpretation. They become a moveable feast. An all-encompassing energy strategy would address the elements that need to be dealt with and how they may be satisfied when a project is being developed.
It is an idea and concept worth considering.