Alberta’s pipelines are about to get hit with a double regulatory whammy from Justin Trudeau in Ottawa and Donald Trump in Washington.
Nonetheless, the Canadian pipeline industry is still cautiously optimistic about success in the coming decade. Its more positive outlook may well be the right mindset for success but that doesn’t mean more hardship isn’t coming soon.
It’s already never been harder to build a pipeline in Canada. From 2009 to 2016, the time it took to get a permit for an oil or gas pipeline increased here to 681 days from 357 days. In Trump’s America, however, the time it took peaked at 561 days in 2015 and dropped to as low as 336 days by 2017, says the Canadian Energy pipeline association.
But now Trump wants more pipelines and less successful legal challenges opposing them. The New York Times and Washington Post report that the Trump administration will instruct federal agencies to no longer take climate change into account when measuring the impact of major infrastructure projects.
The Trudeau Liberals, meanwhile, regularly preach we have a catastrophic global climate crises, so much so that a clause stipulating consideration of greenhouse gas emissions is a major piece of its new industrial project approval process, Bill C-69.
Last spring, Chris Bloomer, CEO of the Canadian Energy Pipeline Association, spoke out strongly against C-69 at Senate hearings, saying it might mean an end to investment in any new Canadian pipeline project.
But now Bloomer is less pessimistic.
“In general, most sectors that are going to be affected by this bill are cautiously optimistic,” he said in an interview.
Why the more positive outlook?
For one thing, Bloomer expects four game-changing pipeline projects — Enbridge Line 3, Keystone XL, Trans Mountain and Coastal Gaslink — will be completed in a few years.
Their success is a tipping point, Bloomer said, which are proceeding even after vigorous opposition and legal challenges. “That’s a sign we are at the end of trying to obfuscate these projects and not have them go ahead.”
Another reason for optimism is that after the oil and gas sector stood up for itself so fiercely against Bill C-69 last spring, the Liberal greatly amended the bill in the Senate, Bloomer said. It’s still not clear how various aspects of the bill, such as the climate change clauses, will play out on any given project. Bloomer hopes the federal government will sign off on the right regulations that will allow projects to proceed if they follow reasonable rules.
Bloomer doesn’t agree with Trump’s approach. “On climate change, we can’t ignore it.”
Canadian oil and gas is dealing with climate change by investing in emission reducing technology, Bloomer said. “We want to make sure that Canada is recognized in climate change action and reducing emissions and is committed to that in the long-term.”
The U.S may be able to attract capital with less red tape on climate change, but Bloomer points out a counter-force, the rise of ESG (environment, social, governance) investing. In this business mode, investors look at the environmental, social and governance issues around a company and its jurisdiction before funnelling billions that way.
“Capital is going to go in the future to those areas that not only have the better economics and the better cycle time on investment, but the ESG component is going to be very, very important in terms of how investors look at placing their capital.”
When it comes to the strong ESG record of the Canadian oil and gas sector, Bloomer wants the Trudeau government to start loudly pounding this drum. “The government has to say, ‘We have these resources, we are socially, environmentally and safety-wise the best in the world, and our energy should be the first mcf (1000 cubic feet of natural gas) or the first barrel consumed in any market.’ ”
I’m less optimistic than Bloomer on pipelines mainly because I see the new approval process as packed full of unnecessary new stipulations that have nothing to do with pipeline safety and everything to do with giving those intent on killing pipelines new legal triggers to pull.
I also doubt that oil-producing dictatorships like Russia, Saudi Arabia, Iran and Venezuela will be impacted by ESG rules. In fact, ESG will most likely be used to hammer on corporations in woke jurisdictions like Canada that bend over backwards to display their virtue.
As Bloomer suggests, one strong signal that our oil and gas industry can thrive will be if the Trudeau government loudly and consistently pushes the ESG virtues of our Canadian industry. But I’ll believe that when I see it.