www.policymagazine.ca June – July 2013 1 Canadian Politics and Public Policy

The Great Alison Canadian Redford Energy Puzzle

$6.95 VolumeJune/July 1 – 2013 Issue 2

1 In This Issue

3 From the Editor: Solving the Energy Puzzle

Canadian Politics and Public Policy

EDITOR L. Ian MacDonald [email protected]

ASSOCIATE EDITOR Lisa Van Dusen [email protected]

CONTRIBUTING WRITERS Thomas S. Axworthy Alberta Premier Alison Redford at ease in her office. Policy photo Andrew Balfour COVER PACKAGE: THE GREAT CANADIAN ENERGY PUZZLE Brian Bohunicky Derek H. Burney Q&A Catherine Cano 7 A Conversation With Alison Redford Margaret Clarke Verbatim: Joe Oliver Celine Cooper 15 Dispelling the Myths about Canada’s Energy Future Fen Hampson Kevin Lynch and Karen Miske Dan Gagnier 20 An Unconventional Energy Revolution Brad Lavigne Velma McColl Kevin Lynch 24 Custom-Built by Provinces: Creating a Flexible Canadian Energy Strategy Jeremy Kinsman Robin Sears Velma McColl 27 The Politics of Pipelines Geoff Norquay David Alward Zach Paikin 30 West-East Pipeline: A Question of National Interest Robin V. Sears Gil Troy 33 The Geopolitics of North American Energy Independence WEB DESIGN Douglas Porter and Earl Sweet Canada’s Cut-Rate Oil: Temporary or Permanent? Nicolas Landry 37 nicolaslandry.ca Catherine Cano 40 Do the Media ‘Get’ Energy? GRAPHIC DESIGN Greg Lyle AND PRODUCTION 42 Conflicted on Canada as an Energy Superpower Monica Thomas David McLaughlin [email protected] Canada’s Climate Challenge: How Getting to 2020 will be Tough, Policy 43 Very Tough Policy is published six times annually Dan Woynillowicz and Merran Smith by LPAC Ltd. The contents are 47 Cutting Carbon: The Heart of a Canadian Energy Strategy copyrighted, but may be reproduced Bob Oliver with permission and attribution in 51 Why Energy Literacy Must Be a National Priority print, and viewed free of charge at the Policy home page at Dan Gagnier www.policymagazine.ca. 53 Developing Canada’s Energy Resources: A Question of Balance Elizabeth May Printed and distributed by St. Joseph 56 Time to Put the Pieces of the Puzzle in Place Communications, 1165 Kenaston Street, , , K1A 1A4 Peter Julian 58 A Question of Stewardship Special thanks Michael Bourque Point A to Point B: The Other Way to Move Oil to our advertisers. 60 Scott Thurlow 63 From Biofuels to the Bio-Economy June/July 2013 WHY EXPORT CANADA’S OIL TO MORE MARKETS?

TODAY, ALMOST ALL OUR OIL EXPORTS OF OUR OIL EXPORTS COULD GO TO MORE GO TO THE U.S. WORLD MARKETS

BY OFFERING OUR OIL TO MORE CUSTOMERS CANADA COULD RECEIVE A HIGHER PRICE $110 $ 85 AN IMPACT OF AT $85 A BARREL, $40 MILLION AT $110 A BARREL, PER DAY* REVENUES INTO CANADA REVENUES COULD ARE ROUGHLY BE MORE LIKE $200 MILLION A DAY $240 MILLION A DAY (2012)

(2012)

* RECOGNIZES TRANSPORTATION COSTS AND QUALITY DIFFERENTIAL

REVENUES FROM OIL EXPORTS BENEFIT CANADA IN MANY WAYS:

$$$ TO GOVERNMENTS FOR THINGS $$$ IN INVESTMENTS TO DEVELOP LIKE HOSPITALS, ROADS, SCHOOLS CANADA’S OIL (EQUIPMENT, PROCESSING)

$$$ TO PAY WAGES AND SALARIES $$$ INDUSTRY PROFITS RETURNED OF WORKERS TO INVESTORS AND SHAREHOLDERS, INCLUDING PENSION PLANS AND MUTUAL FUNDS

IF CANADA SOLD ITS OIL TO MORE MARKETS THIS COULD MEAN MORE MONEY FOR CANADA’S ECONOMY AND MORE JOBS FOR CANADIANS.

TO FIND OUT MORE ABOUT CANADA'S OIL SANDS ENERGY, AND HOW IT WORKS FOR ALL CANADIANS, GO TO OILSANDSTODAY.CA

CANADA’S OIL SANDS. ENERGY AT WORK FOR ALL CANADIANS. A MESSAGE FROM CANADA’S OIL SANDS PRODUCERS. OILSANDSTODAY.CA

Filename i2-CaPP-iGeXPORTS-PRC-2013-05-23-en2 mOdiFied may 23, 2013 11:47 am CReaTed 05/12/2012 aPPROved 05/23/13 2013

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From the Editor / L. Ian MacDonald Solving the Energy Puzzle

elcome to our special issue for the New Brunswick and Atlantic Canadian and world economies in on The Great Canadian En- economies. terms of adapting to market-driven W ergy Puzzle. Douglas Porter and Earl Sweet, senior demand for lower carbon outputs to There are so many political and public economists with BMO, consider the mitigate the effects of climate change. policy pieces to the puzzle, all of them impact of the oil discount on Canadi- Bob Oliver of Pollution Probe writes closely tied to the economy and the an crude in the US, which has been as that energy literacy must become a environment, as well as to Canada’s high as $40 per barrel, with significant national priority. prospects for prosperity. consequences for fiscal frameworks in Green Party Leader Elizabeth May For Alison Redford, the Canadian fed- both Ottawa and the producing prov- considers all the pieces of the puzzle eration is at the heart of the matter, in inces. Canada’s cut rate oil, as they and observes that “a grown-up discus- which natural resources are owned by call it. Is it temporary or permanent? sion starts with acknowledging that the provinces, but international trade s a former minister of Indian Canada needs an energy strategy.” is a federal jurisdiction. We met with Affairs, Industry and the Envi- She suggests seven national goals, in- Premier Redford in her Calgary office, ronment, CIBC Vice-Chair Jim cluding energy security and “an effec- and the resulting Q&A was an enlight- A tive GHG reduction plan.” Prentice has a deep understanding of ening conversation. the many pieces of the puzzle. He For NDP natural resources critic Peter In our Verbatim, Natural Resources writes of the geopolitics of North Julian, it’s “a question of stewardship.” Minister Joe Oliver reminds a Bloom- American energy independence, “un- On the question of pipelines to carry berg energy conference in New York til recently perceived as a pipe dream.” bitumen to tidewater, he reminds us just how much the United States relies Today, the prospect is real. that , the late “great on energy from Canada. From oil and Catherine Cano, a former senior news ,” was an advocate gas to hydro-electric power, Canada is executive at CBC and Radio-Canada, of refining product here at home. by far America’s largest supplier of en- looks at the energy puzzle and won- ergy. He also reminds Americans the Scott Thurlow of the Canadian Re- ders whether the media ‘get’ energy. oil sands account for only “0.1 percent newable Fuels Association, writes that While the industry needs to be more or 1/1000th of global GHG emissions.” demand in that growing sector has al- transparent, the media can do a better ready resulted in emissions reductions For their part, Kevin Lynch and Kar- job understanding the business and “equivalent to taking 1 million cars en Miske of BMO Financial Group policy challenges around energy. remind us of the economic impera- a year from our roads.” And Michael In terms of public attitudes towards tive for Canada to diversify its energy Bourque of the Canadian Railway energy and infrastructure, pollster trade beyond the US, which now ac- Association notes the growing ship- Greg Lyle of Innovative Research counts for nearly 100 percent of our ments of crude by rail, from virtually looks across the entire policy field, oil and gas exports. zero four years ago to nearly a quarter and has some fascinating answers on million barrels per day. Velma McColl, our resident authority where Canadians come out on the on clean energy, has followed the evo- puzzle, and why. While each of our contributors comes lution of the Canadian Energy Strat- at the question of Canada’s energy Dan Gagnier, a former chief of staff egy since the beginning. She writes puzzle from a particular perspective to Ontario and Quebec premiers, now how it is moving forward under the and some are stakeholders, political leads the Energy Policy Institute of auspices of the Council of the Fed- and otherwise, in particular outcomes, Canada, and provides an update and eration, the conference of provincial there are surprising areas of consensus, outlook from the EPIC perspective. and territorial premiers. Robin Sears, beginning with the need for a Cana- her colleague at the Earnscliffe Strat- David McLaughlin, former head of the dian Energy Strategy. It has to begin egy Group, considers the politics of National Round Table on the Environ- with greater diversification of and ac- pipelines, north-south, east-west, and ment and the Economy, looks at Can- cess to markets. There’s also agreement west-east. ada’s Copenhagen target of reducing on the need to factor in clean energy For New Brunswick Premier Gary Al- GHG emissions to 17 percent below alternatives and a lower carbon future. ward, the prospect of refining and 2005 levels by 2020. Getting there, he And, most of all, we need to achieve shipping Canadian oil from the Irving writes, “will be tough, very tough.” a sense of national purpose. We hope facility and deep water Port of Saint Dan Woynillowicz and Merran Smith this issue of Policy contributes to that John is a potential game changer of Clean Energy Canada look at the national conversation.

June/July 2013 4

Policy 5 CLEAN, AFFORDABLE POWER Now more than ever, we need nuclear to provide us with the a ordable, reliable electricity to grow and prosper. We also need nuclear, along with other sources of clean electricity, to support Ontario’s plan to phase out the use of coal.

With the Bruce Power site at its full operating potential we now provide more than 25 per cent of the province’s power and operate one of the largest nuclear generating facilities in the world.

What’s down?

COAL SMOG DAYS SULPHUR GENERATION EMISSIONS

Output from coal Since 2005, the number of 93% reduction generation is down summer smog days in the GTA in Ontario by 90%. has dropped from 48 to 12. sulphur emissions.

What’s up?

OPERATING LOW-COST JOBS AND NUCLEAR UNITS POWER INVESTMENT BRUCE POWER NUCLEAR UP, COAL DOWN Bruce Power doubled the 3,000 MW of additional Thousands of direct and nuclearupcoaldown.ca number of its operational low-cost, reliable indirect jobs. Over $7 billion units from four to eight, electricity for Ontario. of private investment in between 2001 to 2012. public assets.

Then Now BRUCE OUTPUT DOWN BRUCE OUTPUT UP By 1998 Bruce A had been fully shut down Fifteen years later, the revitalization of Bruce A and many thought it would never return to provides Ontario with an additional 3,000 MW service. of low-cost, clean electricity, doubling the number of operating units on site COAL OUTPUT UP Following the shutdown of Bruce A, fossil COAL OUTPUT DOWN generation dramatically increased in Ontario, In the last 10 years, Ontario has reduced jumping from 12 per cent of electricity in its use of coal by 90 per cent, accounting 1995 to 29 per cent in 2000. for only three per cent of the province’s electricity in 2012.

June/July 2013 To ge t h e r We deliver responsibly

Sustainable transportation solutions www.cn.ca

CNC_13158_Policy_MAG_SUS.indd 1 dossier : CNC-13158 client : CN date/modif. rédaction relecture D.A.13-05-24 épreuve 15:09 à description : Annonce Mai 100% titre : « Together SUS » 1 sc/client infographe production couleur(s) publication : Policy Magazine 24/05/13 NEW FONT format : 8,5pox11po infographe : Max 4c 7

Premier Alison Redford meets with CNOOC CEO Li Fanrong at her Calgary office on February 26. On the rules on foreign investment, like the CNOOC takeover of Nexen, Redford says: “We need investment and we need to have a clear and transparent process that allows people to have confidence.” Flickr photo

Policy: There are so many pieces to the Q&A: A Conversation great Canadian energy puzzle. How do you see them all fitting together? With Alison Redford Alison Redford: I think that if we carry on with that analogy, that it is a Managing energy in the Canadian federation puzzle, and in Canada, where, because of our perspective on provincial juris- diction around energy, particularly if you happen to come from Alberta; we haven’t been prepared to engage with Alberta Premier Alison Redford met with Policy Edi- each other across provincial borders. tor L. Ian MacDonald in her Calgary office May 3 A lot of the work that we started to do, that we needed to do, triggered by for a wide-ranging Q&A on the Canadian energy Keystone and some of the work that puzzle. Of all the political elements, Redford con- we want to do to open up internation- al markets, was allowing us to engage curred that managing the energy issue within the differently. Canadian federation was the most important. “I So the pieces are quite different. The think back to those conversations with Premier Alberta piece of the puzzle is around Lougheed,” Redford recalled. “He said the most im- conventional energy. The Ontario piece is more green energy. It’s not pactful way to come to a Canadian consensus, was only about energy sources, it’s also to understand that every premier who comes to the about manufacturing capacity, and how we actually bring together an table is promoting the interests of their province, economic plan that’s based around and if you understand that there can be wins for both conventional and unconven- everyone, then that allows for greater success.” tional energy, as well as renewables. Policy: So if you had to pick one piece of the puzzle that was most impor-

June/July 2013 8

We always run the risk with any federal government, and tion, that that would be problematic. maybe I have a little bit of suspicion around this because I’m But I do think there’s a role for every- one to be at the table. an Albertan, that when the federal government gets involved, if their approach was to impose a solution, that that would be Policy: We were kind of in that movie problematic. But I do think there’s a role for everyone to be at during the Lougheed years, weren’t the table. we? Alison Redford: (Laughs) We were! tant, would it be managing the energy Quebec and New Brunswick. That is We were! issue in the federation? an issue that has now captured the public imagination, not only in Al- Policy: With the NEP, dare I say that Alison Redford: I think so. Under- berta, but across the country. word in Calgary? standing that even though these are issues that are part of provincial juris- Policy: You mentioned the role of Alison Redford: You know it’s so diction, the only way we can have im- the federal government in all of this. funny, because there are people in pact is to come together as provincial At the end of the day the feds are re- this city who’ve moved here recently partners, and set a direction together. sponsible – and you’re a lawyer, you who don’t even know what the NEP And that’s a very difficult issue be- learned this in law school – for inter- was, which is rather ironic, because it cause we’ve never done that before. national trade, and interprovincial was so fundamental to my psyche as And there’s always been an idea that trade with the provinces. And they an Albertan growing up, and for many if issues are of national importance, can invoke Section 92 (10) of the Con- others across the country. then the federal government has to stitution if they want to invoke the Policy: Speaking of Peter Lougheed, lead on the agenda. declaratory power and declare things no Alberta premier since him has In some instances in this area, it’s dif- like pipelines to be in the national in- stepped onto the national stage the ficult for the federal government to terest. Leaving that aside, how would way you have since you’ve come to lead, partly because as provinces we you feel about the Prime Minister call- office. He used to say, “We were Ca- want to retain jurisdiction, but also ing an energy summit, with all the nadians first,” he said that in the last because, very often, these cross-border players, the 13 provinces and territo- speech of his life in June of last year. issues have to involve real-time con- ries and the First Nations at the table? And you’ve said famously in Toronto, versations around energy, environ- ment and industrial growth. I think back to those “we rise together or we fall together, conversations with Premier there is no other way.” So how do you And from my perspective, that’s prob- see Alberta’s leadership role in the fed- ably the biggest challenge, not just Lougheed. He said the most eration on this issue, among others? as a federal-provincial constitutional impactful way to come to a issue, but in terms of actual business Canadian consensus, was to Alison Redford: Well, I’m pretty development and growth. understand that every premier excited not just as premier, and head of government, but in our discussions Policy: This issue seems to be evolv- who comes to the table is with industry leaders who’ve really ing slowly under the umbrella of the promoting the interests of engaged across the country, in terms Council of the Federation, and under their province, and if you of communicating with people about the brand name of “the Canadian En- understand that there can be how economic growth in Alberta re- ergy Strategy.” How do you see that ally does matter to Canada. And the progressing? wins for everyone, then that allows for greater success. way that industry leaders in other Alison Redford: I’m not sure that parts of the country, and other po- I’d say they’re evolving slowly, but litical leaders in other jurisdictions, they’re not issues that are part of have understood that this really is, as the national conversation right now. you have said, a puzzle or mosaic that For example, the work we’re doing needs to come together. And I think around investing in renewables, look- Alison Redford: Well, I think that’s we’re making very good progress on ing at east-west grids for transmission, a very important conversation to hap- that. At the beginning, when you is work that’s essentially happening pen. My concern would be that we were talking about what this means in at an officials or a technical level, and have developed now a pattern, under terms of the federation, I think back it’s not something that’s necessarily the Canadian Energy Strategy, where to those conversations with Premier capturing the public imagination. But we’re beginning to understand that as Lougheed. He said the most impact- that’s okay, it’s still work that needs equal players we need to come to the ful way to come to a Canadian con- to be done. And then there are other table. We always run the risk with any sensus, was to understand that every pieces that are going to develop much federal government, and maybe I have premier who comes to the table is pro- more quickly than even we’ve antici- a little bit of suspicion around this be- moting the interests of their province, pated, such as the reversal of the east- cause I’m an Albertan, that when the and if you understand that there can west pipeline, and the partnership federal government gets involved, if be wins for everyone, then that allows that we now have between Alberta, their approach was to impose a solu- for greater success.

Policy 9

Alberta Premier Alison Redford and Policy Editor L. Ian MacDonald in conversation at the premier’s Calgary office on May 3. On the need to diversity export markets, she said: “Getting our product to tidewater is fundamental to doing what we as a government have an obligation to do, which is to get the best possible price for the resources that are owned by Albertans.” Policy photo, Lee Richardson

Policy: What’s your sense of First Na- States. How do you feel about the to New Brunswick, to Saint John, that tions equity in this conversation? need to diversify our markets? the cost of transporting that product to India is not greater or not much Alison Redford: I think it’s funda- Alison Redford: Well, we have to, greater than if we were to export that mental that we bring First Nations in and I remember the first time that I product from the West Coast. Now to talk about this in a way that ensures went to Washington, and I was talking the other thing which is wonder- everyone receives economic benefit to legislators. And they said: “Well, if ful is that there’s so much product from this. In fact, last year when I was Keystone doesn’t go, then what do you in Alberta that we have the ability in Toronto at a mergers and acquisi- do next?” And I said: “Well, make no to be able to use that to continue to tions panel, and someone asked the mistake about it, Alberta is an export develop refinery capacity in Quebec, question: “What are you most wor- driven economy. And we are putting and upgrading capacity in New Bruns- ried about in terms of infrastructure in place plans to export all of our prod- wick, and still to export that product growth and economic development ucts, not just oil and gas, but agricul- to emerging markets, and that’s where in Canada?” I said that I thought that ture and lots of other things.” we need to get to. it was that we weren’t yet at a place where we were engaging honestly and It’s an interesting statistic Policy: The oil discount, up to $35 at an equal level with First Nations. that if you were to take our and even $40 a barrel isn’t just a prob- product to New Brunswick, lem for you in terms of lower royal- We’ve really been at the forefront in ties, is it? As you know, in the federal terms of developing consultations to Saint John, that the cost budget there was a line that jumped policies, with developing partnerships of transporting that product out: a $28 billion decline in exports with groups like the Fort McKay First to India is not greater or not because of the oil discount, and $4 Nation, with the Metis Settlement much greater than if we were billion in revenue shortfall for the General Council, where we really un- to export that product from federal government because of lower derstood that apart from the fact there tax receipts, which is more than the are First Nations and constitutional the West Coast. contingency reserve of $3 billion. issues, everyone who lives in Alberta has a stake in economic growth, and Alison Redford: That’s right. And everyone needs to be able to benefit here’s another element in the con- from that. There’s no doubt that getting our versation. I had a great conversation product to tidewater is fundamental with some journalists in Quebec, and Policy: On the oil sands, 170 billion to doing what we as a government we were talking about those sorts of barrels of proven reserves, maybe have an obligation to do, which is to numbers, and then one of them, a twice that much, who knows? But get the best possible price for the re- very young fellow, said that the other you’ve got this problem with the oil sources that are owned by Albertans. thing we have to remember is that discount. More than 99 percent of our You know, it’s an interesting statistic this will also impact equalization pay- oil and gas exports go to the United that if you were to take our product ments. And it does. It fundamentally

June/July 2013 10 changes the economics of the coun- sands, we welcome those investments, to be sophisticated about how we put try, if we can’t find a way to make because they allow us to continue to in place a set of criteria, which I’m sure that we’re getting that product to grow the projects, and to make sure fine with, that ensure that the invest- market. that we’re building the capacity that ments allow for a net benefit to Can- we need to continue to be an econom- ada. But we have to stay committed It fundamentally changes the ic engine, both in the province and in to those criteria, and we have to make economics of the country, if the country. sure that all investors understand that we can’t find a way to make those are the ground rules and that Policy: Mr. Harper said on the day that’s what we expect compliance to sure that we’re getting that he announced approval of those two look like. product to market. deals last December: “It is important that Canadian and also foreign inves- Policy: The markets don’t like tors understand that this is not the be- uncertainty. ginning of a trend, but rather the end of a trend.” Are you on the same page Alison Redford: Absolutely. And it’s Policy: How do you feel about own- as he is on that? regulatory uncertainty in every way. ership of the resource by Canadians? I spent a lot of time recently talking The poll numbers on this are very Alison Redford: I was surprised to some very large investment funds, strong, as you know. For example, by those comments, because I don’t and they’re as interested in what we’re where did you come out on the Nex- think that you need to presume that going to do with respect to tax policy, en-CNOOC deal and on the Progress it is either the beginning of a trend of royalty policy, subsidies for corpora- Energy-Petronas deal? the end of a trend. I think it’s part of tions, which we don’t really have. what we need to be doing in order to But just to know, if they come in and Alison Redford: Well, we were very grow our economy and to be interna- make the sorts of investments that clear on those deals. First of all, as tional players. they’re looking to make, in the bil- I’ve said before, the resources in Al- lions of dollars, that they would have berta are owned by Albertans. At no We’re not afraid of foreign certainty over the next 25 to 30 years. point in time in those international interests coming in and They are entitled to ask for that if we want them to invest here. transactions, whether it’s CNOOC or investing in the oil sands, we any other international enterprise, at Policy: What about the environment? no point do we sell our ownership of welcome those investments, Is the industry doing a better job of those resources. All we’ve ever done is because they allow us to extracting more cleanly, and in R&D, signed contracts with producers to al- continue to grow the projects, than they were, say, 10 years ago? low them to develop the fields, to ex- and to make sure that we’re tract the resources, to sell the product building the capacity that we Alison Redford: Absolutely. They and to pay us for that access. need to continue to be an are. The irony is that there are two dif- The resources in Alberta are ferent things that we need to look at. economic engine, both in the One is the environmental impacts of owned by Albertans. province and in the country the projects in the physical location At no point in time in those where they are, and the work that international transactions, we’ve put in place in order to ensure whether it’s CNOOC or any that we’re monitoring environmen- other international enterprise, Policy: So we need investment. tal impact on air and land and water. And even in communities, just the so- at no point do we sell our Alison Redford: We need invest- cial impact now is tremendously dif- ownership of those resources. ment and we need to have a clear and ferent than what it was 10 years ago or transparent process that allows people 20 years ago. We’re doing that in part- to have confidence. One of the things nership with industry, and in fact Al- that troubled me a little bit was after berta industry is involved supporting That still allows us over the long term, those transactions were approved, the monitoring work that allows us to probably the next 50, 60 to a hundred when I was spending time in investor have confidence in that investment. years, to retain the ownership of that markets, to hear comments from peo- But the other piece that’s important, asset. So that’s the first thing, but the ple about the uncertainty around the and it’s a little ironic, and one of our second thing from our perspective is rules to foreign investment. Period. greatest challenges is that when you’re that because we retain ownership of And I thought that people might say, having a climate change discussion, those resources, we have a strong reg- well, there’s uncertainty with respect and you’re talking about emissions, ulatory process in place with respect to state-owned enterprises investing. we know that what industry is doing to sustainable development and the But it was a bit wider than that, and so right now is reducing the intensity of environment, and with respect to cor- it’s very important for us, I believe, as emissions with respect to production porate governance. Canadians, if we truly want to be the on a per-barrel basis. We’re not afraid of foreign interests international leaders that we claim to However, we also know that global de- coming in and investing in the oil be, that we understand that we need mand is increasing so much that pro-

Policy 11 duction is increasing and therefore apples and oranges. And so for us to My sense is after having had you don’t always see a net reduction be able to have real-time, scientifi- four trips to Washington, in the emissions, even though, based cally independent, and verifiable data if you look at the on intensity, there is a reduction, we that’s completely transparent should misinformation and the don’t see that drop because custom- allow for a much better conversation. ers want the product. That’s probably data that many activists are one of the most frustrating conversa- Policy: Now, to pipelines, north- providing, that they’re simply tions to have with people. south, east-west. Let’s begin with using Keystone as a platform Keystone XL, 830,000 barrels a day to But it is important, even apart from be potentially exported from Alberta to try to have a wider that on the emissions side, to actually to the Gulf Coast of Texas, and the conversation. look at what the net contribution of opposition to it. oil sands production is, in terms of GHG emissions worldwide is only My sense, and we would like to have 0.15 percent, according to Energy Al- your view of it, is this isn’t about the a more balanced conversation. And berta, and only 6.8 percent of all the pipeline at all, it’s about the oil sands. my sense it’s okay right now for that emissions in Canada. discussion in the United States to be Alison Redford: Sure, it is. My talking about the importance of jobs, We also know that global sense is after having had four trips to because we’re proud of our environ- demand is increasing so much Washington, if you look at the mis- mental record, and we actually think information and the data that many that it’s fair to have an honest con- that production is increasing activists are providing, that they’re and therefore you don’t versation and say, it’s all right to want simply using Keystone as a platform jobs for Keystone, because the other always see a net reduction in to try to have a wider conversation. thing you have to know is that the the emissions, even though, Which takes us back to what I talked product that’s flowing through Key- based on intensity, there is a about before, which is if we’re going stone is a product that’s produced in reduction. to have that conversation, let’s make an environmentally responsible way, sure it’s factual. We may not all agree, it’s a sustainable product, certainly in but at least let’s agree on what the contrast to other product that’s be- facts are. ing imported into the United States, But as we move ahead, what I think whether we’re talking environmental is interesting, that very often in the impact or production from places like Policy: And this new federal-provin- past what we’ve seen is that in good Venezuela or Nigeria, plus the fact cial information portal, that was re- economic times people spend an that we have really and truly a trans- cently opened, is this a good devel- awful lot of time talking about sus- parent process that allows the infor- opment in terms of transparency and tainable energy and then when the mation to be available, that what we disclosure? economy isn’t as strong, and people can see is that Canadian oil, Alberta oil, should be compared quite favour- Alison Redford: It’s really impor- are losing their jobs, I wouldn’t say it falls off the radar, but it’s probably ably to those other sources. tant, and it’s important for a couple of reasons. One is, it’s going to allow public information in real time, that will be scientifically verifiable so that everyone can use the same data to have the conversation. There will be people who have dif- ferent views as to what the environ- mental impacts should – or shouldn’t —be, but what I’m hoping that we’ll be able to do, because it is indepen- dent, and it does have scientifically verifiable data that’s assessed by an independent committee, what it should allow us to do is at least agree on what the impact is, because so much of the discussion that we’ve heard about has been the different interpretations of data, or the debate around how data has been collected that doesn’t allow you to compare apples and apples, that very often in David Manning, Alberta’s representative in Washington, and Premier Alison Redford speak to the media this discussion we’ve been comparing on Capitol Hill. April 10, 2013. Flickr photo

June/July 2013 12 The other thing you have to know is that the product that’s Policy: Has Keystone been a bit of a flowing through Keystone is a product that’s produced in an wakeup call in terms of east-west, and what we have to do in diversifying environmentally responsible way, it’s a sustainable product, our energy exports, particularly oil, to certainly in contrast to other product that’s being imported be specific, Gateway, Kinder-Morgan, into the United States. the TransCanada proposal west-east, and Enbridge’s proposal to reverse the flow of Line 9, using refining capac- ity in Montreal and Levis ? This comes Policy: There’s an element of hypoc- negotiated it, have both said that the back to managing the economics of risy in play here, isn’t there? The GHG delay on Keystone violates the spirit if the federation, doesn’t it? emissions from the coal-fired electric- not the letter of the energy chapter of Alison Redford: That’s right. Key- ity industry in the United States are the Free Trade Agreement. stone really focused the discussion. It reportedly 44 times those of the Al- speaks to one of the challenges that berta oil sands. we’ve had in Canada for some time, It is a complicated issue. And Alison Redford: Well, it’s funny be- and that is that we are very fortunate cause you talked at the beginning of I believe that Secretary Kerry to live where we live, and very often this interview about a puzzle around is committed to making an we get comfortable, and we haven’t energy, but there’s also another impact with respect to this always thought through what some puzzle around what we need to do of the long-term scenarios might have issue. And we are as well, but been. around environmental development, the way to do that is to come and as I said, you do see coal-fired I don’t think we can have separate generation in the United States that’s together and understand that conversations going on anymore, ei- quite heightened compared to what the 49th parallel is actually a ther between just two national gov- we see in the oil sands. You also see pretty permeated border. ernments not taking into account a very large population, as I said, that what’s happening in states and prov- is demanding the product, and wants inces. We also can’t leave this to in- to use the product, and so from my dustry. One of the reasons that we perspective there is work that needs ended up in the challenging situation to be done, but the work needs to be when we’re talking about Keystone or done by everyone. And in fact as the Alison Redford: Yeah, there’s very Gateway is that for a long time, every- State Department environmental im- specific wording in that and that one took for granted that the public pact said, approving Keystone would wording has been brought to my at- in general understood what energy in- not in any way adversely impact tention. And I’ve spoken to some of frastructure was, why it mattered and greenhouse gas emissions, which just the other negotiators, and it’s quite where it was, and what was under the speaks to the fact that that’s not actu- clear that we promised to be good ground. ally the problem. suppliers if they promised to be good customers. I was asked the question in Policy: If you had two minutes alone One of the reasons that we with Barack Obama what would you the United States last time I was down ended up in the challenging say to him about this? there, would this impact Canada-US relations? It’s not going to impact situation when we’re talking Alison Redford: I would say exactly Canada-US relations in terms of us be- about Keystone or Gateway is what I just said. You know, I remem- ing unfriendly neighbours or trading that for a long time, everyone ber when I first got involved in poli- partners, but I come back to the fact took for granted that the tics and Jock Osler said to me when that 50 or 60 years ago, when we think public in general understood I was trying to answer questions, he about the energy industry in the Unit- what energy infrastructure said, “you can’t answer questions like ed States and the energy industry in that anymore. You can’t start by say- Canada, and the titans of those indus- was, why it mattered and ing this is a complicated issue.” But it tries, they worked together to build where it was, and what was is a complicated issue. And I believe what I consider to be a very connect- under the ground. that Secretary Kerry is committed to ed energy economy...And so from my making an impact with respect to this perspective I think it’s important that issue. And we are as well, but the way Keystone goes ahead so that we can to do that is to come together and un- continue that dialogue, whether it’s derstand that the 49th parallel is actu- about economic growth and indus- ally a pretty permeated border, and it And so at no point in the past, cer- doesn’t in any way allow us to get to trial development, whether it’s about tainly when I was growing up, did we the real issue. And I think we should infrastructure not just around oil and see any policy discussion or any po- be able to do that. gas, and perhaps water, transmission, litical leadership around explaining to that kind of thing, but also in terms of people that there is energy infrastruc- Policy: , the father what we want to do around environ- ture under the ground right now, that of free trade, and Derek Burney, who mental sustainability. in fact Keystone in the United States

Policy 13 would only add 1 percent of linear they are doing well for their provinc- volume to the pipeline infrastructure es, are certainly prepared to work to- that’s currently in place in the United gether when it’s in their best interest, States. Now that there’s sort of been a and sometimes in Canada’s best inter- wakeup call, we’re having to do that est, and that’s where we’re going to work at the same time as we’re trying see the real dialogue take place. That’s to resolve the issue. If we’d been able where we’ve seen success. I’m not so to have a different public conversa- sure that we’ve seen a different tone tion earlier, we would have been able around the table simply because there to say to people, now you understand are women at the table. why we do need to have all of this in place, but if we don’t have this in Policy: How do you balance the de- place, we can’t actually run an econo- mands of this job and role, and fam- my. And the economy is what allows ily, because you’re a Mom, too, and us to have the quality of life we have your daughter’s at the age, 11, where in North America. she’s rising on her teenage years, but she’s also at the age where she prob- Policy: Let me ask you about women ably hears things in the school yard in politics and public life. about her Mum? Alison Redford: Okay. Alison Redford: Well, I’ll tell you Policy: Margaret Thatcher. You were first of all on the family side, Glen 14 years old when she took office in (Jermyn) is fantastic, he’s a great hus- 1979, and 25 when she left office in band, he’s a great dad, we’ve been 1990. Premier Redford at an kindergarten able to manage that quite well. He Alison Redford: She had a pretty class on May 2. On becoming a role model for doesn’t do a lot of politics. He pre- profound impact on my life. I remem- girls, she says: “I’m a little surprised by it and I take fers to spend time living his own life it seriously.” Flicker photo ber her so clearly. I remember the Bar- and being with Sarah. We’re very fo- bara Frum interview, that was classic, cused on family time when we have that was like nothing I’d ever seen ritorial premiers. I wonder whether the chance to spend it together. From before. I remember watching that in- you’ve been there long enough to our perspective, when I started in terview with my mother, and we were see whether the chemistry is differ- politics, our goal was to try to make almost speechless afterwards, because ent with all these women around the sure that Sarah’s lens on the world you saw two strong, intelligent wom- table other than the league of guys. didn’t change. And that’s not always en, who were just engaged in the most possible, but it’s been a pretty good specific and defined conversation. I Alison Redford: It’s very funny you guiding principle, because it gave her think a lot about her. And I think a lot say that. Margaret Thatcher, if you’d a sense of safety. So in the last year about her early life and the challenges asked her that question, she probably or so, as things changed a bit, she’s that she faced. When she first decided would have told you she wasn’t going gotten a bit older, a little more aware to run for politics, if I’m not mistak- to talk about this issue because from of what’s going on. She watches the en, I think she was single when she her perspective she was the prime news, with Glen, and she knows that ran the first time, for the first nomi- minister of the country and she was there’s a lot of political criticism, and nation. Imagine that, a single woman the leader of the party and the fact that some people are quite critical of in the 1950s in the UK, running for that she was a woman was pretty ir- me. It really is like water off a duck’s the Conservative Party, coming from relevant. I’ve got to say from my back to her. She is sometimes aware, the family background that she did. I perspective.... if I come home and I’m tired or some- have nothing but respect for what she thing, she’ll talk to me about it. accomplished in her life. Policy: You all defend your provinc- es’ interests, obviously... Policy: And you’ve become kind of Policy: So the grocer’s daughter be- a role model yourself, do you accept came the Iron Lady. She famously Alison Redford: That’s right, just that? said, “if you want someone to say taking a step back I think I am more of something, get a man; if you want that view, more of her view. I’ve had Alison Redford: I’m a little sur- something done, get a woman.” some time to think about whether or prised by it, and I take it seriously. not you see those differences. I will say You don’t wake up every day and Alison Redford: It’s true. that there is one premier who has said think about it, but you are aware of they are very optimistic that having Policy: Not a bad motto. the fact. Actually, I was in a kinder- more women around the table will al- garten class yesterday, and there was Alison Redford: It’s a very good low for a different dialogue to happen. a little girl, and I know this sounds motto. And I’m heartened by that. I am skeptical. I don’t think that’s a funny, but she was wearing pearls. bad thing, I just think that what we And her teacher told me that her Policy: There are six women, as we have at the table is 13 premiers, who Mum had told her that she could speak, at the table of the Council of are advocates for their provinces and wear pearls if she wanted because I the Federation, as provincial and ter- territories, that want to ensure that was going to be in the class.

June/July 2013 14 TRAFFIC KEEPS MOVING ABOVE BECAUSE OF WHAT WE’RE SAFELY MOVING BELOW

For nearly forty years, our Line 9 pipeline has delivered reliable energy between Quebec and Ontario. We monitor it every second of every day to protect the environment and the communities nearby. We check the entire route twice monthly by air, inspect the interior of the pipe using sophisticated in-line inspection tools, and regularly conduct digs that visually inspect its structural integrity. As the operator of the largest liquids pipeline system in the world, we know that constant care and diligent monitoring are the best ways to ensure a safe network.

Re-establishing the original easterly fl ow of the Line 9 pipeline will provide a secure source of more affordable domestic energy to Canadian refi neries, reducing the dependency on foreign oil. It’s a positive change in direction that will be good for the Canadian economy.

FIND OUT MORE

Enbridge.com/Line9

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Verbatim: Joe Oliver

Natural Resources Minister Joe Oliver at the Bloomberg Energy conference in New York. “Canada” he reminded his audience, “is by far the largest source of US energy imports.” Photo, NRCAN

Dispelling the e have come here to talk W about the Future of Energy. As governments and policy leaders, we Myths About Canada’s are tasked with balancing increased demand with what we have, what we know and quite frankly, what we can Energy Future afford, in a changing and complex global energy market. In the world of energy, change was a constant but looking back it seemed to have fluttered like a gentle breeze. Now Keystone XL is just part of Canada’s narrative of it blows at gale-force – all the time. adaptability in the face of seismic shifts in the The future of energy is fraught with fundamentals of the energy market. As Joe Oliver risk. But it is also brimming with po- told a Bloomberg conference in New York recently, tential. For countries that have what it takes in resources and determination. Canada is actively pursuing a strategic imperative Like Canada. to diversify energy export markets while enhanc- I want to tell you our story, a narra- ing energy security for North America. Within tive of adaptability in the face of seis- mic shifts in the fundamentals of the that framework, asserts Oliver, Keystone should be energy market. It is about Canada’s judged solely on its merits. ambition to harness the power of in- novation to create a cleaner energy mix for today and for the future. And it is about our strategic imperative to diversify energy export markets, while enhancing energy security for North America.

June/July 2013 16 Canada is a source of abundant hy- Canada has aligned its overarching emissions target with the drocarbons and clean energy. Con- United States – to reduce emissions by 17 percent below 2005 sider these numbers. levels by 2020. The Copenhagen target of 2009. It is estimated Canada is: we are halfway there. How did we do it? By taking a sector-by- 1. The world’s sixth-largest producer sector approach. of oil… with the third-largest proven reserves: 173 billion barrels, with 169 billion in the oil sands. 2. The third-largest producer of With that, let me tell you about Cana- sible use of fossil fuel that can meet natural gas. With recoverable gas da’s environmental record. that growing demand. resources approaching 1,300 tril- As many of you may know, Canada Further, our efforts to address climate lion cubic feet, some 200 years of has aligned its overarching emissions change already include concrete ac- domestic supply. target with the United States – to re- tion in the oil and gas sector through 3. The third-largest producer of duce emissions by 17 percent below regulations at the provincial level. hydroelectricity. 2005 levels by 2020, the Copenhagen We are also working on additional target of 2009. It is estimated we are federal regulations covering the oil 4. And the second-largest producer of halfway there. How did we do it? By and gas sector, all part of Canada’s uranium. taking a sector-by-sector approach. commitment to responsible resource Our electricity supply is one of the development. Transportation makes up about one cleanest on Earth, more than 77 per- quarter of Canada’s emissions. So, Creating a clean energy future does cent from non-emitting sources. Al- we introduced tough regulations for require substantial capital invest- most 15 percent from nuclear. light-duty and heavy-duty vehicles, in ment. With our strong focus on eco- lock-step with the US. nomic growth, Canada’s government e are also fortunate that our has been able to secure the capital for resources do not end at Coal is the single largest source of those projects. the land’s surface. We GHG emissions in the world. As the W International Energy Agency stated in In particular, our government has know that renewable energy sources made major investments relative to are a key to the long-term sustainable its report in April, the increasing use our size to increase energy efficiency. future of energy. of coal to make electricity is the great- est threat to a low-carbon future for Over 640,000 or one in 20 Canadian Hydropower is our biggest source of the world, and governments need to households took advantage of almost renewable energy. And it is getting take action to address it. $1 billion in grants to help retrofit bigger. Take the Lower Churchill their homes to reduce household en- project in Newfoundland and Lab- We are the first major coal user to ban ergy use and GHG emissions. rador. This $7.7 billion investment the construction of new coal-fired will create enough zero-emitting, re- electricity plants using traditional We recently committed newable power to supply 430,000 US technology. And we now require all households. existing coal plants to shut down on a an additional $325 million schedule that reflects their economic over the next eight years to The New York Public Service Commis- life, the first country in the world to support R&D in Canada’s sion just approved a plan to build the do so. Champlain Hudson transmission line, many innovative clean-tech which would move 1,000 megawatts Canadian governments have also companies. As a result of these of hydropower from Quebec to New made major investments in Carbon efforts, the IEA ranked Canada Capture and Storage technology. York. The Commission said the proj- second in its rate of energy ect could provide up to 10 percent of And our new coal regulations are efficiency improvement the power used in New York City — helping to make CCS a reality in Can- and would likely reduce power costs. ada. SaskPower is in the process of among 16 developed But hydro is only part of it. Canada commissioning the world’s first com- economies. has invested $10 billion in clean en- mercial-scale power plant with a fully- ergy since 2006. This includes govern- integrated carbon capture and storage ment partnerships with the private system. It aims to reduce GHG emis- sector in demonstration projects such sions from coal generation by 90%, as solar and smart grid through our the equivalent of taking 250,000 cars off the road. Clean Energy Fund and ecoENERGY We recently committed an additional Innovation Initiative. Fossil fuels have to be part of responsi- $325 million over the next eight years In the past decade, we have gone from ble energy development since, accord- to support R&D in Canada’s many in- pretty much a standing start in wind ing to the IEA, they will be the source novative clean-tech companies. As a power to ninth in the world. In 2012, of over two-thirds of global energy in result of these efforts, the IEA ranked we had 6,200 MW of installed capac- 2035. So we need to be resilient and Canada second in its rate of energy ef- ity. Experts say we could add another intelligent to develop workable op- ficiency improvement among 16 de- 1,500 MW this year alone. tions for the environmentally-respon- veloped economies.

Policy 17 As Canada looks to the energy future, In 2011, the oil sands accounted for 0.1 percent or 1/1,000th of we see a compelling economic case to global GHG emissions – similar to emissions originating from diversify our energy market, to meet coal-fired electrical plants in Alabama. the growing energy demand of China, India and other rapidly developing countries. But we are mindful of today’s realities. The US and Canada currently enjoy the world’s largest, most important orth America can be energy tion Alliance. They share intellectual and integrated energy market. independent within 20 years. property… innovative practices… and This opportunity provides technology advancements. All to re- So our two countries are working N America with a fundamental choice: duce the environmental impact of the together to make this integrated en- oil sands. To date, they have shared Either continue to rely for oil on off- ergy market work better. Since 2009, more than 300 patents to improve shore countries, which can be politi- Canada and the United States have environmental performance. Between cally unstable, even hostile, and have been engaged in the Clean Energy 1990 and 2011, we reduced emissions weak environmental standards, or Dialogue. By developing cutting-edge per barrel of oil produced in the oil none at all. science and technology, we can move sands by 26 percent. closer to a low-carbon economy. Canada is by far the largest The environmental requirements on the Canadian oil sands go beyond anada is by far the largest source of US energy imports. GHG regulations. They include water source of US energy imports. Every day, the US imports quality, air quality, and restoring dis- Every day, the US imports C three million barrels of oil turbed land to a natural state. And the three million barrels of oil and petro- and petroleum products from oil sands are subject to a world-class leum products from Canada – more program of environmental monitor- than from Saudi Arabia and Venezu- Canada – more than from ing and reporting. ela combined. Saudi Arabia and Venezuela combined. Very few oil exporters in the world As you know, the IEA has projected subject their industry to this kind that the US will be the world’s biggest of environmental performance and producer of oil as early as the end of monitoring. No other major oil ex- this decade. porter to the US does this. At the same time, the IEA predicts So the Canadian oil destined for the that, by 2035, global energy demand US is being developed responsibly. is expected to grow by 35 percent. In Or rely on your neighbour to the The US State Department, in its 2000 this scenario, China, India and the north. A long-time partner and friend. page Supplementary Environmental Middle East will account for a com- A source that is safe, secure, and reli- Impact Statement, concluded that manding 60 percent of the increase in able. And environmentally responsi- Keystone XL would not create signifi- world energy demand. ble. This is the choice of North Ameri- can energy security. cant environmental damage. Like it or not, for many decades fos- sil fuels will be crucial for developing Now I want to tell you about how he next question is how to countries to address energy insuffi- we’re developing the Canadian oil deliver the product safely. Key- ciency and bring their citizens out of sands in a responsible way. About how stone XL will actually be safer we want to deliver this product safely poverty. T than other typical pipelines in the through the Keystone XL pipeline. As production rises and demand falls, United States. That is not coming US dependence on imported oil is Let me start with the context. In from me. That is the opinion of the expected to decline sharply. But the 2011, the oil sands accounted for 0.1 State Department. US will still need to import signifi- percent or 1/1,000th of global GHG Compared to pipelines already built, cant quantities of oil to meet its daily emissions – similar to emissions origi- Keystone has 57 additional safety fea- needs. Even in 2035, according to the nating from coal-fired electrical plants tures. Welding of pipe seams. Inspec- IEA, the US will still rely on imports in Alabama. tions of full right-of-way 26 times a for some 3.4 million barrels a day. I am proud to say that, when it comes year. These will all be standard for Canada has the resources to meet all to investing in innovation, no coun- Keystone. of America’s future needs for imported try has a better record than Canada. Now let’s look at the current net- oil – to fill its one-third gap between Innovation goes beyond government work of oil pipelines in North Amer- domestic supply and demand. So a policies and supports. Industry, too, is ica. They stretch more than 200,000 goal that even five years ago would taking environmental leadership. miles. Decades of experience tell us have been unthinkable is now within Fourteen major oil producers have that pipelines are among the safest, our reach. created Canada’s Oil Sands Innova- most efficient and most environmen-

June/July 2013 18 tally responsible method to deliver Let’s look at the current and enjoy a track record of reliable oil. network of oil pipelines in governance. All observers agree the US will have to North America. They stretch Finally, we are committed to produc- build more pipelines to grow its econ- more than 200,000 miles. ing energy responsibly, giving appro- omy. Seven thousand miles of new oil Decades of experience tell us priate consideration for environmen- tal and safety concerns. pipelines have been built in the US in that pipelines are among the the last five years alone. But even that safest, most efficient and most For countries that have what it takes, has not been enough. The demand to there is an increasingly important role move oil is outstripping the capacity environmentally responsible to play in the global future of energy. of the US pipeline network. method to deliver oil. A role that has key players supporting Railways are filling some of the gap. a diversified energy mix that responsi- In 2012, rail transport of crude oil bly meets their own needs, while also jumped by a whopping 256 percent. and economic growth. On its merits being part of the global community. That represents about 250,000 barrels we feel confident Keystone should be In a complex global energy market, per day compared to 2011 levels. The approved. Canada is proud to have the resourc- rail sector plans to invest $24.5 billion es, the know-how and the track record Canada is looking forward with confi- to build, maintain and upgrade the US to help the lead the way. dence, and with good reason. rail network, in part to move oil. But Joe Oliver is Canada’s Minister of the fact is pipelines are less expensive, Armed with tremendous energy re- Natural Resources. Excerpted from an especially for longer distances. sources, we are aggressively expanding address to an energy conference organized our export options. At the same time by Bloomberg News in New York, April o it is Canada’s fervent wish that we can make possible North American 24, 2013. Keystone XL will be judged on energy security for today’s generation. S its merits and those merits are We have a strong enabling business considerable – a safe pipeline that environment – one that encourages will not cause environmental dam- investments in the energy sector. age, enhanced national security, jobs We are devoted to market principles,

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WWW.PWC.CA Policy Keystone XL: The Choice of Reason

After more than four years of comprehensive and exacting economic and environmental review by the U.S. State Department, the Obama administration will soon make a decision about whether to approve the Keystone XL pipeline from the oil sands in Alberta to refi neries in America’s Gulf Coast. Alberta’s collaborative relationship with other governments in Canada and internationally will play a pivotal role in the success of the pipeline in the years to come.

America’s desire to effectively balance strong environmental policy, clean technology development, energy security and plentiful job opportunities mirrors that of the people of Alberta.

And these joint values refl ect the actions of the Government of Alberta. This is why choosing to approve Keystone XL and oil from a neighbour, ally, friend and responsible energy developer is the choice of reason.

The State Department has indicated that Keystone XL will not have a signifi cant impact on the environment. Yet some still argue Keystone should be decided on emotion rather than science and fact about responsibly developed oil sands resources.

Learn more about the oil sands and Alberta’s environmental track record at jointoilsandsmonitoring.ca

Did you know?

In 2008, Alberta was the fi rst place in North America to legally require all large industry to curb greenhouse gas emissions, and Alberta already has a $15 price on carbon. Alberta is committed to pushing the bar higher on its leading climate change policy that already includes a $1.3 billion investment in carbon capture and storage and a fund that is helping to fi nance more than 40 clean technology projects. Canada and the U.S. share the world’s closest trading relationship. For every dollar of oil the U.S. imports from Canada, 90 cents returns to the U.S. economy through Canadian imports of goods produced in the U.S. This compares to 33 cents for Saudi Arabia and 46 cents for Venezuela. Greenhouse gas emissions from the oil sands in Alberta make up just over 1/10th of one per cent of the world’s emissions.

*Source: U.S. State Department **Source: Canadian Energy Research Institute, July 2012 (CERI) Just one of the many ways we’re Building Alberta

June/July 2013

PABCORC37741 Keystone Policy Mag.indd 1 5/29/13 8:31 AM 20

Energy supply and energy security are overarching policy and economic issues driving the diversification of energy trade. Shutterstock photo

n unconventional oil and gas revolution is sweeping global A energy markets. It will ensure that fossil fuels (oil, gas and coal) re- main the dominant sources of global energy for the next quarter century at least, if not longer. It will propel the US, once the world’s largest en- An Unconventional ergy importer, into (net) energy self- sufficiency over the next two decades. It will incent movement towards a Energy Revolution world gas market, creating arbitrage opportunities among today’s regional Kevin Lynch and Karen Miske gas markets in Asia, Europe and North America. It will alter the geopolitics of energy security as Asia, led by China, becomes the predominant buyer of On a global scale, security of energy supply and se- Middle East oil and gas; not Europe or the United States. And, it will fun- curity of energy demand are shifting, profoundly, damentally affect the security of de- with the advent of unconventional energy supplies mand for Canada’s energy exports. from shale gas and the oil sands and unconventional Security of energy supply and security of energy demand are shifting, pro- sources of energy demand from developing markets. foundly, with the advent of uncon- The imperative for Canada implied by these global ventional energy supplies from shale shifts is urgent diversification of our export markets, gas and the oil sands and unconven- tional sources of energy demand from most likely to the Asia Pacific region. But above all, the “rise of the rest”, in Fareed Za- we need a comprehensive energy strategy if we are to karia’s evocative term. Global energy demand is expected to grow by more bring the various Canadian interests together with a than one third from 2010 to 2035, shared sense of national interest and common pur- with China and India alone account- ing for 50 percent of this growth, and pose commensurate with the scale and scope of the other emerging economies for most of energy opportunity before us. the remainder.

Policy 21 Global energy demand is expected to grow by more than one mands are soaring due to huge price third from 2010 to 2035, with China and India alone accounting subsidies, political tensions in the region are on the rise, and the new for 50 percent of this growth, and other emerging economies Asian customers for Middle East oil for most of the remainder. and gas must now worry about the se- curity of their supply. Over this same period of time (see supply is falling in China, India and The imperative for Canada implied by Charts 1a and 1b), OECD countries South Korea and plummeting in Ja- these shifting global energy markets is will account for only three percent of pan. Security of energy demand is diversification of where we sell our en- global energy demand growth, and impacted, and negatively, in Canada, ergy resources, and urgency in effect- US imports of both oil and gas are and Russia, although for dif- ing this diversification. expected to fall substantially. Indeed, ferent reasons in each. Consider, for the moment, what these the US could be a sizeable net exporter With question marks hanging tectonic shifts imply for global gas of gas, depending on the willingness markets. Today, unlike with oil, there of the US government to permit LNG over the future of electricity is no global gas market and no bench- gas exports to non-FTA countries in generated by nuclear power mark global gas price. Gas markets are Asia (see Chart 2). In a May 3, 2013 post-Fukushima, Japan, which regional, and gas price differentials speech in Washington, Japan’s min- imports 100 percent of its are huge (see Table 1). Herein lies a ister of economy, trade and industry, huge opportunity for Canada, and for said: “New flow of LNG supply from oil and gas, has become a others. the US to Asia is an essential game massive buyer of gas from the changer that would contribute to en- Middle East. ergy security as well as economic and xporting LNG from Canada to geopolitical stability in Asia.” Wheth- Asia, for example, would ben- efit both Canadian gas produc- er this happens depends on a tug-a- E ers and Asian gas consumers. Cur- war within the US between those who In Canada’s case, we have an increas- rently Asian gas prices are indexed to see cheap, plentiful gas as a domestic ingly unreliable single buyer for our global oil prices (Qatar is the price set- stimulus, and those who see gas ex- energy, the United States – in terms ter), North American gas prices are set ports as a geopolitical tool. With ques- of future US energy demand as well by continental demand and supply, tion marks hanging over the future of as in the infrastructure needed to sup- and European gas prices are largely set electricity generated by nuclear power ply incremental unconventional oil by Russia. Unconventional gas from post-Fukushima, Japan, which im- to US refineries (Keystone XL). Rus- North America and elsewhere, deliv- ports 100 percent of its oil and gas, sia faces more potential competitors ered through massive LNG transporta- has become a massive buyer of gas in supplying gas and oil to Western tion systems, could create something from the Middle East. Europe while Australia fears Canada, closer to a global gas market. In this These shifting sources of energy de- the United States and Russia could world, the potential for gas price ar- mand and supply are creating new become competitors in the lucrative bitrage is enormous, and so is the un- opportunities and new risks. Securi- Asian gas markets. The Middle East certainty about what future gas prices ty of energy supply is soaring in the becomes even more complicated and might be. Being the early mover in United States (and in Israel with large riskier with these shifting global en- LNG gas sales to Asia will extract the offshore gas finds). Security of energy ergy markets. Domestic energy de- maximum upside price arbitrage and

Chart 1a: GROWTH IN PRIMARY ENERGY DEMAND Chart 1b: SHARE OF GLOBAL ENERGY DEMAND

12,380 Mtoe 16,730 Mtoe 4,500 100% 4,000 4.5 3,500 All Industry 80%4.0 NORTH DAKOTA 3,000 ex Oil & Gas 3.5 WESTERN CANADA 2,500 2001-12 AVERAGE 60%3.0 2013 INITIAL PLAN 2.5

ConventionalMtoe 2,000 40%2.0 1,500Oil & Gas 1.5 1,000 20%1.0 500 Unconventional Oil 0.5 0 0.0 2010-10 2015-5 2020 0 5 2025 10 203015 203520 05 06 2010 07 08 09 10 203511 12 13 OECD Rest of world Middle East OECD China India Middle East Russia Other developing Asia India China Rest of non-OECD

Source: World Energy Outlook, 2012 OECD/IEA Source: World Energy Outlook, 2012 OECD/IEA

June/July 2013 22

Chart 2: NET OIL & GAS IMPORT DEPENDENCY IN SELECTED COUNTRIES Table 1: GAS PRICES (2013 YTD AVERAGE)

GAS IMPORTS (US$/mmBtu) 100% Japan North America $3.68 (USD) 80% European Union 60% Asia 40% Japan $17.00 (USD) 20% China India South Korea $17.00 (USD) United States 0% Europe $10.24 (USD) 20%

20% 40% 60% 80% 100% U.K. $10.17 (USD) GAS EXPORTS OIL IMPORTS 2010 2035

Source: World Energy Outlook, 2012 OECD/IEA Source: Bloomberg, (Jan 1-May 2, 2013)

Chart 3: CRUDE OIL PRICE: WESTERN CANADA Chart 4a: CANADIAN EXPORT Chart 4b: IMPACT OF CRUDE OIL SELECT – WTI CUSHING DISCOUNT AND IMPORT PRICES FOR PRICE DIFFERENTIALS ON MONTHLY AVERAGES (MAY 08 – MAR.1 3) CRUDE OIL NOMINAL EXPORTS INDEX 2010 Q4 = 100 $ BILLIONS ANNUALIZED 40 140 0 Import 35 price -2 30 130 -4 25 -6 20 (US$/BBL) 120 -8 15 Export 10 price -10 5 110 -12 $0 -14 1 1 1 3 2 0 2 0 2 0 AVERAGE SINCE 2011Q1: $8.4 BILLION 1 1 1 1 1 1 1 1 1 1 100 -16

Jan 2010 2011 2011 2012 2012 Jan Jan Jan Jan 09

Sep 2010 2011 2011 2012 2012 Sep Sep Sep 08 Sep 09 May May May May 08 May 09 Q4 Q2 Q4 Q2 Q4 Q4 Q2 Q4 Q2 Q4

Source: Bloomberg Sources: Statistics Canada; Department of Finance Calculations

minimize the downside future price present -— is enormous. Absent the which itself will increasingly be able risk. Japan, with its huge gas require- US discount on our oil exports, Ca- to supply more and demand less. At ments in the aftermath of the Fuku- nadian energy exports and nominal the same time, we have the capacity shima disaster and the high spot price GDP would have been over $8 billion to dramatically increase our supply it pays as a result, is an obvious poten- higher in 2012 (Charts 4a and 4b). The of unconventional oil and gas, pro- tial market for Canadian LNG. 2013 Budget calculated that, if the oil vided we secure new customers and price discount were eliminated and do so before our competitors. Asia is While Canadian gas prices have been LNG gas exports allowed Canadian similarly wedged between an increas- depressed by the supply imbalance in gas producers to receive a price clos- ingly risky reliance on a predominant North American gas markets as a re- er to European levels (not Japanese), energy supplier, the Middle East, and sult of unconventional gas, Canadian the impact on Canadian exports and rapidly increasing energy demands oil prices have been depressed for a GDP would be roughly of $28 billion to fuel growth and consumer needs. more insidious reason: while world oil per year -— quite a boost to Canadian Herein lies the seed for a mutually prices have remained relatively high, incomes and over $6 billion annually beneficial energy partnership between the “discount” on Canadian crude in additional federal and provincial Canada and Asia. But, to turn this oil shipped to US markets for refining revenues. potential into reality, Canadian en- and sale (see Chart 3) has climbed in ergy producers must be able to access recent years for a variety of reasons, o, how is Canada positioned for new energy markets in Asia, and this reaching above $30 per barrel at times. this global energy revolution? requires energy transportation infra- The impact of this discount on the S The answer is mixed. We rely structure that we currently lack. value of Canadian oil exports to the on a single customer for all our oil Without the ability to reach these US – our only oil export market at and gas exports, the United States, Asian energy markets through new

Policy 23 oil and gas pipelines, rail capacity and US National Bureau of Asian Research a comprehensive energy strategy is port facilities, our unconventional en- and the Asia Pacific Foundation of needed to establish common purpose ergy potential will remain unrealized. Canada – brought together energy and create mutual advantage. We must recognize that the need for and environment experts, business The report also advocated that con- Canadian energy in Asia is an oppor- and policy leaders from Canada, Asia sideration be given to a “public en- tunity that may disappear if we do not and the United States to wrestle with ergy transportation corridor” to the act decisively, and quickly, to capture this new energy era and what it could West Coast, established by the federal these markets in the face of stiff com- mean for Trans-Pacific trade and in- government in concert with the rel- petition. Without new market access vestment. There was a clear sense that evant provincial governments. The and the transportation infrastructure Asian countries were approaching the “corridor” would incorporate specific linking us to those markets, our un- issue of security of energy supply with environment standards, remediation conventional energy resources have a much clearer perspective of national capacity and insurance, revenue shar- limited economic value. interest and urgency than that with ing with aboriginal communities and which Canadian participants were ad- The immediate challenge for Canada interprovincial commitments. Private dressing the growing insecurity of our is putting in place the energy transpor- sector entities would build, own and energy demand. tation infrastructure necessary to sup- operate transport infrastructure in the ply these Asian markets with LNG and corridor on a competitive basis, with oil. However, for such large, complex here does this all take us? policy certainty to both them and the energy projects, there is an emerging Dialogue matters, greatly, public. as we consider this com- “triple-licensing” requirement: W LNG exports from British Columbia plex shift in North American energy 1. Commercial licence: The project has production and the imperative for to Asian markets have enormous po- to make economic sense on a risk- Canada to diversify its energy trade to tential for Canada’s major gas produc- adjusted basis. This includes costs, new markets, most likely in the Asia ers, B.C. and Alberta, but they need financing, revenues, risks of cost Pacific region. And we need to inten- pipelines, facilities, and contracts to over-runs, and price uncertainty. sify this dialogue both within Canada make this opportunity a reality, and 2. Policy licence: The project has to and with potential energy trading they face competitors. For example, obtain policy approval to move partners. the US has approved one LNG export project, the Sabine Pass plant in Loui- ahead, and this entails conditions But more than this, we need a com- and costs. Pipeline approvals (both siana, to export LNG and a further 19 prehensive energy strategy if we are to applications have been filed with the oil and gas) are key policy licence bring the various Canadian interests requirements to access the Asia Pa- US Department of Energy. Similarly, together with a shared sense of na- Asia Pacific countries want to diver- cific, and likely port infrastructure tional interest and common purpose approvals as well. sify their sources of oil imports, and commensurate with the scale and Canada would be a preferred export 3. Social licence: Major projects that scope of the energy opportunity be- partner for a variety of reasons. But raise complex environmental is- fore us. It is difficult to envisage how B.C. is locked in a dispute with Al- sues, affect communities directly or a collection of private sector projects berta over the building of pipelines, indirectly, or impact on lands with can obtain the triple licensing require- and there is opposition from Aborigi- indigenous rights all have to effec- ments that are needed for an enter- nal, community and environmental tively obtain a social license to op- prise of this magnitude absent a com- groups to “granting” a social licence erate. If not, there is a high risk of prehensive approach. And it is even to pipelines moving oil from the oil public backlash, political pressure more difficult to foresee how Canada sands to the West Coast for export – and litigation. can move forward with the urgency an impasse that benefits no one in the required in the competitive environ- longer term. Dialogue matters, greatly, ment to develop LNG and oil exports markets in various Asia Pacific coun- Energy markets are increasingly global as we consider this complex tries if we continue as we are. but energy policies remain stubbornly shift in North American national. The unconventional energy Indeed, developments on the energy revolution offers Canada the possibil- energy production and the supply and energy demand sides, ity of a new energy relationship with imperative for Canada to as well as the energy transportation Asia at a time when its traditional en- diversify its energy trade to front, since the release in June, 2012 ergy market is becoming more uncer- new markets, most likely in of the Asia Pacific Foundation Task tain. The opportunities are clear, but Force Report “Securing Canada’s En- we have to work harder, collectively, the Asia Pacific region. And we ergy Future,” only serve to reinforce if we are to realize them. need to intensify this dialogue its main recommendations, namely: both within Canada and with that Canada needs to diversify its en- Contributing Writer Kevin Lynch, ergy export markets (principally to Vice-Chair of BMO Financial Group, is potential energy trading Asia) and urgently; that Canada needs a former Clerk of the Privy Council and partners. massive new energy transportation head of the Public Service of Canada. infrastructure to tidewater to achieve Karen Miske is Senior Advisor, office of this; that investments in R&D and the Vice-Chair, BMO Financial Group. innovation are crucial to the contin- The Pacific Energy Summit held in ued development of unconventional Vancouver in April – co-hosted by the energy supplies in Canada; and, that

June/July 2013 24

Provincial and territorial premiers around the table of the Council of the Federation annual meeting in Halifax last year. Part of the reason the premiers are making progress on a Canadian Energy Strategy, writes Velma McColl, is that the feds aren’t “leading or even in the current conversation.” COF photo Custom-Built by Provinces: Creating a Flexible Canadian Energy Strategy Velma McColl

At last year’s Council of the Federation meeting in n the quiet of summer, our provin- Halifax, three premiers – Newfoundland’s Kathy cial and territorial leaders will I gather in Niagara-on-the-Lake for Dunderdale, ’s Greg Selinger and Alberta’s the annual Council of the Federation Alison Redford – agreed to prepare recommendations (COF) meeting. They will report on how to strengthen the economy and on creating a Canadian Energy Strategy. Part of the address fiscal imbalance, infrastruc- reason that individual provinces have been willing ture and energy. It will be a lively conversation among a spirited set of to consider developing a strategy is that the federal leaders. government is not leading or even in the conversa- You may recall the impassioned dis- tion, at least at this point. Prime Minister Harper has cussions between British Columbia been cool to the idea and Natural Resources Minister and Alberta at last year’s meeting in Halifax. What you may not remem- Joe Oliver openly dismissive, but in many ways it is a ber is that, despite the dust-up and positive that the federal government remain outside B.C.’s objections, three Premiers – Newfoundland’s , the COF process. It has allowed the provinces to lead Manitoba’s Greg Selinger and Alber- from their strengths and to be more creative within ta’s Alison Redford – agreed to prepare the federation. recommendations on creating a Cana- dian Energy Strategy. While the process got off to a slow start last fall, the three premiers, ener- gy ministers and officials from all the

Policy 25 provinces have been working to bet- While the three premiers will up- Newfoundland and Quebec may ul- ter understand progress and priorities date their colleagues in July, with the timately limit the interest in setting on energy in each province and ter- complexity of these files and some a longer-term energy vision for the ritory and then craft a pan-Canadian underlying political tensions, it was country. Perhaps the other premiers vision. The premiers are building on wisely decided that an integrated strat- will be able to help isolate specific a 2007 COF report titled, A Shared Vi- egy would not be ready before 2014. inter-provincial disagreements (B.C./ sion for Energy in Canada though some What’s interesting is that Premiers Alberta and Newfoundland/Quebec) of the context has changed, includ- Dunderdale, Redford and Selinger in the interest of realizing the other ing the imperatives around market have decided that while they want benefits of a collaborative approach diversification for Canadian energy to compile a solid reflection of what on energy. and the changing environmental and their governments are doing, they supply pictures in North America and also want to create practical, action- Part of the reason that Alberta globally. oriented initiatives between provinces and Quebec have been willing that share an interest in particular The provinces have now agreed to fo- areas. This means that provinces are to consider developing a cus their work on sustainability and free to pursue partnerships with ju- Canadian Energy Strategy is energy conservation; technology and risdictions that share their priorities. that the federal government innovation; and improving the sys- This provides the necessary flexibility tems that move energy to people and is not leading or even in the for common interests to be pursued, current conversation. markets, whether through electric- while still working to knit together ity infrastructure, pipelines or other the overarching economic, trade and means. Governments are compiling environmental imperatives for the information on what’s happening country. across the country in energy efficien- Part of the reason that Alberta and cy, renewable energy, the state of en- Premier Redford has been an active Quebec have been willing to consider ergy R&D for clean and conventional proponent of a Canadian Energy developing a Canadian Energy Strate- sources, human resources, regulatory Strategy from the beginning. She has gy is that the federal government is not approvals and what measures are cur- gone out to meet with the premiers of leading or even in the current conver- rently in place to transition to a low- Quebec, Ontario and New Brunswick sation. Though Prime Minister Harper and has sought common cause with carbon economy. A secretariat is man- has been publicly cool to the whole her own priority around market di- aging the process and is consulting idea and Natural Resources Minister versification. There is an expectation internally with governments as well Joe Oliver openly dismissive, in many that, over time, other provinces will as reaching out to stakeholders. ways it is a blessing that the federal identify different priorities and build support for more work in areas like government remains outside the COF Surprisingly, we have little process. The federal government does central data on energy in clean technology, renewables and en- ergy conservation. place a high priority on the energy file Canada – and even less on the and has invested significant political capital at home and abroad in advanc- current state of programs and hile Ontario had played a ing its vision for regulatory streamlin- policies across all jurisdictions. lower profile role in the ing, market diversification for oil and energy debate until now, W gas and a limited set of environmen- Premier Kathleen Wynne becomes tal and technology initiatives. But the the Chair of the COF in July through to 2014 and may take a stronger role federal vision is not broad enough for in shaping the conversation with her some provinces and so they are step- ping up. That could change over time urprisingly, we have little cen- colleagues. B.C. remains a mystery but, for now, it raises some interesting tral data on energy in Canada – under Premier since she questions for our vision as a federa- and even less on the current has stated that they will remain an S tion on the energy file. state of programs and policies across observer until they have a satisfactory all jurisdictions. Part of the exercise response from Alberta and the federal between the provinces will be to gath- government on the Gateway pipeline ver the last several decades, er this information and create a more proposal through northern B.C.. when we heard from premiers complete picture. There are also some We also cannot ignore the fact that O together, it was only at First innovative ideas emerging to increase the deepest remaining vein of politi- Ministers’ meetings where they were energy literacy among Canadians so cal tension over energy exists between criticizing the federal government or that the energy systems that power Quebec and Newfoundland and Lab- demanding more dollars for health our homes and office buildings are rador. It is somewhat ironic that Al- care, social programs or equalization. better understood – and so that we berta has made progress over the last The news conferences became pre- know where our energy comes from three years in overcoming its own dictable, with the only question being and have a clearer picture of Canada’s historic aversion to discussing energy which premiers would be most vocal; economic, environmental and social in a national context but, without most often those closest to an elec- opportunities from the full range of efforts to contain the bilateral issues tion. After the failure of the Meech resources we are blessed with. around hydro, the animosity between Lake and Charlottetown accords,

June/July 2013 26 there was also little public appetite where the federation is concerned. Perhaps we’re ready to leave behind for grand national designs set from But we have seen successful regional the 1970s image that progress for the above. This unfairly oversimplifies experiments where provinces are lead- country meant a prime minister and much of the good work done in the ing change through initiatives like all premiers standing together, sing- 1980s and 1990s but it is perhaps why the Trade, Investment and Mobility ing from the same song sheet. Perhaps there was little public outrage when Agreement (TILMA) among B.C., Al- we’re ready to accept that we can find Stephen Harper simply did away with berta and that was so harmony in a “mash-up” of melo- the annual gatherings of all of Cana- successful that it was expanded to dies across the federation, recogniz- da’s political leaders when he came to become the New West Partnership ing that, in a world that is changing power in 2006. Trade Agreement; or the Atlantic En- around us, experimentation and di- While it took a few years to ergy Gateway to increase the level of versity can be strengths. Our premiers break the old fed-bashing regional cooperation on electricity can proudly defend what’s working in systems across the region; or increased their own province or territory, advo- patterns, COF has become a dialogue between Ontario and Que- cate regional coalitions where practi- rare space for the expression bec on a wide range of issues. Most of cal, and still selectively seek pan-Ca- of collective views on the these initiatives are less than five years nadian solutions on issues like health future of the country. old but each has yielded a number of care, equalization and labour markets. practical solutions that hold lessons We will need to find new, more ag- that can be applied across the country. ile ways to engage between regions and provinces, through COF or other We should watch the dynamics mechanisms. As for energy, we can do between our current set of all three – make progress within each It was a good thing that in 2003, the premiers. As a cohort, they jurisdiction, engage in broader region- premiers, led by Jean Charest, cre- are younger, relatively early in al solutions and, in time, be ready for ated the Council of the Federation, a pan-Canadian vision – perhaps even their own table for dialogue and their mandates, have a keen involving the federal government. sense of political history and, problem-solving. Since then, provin- In the meantime, Premiers Dunder- cial and territorial leaders gather an- of course, are fierce advocates dale, Redford and Selinger will present nually, work by consensus and gen- for their own provinces. Some their update to their colleagues this erate strong policy analysis on issues will face elections soon but the summer, framing practical steps for ranging from transportation to health moving energy to people, building our care to the environment to economic majority will sit together for a capacity in innovative technologies, growth. While it took a few years to few years at COF. break the old fed-bashing patterns, and moving toward a more sustain- COF has become a rare space for the able, low-carbon economy. The chal- expression of collective views on the lenge for their final report in 2014 will future of the country. Saskatchewan be to fit pieces into Canada’s energy Premier Brad Wall and Prince Edward puzzle so the picture reflects the full Island Premier Robert Ghiz issued an e should watch the dynam- range of opportunities for our future. important report on health care last ics between our current But there’s no mistake that the prov- year and there is good work being W set of premiers. As a co- inces are leading on the path toward done on fiscal imbalance, infrastruc- hort, they are younger, relatively early an integrated energy vision for the ture and energy. Premiers also worked in their mandates, have a keen sense country. together on economic issues after the of political history and, of course, are Contributing Writer Velma McColl is financial crisis of 2006 and embarked fierce advocates for their own provinc- a principal of the Earnscliffe Strategy on a shared trade mission to Asia last es. Some will face elections soon but Group, where her practice focuses on fall. the majority will sit together for a few energy, clean technologies and the years at COF. They are leaders who If you take the time to read the recent environment. [email protected] COF reports or listen to their news are managing changing economies, conferences, you find that these pre- fiscal pressures and demands for bet- miers are also passionate defenders ter service delivery in healthcare, in- of Canada as a federation, a country frastructure and social programs. The more than the sum of its parts. And if balance of power among the Premiers the federal government will not come has changed recently, with a marked to the table, then they are prepared to shift West. And with six women at the forge ahead themselves, as they have table, COF is now the most gender- on energy. balanced political body we have ever The skeptics will say that provinces had in this country. They have the po- alone have no real power to change tential, individually and collectively, things, that they have control in their to set and implement practical ideas own jurisdictions but little influence that will shape the future of Canada.

Policy 27

B.C. Premier Christy Clark with national Aboriginal leaders at last July’s Council of the Federation meeting. It’s clear that provinces and First Nations along the route of proposed pipelines will have an important say in any of them going ahead. B.C. government photo

aved by the prodigiously inept The Politics of campaign of British Columbia S NDP leader Adrian Dix, the Ca- nadian pipeline sector has been break- Pipelines ing out the champagne, Sun TV has been celebrating the death of social- ism, and editorialists from coast to Robin V. Sears coast have been uttering predictably pious platitudes about the triumph of economic probity among B.C. voters. Not so fast. The arc of modern pipeline history begins with the Some pipelines might get built, some- triumphant battle by C.D. Howe to force feed his proj- time, but none soon or quickly. First, the B.C. NDP decided to oppose ect through a recalcitrant Canadian Parliament. From the Kinder Morgan pipeline for the the 1956 pipeline victory, TransCanada Pipeline was sound, if opportunistic, reason that born. Flash forward to the approval process for the opposition was also the view of a ma- jority of B.C. voters. How was it pos- Keystone XL project, also a mega-project championed sible then, you might ask, that Adri- by TransCanada, and the process could not be more an Dix got trounced? Hypocrisy, or more gently put, “conflicted political different. Years of consultation, legal battles and polit- values,” is not rare among Canadian ical delay and still TransCanada is fighting a rearguard voters. action against ranchers, environmentalists, scientists B.C. voters appear to have applied a version of the famous aphorism about and many local, state level and national politicians. It Quebec voters, who allegedly used will probably be approved, after many concessions by to pine for “a free Quebec within a united Canada.” B.C. voters appear TCPL, but at a heavy cost to the political capital of all to have voted for a “strong, resource the governments involved. based B.C. economy, so long as it does

June/July 2013 28 not involve pipeline or tanker traffic Curiously, the various LNG projects planned for B.C.s North in any B.C. port.” have far more political and social licence, and significantly less The City of Vancouver, B.C. First Na- First Nations resistance than the oil sands competitors. tions, and the province’s vast and en- trenched environmental community are of one mind on the project – no oil more political and social licence, and have impacted the oil and gas busi- pipeline requiring the addition of doz- significantly less First Nations resis- ness in the province is this: if Adrian ens of oil tankers passing under the tance than the oil sands competitors. Dix had been elected he would have Lion’s Gate Bridge will be permitted. While energy experts may be puzzled okayed the early launch of an LNG Period. And in case it has faded from why citizens are less fussed about LNG pipeline and terminal, and delayed memory, it is useful to recall that the tankers travelling the same maritime or nixed both Kinder Morgan and most hardcore wing of Greenpeace, routes as double hulled modern oil Northern Gateway. the Sea Shepherd organization, was a tankers, one wag observed that gas product of B.C. environmental rage, tankers may explode, but then they The difference, given the rebirth of in response to the disaster for the oil sink and disappear, crude doesn’t. Christy Clark, is nothing, apart from rhetoric. and gas sector called Exxon Valdez. To give credit where it is due, the LNG Does anyone really think that tank- sector has demonstrated an approach But the net impact in B.C. in ers in and out of Vancouver or Kiti- closer to the best of the chemical and mat will not be targeted for disruption forestry firms in understanding the im- 2013 is that the same voter by the children of these green activist portance and power of deep and open who would be opposed to pioneers? community consultation, of providing an oil tanker in Vancouver’s So the chances of Kinder Morgan the political leaders – whose approval inner harbour is surprisingly overcoming this level of political re- they depend on – with the protective sistance on Canada’s Left Coast are cover they need to support them. sanguine about flotillas of LNG tankers off B.C.’s northern modest. The Liberal government may Perhaps it is due to the tough battles be willing to spend the political capi- they have had to fight in Europe, coasts. tal of a new mandate on such a con- Southeast Asia and Australia to get troversial project, but it is hard to see approval for large scale LNG projects, why it would. perhaps it is because many firms in But Kinder Morgan’s prospects are the sector have upstream and custom- That the new B.C. government will positively rosy, compared with the er-facing downstream businesses. The end up in the same place as the old, opposition around the Northern differences in their public reputations no different than where it would have Gateway project, which would see probably have a variety of sources, been under a Dix administration, huge tankers navigating some of the but the net impact in B.C. in 2013 is should not be so surprising given re- most pristine coastline in the world. that the same voter who would be op- cent Canadian history: Liberal and Enbridge still has the option of mov- posed to an oil tanker in Vancouver’s Conservative federal governments ing from Kitimat to Prince Rupert, a inner harbour is surprisingly sanguine have been committed to the Macken- marginally less emotional route. Sadly about flotillas of LNG tankers off for both companies, they have little B.C.’s northern coast. zie Valley Pipeline for decades now, experience in managing a corporate apart from a commitment to actually build it. The NDP in Alberta and Sas- reputation with the consumer public. overnment has a far greater katchewan have long been in favour incentive and urgency to Unlike the chemical sector whose of oil sands development, conditioned Love Canal and Bhopal experiences make a decision where these G by a slower development pace, tough- a generation ago have bred a tough projects are concerned for two rea- er clean-up enforcement and an in- and seasoned executive corps who sons. There are half a dozen projects sistence on local refining – a position understand crisis communication and planned for the west coast of North reputation management, or the forest America to serve the booming Asian they “acquired” from Peter Lougheed. sector which has grown enormously economies with Canadian and Ameri- Only days after her election triumph from the nadir of Clayoquot Sound can gas. Only two or three of them the B.C. government announced that and the battles of the 1980s, the pipe- will get built. The first movers will it would not support Gateway bar- line industry have flown largely under establish great advantage in access to ring massive changes. In so doing, the political radar until recently. Pipe- the best customers at the best prices. the comeback Premier bought herself line guys are different. They are engi- Government has a second incentive: some early anti-pipeline political in- neers who deal with other engineers money. There are hundreds of mil- surance. The ball is now in Enbridge’s and the specialists and technicians of lions in royalties and tax revenues to court to respond. the oil and gas sector, not housewives be collected from successfully nurtur- or angry students, let alone profes- ing an LNG industry in B.C. that runs hese merely rhetorical differ- sional green agitators. from production, through transporta- ences should not be surprising: An exception is the natural gas sec- tion to LNG compression, to export. T all parties have offered their tor. Curiously, the various LNG proj- So a less febrile reaction to the out- support of the MacKenzie Valley Pipe- ects planned for B.C.s North have far come of the B.C. election as it might line for years, just not enough support

Policy 29 to actually get it built. There is an im- enormous convoys of grain shipment enormous defeat the very next year, portant lesson here for non-Conser- tankers familiar to every Prairie driv- in 1957. That brutal approach to pub- vative Canadian politicians, however, er. They face challenges from envi- lic consultation delivered a painful starting with Adrian Dix and Thomas ronmentalists at the point of export lesson even in the much more defer- Mulcair: “Be careful how you position similar to the pipeline companies, but ential era of the 1950s. your messaging about pipelines and railways can choose from – or build Flash forward to the approval pro- oil sands to soothe your base.” Where anew – a dozen possible export sites cess for the Keystone XL project, the old Social Credit coalition was ex- in the American Northwest or British by an ironic twist of history, also a pert at stopping “the socialist hordes”, Columbia. mega-project championed by Trans- today’s Liberal coalition gains from So if we were to look out to the next Canada, and the process could not be positioning the NDP as environmen- B.C. election, four years from now, more different. Years of consultation, tal extremists. what would we see in the pace and more years of legal battles, even more There is a separate cast of private sector style of resource development in the years of political delay and still Trans- players in this ongoing “environment province? We would probably observe Canada is fighting a rearguard action versus economy” political soap opera an LNG pipeline and terminal more against ranchers, environmentalists, who are quietly moving up the charts than halfway to completion on B.C.’s scientists and many local, state level of the Canadian political hit parade: north coast. We would probably have and national politicians. It will prob- our ancient and beloved railways. become used to the passage of hun- ably be approved, after many conces- Tanker cars full of oil do derail and dreds of railcars to a new export ter- sions by TransCanada, but at a heavy pollute, but apart from the damage of minal south of Vancouver. And we heavy cost to the political capital of the TV images to railway reputations, would smile at the sight of First Na- all the governments involved. the actual environmental damage is tions executives in some of these en- In the middle of that pipeline history necessarily limited. A burst tanker car terprises, defending the environmen- came the ill-starred launch of the first may spill a few dozen or even a few tal commitment of their firms, and MacKenzie Valley Pipeline, stopped hundred barrels of oil in a farmer’s extolling the economic benefits that in its tracks by a sensational commis- field or a nature preserve, but unlike a their negotiated partnerships with sion of inquiry led by Tom Berger. The pipeline it doesn’t keep flowing. B.C. First Nation communities had battle over First Nations’ rights, early Tanker car spills are a problem for the begun to deliver. environmental activist concerns, and railways positioning as the green solu- The prospect of a massive double pipe- engineering claims gripped the coun- tion to moving oil across the country, line pumping Alberta bitumen 24/7 try for months. The Commission Re- but they are a more limited and more into a fleet of waiting tankers along port became a bestseller. And Justice easily remedied problem than manag- the shores of North Vancouver, un- Berger’s work buried the idea of a ing the leaks in the aging infrastruc- likely. The potential for a similar pipe pipeline to the north for decades. Its ture of many North American pipe- to be filling the world’s largest double- revival with full aboriginal equity par- lines. They have several commercial hulled oil tankers off the shores of Kit- ticipation has still not been enough advantages as well. Tanker cars can imat, even more unlikely. to get the project to lift off. Industry pick up and deliver in an enormous experts today are more dubious than variety of places among the tens of ever about its prospects given rapid- The arc of modern pipeline ly falling natural gas prices, and flat thousands of miles of rail. You can history begins with the dispatch 10 at a time or 1000, or none American oil demand. at all if demand sags. Pipelines don’t triumphant battle by C.D. The Trans-Canada Pipeline, now near- move, and need to be kept filled. Howe to force feed his ing its 60th anniversary, is the last in- project through a recalcitrant terprovincial pipeline project travers- second large advantage where Canadian Parliament. The ing sensitive environmental terrain oil sands crude is concerned is 1956 pipeline debate used and contested First Nations lands to that tanker cars can take it have been built in Canada. The North- A the then-rare procedural ern Gateway’s efforts to be the next straight out of the ground, pipelines need to dilute it by at least 30 percent sledgehammer of closure. project of similar scale traversing simi- in order to make it flow smoothly. larly sensitive political territory needs That imposes two costs on pipeline to be seen in light of that long gap. customers: they must buy and trans- The successful pipeline chief execu- port the ‘diluent’ into their pipeline he arc of modern pipeline his- tive needs to have a keen sense of tim- terminal, and they have to pay to tory begins with the trium- ing, a keen eye for partners and their move a product that is then removed phant battle by C.D. Howe to contributions, exquisite taste in judg- when it reaches a refinery. T ing the necessary social ingredients, force feed his project through a re- a populist politician’s intuitive grasp New crude tanker cars are being built calcitrant Canadian Parliament. The of how to move a skeptical public, a by the thousands in Hamilton and 1956 pipeline debate used the then- strong back and a lot of luck. the American Midwest as a result. A rare procedural sledgehammer of clo- very large fleet of oil tanker cars will sure. TransCanada Pipeline was born, Contributing Writer Robin V. Sears is soon be making up trains in Canada the TransCanada Pipeline was laid, a principal of the Earnscliffe Strategy and the US similar in scale to the but so were the seeds of the Liberals Group. [email protected]

June/July 2013 3030

The Irving refinery in Saint John is the largest in Canada, with a capacity of 300,000 barrels of oil per day. Nearby Saint John Harbour is the deepest on the east coast of North America. Irving Oil photo

t the founding of our country, Canadians built a railway from West-East Pipeline: A east to west. This visionary pan-Canadian project was essential to the building and strengthening of A Question of National our nation. Without it, Canada as we know it today would most certainly not exist. Interest Today our country faces significant economic challenges from forces orig- David Alward inating largely beyond our borders. New Brunswick is not immune to the effects of these forces. Thus rebuilding and strengthening our economy, cre- With the proposed West-East pipeline, New Bruns- ating jobs here and enhancing qual- wick has a huge opportunity to play a key role in ity of life for our families are our top strengthening our provincial and national econo- priorities. New Brunswick has a huge opportuni- mies. Among its benefits, the project would not only ty to play a key role in strengthening create jobs in New Brunswick. It would open up new our provincial and national econo- mies. Just as our country’s founders markets for one of Canada’s most important exports, tackled the task, we are on the cusp of help Canada get better prices for its oil and reduce another critical nation-building proj- our dependence on imported crude. Premier David ect – a west to east pipeline bringing western Canadian crude oil to Saint Alward sees New Brunswick as Canada’s next energy John, New Brunswick. This pipeline powerhouse, and Saint John as the anchor of that will be as important to our nation’s economic future as the railway was to powerhouse. our past.

Policy 31 Just as our country’s founders tackled the task, we are on the The Irving Oil Refinery in Saint John cusp of another critical nation-building project – a west to is Canada’s largest and most modern. It has a capacity of 300,000 barrels per east pipeline bringing western Canadian crude oil to Saint day, which would allow it to refine John, New Brunswick. This pipeline will be as important to our crude oil for both domestic and export nation’s economic future as the railway was to our past markets, creating significant value for Canadian oil producers, pipeline op- erators, refiners and Canadian work- ers across the country. This is about building our nation, have a family member or good friend strengthening our national economy, who is working in the oil and gas in- To help get those exports to interna- increasing our exports and our energy dustry somewhere in Canada or the tional markets, the Port of Saint John security, and creating good jobs for around the world. is the deepest on the east coast of North America. our citizens. I want to see the day when the mother Although I’m very excited about what or father, the son or daughter leave New Brunswick has year-round, ice- this means for New Brunswick, I’m their New Brunswick home in the free access to some of these emerging equally excited about what it means morning to go to work in the devel- markets via shorter shipping routes for Canada. I first spoke nationally opment of natural resources, they than many other North American about the West-East pipeline more will return for dinner that night, not ports, including those on the west than a year ago at the Economic Club weeks or even months later. coast and US gulf coast. In addition, in Toronto, to a very enthusiastic au- the Port of Saint John has over 50 But we must not forget that this is a years of history and experience in dience. I reiterated the message and critically important project that will again saw the enthusiasm for this handling some of the world’s largest benefit all of Canada and all Canadi- crude oil carriers in a safe and envi- project from across the country this ans by adding value to our resource spring. We share this enthusiasm with ronmentally responsible manner. Ac- and our exports. cess to tide water for Western Cana- premiers across the country, several of dian crude oil will transform North whom I have met recently to discuss A west-east pipeline will strengthen America’s energy markets. this project, and with business leaders Canada’s economy and stimulate new and financial institutions across the growth and jobs in every region and With a long tradition of large industri- community of our province. country. al operations, Saint John has a highly • We will no longer sell our oil at dis- skilled workforce. I have also met with Prime Minister counted prices, costing us between Stephen Harper and Natural Resourc- $30 and $70 million a day accord- es Minister Joe Oliver and I appreciate This project will require a ing to the Canada West Foundation their support for this project. significant and long-term • We will no longer be as reliant on Among its benefits, this project would: operational commitment higher priced imported crude oil • Open up new markets for one of from Western Canadian oil • We will add value to it right here at Canada’s most important exports; producers, and will ultimately the Saint John refinery • Help Canada get better prices for its be judged on its economic • We will increase our exports by and environmental merits. natural resources; shipping it to an energy hungry • Reduce our dependence on import- world. However, government support ed crude; • We will create quality jobs here in and approvals will also be • Increase security of oil supply to Saint John, throughout the prov- required at both the federal Eastern Canada and the American ince and across Canada. and provincial levels. northeast; Saint John and New Brunswick have • Add value to Canadian crude by re- key assets to make this project a suc- New Brunswick welcomes the op- fining it at refineries in New Bruns- cess. As Canada’s energy gateway to portunity to work with Canadian oil wick, Ontario and Quebec and New and the Atlantic Basin, and natural gas producers and other New Brunswick’s geographic location • Create new jobs and new opportu- provinces in an effort to develop this continues to play a strategic role in nities across the country. west-to-east crude oil pipeline. Col- serving our nation’s energy needs and lectively, we can develop new markets There will be huge benefits, both direct export potential. New Brunswick has for our country’s energy resources and and spin-off, generated by this impor- robust electricity connections with refined petroleum products in the At- tant project, including new jobs, good Quebec, and lantic Basin and rapidly expanding high-paying jobs, and investment in , as well as the State of economies of the Asia Pacific region. every region of our province. Maine. We have a liquefied natural gas termi- e recognize that this proj- e understand the impor- nal, Canaport LNG, that can deliver ect will require a signifi- tance of this pipeline up to one billion cubic feet per day W cant and long-term op- W to creating jobs here. Be- of natural gas into the international erational commitment from Western cause New Brunswickers in every sin- northeast market during seasonal pe- Canadian oil producers, and will ul- gle community in this province likely riods of peak demand. timately be judged on its economic

June/July 2013 32 and environmental merits. However, government support and approv- In an era of fiscal challenges and pressures to reduce als will also be required at both the government debt, the new revenues that will flow from this federal and provincial levels. Here in pipeline will help continue to fund the services our citizens New Brunswick, both political parties expect and need from their governments. in our Legislature have unanimously passed a resolution supporting the duction, transmission and distribu- indeed benefit Canadians across the project. tion, electricity generation from natu- country. In an era of fiscal challenges TransCanada’s recent announcement ral gas, petroleum retail, and related and pressures to reduce government of an open binding season seeking administration and transportation debt, the new revenues that will flow firm commitments of interest in the activities. The sector is an important from this pipeline will help continue proposed pipeline was a necessary and contributor to New Brunswick’s econ- to fund the services our citizens expect encouraging step in this process. In omy, providing direct employment and need from their governments. fact, we in New Brunswick view it as a for an estimated 7,500 New Bruns- We envision New Brunswick as Can- milestone of national significance. wickers in a wide range of retail, ad- ada’s next energy powerhouse and We will work with the federal Canada ministrative, professional, technical Saint John as the anchor of that pow- in coordinating the project permitting and engineering occupations. erhouse. If we proceed, this project process, while ensuring a thorough and We recently released the New Bruns- will strengthen our national and pro- rigorous environmental impact assess- wick Oil and Natural Gas Blueprint, re- vincial economies and create jobs and ment. We will also continue to work inforcing our province’s strong com- economic growth today and for gen- closely with other provinces, such as mitment to developing our oil and erations to come. Quebec and Alberta, in ensuring that gas sectors. The proposed Energy East But first we need this project to the project provides tangible benefits project provides a truly unique op- proceed. We stand ready to move for all jurisdictions and their citizens. portunity to provide increased energy forward enthusiastically on the up- We are very proud of our province’s security and create new value-added coming steps in this new historic ini- growing oil and natural gas sector, economic activity and greater pros- tiative to strengthen our province and which is comprised of a wide range of perity for the benefit of all Canadians. our nation. industrial and commercial activities, I want to emphasize that point. See- David Alward is Premier of New including oil refining, natural gas pro- ing this proposal become a reality will Brunswick.

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33

Image courtesy National Energy Board.

ive years ago, during the first The Geopolitics of presidential debate of the 2008 F campaign, Barack Obama spoke plainly to the American people: the arithmetic, he said, was incontest- North American able – the United States could not and should not expect to drill its way to continental energy independence. He Energy Independence compared the quest for a reduced reli- ance on overseas oil imports to John Jim Prentice F. Kennedy’s goal of sending a man to the moon – nobody was sure how to do it, but America needed to try. In less than a decade, the North American energy He spoke of alternative energy sources and a new push into nuclear. On that landscape has changed drastically, with particular im- night and throughout the campaign, plications for US competitiveness, economic health the future president didn’t foresee the supply surge that lay ahead. Frankly, and foreign policy. These are volatile and highly con- few people did. sequential times for everyone with a stake in the en- Five years later, the game has changed ergy industry: producers, consumers, policy makers when it comes to hydrocarbons in North America. New technologies – as well as those concerned with the environment and new ways of taking energy from generally, and climate change specifically. While Can- the ground have brought extraordi- nary changes to the continental sup- ada must adjust to the continent’s new energy reality, ply of oil and natural gas. At the same what’s clear above all else is that we need to respond time, various forces – including new efficiencies and fuel substitutions – by pursuing our own geopolitical interests as one of are easing North American demand the world’s largest energy suppliers. for energy, at the very moment that

June/July 2013 34 Short years ago, the prospect of North American energy fied Natural Gas facilities were being independence was perceived as a pipe dream. Today, the constructed on the shores of North America to import natural gas. A few prospect is real. Amid the volatility, this new energy reality is years later, the United States has by beginning to bite with real market consequences – and with some estimates a century’s worth of geopolitical implications that will reverberate across the globe. gas in the ground. Canada’s reserves, on a per capita basis, are even larger. The LNG terminals being proposed for construction along the B.C. coast supply is increasing. Short years ago, shock,” now forecasts US production would ship natural gas off our con- the prospect of North American en- of more than 11 million barrels of tinent and onward to Asia. The IEA ergy independence was perceived as oil per day by 2020, up from 5 mil- predicts the US will by 2015 overtake a pipe dream. Today, the prospect is lion barrels in 2008. This remarkable Russia as the world’s leading producer real. Amid the volatility, this new en- growth is being welcomed by most – of natural gas. ergy reality is beginning to bite with though not, perhaps, the publishers of real market consequences – and with all those books about Peak Oil. Canada, meanwhile, has geopolitical implications that will re- verberate across the globe. Canada, meanwhile, has – year after – year after year – been year – been increasing production of increasing production of oil Let’s look first at the scope of this en- oil by about 200,000 barrels per day. by about 200,000 barrels ergy supply revolution. Since Obama Depending on the assumptions that spoke to Americans in that presiden- one is prepared to make about the pace per day. Depending on the tial debate, the United States has seen of oil sands expansion, we could be assumptions that one is a 40 per cent increase in domestic oil looking at daily domestic production prepared to make about the production. In 2012, US crude oil pro- levels of six million barrels by 2030. duction rose by almost 800,000 barrels pace of oil sands expansion, per day, the largest annual increase At the same time, increases in natural we could be looking at daily since the beginning of commercial gas production – and the expansion of domestic production levels of production in 1859. The International recoverable reserves – have expanded six million barrels by 2030. Energy Agency, describing these in- at rates that are virtually exponen- creases as nothing short of a “supply tial. Less than a decade ago, Lique- The supply-demand balance for North American energy has been fundamen- Chart 1: OIL SANDS WILL DOUBLE CANADA’S OIL PRODUCTION tally altered. There is no longer any need to import natural gas. And pe- 7 troleum imports are in stark decline. Forecast 16 6 In 2005, the United14 States imported 5 60 per cent of its crude12 oil. That fig- ure had declined below 50 per cent 4 10 by 2010. Today, it is in the vicinity of 3 40 per cent, and falling.8 In fact, there 2 are forecasts now that,6 by 2030, the Mn bbls/day

Mn bbls/day 1 US could, if it chose,4 become a net exporter of oil. Certainly, it is beyond 0 2 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 dispute that, taken together,0 imports from Canada and Mexico Northwill be America more Russia Oil Sands Conventional light/medium Conventional heavy than sufficient to meet remaining US demand. In a time of rising produc- Source: Canadian Association of Petroleum Producers tion and easing demand, the North Chart 2: US DEPENDENCE ON IMPORTED OIL American continent, consisting of the US, Canada, and Mexico will soon no 65 longer require anyone else’s oil. 60 In sum, then, technology has stood 55 conventional wisdom on its head. 50 The sweeping effects of these extraor- 45 dinary developments are now becom- ing apparent. Continental prices of 40 natural gas have effectively been de- 35 coupled from the global market price

Imports/US oil consumption (%) 30 and now rank among the lowest in 95 99 03 07 11 15 19 23 the world. Canadian industry is press- ing with renewed vigor to secure ac- Source: US Department of Energy cess to tidewater so it can sell its oil

Policy 35 overseas. At the same time, proposed ity has been its energy dependency. This trend will only be enhanced by investments in major hydro projects The OPEC oil embargo of the 1970s, the development of more Canadian hold the potential to further abet in ways subtle and obvious, has influ- hydro, especially the Lower Churchill North American’s energy indepen- enced the direction and expression of in Newfoundland and Labrador, dence and help position Canada as a US foreign policy. It stands as logical, which on its own holds the ultimate clean energy superpower. then, that bilateral ties between the potential to produce in excess of 3000 US and key oil exporting countries in megawatts of clean power for domes- Technology has stood the Middle East will, by definition, be- tic use – and for export to the United conventional wisdom on its come less important. This is not to ad- States. (It is worth noting that New vocate for American isolationism. But England still generates half its power head. The sweeping effects a United States with a secure supply of by burning fossil fuels.) of these extraordinary energy will certainly be free to pursue Taken together, these benefits sug- developments are now foreign policy objectives that are not gest the ability of the North American becoming apparent. narrowly defined or dictated by the marketplace to achieve energy inde- Continental prices of natural need to access hydrocarbons. pendence will have a lasting and posi- gas have effectively decoupled Environmental benefits. At Copen- tive influence. It will advantage our from the global market price hagen, the US and Canada harmo- industrial competitiveness relative to nized their greenhouse gas standards, virtually everyone else in the world. and now rank among the pledging by 2020 to reduce their emis- lowest in the world. It represents a greener future. It will sions to levels 17 percent below 2005 drive investment flows, reorient bal- levels. As a result of our new energy ance of payments and strengthen the reality, the United States is well on its US dollar. way to achieving its targets. One ma- hese are volatile and highly jor reason is aggressive fuel substitu- consequential times for ev- tion – in particular the replacement or those who believed in the eryone with a stake in the en- T of coal with natural gas in the gen- theory of Peak Oil, or doubt- ergy industry: producers, consumers, eration of electricity, which reduces F ed the technological capabili- policy makers – and those concerned both emissions and pollutants. An- ties of North American industry and with the environment generally, and other reason: aggressive new motor its capacity for innovation and risk climate change specifically. vehicle efficiency standards adopted taking, there is certainly an element For the United States – or, as some an- by Canada and the United States in of embarrassment associated with this alysts have taken to calling it, “Saudi 2010 – all this at a time when energy turn of events. But for those with a America” – there are advantages that consumption has been in decline on a passionate belief in the power of the go beyond energy security: per capita basis since 2007. The situa- free markets – specifically, the free market forces that lie at the heart of Industrial competitiveness. Low nat- tion in Canada is somewhat different and more challenging. Still, taken as the North American energy market- ural gas prices will benefit the US in place – there is a sense of vindication. industries that are heavy users of ener- whole, North America stands poised gy and petroleum feed stocks, such as: to achieve something that would have Our North American standard of liv- petrochemicals, steel manufacturing, been all but unimaginable just three ing has been driven in no small part fertilizers, cement and certain heavy years ago in Copenhagen: the dual by the largest free-market energy sys- manufacturing. At a time when Asia’s advantage of abundant, reasonably tem in the world. This continental labour cost advantage over North priced energy and a natural environ- marketplace is richly endowed with America is deteriorating, the United ment that is improving, rather than resources. It is mercilessly efficient as States will also continue to open up a deteriorating, in quality. an arbitrator of labour and capital. It significant energy cost advantage. Economic and financial benefits. Chart 3: NORTH AMERICA RECLAIMS TOP OIL PRODUCTION SPOT Today, the United States’ oil import bill alone is expressed as 1.7 percent 16 of GDP. Energy self sufficiency, cou- 14 pled with low natural gas prices and 12 the positive consequences of re-in- 10 dustrialization, will have a significant and positive effect on the US current 8 account deficit – and ultimately on 6 the strength of the US dollar and the Mn bbls/day 4 American economy. Importantly, this 2 will take place not at some distant 0 point in the future but over the course North America Russia Saudi Arabia China of the next five years. (Can + US)

Foreign policy. For decades, Ameri- Source: IEA. Figures are for Dec ‘12 and include all petroleum liquids. ca’s essential geopolitical vulnerabil-

June/July 2013 36 sets prices ruthlessly – in both direc- ada’s interests and those of the US and weather and we will continue tions. And, most importantly, it is re- are not – and never will be – identi- to have somewhat differing perspec- lentlessly innovative, embracing tech- cal. Canada is a net hydrocarbon ex- tives on climate change. Even if that nological change and opportunity at a porter, and will need to continue to weren’t true, it would never be pos- breathtaking pace. pursue world prices and market diver- sible to fully harmonize energy and Even with the unprecedented change sification. The United States is a net environmental policies. we’re witnessing, the Canada-US en- importer and will continue to pursue What’s clear above all else is that ergy relationship will remain pivotal diversity of supply to maintain down- Canada needs to respond to the con- to both countries – and despite the ward pressure on prices. Free markets tinent’s new energy reality by pursu- many benefits of rising energy pro- must be allowed to work to arbitrate ing its own geopolitical interests as duction, improved energy security these differences. one of the world’s largest energy sup- and falling prices, it will not be with- pliers. We must contribute efficiently out strain. Fundamental differences of Canada must continue to to North American energy indepen- interest will persist. fight for a continental energy dence and press for a continued, open continental market – but we must also First and foremost, Canada must con- market that is free from tinue to fight for a continental energy be ambitious, moving with purpose market that is free from the well-in- the well-intentioned, but to benefit from Asia’s growing energy tentioned, but damaging, interven- damaging, interventions of demands. The game has changed. The tions of government, specifically in government, specifically in implications are profound – and so the form of national and sub-national the form of national and sub- too, if we play our cards right, can be impediments. Regional low-carbon national impediments. the opportunities. fuel standards or renewable portfolio Jim Prentice is Senior Executive Vice- standards serve only to restrict access President and Vice Chairman of CIBC. to continental resources with conse- From 2006-2010, he served in senior quential impacts on prices and con- Third, our position on the environ- Cabinet portfolios as minister of Indian sumers. Canada must stand against ment will be similar to that of the and Northern Affairs, minister of Indus- protectionism – and green protection- Americans but, once again, not iden- try, and minister of the Environment. ism is protectionism nonetheless. tical. Our two countries have very dif- He also chaired the Cabinet Operations Second, we must remember that Can- ferent industrial bases, geographies Committee.

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An oil rig worker in Alberta. The discount on Canadian oil in the US, as much as $40 per barrel, seriously impacts the royalties of producing provinces, and the tax revenues of Ottawa. iStock photo Canada’s Cut-Rate Oil: Temporary or Permanent? Douglas Porter and Earl Sweet

The oil discount of to West Texas Intermediate has been as high as $40 per barrel. And with WTI crude discounted to the world price, the actual discount to WCS can be even higher. Relatively low prices in Canada pose a serious challenge to oil producers and their servicers, and the differential has been a major trigger of softer economic activity in Western Canada. Federally, while Canada does not directly collect resource royalties, the wider discount has a negative impact on revenues through lower corporate and personal tax receipts and nominal GDP growth. But developments now under way, including pend- ing pipeline projects, will expand the demand for heavy oil and facilitate its flow south to major refining hubs in the Midwest and the Gulf Coast. Meanwhile, the discount has narrowed sharply since the beginning of the year and should nar- row further over the next year, boosting revenues of Canadian producers.

June/July 2013 38 he discount on Canadian oil in The good news is that the discount has narrowed substantially US markets is a major issue for so far in 2013, partly due to seasonal demand for bitumen T governments both in oil pro- (i.e., asphalt, etc) but also thanks to completed refinery ducing provinces and in Ottawa, which have seen declining royalty maintenance in the Midwest and more pipeline capacity and tax receipts as result of lower oil linking the Cushing crude oil hub and the Gulf Coast refineries. prices and industry profit margins. The oil price discount of Western Ca- pose a serious challenge to oil produc- performs initial expectations, just like nadian Select to West Texas Intermedi- ers and their servicers, particularly investment last year underperformed ate has recently been as high as $40 per smaller operations that don’t have by a huge margin. barrel. With WTI crude itself tracking the financial strength to comfortably If reality matches intentions, that below world prices, the actual discount weather the rough ride. This is amply to WCS product was even higher. would mark the second consecutive evident in equity prices. For instance, year of virtually no growth in invest- It is no mystery what this means to the S&P/TSX index for oil & gas energy ment, following huge increases in 2010 federal policy makers – lower revenues, exploration and petroleumproduction and 2011. Weak capital expenditures a lot lower. The March 2013 federal companies fell 3.3 percent year to year in the oil and gas and related industries budget forecast a shortfall of $4 billion by the end of the first week of May, are a primary factor in our assessment in federal tax revenues due to the oil while the overall index rose 5 percent. that Alberta’s real GDP growth will discount, a number which exceeds the The wider differential received by Ca- cool from 3.9 percent in 2012 to an es- contingency reserve of $3 billion. nadian producers of heavy oil relative timated 2.5 percent this year. For Finance Minister Jim Flaherty, to WTI prices has been a major trigger More broadly across Canada, a wider this makes his task of managing the of softer economic activity in West- discount has a negative impact on the fiscal framework, and his target of bal- ern Canada (particularly in Alberta). terms of trade and investment activ- ancing the budget by fiscal 2015, all The good news is that the discount ity. The Bank of Canada estimated in the more daunting. has narrowed substantially so far in its quarterly Monetary Policy Report Discounted oil prices in Canada 2013, partly due to seasonal demand in January that deterioration in the have caught national attention. The for bitumen (i.e., asphalt, etc) but also oil-related terms of trade (i.e., WCS WCS discount from the WTI bench- thanks to completed refinery main- discount from imported Brent) cut mark price has historically been very tenance in the Midwest and more national real gross domestic income volatile, reaching a monthly average pipeline capacity linking the Cush- (GDI) growth by an annualized 0.2 peak of 38 percent in December 2012 ing crude oil hub and the Gulf Coast points in the second half of 2012. refineries. Despite the challenge, oil (Chart 1). At times during Decem- Moreover, low Canadian oil prices production in Alberta was still up a ber, the discount rose to the vicinity are complicating the task of govern- solid 16 percent year over year in the of 50 percent. The impact on Cana- ment budgeters, particularly in those fourth quarter of 2012, and Canadian dian producers has been exacerbated provinces that depend heavily on roy- exports to the United States rose 8.4 by the fact that WTI itself has been alties from the industry, not to men- percent. However, capital spending trading at a significant discount from tion from taxes on related income. intentions in the sector, surveyed in international prices (Chart 2) due to Resource revenues are expected to late 2012 and early 2013, are flat for the growing mid-continent glut of oil make up 19 percent of Alberta’s oper- this year. stemming from insufficient pipeline ating revenue in fiscal 20013-14, with capacity to transport oil south to the The rise in the WTI benchmark and almost half, 46 percent, of that com- major Gulf Coast refining hub. narrowing of the WCS discount from ing directly from bitumen royalties. There’s no doubt that relatively low WTI since the time of the survey may The province estimates that a $1 drop prices in Canada, were they to persist, mean that investment this year out- in WTI prices or a 1 percent increase

Chart 1: WIDE DISCOUNT NARROWING Chart 2: THE DOUBLE DISCOUNT (% deviation below WTI) Western Canada Select (WCS) (US$/barrel) Crude Oil Benchmarks

40 140 35 120 30 100 Brent Average WTI 25 = 20% 80 WCS 20 60 15 10 40 5 20 0 0 08 09 10 11 12 13 08 09 10 11 12 13

Policy 39

Chart 3: ENERGY DRIVES INVESTMENT Chart 4: FAST GROWTH NORTH OF CUSHING (average % change during period) Business Investment (millions of barrels per day) Crude Oil Production

4.5 All Industry 4.0 NORTH DAKOTA ex Oil & Gas 3.5 WESTERN CANADA 2001-12 AVERAGE 3.0 Conventional 2013 INITIAL PLAN 2.5 Oil & Gas 2.0 1.5 1.0 Unconventional Oil 0.5 0.0 -10 -5 0 5 10 15 20 05 06 07 08 09 10 11 12 13 in the WCS discount would cut rev- above its long-run average of 19 per- of transporting northern oil south by enues by an estimated $140 million. cent. While there will be inevitable close to 0.60 mmb/d600,000 barrels So, all else being equal, a 10 percent fluctuations along the way, we expect per day by mid-2014; and, the pro- widening of the WCS discount would the discount to trend further down- posed reversal of Enbridge’s Line 9 cut overall provincial operating rev- ward. Its notable rise late in 2012 and Pipeline, that would facilitate the flow enues by nearly 4 percent. Addition- early in 2013 reflected the sharp ramp of Alberta oil to Montreal and possi- ally, lower prices received by oil sands up of both North Dakota and Alberta bly further east, reducing reliance on producers could temper demand for crude oil production last year – a com- imports. Of course, approval of the land lease sales, applying additional bined increase of about 600,000 bar- full Keystone XL Project would slice downward pressure to revenue not rels per day – competing for limited into the western Canadian discount captured by the above sensitivity space on pipelines south to Cushing by providing a direct artery from Al- (land lease sales are expected to make Oklahoma, the pricing point for WTI berta’s oil sands to the Gulf Coast up 16 percent of resource revenue in on the NYMEX (Chart 4). Longer- refining hub, with initial capacity of fiscal 2013-14). than-expected Midwest refinery out- more than 800,000 barrels per day. ages contributed to the discount by Even these major pipeline expan- ederally, while Canada does not temporarily reducing the demand sions will be hard-pressed to keep up directly collect resource royal- for Canadian crude. However, rising with rising production in Alberta, Sas- F ties, the wider discount has a heavy oil conversion capacity in Mid- katchewan, and North Dakota. This negative impact on revenues through west refineries will increase the de- highlights the importance of access- lower nominal GDP growth and- mand for Canadian crude by the sec- ing new markets for Canadian crude growth in corporate and personal tax ond half of 2013, by close to 300,000 through expanded pipeline capacity receipts. This year’s budget estimated barrels per day. to the West Coast, the East Coast or that lower Canadian crude prices, rela- both through a re-purposed Trans- tive to global benchmarks, cut GDP by dditionally, a number of pipe- Canada mainline, or both. about $28 billion per year, which again line projects currently under translates into more than $4 billion in way or proposals being devel- While Western Canada producers have A been struggling with low domestic oil foregone federal revenues—that would oped will help reduce the bottlenecks be 1.5 percent of total federal revenues from Cushing to major Gulf Coast prices, developments under way will for the current fiscal year. refineries, where there remains sub- expand the demand for heavy oil and stantial unused capacity (more than facilitate its flow south to major refin- Furthermore, investment has been one million barrels per day) for up- ing hubs in the Midwest and the Gulf one of the leading drivers of the Ca- grading heavy oil, and from Canada Coast. Both the discount of WTI from nadian economic recovery, along to the Midwest. These include: the re- Brent and the discount of WCS from with residential construction. Now, cent expansion of the Enbridge/Enter- WTI have narrowed sharply since the with the housing market taking a stra- prise Seaway pipeline from Cushing beginning of the year and should nar- tegic pause and consumers and gov- to the Gulf to a capacity of 400,000 row further over the next year, boost- ernments gearing down, investment barrels per day and the planned twin ing revenues of Canadian producers. may be the only domestic driver. This line following the same right-of-way Although earlier weak pricing may will be a tall order, given the relatively that would further expand capacity see industry investment remain flat in small size of capital expenditures in to 850,000 by mid-2014; the south- 2013, it will be at a relatively elevated the economy and the fact that, dur- ern leg of TransCanada’s Keystone XL level and medium-term growth pros- ing the past three years, oil and gas Project that commenced construction pects are good. sector capital expenditures (Chart 3) last August and should be ready dur- Douglas Porter is chief economist accounted for close to 20 percent of ing the second half of 2013, initially of BMO Capital Markets. douglas. total private sector investment. adding 700,000 barrels of daily capac- [email protected]. Earl Sweet is a senior Since December, the oil discount has ity; Enbridge’s Flanagan South Pipe- economist at BMO Capital Markets. fallen sharply to 22 percent, not far line, that would expand the capacity [email protected]

June/July 2013 40 Do the Media ‘Get’ Energy? Catherine Cano

In the last four years, the volume of energy coverage, heightened media interest in energy issues. According to our research de- measured by the number of stories, has increased by partment at NATIONAL Public Rela- 15 percent in Canada. The number of stories related tions, the proportion of negative print to pipelines, such as Northern Gateway and Keystone stories grew by 11 percent overall, pri- marily at the expense of neutral cov- XL, has grown 450 percent in four years. A third of erage. This indicates a more polarized them are negative in tone; fewer than a fifth are posi- discussion, increasingly unfavourable to energy development. The number tive. So, what has been the media’s role and how do of stories related to pipelines, such as they fare in this debate? The mere fact that news orga- Northern Gateway and Keystone XL, nizations dedicate more ink and air time to energy is- has grown 450 percent in four years. A third of them are negative in tone; sues is indicative of the impact news executives think fewer than a fifth are positive. it has on Canadians. With issues so complex and po- larizing, the role of the media itself becomes a piece of Canada’s energy puzzle.

f you want to know how to get sank, killing 11 people and spewing media attention, just ask Al for 87 days before it was capped. It I Gore. He called Canada’s oil sands prompted weeks of news stories and a a “reckless spewing of pollution in the closer look at the state of our Canadi- Earth’s atmosphere as if it’s an open an industry, both inland and coastal. sewer.” You may have read this in the It also attracted influential person- Globe and Mail. I heard it in person alities, such as movie director James at in Toronto. The Cameron, to come to Alberta and to former US vice president wanted to denounce the development of the oil be provocative – and he succeeded, sands. The Globe and Mail sent a writer along the entire praised by some and condemned by US route of the proposed Keystone XL pipeline. As Catherine Cano notes, the number of media stories others. His timing could not have related to pipelines has increased by 450 percent in been better for opponents of the oil The number of stories related the last four years. Policy photo sands, nor worse for the industry and to pipelines, such as Northern governments. Gateway and Keystone XL, Outside voices are also fueling the neg- Why? Gore’s words conferred instant has grown 450 percent in four ative perception. The debate has been credibility on one side of the debate years. A third of them are raging in the United States over the on a hot issue. Although uneven, me- negative in tone; fewer than a dia interest in energy issues has grown Keystone project; in Europe, the battle significantly in the last few years, fifth are positive. is well under way. Everyone is now mostly driven by news stories around paying attention. In May, the New spills, demonstrations or high-profile York Times published yet another sto- events. ry on the oil sands – the most emailed of the day – headlined: “Is Canada’s One of these media moments was the oil too dirty for Europe?” The Europe- worst oil spill in the history of the in- an Commission is proposing to clas- dustry, in 2010 in the Gulf of Mexico. In the last three or four years, the vol- sify oil from the oil sands as “highly Everyone knows about what became ume of energy coverage, measured by polluting” – a punitive designation known as the “BP oil disaster,” trig- the number of stories, has increased that the Canadian government and gered when an oil rig exploded and by 15 percent in Canada, suggesting

Policy 41 CEOs know that attitudes and communications have to change energy sector is no exception. Both in- in a new era of transparency and real commitment to the dustry and media would benefit from opening up to each other. For CEOs environment and communities. and members of the oil and gas indus- try, creating a connection and over- coming their fear of the media would help them better understand the role the industry are fighting on all fronts, openness changed Cameron’s mind: of journalists. This would require including the domestic arena. In May, he said in a One on One interview with more transparency and trust, but they the Globe and Mail asked Canadians CBC’s Peter Mansbridge that it was all know that this is the new normal. if they agreed with Gore’s statement easy to “vilify the oil companies” and that there is no such a thing as ethical that there was “the potential to do it oil; 52 percent said they did. right for the environment”. Openness For CEOs and members of the is necessary for the media to “get it”, oil and gas industry, creating o, what has been the media’s role and the media have a crucial role to a connection and overcoming and how do they fare in this de- play in our understanding of the is- their fear of the media would bate? The mere fact that news sues. While it would be tempting to help them better understand S conclude that most media do not, at organizations dedicate more ink and air time to energy issues is indicative least some media outlets are chang- the role of journalists. of the impact news executives think ing their approach. For example, the This would require more it has on Canadians. But do the media Globe and Mail has intensified its cov- transparency and trust, but “get it”? Undoubtedly, many get the erage, including in a series from Na- they all know that this is the than Vanderklippe, who followed the importance of covering it. There are a new normal. dozen daily articles and weekly radio route, reporting and television stories. The print me- people’s reactions along the way. One dia, mostly in Calgary, have dedicated of his pieces discussed the company’s resources and energy beat reporters. handling of the local communities, of- Radio-Canada television is pushing In broadcasting, the story is usually fering some learning for the industry. the thinking even further, planning a covered by environment or business The paper has dedicated more space to new show this fall to tackle issues and reporters. Dedicated resources do covering the issue from many angles, seek solutions. Instead of simply stat- make a difference in understanding including in stories by its national en- ing a problem, the network intends to the issues and objective reporting. Un- ergy reporter and others. It has made move the dial. The goal will be to bring fortunately, few news organizations a great effort to answer some of the together guests with different points feel they can afford to have in-house questions and to present the facts. It of view and to challenge their think- specialists. would be useful for other news orga- nizations to emulate the Globe and ex- ing by focusing on common ground, Is the coverage fair and balanced? Not plain the issues objectively. pushing for answers and making all everyone agrees. The industry thinks participants part of the solution. This the environmentalists are winning the A recent US study from Northwestern is an innovative idea that will help day, while the ENGOs believe the op- University’s Medill School of Journal- educate people about nuanced, com- posite. But our research indicates that ism found that when news stories ap- plicated problems. overall coverage has been increasingly proach critical energy issues from a Canadians know there is a lot at stake. negative in tone and unfavourable to scientific perspective – as opposed to The oil sands have been the engine of the industry. a policy or human-interest perspective – they are more effective in engaging our economy, but raise real concerns The ENGOs have had great communi- and educating news consumers. over the impact on the environment. cations strategies and have provided The issues are complex: what we need substantial information to the press. Beyond the need for fact-based media is to be more informed, in a sustained For years now, this has put the indus- coverage, the relationship between and constructive way. try on the defensive, forcing devel- the media and the business commu- opers and producers to change their nity is of deeper concern. Whereas re- Catherine Cano, managing partner in approach and way of doing business, porters like to be close to sports and the Toronto office of NATIONAL Public while becoming more open and acces- entertainment personalities, and even Relations, is a former head of news sible to the media. CEOs know that at- politicians, historically they have at Radio-Canada, and former head of titudes and communications have to mostly kept their distance from cor- the RDI news network. As director of change in a new era of transparency porations. Therefore, they often know program development at the CBC, she and real commitment to the environ- little about companies’ efforts and directed the 2011 federal election cover- ment and communities. community contributions. age on all platforms. [email protected] Recently, some news executives told hen Canadian film direc- me they felt disconnected from the tor James Cameron came business community. They believe W to Alberta, CEOs wel- they could find ways to take a closer comed him and showed him the land look at companies without sacrificing and the environmental impact. That their journalistic independence. The

June/July 2013 42 Canadians Conflicted on Canada as an Energy Superpower Greg Lyle

s this edition of Policy dem- here http://www.innovativeresearch. Canadians have concerns about our onstrates, energy has become ca/public-polls.htm . levels of energy exports in general. a central issue in Canada’s A majority (53 percent) say we are A A majority of Canadians in 2007 (56 national political debate. The Harper already too dependent on money percent) and today (52 percent) say government sees energy exports as from energy exports. A majority (58 critical to Canada’s economic well- becoming an energy superpower is percent) also believe we should save being, and is determined to improve a good idea. However, opposition is our oil and gas for future generations. access to the global market. The leader growing as the number saying it’s a However, when asked if they are will- of the Official Opposition, Thomas bad idea has grown from 9 percent to ing to make sacrifices today to save re- Mulcair, has focused more on Cana- 20 percent over the past six years. serves for the future, agreement drops dian energy security, minimizing our Canadians agree (58 percent) that it is down to 44 percent. environmental footprint and increas- our turn to reap the economic bene- Finally, Canadians are also divided on ing domestic value-added. Somewhere fits of our natural resources. They also which is more important, the state of in the middle there is Justin Trudeau’s agree (66 percent) with the idea of us- your provincial economy (47 percent) Liberal Party. While it is still the early ing our own oil and gas resources to or the state of the global environment days in Trudeau’s leadership, he has keep the domestic cost low. (47 percent). Similarly, while 41 per- come out opposing Enbridge’s pro- cent disagree that we should not de- posed Northern Gateway pipeline, he anadians are evenly divid- velop oil and gas resources because of expressed interest in possibilities of ed (37 percent agree, 37 per- the environmental harm they cause, shipping bitumen to refineries in East- C cent disagree) on whether we 38 percent agree, up 5 points over the ern Canada and, more recently, he has have a responsibility as a good neigh- past 6 years. indicated support of the Keystone XL bor to provide the US with reasonable pipeline. access to our natural resources once ENERGY AS A BATTLEGROUND Grouping Canadians by Shared Views Where do Canadians stand and how our own needs are met. A majority (58 of Oil and Gas is that changing over time? In May, percent) say they are not interested in Innovative Research Group tracked being an energy superpower if it just a series of energy questions we first means becoming a really big supplier Consistent asked Canadians in 2007 on behalf to the US. An even larger majority (64 Oil of the Canadian Defense and Foreign percent) agree that we need to pro- Supporters; Affairs Institute. Both studies were tect Canadian natural resources from 23% completed on our Canada 20/20 on- the insatiable appetite of American Persuadable line panel. Survey details can be found consumers. Public; 52% Opponents; Consistent25% Oil Opponents; 25% MAJORITY SUPPORT IDEA OF CANADA AS AN ENERGY SUPERPOWER

Good idea 2007 56% As a concept do you think Canada as 2013 52% Q an emerging energy superpower is a good idea or a bad idea? Looking across all of the conflicting responses, the bottom line is that pro- 39% ponents of oil and gas projects can only count on about one-in-four (23 Bad idea percent) Canadians as consistent sup- 29% 2007 9% porters while another one-in-four (25 2013 20% 23% percent) Canadians are consistent op- 19% ponents of oil. Half (52 percent) of our 17% 18% 17% respondents fall into the “Persuadable 13% Public” category. They are open to ar- 9% guments but their support cannot be 7% 7% taken for granted. Proponents must 2% earn it.

Very good Somewhat Neither good Somewhat Very bad Don’t know Greg Lyle is Managing Director of good nor bad bad Innovative Research Group, a national public opinion research firm.

Policy 43 Canada’s Climate Challenge: How Getting to 2020 will be Tough, Very Tough David McLaughlin

The world came to Copenhagen three years ago to agree on a new global climate pact and the world left without one. But a residue of global action on climate change remained – at the country level – and Canada signed up to reduce our emissions by 17 below below 2005 levels by 2020. Projections now show Canada with a striking increase in carbon emissions in the years ahead, principally due to growth in the oil and gas sector led by oil sands. That means stabilizing emissions will be difficult on its own while reducing those emissions from what they would have been will be even tougher. Which is why debate over a Canadian energy strategy and the future of pipelines has become so central to making progress on an effective climate policy not just in Canada but in the United States as well. Right now, provincial governments are doing the heavy lifting in meeting the climate challenge but it’s still not enough. If we are serious about achieving our climate policy goals, a new approach across Canada is needed. Now.

or 25 years, Canada has wrestled with getting climate policy TIMELINE OF FEDERAL APPROACHES TO CLIMATE CHANGE AND F right, setting eight different cli- EMISSIONS TRENDS mate targets and adopting three major policy approaches to get there. None 748 Mt Turning the Corner (2007) has succeeded. The first targets were Kyoto ratified 750 (2002) set in 1988; the last in 2010. Except 715 Mt for the high-water mark contained in Project the Kyoto Protocol, our collective am- 731 Mt Green e) bition has been a declining one. From 2 700 (2005) 709 Mt a projected greenhouse gas emission target of 470 megatonnes of CO2e by Climate Change Plan 677 Mt for Canada (2001) 2005 (fixed in 1988), our current target 650 is now hoping for 607 MT of CO2e by Action Plan 2000 (1998) 2020, 15 years later. The political and 640 Mt 600 economic realities of meeting national National Action Program targets continue to overwhelm our on Climate Change (1995) 2020 Target 607 Mt global commitment to do more. 590 Mt Green Plan (1990)

National GHG Emissions (Mt CO 550 Today, Canada’s emissions stand at Current Target 692 MT, an increase of about 17 per- Announced (2010) cent from 1990 levels, but down about 6 percent from 2005 levels. The last 0 0 couple of years have seen a stabilizing 20 01 1995 2 2001 2007 1998 20 2002 2009 2005 rather than reduction of emissions, 1990 mostly due to slower economic growth Source: Reality Check: The State of Climate Progress in Canada, NRTEE, 2012 and industrial output causing those

June/July 2013 44 emissions. This is better than the al- eclipsing Ontario and Quebec. And ernment has pulled Canada from the ternative, but nowhere near sufficient with significant financial wealth be- Kyoto Protocol and ditched its own to meet our 2020 target. As economic ing generated from higher produc- climate plan in favour of its current growth occurs, so do emissions. All tion and exports of Alberta oil sands, policy of alignment with the United projections show Canada with a strik- the challenge becomes clearer. Al- States. While the Liberal government ing increase in carbon emissions in berta alone will not get Canada to its had signed Kyoto, it put very little ac- the years ahead, principally due to 2020 target, but without Alberta it’s tion policy actions in place to reduce growth in the oil and gas sector led impossible. emissions and meet the ambitious by oil sands. That means stabilizing Looking ahead to 2020, the principal target to which it committed Canada. emissions will be difficult on its own source of emissions growth is clear: The Conservative government has at while reducing those emissions from oil and gas outstrips all others. This is least put some actions in place that what they would have been will be due to expected increases in oil sands will result in some emission reduc- even tougher. production. Transportation emis- tions by 2020. sions will also rise as we drive more But as federal government actions nergy is the biggest driver of with more vehicles on the road. But have ebbed, provincial actions have emissions. This covers oil and not all emissions will rise. Electricity flowed. Political and policy vacuums E gas, electricity, and buildings. emissions, in fact, have been falling at the federal level in the early to mid- Transportation – cars, trucks, and and are forecast to fall further. That 2000s were significantly filled by pro- buses – is next. So, how we produce sector will see a significant decrease of vincial governments. To understand and use energy is at the core of any about 25% between now and 2020 as whether Canada can achieve its 2020 carbon emissions strategy to reduce we move off coal-fired electricity pro- climate target, an understanding of dangerous climate change. That’s why duction, add renewables to the grid, provincial policies and their contribu- debate over a Canadian energy strat- and use electricity more efficiently. tion must be undertaken. egy and the future of pipelines has With the more direct connection be- Shortly before its doors were closed by become so central to making progress tween electricity generation and con- on an effective climate policy not just the federal government’s March bud- sumer pricing, the incentive to reduce get, the NRTEE undertook original re- in Canada but in the United States as electricity use – plus generate it more well. search into where Canada really stood cleanly – is having an impact. en route to the 2020 target and exact- This makes climate change a political Like the heat-trapping greenhouse ly how much both federal and provin- economy story, not just an environ- gases themselves, climate policy in cial actions were contributing. Ironi- mental one. Where emissions come Canada has had its own life cycle. At cally, that work was commissioned by from matters and in a federation like times the federal government has led the federal minister of Environment. Canada, it matters a lot. The biggest the charge – Kyoto in 1993 under the It was released in June, 2012. The fol- source and growth of emissions re- Liberals and the Turning the Corner lowing is based on that research and sides in Alberta’s oil and gas sector. plan in 2007 under the Conservatives. shows that while progress has been In 2009, Alberta accounted for over Both, however, were overtaken by made, it is not nearly enough to meet a third of Canada’s total emissions, events. Now, the Conservative gov- Canada’s climate policy goals.

EMISSIONS BY ECONOMIC SECTOR PROVINCIAL AND TERRITORIAL CONTRIBUTIONS TO CANADA’S TOTAL EMISSIONS (2009)

WasteWaste & Others& Others N L 1 % • 10 Mt 50 50Mt Mt 24%24% NB 3% • 18 Mt 7%7% MB 3% •20 Mt AgricultureAgriculture TransportationTransportation 69 69Mt Mt 10%10% BC NS 3% • 21 Mt 166166 Mt Mt 9%

EmissionsEmissions Intensive Intensive 64 Mt TERR 0%• 2 Mt AB & Trade& Trade Exposed Exposed PEI 0%• 2 Mt 34% IndustriesIndustries 11%11% SK 75 75Mt Mt 11% 234 Mt 73 Mt 11%11% 22%22% QC BuildingsBuildings OilOil & Gas& Gas 12% 79 79Mt Mt 154154 Mt Mt 14%14% 82 Mt ON 24% ElectricityElectricity 99 99Mt Mt 165 Mt

Source: Reality Check: The State of Climate Progress in Source: Environment Canada, 2010 data. Canada, NRTEE, 2012

Policy 45 The figure below illustrates the main FORECASTED CHANGE IN EMISSIONS BY ECONOMIC SECTOR findings from the report. It forecasts (2005-2020) what emission reductions will occur

30% due to existing and proposed govern- ment policy measures – federal and 200 10% provincial – and it shows the ‘gap’ to 2005 the 2020 target. 2020

e) Overall, it shows that Canada can ex-

2 150 -25% pect to be about halfway to the target by 2020. Put another way, unless new

8% 22% climate policy actions are put in place 100 1% 5% soon, Canada will miss its 2020 target by just over 50 percent. Instead of be- ing at 607 MT in 2020, emissions will

GHG Emissions (Mt CO 50 likely be at 724 MT, a gap of 117 MT. Since the report canvassed all possible measures in the climate pantry of gov- ernments, so to speak, this conclusion 0 is inescapable. Transportation Electricity Oil and Gas Emissions- Buildings Agriculture Waste and Intensive Trade- Others Every province has a climate change Exposed Industries action plan. And every province has Note that the sectoral breakdown in this chart is taken from Environment Canada’s Emissions Trends Report, not the National Inventory Report as in the rest of this chapter. its own emissions reduction target. The means to do so are as varied as Source: Reality Check: The State of Climate Progress in Canada, NRTEE, 2012 the sources of emissions among them. Some use forms of carbon pricing, like EMISSION REDUCTIONS UNDER EXISTING AND PROPOSED FEDERAL, BC, Alberta and Quebec; all have ener- PROVINCIAL, TERRITORIAL POLICIES gy efficiency measures; many are focus- ing on renewable energy development; elimination of coal-fired electricity in Emission Ontario is a major contributor. While Reductions in 2020 not coordinated, collectively, these provincial actions add up to a signifi- 828 Mt cant contribution to national emis- No Policy sions reductions. 807 63 Mt

he federal government, mean- 10 Mt while, has adopted a sector-by- 765 Mt 757 21 Mt 755 Mt sector regulatory approach, set-

e) T ting performance standards for some 2 10 Mt 734 Mt industries and products. It has es- 724 Mt chewed any form of economy-wide 707 carbon pricing, including the cap-and- trade system for large final emitters it announced as part of its Turning the Corner plan. 657 The NRTEE report examined, for the first time, the contribution by each

National GHG Emissions (Mt CO level of government to GHG emis- 607 sion reductions by 2020. The results were revealing. Looking at both exist- 2020 Target 607 Mt ing and proposed policy measures by governments (which encompassed 0 everything being considered across 2005 2010 2015 2020 the country), the report showed that Abatement from existing Overlap between existing Abatement from provincial reductions will account for provincial/territorial policies federal and provincial/ existing federal approximately 75 percent of Canada’s territorial policies policies emission reductions in 2020; the feder- Abatement from proposed Remaining emissions federal/provincial/territorial to 2020 target al government the remainder. Provin- policies cial governments are doing the heavy Source: Reality Check: The State of Climate Progress in Canada, NRTEE, 2012 lifting so far in meeting the climate challenge.

June/July 2013 46 fold: first, higher carbon prices are DETAILS ON 2020 EMISSIONS REDUCTIONS AND GAP TO TARGET needed sooner to incent the technol- ogy development and behavioural 70 change required to move off of high- emitting activities to lower ones; sec- 5 ond, most of the additional abate- 60 ment needs to come from the oil and e) 4 2 gas sector and that means a real focus 3 on carbon capture and storage, which 50 2 is expensive. Following on, it is not 1 hard to see that this means most, if 0 not all, of the additional actions need 40 BN SN P E I LN to occur in Alberta. Climate change is a long-term prob- 30 lem requiring actions now to get re- sults later. It is a classic ‘tragedy of the commons’ problem where ownership 20 resides with everyone and no one in particular. All have a responsibility to

Provincial GHG Emission Reductions (Mt CO Provincial act but no one action is sufficient. This 10 has been the calculus behind Cana- da’s climate policy challenge for two 0 decades now. Targets are set, policy is BC BA KS MB NLPEINSNBQCON proclaimed, and actions languish. The results can be seen here. Remaining gap Abatement from Abatement Abatement to provincial proposed federal/ from existing from existing targets provincial policies federal policies provincial policies or Canada to make substantial progress to meeting the 2020 Source: Reality Check: The State of Climate Progress in Canada, NRTEE, 2012 F goal, a major new climate pol- icy push would be required. A “C-3” Before applauding provincial govern- ent than any other engaged in climate approach among governments that ments, it is also worth assessing what policy. They want the most emis- is more collaborative, coherent, and progress they are making in achieving sions reductions at the least economic considered is best: their own climate policy goals. Here, cost. That means less impact on the • Better collaboration between the the picture is less rosy. As the figure economy in terms of reduced growth, federal and provincial governments shows, only one province – Nova Sco- investment and jobs. It also means at on policy approaches so national tia – appears to be on track to meeting the lowest carbon price possible. Cost- and regional actions work better its 2020 target. effective climate policy should also be together. the goal of our governments. ederal policy measures have • More coherent policy actions by an effect across the country so The NRTEE considered the challenge both levels of government, in- they are counted in each prov- from this perspective in closing the cluding looking at how a base F gap to 2020. What would be the most carbon-pricing regime, topped up ince’s total, too, just as provincial measures collectively add up to reduce cost-effective means of reducing that by provincial policies, could more national emissions. This is important additional 117 MT by that time? To do cost-effectively achieve targets. since, in theory, if every province just so, all existing and proposed actions to • More considered policy actions met its own targets, Canada would be date were grouped into three carbon based on improved and shared well on its way to achieving the over- price per ton bands of low ($0-$50), data, forecasting, progress reviews, all 2020 target. But coordination of medium ($51-$100), and high (over and outcomes reporting. climate policies has never taken root $100). Then, potential emission re- In climate terms, 2020 is just around in the country nor has any attempt at ductions to fill the gap were added on, the corner. Getting there will be climate burden-sharing been attempt- again grouped by carbon price band. tough, very tough, based on prog- ed. The result is policy fragmentation The results show clearly that most of ress to date. If we are serious about and inadequate progress. the effort so far has been in the low achieving our climate policy goals, a Time is not on our side here. The lon- carbon price band of under $50 per new approach is needed across Cana- ton. To meet the target, much more ger the country waits to put effective da. Now. climate policies in place, the closer we effort in the higher price bands will be David McLaughlin is the former get to the target date but the further required, with over 40 percent of the president and CEO of the National we get from the target itself. And the additional emission abatement hav- Round Table on the Environment and ing to come from measures costing cost of getting those emission reduc- the Economy. Previously, he was chief tions grows as a consequence. more than $100 per ton. of staff to the minister of Finance of Canada’s governments are no differ- The reason for the higher costs is two- Canada.

Policy 47 Cutting Carbon: The Heart of a Canadian Energy Strategy Dan Woynillowicz and Merran Smith

Shifting social and economic conditions in key export juggled a variety of carbon targets and policies, the world around us has been markets are introducing significant new risks to Can- changing. This change stalled during ada’s oil and gas sector, leaving our nation’s resource the recession, but is now picking up economy exposed. A Canadian energy and climate speed. In its 2012 World Energy Outlook, the strategy, led by the Council of the Federation, offers International Energy Agency leveled a a promising venue and process for mitigating these stark reality check: if the world is to have a 50 percent chance of fulfilling risks and leveraging new opportunities for the nation the Copenhagen Accord goal of limit- in the growing global market for low carbon goods ing global warming to 2 degrees Cel- and services. To succeed, the premiers must grab hold sius, more than two-thirds of current fossil fuel reserves will need to stay in of two issues that, taken together, have become the the ground between now and 2050. third rail of Canadian energy politics. In this scenario, Carbon Tracker and the School of Economics’ Grantham Research Institute on Cli- mate Change have concluded that much of the future value of currently booked reserves could never actu- ally be realized, meaning the compa- hen it comes to energy and nomic prospects for our carbon-based nies that own the rights to them are the environment, Cana- energy resources, notably, high-car- overvalued today, and investors are dians might be forgiven bon oil sands;, and second, the signifi- staring at a “carbon bubble” that, if W burst, could have significant market for feeling they’re grappling with an cant opportunity to contribute clean acute identity crisis. Are we purveyors energy products, technologies and ser- implications. of “ethical oil” or “dirty oil?” Are we vices to a rapidly growing global mar- on track to fulfill our commitments ketplace. These signals should inform to reduce carbon pollution and tackle the ongoing development of an inte- hat might this mean for climate disruption, or destined to fall grated, national climate and energy W Canada? short? Are we an emerging energy su- strategy. The impacts of the “carbon bubble” perpower or a laggard in the accelerat- As Canadian political and business bursting wouldn’t just hit the TSX ing transition to a global low carbon leaders have hemmed, hawed, and (Table 1), it would also impact public economy? The debate about how we produce and Table 1 consume energy, and the implications of these choices on our economy, en- Toronto Stock Exchange (TSX) vironment, and the global climate has Key stats Top fossil fuel companies grown increasingly polarized. Envi- ronmentalists have battled oil compa- CO2 in listed fossil fuel reserves CNQ Canadian Natural Resources nies, landowners have scrapped with 33Gt (current) 69 Gt (potential) SU Suncor Energy Inc. wind power producers, and govern- TCK.B Teck Resources Ltd. ment leaders have rattled sabres with Market capitalisation of fossil fuel companies CVE Cenovus Energy Inc. their peers, both within and between $295.8 billion TLM Talisman Energy Inc. levels of government. Capital expenditure of fossil fuel ECA EnCana Corporation All this conflict has only served to ob- companies NXY Nexen Inc. scure important signals that should be $52,120.5 million HSE Husky Energy Inc. guiding decisions about how best to Debt held by fossil fuel companies PWT Penn West Petroleum address Canada’s energy and climate $86,686.6 million S Sherritt International Corp challenges: First, the uncertain eco- Source: Carbon Tracker

June/July 2013 48 revenues from lower-than-expected thing. President Obama used both his my (NRTEE) stated: “The future is low provincial royalties, and provincial 2013 inaugural address and State of carbon. Economies the world over are and federal taxes. The oil sands are the Union speech to highlight climate making the transition. Canada’s ac- particularly vulnerable. Despite be- action as a priority for his second tions today on climate, energy, trade, ing the second-largest proven oil re- term, challenging Congress to deliver innovation, and skills will shape its serve in the world, the resource is also a market-based climate change plan – economic prosperity for decades to among the most costly and most car- namely, policy that puts a price on car- come.” The world has already begun bon intensive to produce. In a Janu- bon pollution, backstopping his chal- thinking about energy in new ways, ary 2013 brief, HSBC Global Research lenge with a promise of regulations focusing on energy technologies and contemplated the impacts that an should it fail to deliver. Meanwhile, services rather than just energy com- “unburnable carbon” scenario would China has made clean energy and cli- modities. The International Energy have on oil and gas development. The mate change a central component of Agency suggests that the low carbon company concluded that declining its 12th five-year plan, and this year goods and services market is rapidly demand could depress oil prices, and launched a pilot cap-and-trade system growing: valued at $339 billion in that capital intensive, high risk proj- covering seven regions of the country, 2010, in an emissions-constrained ects such as heavy oil and oil sands a system it plans to expand nationally scenario the market could reach $8.3 would be at greatest risk. by 2020. trillion by 2050 – an annual growth But what are the prospects that global rate of eight percent. Clearly, carbon action to reduce carbon pollution will erhaps even more significantly, reduction can’t simply be considered actually materialize? China and the United States a burden – there is also immense aren’t just taking these actions opportunity. In a March 2013 brief, HSBC Global P unilaterally, they are collaborating. Research identified five key trends As the NRTEE report found, Canada In April, the two nations signed an that the company believes will accel- is well-positioned to compete in the agreement stating that they “consid- erate global efforts to address climate global low carbon goods and services disruption: er that the overwhelming scientific marketplace in a carbon-constrained consensus regarding climate change scenario, increasing employment • The impacts of climate disruption constitutes a compelling call to ac- from 42,000 in 2012 to 159,000 in are both real and costly, and can act tion crucial to having a global impact 2050, and increasing expenditures as a “threat multiplier” for under- on climate change,” and committed from $7.9 billion in 2010 to $60 bil- lying resource stress (e.g. drought to accelerate action to reduce carbon lion by 2050 (a growth rate of 5.6 per- leading to crop failures, leading to pollution by advancing cooperation cent). Further, and of note given the social disruption); on technology research and develop- tension around the geographically • Opinion is changing, with concern ment, energy conservation, and alter- concentrated nature of Canada’s fossil about climate change increasing native and renewable energy. fuel reserves, our clean energy oppor- in both developing countries, like Assemble all these puzzle pieces, and tunities are well-distributed across the China and India, and critical devel- a picture begins to emerge – one of country (Figure 1). oped countries, notably the United change and transformation. To put it But Canada is lagging behind other States; simply, it would be fiscally imprudent nations in re-orienting our economy • Economics are aligning in the to plan our economic future around to capture a greater share of this op- developing world, as rising fos- an assumption that, when it comes portunity. In its 2012 edition of Who’s sil fuel imports during a period of to climate policy, leading economies Winning the Clean Energy Race?, pro- high oil prices trigger reductions and customers will continue to sit on duced by Pew Charitable Trusts and in consumption subsidies, sending their hands. Bloomberg New Energy Finance, Can- a strong market signal for energy ada’s year-over-year ranking slipped conservation; To put it simply, it would be from 11th to 12th in the G20 (down • The costs of key clean energy tech- fiscally imprudent to plan from 8th in 2009). A 2013 study by nologies (both on the supply and our economic future around the Pembina Institute interviewed demand sides) are falling, enabling an assumption that, when more than 20 leading clean energy en- more climate benefit at less cost; trepreneurs, executives and academics it comes to climate policy, to hear firsthand the challenges they • A bundle of policy drivers – includ- leading economies and face, and solutions to overcome them. ing changing economic structures, customers will continue to sit Their challenges fell into two broad energy substitution via efficiency on their hands. themes: a lack of stable, long-term and lower carbon supply, local air government policy, and difficulty ac- pollution, water stress, and car- cessing capital. The study concluded bon regulation and pricing – will that there was a clear role for gov- increase the focus on low-carbon ernment policy to unleash Canada’s growth. clean energy sector, and made nu- Looking at two of the most influen- merous recommendations, including tial of Canada’s trading partners, the the need for a national energy strat- United States and China, suggests In its final report, the National Round- egy and putting a price on carbon that HSBC may well be onto some- table on Environment and the Econo- pollution.

Policy 49 fforts to develop meaningful There exists no formal effort to craft a Canadian climate solutions to both our energy change strategy. Numerous federal attempts to address E and climate challenges are fall- carbon pollution and climate disruption – first under the Kyoto ing short precisely when we need to be making eyes-wide-open choices. Protocol and now under the Copenhagen Accord – have One of the key snags is the fact that spanned decades but delivered little. we are trying to address questions about our energy system and climate disruption as separate portfolios when der the Kyoto Protocol and now un- approach, overlaid on a patchwork they are inextricably linked. der the Copenhagen Accord – have of provincial policies of varying form At present, there exists no formal spanned decades but delivered little. and ambition. effort to craft a Canadian climate Stymied by both intergovernmen- change strategy. Numerous federal tal and ideological disputes, we are This inefficient approach has not yet attempts to address carbon pollution presently left with a slowly emerging put our country on a track to achieve and climate disruption – first un- federal “sector-by-sector” regulatory our 2020 carbon pollution reduction

Figure 1: Low-Carbon Strengths and Opportunities Identified by Stakeholders

WESTERN CANADA QUÉBEC Strengths – intellectual capital Strengths – intellectual capital // AB: Energy sector fi nancialAARCTICR C expertiseTI C and resources // Expertise in transportation equipment manufacturing // AB: Energy expertise (drilling,OCOCEANEA projectN staging, etc.) // Partnerships to develop and test low carbon aircrafts // BC: Emerging clean technology cluster // Sask: Nuclear research capacity Strengths – institutional capacity // Entrepreneurial spirit // Residual materials management regulations Opportunities – existing Strengths – institutional capacity LLABRADORABRAD OR // Manufacturing industry powered by // MB & BC: low-carbon electricity provider SSEAE A // BC: Smart grid interest (smart meters) low-carbon electricity // BC & AB: carbon-pricing programs // Transportation equipment manufacturing // Information and communications technology (ICT) sector Opportunities – existing // Cleantech industry // Resource YK industries (agricultural, hydropower, NU oil & gas, mining) Opportunities – potential // Waste heat recovery for energy effi ciency // Energy recovery from non-recyclable residual materials // AB & Sask: effi cient urbanNT design, buildings, etc. // Manufacturing of low-carbon transportation equipment to accommodate growth (electric buses, aircraft) // Testing and deployment of electric vehicles Opportunities – potential and related infrastructure // Energy expertise applied to geothermal resource use // Low-carbon products from forest sector // CCS commercialization // ICT applications for energy effi ciency // Electrifi cation

BC HUDHUDSONSO N ONTARIO BAY Strengths – intellectual capital AB // Nuclear expertise // Car manufacturing talent pool ATLANTIC SK // Financial expertise Strengths – intellectual capital // Several Cleantech companies, exporters of innovation MB QC // Expertise in marine energy technologiesNF // Highly educated workforce, concentration of ONON // Innovative capacity a function of quality research innovation clusters infrastructure, supportive start-up environment, Strengths – institutional capacity and high quality of life // Low-carbon electricity provider Strengths – institutionalP.E.I.PPEI capacity // Smart grid interest (smart meters, storage technologies) // Regulations for offshore resource development NBB // Green energy regulations & programs // Regional co-operationNSN (e.g., Atlantic Energy Gateway) Opportunities – existing Opportunities – potential // Nuclear industry // Ocean technologies (e.g., remote sensing) // Regionally integrated car manufacturing industry // Pilot site for technology and regulatory processes Opportunities – potential (NL: pilot site for off-grid low-carbon energy technologies for remote communities) // Off-grid low-carbon energy technologies for remote communities // Proximity to U.S. (New England) Markets // Low-carbon vehicle manufacturing // Energy and emissions literacy // Waste CO2 recovery from industrial emissions

Source: National Roundtable on the Environment and the Economy, Framing the Future: Embracing the low-carbon economy (2012).

June/July 2013 50 target, and appears unlikely to do so. In developing a Canadian energy strategy, the Council of the Contrast this with the United States, Federation has a unique opportunity to both mitigate carbon which shares the same target but is ac- tually poised to meet it. Again, at the risk and unlock low carbon opportunities. Ultimately, any such federal level and in many provinces, strategy should enable provinces and Canada as a whole to energy ambitions and climate obliga- strengthen and diversify our energy system, not to legitimize tions appear to each be considered in business-as-usual. isolation. However, the Council of the Federa- tion – an institution comprised of the country’s premiers – is leading an ef- While the use of carbon pollution • The Council of the Australian Fed- fort to develop a Canadian energy pricing – whether through a carbon eration, comprised of all states and strategy that, among other things, tax or a cap-and-trade system – has territories, not only supported coor- aims to deliver “a more integrated ap- become a political football in the dinated national action on climate proach to climate change, reducing House of Commons, the premiers change, but in the absence of feder- greenhouse gas emissions and manag- would be unwise to dismiss it out of al leadership designed its own emis- ing the transition to a lower carbon hand. Not only are such market-based sions trading system and commit- economy.” In essence, the premiers policies preferred by economists, they ted to implementing it if the federal have articulated a clear mandate to have also been supported by a broad government would not; and deliver a climate and energy strategy. spectrum of individuals and organiza- • In designing and implementing Might the premiers succeed where nu- tions, from Preston Manning to David its emission trading system, the merous political leaders – both federal Suzuki, from the Canadian Council of European Union developed an un- and provincial – have failed? Chief Executives to Greenpeace. Fur- derlying Effort Sharing Agreement ther, the vast majority of provinces to address the issue of distributing The Council of the Federation have, individually, expressed an inter- costs and benefits among member – an institution comprised est in carbon pricing, and a number of countries. of the country’s premiers them have already implemented vari- ous policies that do just that. In developing a Canadian energy – is leading an effort to strategy, the Council of the Federa- tion has a unique opportunity to both develop a Canadian energy he distribution of costs and strategy that, among other mitigate carbon risk and unlock low benefits is perhaps a more chal- carbon opportunities. Ultimately, any things, aims to deliver “a T lenging question as it often such strategy should enable provinces more integrated approach triggers suspicions about ulterior mo- and Canada as a whole to strengthen to climate change, reducing tives to redistribute wealth from one and diversify our energy system, not province to another (harkening back to legitimize business-as-usual. greenhouse gas emissions to the much-reviled National Energy and managing the transition Program). As the Canada West Foun- In the final accounting, the success of to a lower carbon economy.” dation noted in 2007 in Getting it a Canadian energy strategy will hinge In essence, the premiers have Right: A Canadian Energy Strategy for on the extent to which it both re- a Carbon-Constrained Future, the load duces carbon pollution and positions articulated a clear mandate to must be shared by “…being balanced Canada to compete in the low carbon, deliver a climate and energy across sectors, not focusing on a single clean energy future, an economic real- strategy. industry or source of emissions, and ity and global opportunity that looms taking into account both produc- larger every day. tion and consumption as sources of Dan Woynillowicz is the director of GHGs.” If Canada is going to make an policy and partnerships and Merran effective, economically efficient and Smith is the director of Clean Energy truly national effort to reduce carbon Canada at Tides Canada, a solutions- pollution, then we must overcome focused NGO working to accelerate regional distributive conflicts. The Canada’s transition to an energy- Council of the Federation offers our efficient, ecologically responsible, and To succeed, the premiers must grab premiers a venue to do precisely that. prosperous low-carbon economy. hold of two issues that, taken togeth- Fortunately, there are several ex- er, have become the third rail of Cana- amples from elsewhere that they can dian energy politics: draw from to develop their approach: 1) Using carbon pollution pricing as • The has developed the most transparent, economi- a Low Carbon Transition Plan pre- cally efficient policy option, and mised upon a national climate and 2) Determining how the costs and energy strategy, and established a benefits of implementing such a federal ministry of energy and cli- policy will be distributed. mate change;

Policy 51 1 percent of the students scored high- er than 80 percent on their knowl- Why Energy Literacy edge of energy (i.e., basic concepts and issues). Interestingly, attitude and behaviour scores in the survey Must be a National were slightly better. According to the survey’s designers, this suggests that “while students may recognize the Priority existence of an energy problem, they generally lack the knowledge and ca- Bob Oliver pabilities to effectively contribute to- ward a solution.” In 2012, a survey on energy literacy in Canada found Canada’s future rests significantly on effective strategies that Canadians “lack detailed knowl- to develop its energy opportunities. Improving energy edge about sources of energy fuels, as well as sources and linkages with literacy must be viewed as a priority in every part of environmental impacts” and “were Canada. The lack of alignment between what we know, less enthusiastic to the idea of install- how we think and feel, and how we behave when con- ing home solar panels or switching to electric cars, even when offered a sub- fronted with energy issues and choices constitutes a sidy to do so.” The survey also showed deficiency in energy literacy. Establishing fluency in that most Canadians believe that we are too reliant on the US as a custom- energy systems will improve the efficiency of energy de- er for our energy products, but we are cision-making, enhance the quality of energy dialogue unwilling to support the infrastruc- and citizen engagement, foster energy innovation and ture necessary to access new markets. This lack of knowledge prevents the expand energy sector investment opportunities. adoption of personal, as well as larger scale, energy investment. Energy is the underlying currency that is necessary for everything The lack of alignment between what humans do with each other – whether in the workplace or in their we know, how we think and feel, and personal lives – and with the natural environment that supports how we behave when confronted with energy issues and choices constitutes them. KEEP, Wisconsin’s K-12 Energy Education Program a deficiency in energy literacy. More than just the possession of knowledge, literacy refers to the extent to which knowledge is accessed and used. It he energy systems that Canada duction, distribution and use of en- is, according J.E. De Waters and S.E. chooses to build in the coming ergy is remarkably poor. For example, Powers “not only a way of knowing, T decades will determine, to a sig- a national survey conducted by re- but a way of being – curious, objec- nificant extent, the future of the coun- searchers at Columbia, Ohio State and tive, and capable of assessing and ap- try, its people, its prosperity, its in- Carnegie Mellon universities and pub- plying information and skills to make ternational relevance and its culture. lished in the Proceedings of the National sound decisions and actions.” Canada is blessed with a vast and di- Academy of Sciences found that: Just as a person’s lack of financial lit- verse endowment of energy resources eracy or computer literacy can lead that are needed here and in demand … when asked for the most effec- tive strategy they could implement to poor decisions and inhibits his or globally. The mindful stewardship, her opportunities in a modern, global purposeful development and produc- to conserve energy, most participants mentioned curtailment (e.g., turn- economy, a lack of energy literacy in tive use of this endowment will enable Canada constitutes a threat to our po- us to build financial, social and intel- ing off lights, driving less) rather than efficiency improvements (e.g., tential prosperity as nation. The cur- lectual capital that can be leveraged to rent public dialogue on energy is po- installing more efficient light bulbs advance Canada’s interests, address- larizing and opportunities are going and appliances), in contrast to ex- ing both domestic and global objec- unrealized. Because energy systems perts’ recommendations. tives. How we choose to marshal our are not well understood, companies energy resources and apply our energy Furthermore, in a pilot survey of en- and municipalities often use energy ingenuity can define Canada’s impact ergy-related knowledge, attitudes and less productively than they could, on the world and the opportunities behaviours developed for middle and limiting the value created by their ac- bequeathed to future generations. high school students in New York tivities; and individuals often make However, people’s understanding – in State according to psychometric prin- choices that are misaligned with their Canada and elsewhere – of the pro- ciples and methodologies, fewer than interests and objectives.

June/July 2013 52 It enables Canadians to build a fu- ture replete with options: to expand In the figure below, the opportu- portunity for investment by foster- its capacity to attract the best and nity to invest in the energy sector is ing the technological innovations brightest; to elevate its quality of represented as the overlap of three needed to unlock the value of the life through energy innovation; and “realities” – physical, technological energy resource and by enhanc- to meaningfully address the world’s and political. That is, investment in ing fact-based citizen engagement most pressing challenges, such as cli- developing a physical energy re- that builds public confidence and mate change, social injustice and eco- source only occurs when the tech- enables political support. nomic stagnation. It is important to nology exists to make it economi- Thus, energy literacy can serve as stress that energy literacy is not only cally practicable and the initiative is a tool to change our technological needed among students and the gen- politically acceptable. and political realities, so that op- eral public – energy literacy is essen- Energy literacy can expand the op- portunities for investment grow. tial for policy-makers in government, elected officials, decision-makers in industry, community planners, edu- on C ati iti ov ze n n cators, media professionals, technolo- ogical Re Polit n cal Reality Po E ol al ic I gi li n n it a ti g y l lo c gists and civil society advocates. h R a a c e o l e g a n R T h e l e i c m

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a new entity, called Energy Exchange, P ty P y h li hy lit ysical Rea sical Rea to be implemented with capacity and accountability for developing and ex- ecuting a national strategy on energy literacy. Energy Exchange represents a game change in our collective ap- n 2011, Pollution Probe conduct- with accuracy and coherence; and proach to energy literacy. It is a mean- ed a series of workshops across to use and to manage information ingful, actionable and pan-Canadian I Canada in which more than 200 about energy as the basis for in- response to the energy literacy need experts on energy from industry, formed decisions and creative solu- of Canada. tions development. government and academia, as well We are citizens of an energy nation, as practitioners of energy education, The impacts of increasing energy lit- and we will be judged according to were consulted on the foundational eracy levels in Canada are potentially what we choose to do with our en- elements of a comprehensive strategy wide-ranging and socially transfor- ergy endowment and how we choose to advance energy systems literacy in mative. Energy literacy can trans- to apply it. This confers upon us a Canada. The focus on systems-based form people’s perception of energy, responsibility to be fluent in the lan- energy literacy arose from the recog- as well as their relationship with the guage of energy. And that is why en- nition that, to understand the full energy systems to which they are con- ergy literacy is a national priority. range of social, economic and en- nected. This, in turn, can transform vironmental drivers and impacts at the behaviour of energy end-users, play in Canada’s energy system, one enabling them to create more value needs to be aware of the intercon- and to generate more wealth through [Energy] is the agent of nections that link energy production, the efficient and innovative use of change for all processes on distribution and use. In other words, energy. Perhaps even more profound Earth and throughout the knowledge of just one aspect of the is the potential for energy literacy to energy system does not facilitate com- transform the dialogue in Canada on universe. prehensive, systems-wide solutions to energy policy and strategy. Literacy is KEEP, Wisconsin’s K-12 complex problems, nor is it sufficient the medium of ideas, and the process Energy Education Program to confront the trade-offs implicit in of building energy literacy can trans- choice. The definition of energy sys- form our society from a state in which tems literacy that emerged is: we are divided over our energy op- Energy systems literacy can be tions and pitted against our own inter- Bob Oliver is CEO of Pollution Probe, a thought of as the essential platform ests, to a future in which the country national, not-for-profit environmental for fluency and comprehension that is united around its potential to be a organization. He is executive sponsor allows individuals to consider en- global leader through a shared vision of Pollution Probe’s work on energy lit- ergy issues with critical analysis, in- on energy. eracy, which began with the publication ference and synthesis; to articulate Pollution Probe views energy literacy of the seminal Primer on Energy Systems energy impacts and implications as a key to unlocking this potential. in Canada.

Policy 53

Pipelines are one part of the energy puzzle that need to be developed striking a balance between the economy and the environment. Kinder Morgan photo Developing Canada’s Energy Resources: A Question of Balance Dan Gagnier he Energy Policy Institute of Canada’s mission as a non-for- T profit established by business leaders was: The Energy Policy Institute of Canada (EPIC) came 1) To build an energy framework and strategy from the standpoint of together in August of 2009 to provide a broad, cross- Canada’s overall economic future; sectoral, full value chain perspective on a Canadian 2) To engage organizations that care energy framework and strategy. The EPIC 2012 Cana- about energy; 3) To assemble contributions from dian Energy Strategy Framework that resulted from associations for incorporation that process highlighted five key pillars through which into an energy framework and Canada could benefit from and mitigate the effects of strategy and 4) To be a project completed in the coming transition to a new energy economy: Regu- two to three years by deliver- latory reform; innovation; conservation and literacy; ing a strategy representing many market diversification and carbon management. None stakeholders. of these five areas is easy and neither the timing nor We were to do this knowing full well that ownership of these natural re- the execution is a foregone conclusion. EPIC President sources includes an obligation for re- Dan Gagnier argues that to ignore the consequences of sponsible production and use. paralysis is to put at risk our ability to benefit from the We successfully engaged govern- ments as well as interested parties in billions of dollars and hundreds of thousands of jobs at all regions of Canada and spent as stake in solving our energy puzzle. much time discussing innovation,

June/July 2013 54 technology, and conservation or en- The International Energy Agency (IEA) and others have in the ergy efficiency as we did a common last five years put out papers and studies that point to Canada’s sense framework for the production, transportation and consumption of inability to move beyond debating energy issues and options. energy. Collectively, we educated our- selves on the importance of energy in our everyday lives, to our economic natural gas, oil or the reversal of exist- The EPIC policy working group made prosperity and to our environmental ing pipelines in light of recent shifts in the following argument: well-being. the market. A recent IEA paper points “Market diversification, in the sense of As we drew near the end and with the to stalled projects and supply shocks diversification of energy supply sourc- satisfaction of knowing we had done in the United States with a forecast es, could also help lower energy costs good work we realized that EPIC had that gives lie to the tight markets of to Canadian industry and consumers. filled a gap in the debate on energy the past and our ambition to export Within electricity markets, US export and that governments as well as in- more energy of all kinds south. That electricity markets have room to ex- terested parties were expressing a de- possibility is still there but as Maria pand. Future incorporation of carbon sire and articulating a need for us to van der Hoeven, Executive Director costs into electricity production prices stick around a little longer. Why? Are of the IEA pointed out, in the Globe would make the hydro resources of on May 15: “...the ramp up there not enough associations, large and Mail Newfoundland, Quebec and Manito- in production will be slow over the companies, NGOs and interested par- ba more attractive to the US market. next two years due in part to a lack of ties to carry on? Could governments This could also spur the development export infrastructure that has resulted not move ahead and lead Canadians of new generation capacity in those in a significant discount on Canadian to a yes through judicious and timely provinces, and in neighbouring prov- crude.” leadership? inces such as Ontario, Nova Scotia, Al- The answer is unclear; probably a In plain English, Canada is running berta and Saskatchewan.” a great risk in missing the window as maybe, and what’s wrong with that? We were not just thinking of tradi- the US and the world move on to meet Picture a country rich in natural re- tional oil and gas: sources, well-educated business peo- their energy needs. We are mired in a ple and a bright generation of in- contextual shift, as Bruce Anderson of “By enlarging its export focus to re- novative thinkers. A country with a Anderson Insight points out. We are flect this geopolitical evolution, Can- capable workforce and an economy caught between our aversion to fossil ada is more likely to be in a position that has the potential to continue to fuels and the wealth they generate, a of strength, or at least to minimize improve on the lot of its citizens. Why passive but potent NIMBYism (Not In the risk of having its influence dimin- then are we mired in interminable My Back Yard) and polarized energy ished. Realizing optionality and flexi- processes, consultations, discussions, politics aimed at ensuring energy is to- bility Canada is necessarily exposed to seminars and workshops? Is it because day and tomorrow’s political football. market volatility, and our challenge is we don’t understand the issues – the to mitigate that risk as best possible. risks attached to various solutions – or s the 2012 EPIC report notes: Having excess infrastructure capacity do our regional differences and our “From a supply and demand is preferable to an insufficiency and inability to surmount them keep us perspective, Canadian pro- one way to mitigate risk... In a broad- A er sense, our energy security and eco- from aiming for the common good? ducers may in fact be forced to look nomic prosperity depend on our abil- Canada is a nation built on energy and outside North America as Canadian ity to take Canadian technology to all that energy is a key part of our eco- energy export capacity grows beyond parts of the globe.” nomic and political reality. Our his- what traditional US markets can take. tory is that of a middle power capable Beyond that necessity, market diversi- of global leadership. In building this fication is part of the drive to ensure he role of governments here country we have combined economic Canadians realize full value from their is to ensure that standards ap- vitality and innovation dispropor- resource endowment and contribute T ply to pipelines, transmission tionate to our size of population and to growing Canadian prosperity and a lines and tanker use as well as any oth- shaped our contribution to an ever healthier domestic economy.” er form of getting energy to the mar- ket and consumers. The role of regu- changing world. That world is still I remember the long discussions with lators is to provide Canadians with a changing but we are lagging behind, specialists and business people from comfort level that transgressors will unable to diversify and accommodate across the country on the importance be severely dealt with. We all need to growing markets in need of both our of market access and the need for mar- know that the risks are reasonable and resources and our technologies. ket diversification. Their arguments that the costs of clean-up are not on The International Energy Agency were structured and logical, their con- the taxpayers backs. (IEA) and others have in the last five cerns expressed not just in the profit- years put out papers and studies that ability of their individual companies Given the difficulties in reconciling point to Canada’s inability to move but in their overall responsibilities the vested interests and satisfying beyond debating energy issues and to their employees and their families all stakeholders, I find myself asking options. Ours has been a patchwork and in their contributions to the rev- whether in today’s world of smart approach to energy infrastructure and enue base of this country, the prov- phones and social networks we would efficiency whether it be for electricity, inces and their communities. have ever built the CPR, our airports

Policy 55 or any other critical infrastructure. n the positive side, as Bruce Similarly, Alberta Premier Redford has The bigger the project, the more likely Anderson reminds us, there is taken the initiative and been pro-ac- it is to engender political resistance O in all regions a pride in Cana- tive south of the border. from a vehement minority. dian ability, a recognition that pipe- All this activity points to the impor- lines are not only important but are The role of governments tance of energy to our economy. It still the safest means for energy trans- underlines the fact that if we spend here is to ensure that portation and a sense that our infra- the next few years in debate about standards apply to pipelines, structure can be both economical and what we should do and whom we transmission lines and tanker greener thanks to new technologies should do it with, we will be mired in use as well as any other form and standards. We have the backdrop inaction; no closer to a decision and to the puzzle – what do we need to of getting energy to the likely to suffer the same slow painful move forward? consequences on energy and the en- market and consumers. The Council of the Federation has vironment as we have on the carbon moved to give effect to the mandate management issue. Incremental prog- Somewhere in this picture a major- given to three premiers at its July 2012 ress to avoid criticism and a lack of ity of Canadians generally supports meeting to renew the development consensus will leave us at the mercy projects that both build our econ- of the Canadian Energy Strategy. Al- of countries able to take bold steps omy and protect our environment. berta, Manitoba and Newfoundland both in their own national interests They are witnesses to many success- & Labrador are co-chairing the initia- and that of others. ful projects but their anxiety today is tive. They have been active over the Contributing Writer Dan Gagnier is around whether they are done right. past months in coordinating a process President of the Energy Policy Institute This cause for anxiety is occasioned to advance development. Alberta has of Canada. He is a former chief of Staff by an increase in both the knowledge also established the Canadian Energy to Premier Jean Charest in Quebec, and the reality of risks, a lack of con- Strategy Secretariat to help in these principal secretary to Premier David fidence in what we remember as the efforts. At the federal level, both the Peterson in Ontario, and deputy government’s safety net and the po- minister of Natural Resources and the secretary of the Privy Council in Ottawa. larization of views along political and Prime Minister have been active with In the private sector, he was senior partisan lines. Add to this longstand- predictably mixed results in promot- vice president at Alcan, with global ing neglect of aboriginal cries for in- ing, selling and answering critics of responsibility for corporate affairs, volvement and participation. north-south pipelines. health, safety and environment.

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June/July 2013 56 Time to Put the Pieces of the Puzzle in Place Elizabeth May You cannot solve a puzzle without seeing the big pic- now, if there were a disruption of sup- ply from OPEC nations, most Canadi- ture. And in Canada’s current energy debate, sadly, ans would have no home heating oil, the family cat got on the table, knocking most of the no gas, and eastern refineries would be in crisis. While debating how best to pieces to the floor, while toddlers argue over the three export as quickly as possible, as much remaining pieces shouting “Mine!” Those pieces are as possible, raw, virtually unprocessed bitumen, more than half of Canada is the oil sands and while we maintain an obsessive fo- dependent on imports of foreign oil cus on them, other elements crucial to our energy from Saudi Arabia, Nigeria, Kazakh- stan, Venezuela, and Norway. As Gor- security, economic prosperity and our future as a don Laxer of the Parkland Institute planet are being neglected at Canada’s cost and peril. identified, Canada has no energy secu- rity. Unlike the US, we have no Stra- tegic Petroleum Reserves. If there was a blockade of foreign oil or economic embargo, those in Eastern Canada f all the key pieces of Canada’s while toddlers argue over the three re- would have to wait for tankers to bring energy future – the climate crisis, maining pieces shouting “Mine!” a prosperous economy, labour is- them bitumen for processing through I A grown-up discussion starts with ac- the Panama Canal and up the eastern sues, east-west connectivity, energy knowledging that Canada needs an seaboard. As bizarre as that sounds, it efficiency, technological innovation, energy strategy. Federal and provin- federal-provincial relations – were was the solution offered by a Suncor cial jurisdictions respected, we need to executive when asked in Natural Re- jigsaw pieces on our collective family think like a country. Rather than pit table, it would be worthwhile to find sources Committee about the vulner- one region against another, we should ability of Eastern Canada to embargos. the picture on the box the pieces came start the conversation by setting out in. some over-arching goals. While debating how best to The cover of the box, a glorious sus- Energy touches everything. A discus- export as quickly as possible, tainable energy roadmap, would sion about an energy strategy is not as much as possible, raw, depict where we want to be, with: a fundamentally about the oil sands. meaningful carbon reduction plan; The oil sands are part of the conver- virtually unprocessed bitumen, phasing out coal across the land; sation, but, back to our puzzle meta- more than half of Canada bringing in energy conservation and phor, those toddlers are fighting over is dependent on imports efficiency standards; producing far the oil sands pieces of the puzzle. more energy from renewable sources; Nothing gets solved that way. of foreign oil from Saudi applying cleantech solutions broadly; Arabia, Nigeria, Kazakhstan, National goals should include: paying attention to energy security; Venezuela, and Norway. and shifting from a strategy of rapid 1) Energy security export of unprocessed product to 2) Energy pricing managed production at a steady rate 3) An effective greenhouse gas (GHG) of upgraded and refined product, reduction plan for the needed tran- he irony is that the dividing with value-added creating far more sition to a post-carbon economy line of foreign oil to the east employment in oil production while 4) Full employment goals and Alberta oil for the west was energy efficiency targets create jobs T 5) The promotion of innovation and the result of deliberate government everywhere in overhauling our built policy – aimed at helping the Alberta infrastructure. competitiveness in Canada 6) Social justice; ending energy oil and gas sector. Back in 1961, the You cannot solve a puzzle when you poverty National Oil Policy decreed that east- do not see how the pieces fit together. ern Canadians (east of the Ottawa 7) Energy strategies for a resourceful River) would only receive imported oil In the case of the current energy de- and resilient Canada bate, the dialogue is so devoid of con- while those in the West had to pur- tent that one cannot dignify the noise Taken separately, we could be fight- chase Alberta product. By deliberate by calling it debate. Back to that Ca- ing over these individual elements policy, Eastern Canadians became de- nadian family table with all the jigsaw without resolution. Taken together in pendent on foreign oil, while Alberta pieces we need to fit together, sadly, a grown-up conversation, they all fit oil was consumed by those in western the family cat got on the table knock- together. provinces and exported to the US. ing most of the pieces to the floor, Starting with energy security. Right Now it is time to think like a country.

Policy 57 The current proposal to link us east- The carbon reduction plan would have the benefit of west also makes no sense. Former New Brunswick Premier Frank McKenna diversifying our energy sector with the commercialization of has proposed shipping unprocessed renewable energy – from wind, sun, geo-thermal, tidal. We bitumen to Saint John, NB, to put it also need to improve our east-west electricity grid to allow in tankers and export it from there. renewable-rich provinces to export to provinces with less. Energy security would start by estab- lishing the principle that we only ex- port once domestic needs are met. ers Union, representing most of the by the Pembina Institute. Our myopic energy patch workforce, is against the focus on the oil sands, as if it were the That brings us to the importance of Keystone XL pipeline. It’s taking jobs only part of Canadian economy that maximizing employment opportuni- previously slated for Alberta. mattered, is blinding us to other and ties. It makes much more sense for better opportunities. As the World Canada to upgrade the bitumen, be- ne reason the upgraders were Energy Outlook, reproduced by the fore trying to make it sufficiently fluid cancelled is that what the International Energy Agency, pointed to flow in pipelines. Bitumen is not late Peter Lougheed used to out, the world is coming to the real- crude oil. And it isn’t even oil at all. O call “the traffic jam.” The hyper-infla- ization that we must keep at least two- It is thick and solid, described as be- tionary bubble over northern Alberta thirds of all known reserves of fossil ing the consistency of peanut butter. is created by the push for constantly fuels in the ground if we are to avoid (Before mining, bitumen is 10 percent expanding production targets. Labour such catastrophic levels of climate of the volume of soils, then described and capital are both scarce and pricey. as being the consistency of molasses. change that we put our very survival (This is the explanation for Stephen Oil-like analogies seem to run to food.) as organized societies and successful Harper’s remarkable transformation economies at risk. To make it flow, a naphtha-like fos- regarding China. From his holier than A major new report from the UK, “Un- sil fuel substance, called a diluent, thou treatment of the People’s Repub- burnable Carbon 2013: Wasted capi- is added. All the controversial pipe- lic of China over the Beijing Olympics tal and stranded assets,” engaged the lines now under debate (Keystone to the compliant, “Where do I sign?” talents and expertise of Sir Nicholas XL, Enbridge’s Line 9 and Northern greeting to President Hu in Vladivo- Stern through a collaborative research Gateway), are intended to carry a 70- stok last September, when he penned project involving Carbon Tracker and 30 mixture of bitumen and diluents the Canada-China Investment Treaty. the Grantham Research Institute for – brilliantly described as “dilbit.” Ac- There just isn’t enough capital from Climate Change and Environment cording to Enbridge’s evidence in the profit-oriented private sector oil mul- at the London School of Economics NEB hearings, its twinned pipeline tinationals to keep building new, and will carry imported diluents from Kiti- potentially unprofitable, oil sands and Political Science. The result is a mat to Alberta to be mixed with the mines without China). new concept – the “carbon bubble.” bitumen. And the diluents will be pur- The essence of their work is this – a chased from the Middle East, and put We could with a bit of the planned great deal of the stated value of stock in tankers to Canada. So much for be- approach, once advocated by Peter exchanges around the world is in un- ing a domestic source of oil. Lougheed, produce a steady amount burnable fossil fuels. The level of capi- of oil, upgraded and refined in Cana- tal expenditure in developing those Back to energy security, jobs and min- da. Without the “traffic jam,” the in- reserves over the next decade would imizing environmental risks, if the dustry could afford to build the ancil- amount to $6.74 trillion in wasted bitumen was upgraded to synthetic lary infrastructure of upgrading and capital – developing reserves that sim- crude in Alberta we wouldn’t be talk- refining. We could do so within a plan ply cannot be burned. ing about moving the most hazard- for dramatically reduced GHG from ous of all spillable fossil fuels. Check Canada, by shutting down all coal- This new realization of the “carbon out the US government reports on fired power plants, following the lead bubble” means that fossil fuel invest- the findings about the Enbridge spill of another former premier, Dalton ments could very rapidly become in the Kalamazoo River to understand McGuinty. The carbon reduction plan stranded investments leading to fi- how much more damaging dilbit is would have the benefit of diversifying nancial ruin. in the natural environment than any our energy sector with the commer- No harm can ever come from diversi- other pre-crude, as well as how much cialization of renewable energy – from fying an economy. And that diversifi- more challenging and expensive it is wind, sun, geo-thermal, tidal. We also cation and embrace of clean tech will to clean up a spill. The summer 2010 need to improve our east-west electric- help address our growing productivity Kalamazoo spill is still not completely ity grid to allow renewable-rich prov- gap with the US through innovation cleaned up. inces to export to provinces with less. and R&D. Prior to the 2008 recession, several It would create jobs in all parts of Sustainable energy is attainable. Stop- upgraders were planned for northern Canada through the retrofitting of ping the waste of energy, noting that Alberta. Once the recession ended, buildings – commercial, institution- more than one half of all the energy the multinationals with under-capac- al, residential – from energy wasters Canada uses is lost as waste, is essen- ity refineries for unconventional oil to energy misers, as well as through tial. There is no excuse for not getting looked south to the refineries already investments in modern, convenient it done. built and sitting on the coast of the mass transit. Gulf of Mexico. The Alberta upgrad- Elizabeth May is the MP for Saanich-Gulf ers were cancelled and replaced with The cleantech sector has the potential Islands and the leader of the Green Party a pipeline proposal to move dilbit to of becoming a $60 billion contribu- of Canada. She is a former executive US refineries. No wonder the Com- tor to the Canadian economy within director of the Sierra Club of Canada. munications, Energy, and Paperwork- only seven years, according to a study [email protected]

June/July 2013 58 58

Welders working on a pipeline project. Critics, including the late Peter Lougheed, have argued for refining oil sands bitumen at home, before transporting it to the US and abroad. TransCanada photo A Question of Stewardship

Peter Julian ur country’s abundant natu- ral resources are a source of O pride for all Canadians. For many, in every region of the coun- On the question of Keystone, the late Peter Lougheed try, they are even part of our identity. said that we should be refining bitumen in Alberta, Several key economic sectors – fisher- ies, agriculture, tourism, mining, for- not south of the border. Contrast that sentiment with estry, oil and gas, renewable energy, export policies of the federal Conservatives, which the list goes on – are directly depen- dent on creating value for Canadians are rooted in short-term profit rather than long-term from those resources. value. The Conservatives’ persistent and categorical Even the success of our refusal to change tack is damaging our relationship financial services sector with our closest trading partner – and pushing Cana- is inextricably tied to our da further out of step with global consensus. natural resource wealth. Just ask any fund manager about the importance of mining or oil and gas companies to their portfolios.

What’s more, other key sectors – man- ufacturing, petrochemical, transpor- tation, construction – are fundamen- tally dependent on developing those resources. In turn, these sectors create Canadian value by upgrading, refin- ing, and transforming resources right here at home. Even the success of our

Policy 59 financial services sector is inextricably One result of the Conservatives’ unwillingness to look beyond tied to our natural resource wealth. Just ask any fund manager about the the short term is that Canadian crude is being sold for importance of mining or oil and gas significantly less than it is worth. As a result, this country is companies to their portfolios. losing potential royalties and tax revenues. And our governments, at all levels, have a crucial role to play in ensur- ing Canadians, now and in the future, One result of the Conservatives’ un- lutions. No public relations campaign extract value from this bounty we willingness to look beyond the short can paper over this government’s fun- possess. term is that Canadian crude is be- damental disregard for the environ- The late Peter Lougheed, a great Al- ing sold for significantly less than it mental implications of development. berta premier, understood the need is worth. As a result, this country is Instead of wasting Canadian tax dol- to think and act like an owner when losing potential royalties and tax rev- lars on ineffective advertising abroad, it came to managing his province’s enues. The Conservative response is the Canadian government should be oil wealth. When asked about the to facilitate the quick export of raw demonstrating responsible steward- proposed Keystone XL pipeline that bitumen instead of exploring the po- ship to use as a calling card on the would initially ship up to 830,000 bar- tential of upgrading and refining that world stage. rels of unprocessed crude every day to bitumen here in Canada and of climb- the US Gulf Coast, Lougheed shared ing the global value chain. Conservatives may soon find them- selves standing alone. Many Canadi- some wisdom that we would do well In addition to robbing Canadians of to heed: “We should be refining the the full benefits of extracting our re- ans support President Obama’s state- bitumen in Alberta and we should sources, Conservative enthusiasm for ments recognizing the urgent need to make it public policy in the province.” exporting these resources without take action on climate change, reduce internalizing the full environmental the carbon footprint of fossil fuel ex- ow contrast that sentiment cost has contributed to an artificial traction, and shift to renewable ener- with policies of the cur rise in the Canadian dollar and hurt gy. The Conservatives’ persistent and N rent federal Conservatives, other export-oriented sectors like categorical refusal to act is damaging which are rooted in short-term prof- fishing, forestry, manufacturing and our relationship with our closest trad- it rather than long-term value, and agriculture. ing partner – and pushing Canada fur- which fail to ensure our resources are ther out of step with global consensus. developed in a way that maximizes Furthermore, the Conservatives’ fail- Canadian interests. ure to adopt rigorous environmental While other jurisdictions are inves- standards is damaging Canada’s inter- tigating ways to strengthen envi- With strong leadership and a compre- national reputation and, potentially, ronmental regulation and protec- hensive vision for a Canadian energy our trade interests. Sadly, Canadian strategy, the federal government could tion, the Conservatives are gutting Environment Commissioner Scott environmental reviews, running play a key role in enhancing our en- Vaughan’s stern warning to govern- ergy security and ensure we get lasting roughshod over consultation with ment, that when purchasing a re- First Nations and the broader pub- value from our resources. Promoting source, trade partners also consider responsible upgrading and refining of lic, and giving cabinet the power the environmental characteristics of our resources before shipping them to overrule unfavourable deci- how it’s extracted, treated and trans- abroad is part of that puzzle. Equally sions from independent regulators. ported, has fallen on deaf ears. important is ensuring that balanced While under the Conservatives, Cana- and sustainable development is at the he Conservative government da has missed critical opportunities to core of policymaking. also fails to see the profound add value to our resources, all is not Alberta has already committed to connection between Canadi- lost. The conditions are ripe to pursue T policies that rebalance our economy increasing the proportion of crude ans’ long term environmental and oil upgraded in the province to two economic interests. Governments and keep economic and employment thirds by 2020. With seven upgraders have the opportunity and the re- benefits here at home, adhering to in Alberta that process raw bitumen, sponsibility to support clean tech in- principles of sustainability. novation through policies like cap- and 19 refineries across the country, Unused refining capacity in Eastern and-trade and strong environmental Canada has a total refining capacity Canada can be harnessed for the bene- of nearly two million barrels per day. regulation. This protects our inter- fit of the entire country, but must start That’s a good start. ests in a cleaner environment and, in turn, would demonstrate to our trad- with a proper environmental assess- There are significant benefits to the ing partners that, like them, we are ment, including effective public con- Canadian economy of adding value to committed to sustainability. sultation. There is still time to reverse our oil products before shipping them direction, but if we fail to take on the abroad. In contrast, if approved, the Strong opposition to the Keystone XL challenge and heed Peter Lougheed’s Keystone XL pipeline will result in the pipeline south of the border, and a po- advice, it will be our children – as tential European Union Fuel Directive export of 40,000 Canadian jobs to the owners – who will pay the price. United States. Those jobs are high val- that targets oil sands exports, are just ue jobs that would provide well-paid two examples of what is to come if Peter Julian, MP for Burnaby-New West- work and sustain Canadian families the current government continues to minster, is the NDP Energy and Natural over the long-term. prefer superficial fixes to long-term so- Resources Critic.

June/July 2013 60 Point A to Point B: The Other Way to Move Oil Michael Bourque While the debate over pipelines has raged, rail has seen use rail to access world prices, versus lower inland oil benchmarks (West- its shipments of oil soar. The market dynamics as well ern Canadian Select and West Texas as the flexibility and scalability of the rail mode have Intermediate). Refiners and marketers are also using railways to access lower positioned Canada’s railways as a viable alternative for priced energy. shipping crude to domestic and international markets. he fact is that many refineries Canadian railways have a North American footprint are located near tidewater for that facilitates reach for producers to refineries located T access by ocean tankers and are not currently served by pipeline (the near tide water for access by ocean tankers. Railways Irving refinery in New Brunswick is also have a remarkable safety record when it comes to an example). Canadian railways have transporting regulated commodities. a North American footprint that al- ready reaches these coastal refineries that would normally pay world prices. Furthermore, heavy oil products must be diluted for transport via pipeline. This adds up to a 30 percent cost fac- hipments of crude oil by rail have but it is a small part of what railways tor in transportation. When heavy risen considerably over the last do, and a small percentage of the total oil is transported by rail, a reduced S four years. In 2009, Class I rail- oil being moved in Canada. amount or no diluent is required. ways moved a minuscule 500 carloads of crude. Fast forward to this year and Canadian railways are a This 30 percent difference in load fac- tor is a key element in making rail a current estimates are in the range of significant economic enabler 130,000 – 140,000 carloads. With an competitive option for transporting estimated average of 600 barrels per for the economy, moving over crude. These factors which are also carload, that amounts to about 230,000 7.7 million carloads of traffic bolstered by the scalability and op- barrels per day (bpd). So, from virtually in 2012 to domestic, North tionality of the energy by rail model nothing only four years ago, to nearly American and world markets. have positioned Canada’s railways as a quarter million barrels a day. a viable alternative and a significant In fact, railways move over complement to pipelines for shipping Growth of similar magnitude is ex- 70 per cent of the freight in crude to domestic and international pected over the next few years. This markets. Typically, energy companies growth is impressive, but let’s put it in Canada, while only emitting that use pipelines must enter into perspective: this volume of crude rep- 3 per cent of the greenhouse long-term take or pay contracts with resents 1.8 percent of CP’s and CN’s gases for the transportation the pipeline companies. Energy cus- total rail carloads for 2012. Every day, sector. tomers appreciate the fact that they railways in Canada move over 1,100 don’t have to enter into a long-term freight and passenger trains. Canadi- contract with railways to move their an railways are a significant economic There are a number of market factors product. At the same time, if they enabler for the economy, moving over driving the increase in energy by rail want to add more volume, they can. 7.7 million carloads of traffic in 2012 shipments. There has been rapid de- The energy by rail model is flexible to domestic, North American and velopment of non-conventional en- in that it can be tailored to meet the world markets. In fact, railways move ergy in North America. This growth, changing needs of the customer in a over 70 per cent of the freight in Can- along with planned expansions in dynamic marketplace. ada, while only emitting 3 per cent of other energy producing regions, has Railways also play a key role in trans- the greenhouse gases for the transpor- outpaced the development of new tation sector. Everything from your porting input products (e.g. sand, pipeline infrastructure. automobile to the food on your table pipe and materials) to support the and the goods in your local hardware Consequently, railways have become resurgence of the North American en- store is moved in an environmentally a complementary option for moving ergy market. There have been many friendly way by the rail supply chain. crude to refineries. This has allowed statements in the media questioning So, the oil by rail story is important Canadian and US energy producers to the safe transport of energy by rail.

Policy Yuk on T errit ory North wests T errit orie s

Nuna vut 61 Hay River C a n a d a CANADIAN RAILWAY NETWORK Schefferville British C olumbia Churchill Ne wf ound land and TSH Labr ador Al berta Labrador City WLR Prince CN QNSL Rupert HBRYR Saska tche wan CFRR CN RMR CFA Manit oba Quebec AMMC Sept-Îles Edmonton CFG Princ e SCR RMR CTRW EdwEdw ar d RMR Moosonee Island CP CN APR Saskatoon RS New Calgary On tario Brunswick Moncton Vancouver KPR CN CBNS WCE GSR ONR CFC CP BNML CN NBSR CN Regina CEMR Québec SRY Halifax CP CP MMA Nova NCR CFQG EMRY KFR GWR SLQ Scotia Montréal Sherbrooke Thunder Bay Sudbury CFO BNSF AMTT HCRY OVR VIA CR CP CN BCRY CSX BNSF GOGOGO Albany SSR Toronto Minneapolis PCHR St. Paul GEXR SOR CP VIA OSR Rapid City STER NS Detroit ETL CN Chicago CP

Source: Railway Association of Canada, 2013. NS CSX Calling rail unsafe is simply not true. BNSF Recent media claims that oil pipelines There hasKans beenas City rapid NS Transporting dangerous commodi- have fewer GHG emissions per barrel development of non- CN ties like hydrocarbons is not new to moved than CSXcrude by rail are wrong. U n i t econventional d S energyt in a North t e NSs rail and railroads have a tremendous BNSF CSX Furthermore, Canadian railways safety record for moving dangerous America. This growth, along have reduced their GHG intensity for materials, including crude oil. An as- with planned expansions freight operations by 21.85 per cent tounding 99.9977 per cent of all rail in other energy producing since 1995. hazmat shipments reach their desti- regions, has outpaced the Canada has more oil in known re- nation without a release caused by development of new pipeline serves than Russia, Libya and Nigeria train accident. infrastructure. combined. Just as no one source of en- Over the past decade (2002-2012), the ergy can meet demand, no one trans- estimated spill rate for crude oil mov- port mode can meet all of the demand ing by rail was 0.38 compared with vent, prepare for, respond to and re- for Canadian crude oil movements. the estimated pipeline spill rate of cover from incidents. Oil has always been transported using 0.88 (measured as gallons spilled per a variety of modes because the sup- Railways, like all industries, have ad- million barrel miles moved). Railways ply chain is continuously evolving. opted new technologies and many of Technology, markets, supply and de- have a higher (albeit very low) chance these are aimed at increasing safety. mand and capacity all play a role in of an incident but a lower magnitude For example, automated inspection determining which mode is chosen. of release than pipelines. And let’s not systems with predictive analytical Currently, there are energy and even forget that trains are staffed by engi- capabilities have been introduced pipeline companies that own hun- neers, so when there is an incident, to enhance safety, reliability, and dreds of rail tank cars for transporting railway companies know immediate- productivity. These systems include crude oil by rail. ly and are prepared to respond with equipment health monitoring sys- trained emergency and remediation tems, technology driven train in- Some people have and no doubt will teams, thereby limiting any impact. spection systems and real time data continue to come forward and make ailways are continuously im- streams. Significant research is done erroneous statements about the safety proving safety when it comes to by the industry in collaboration with of railroads, or pipelines for that mat- transporting crude oil and the National Research Council, the ter, but the facts do not support them. R Railway Association of Canada and Canada was born on a railroad but it is other dangerous goods. We also have extensive training and preparedness the American Association of Railroads maturing as a modern, technological programs involving specialized safety in areas such as harsh weather condi- society with significant investment training for rail personnel, as well as tions, grade crossing safety and risk and expertise in its transportation local first responders. In the event analysis. network. Ours is a society that owes its prosperity to its wealth of natural of an incident, our first concerns are Railways are extremely energy ef- resources and its ability to transport community and employee safety, ficient. In terms of GHG emissions, closely followed by environmental work done by the US State Depart- them safely and responsibly to do- mitigation and remediation. We also ment confirms that rail is more energy mestic and international markets. work pro-actively with emergency efficient than a crude oil pipeline by a Michael Bourque is President and CEO responders and communities to pre- factor of 2.7 on a barrel per mile basis. of the Canadian Railway Association.

June/July 2013 It is Time to Stop Talking and Time for Action

MARKET DIVERSIFICATION INNOVATION AND TECHNOLOGY LITERACY AND CONSERVATION REGULATORY REFORM

An energy dialogue has engaged Canadians from Our reputation as a balanced and strong voice is coast to coast in a meaningful discussion about acknowledged by many, especially with government our energy for today and tomorrow. Many views leaders who have encouraged our ongoing support exist but we believe most think it is time to stop for Canada’s future energy. the talking and to start the action. Action for Energy is needed now and EPIC will The Energy Policy Institute of Canada (EPIC) released share our knowledge and is proud to be an its recommendations in an in-depth report entitled enthusiastic voice of motivation. “A Canadian Energy Strategy Framework”. This document was the result of input from our members, various associations, professional organizations and topic experts. The many recommendations made will lead to a prosperous and sustainable energy future Energy Policy Institute of Canada for our nation. Institut canadien de politique énergétique EPIC is a business organization with a single focus – energy. This is a pan Canadian and pan energy value and we represent a diversified group of businesses. For more about EPIC visit www.canadasenergy.ca 63 From Biofuels to the Bio-Economy Scott Thurlow

Canada is perfectly positioned to be a world leader vast energy reserves are ours to share with the world, and the monetiza- in responsible, clean energy. In addition to the abun- tion of that energy will drive our dance of petroleum-based natural resources, we have economy for generations to come. In addition to the abundance of a wealth of biomass and cropland from which energy petroleum-based natural resources, crops can sprout. While our domestic biofuels indus- we have a wealth of biomass and try is a working success, the simple fact is that to meet cropland from which energy crops can sprout. Ethanol and biodiesel our growing energy needs and stresses, we need to come from a variety of these land do more. As a country, recognizing our clean-energy based sources, and provide an im- portant business risk management potential is no longer sufficient, we need the circum- tool for farmers as they help to di- stances by which to realize it. versify their income streams. In the case of cellulosic ethanol, the fuel can be developed from wood waste or municipal solid waste, thereby solving other environmental prob- lems. Similarly, biodiesel made from ntil the turn of the 20th cen- changed, will carry high environmen- restaurant grease will turn the waste tury, the world relied on tal costs that will be paid by genera- from one sector into fuels which can U what was above the earth’s tions to come. And while the climate be given an additional chapter of crust for all of its energy needs. In so challenges facing our country, govern- economic life. doing, we regulated carbon naturally ments, and consumers are essentially Canada’s renewable fuels through our farming, our forests and global; this is not to say that our solu- our daily lives. Much has changed tions to these problems cannot be lo- industry is domestically since then, and the need for energy cal, domestic and even home grown. producing almost 1.8 billion has never been greater. Over time, our litres of ethanol and, by planet has become increasingly reli- ant on fuel sources that are buried and CANADIAN GHG EMISSIONS the end of 2013, over 400 BY ECONOMIC SECTOR finite, slowly changing the natural en- million litres of biodiesel in vironment in the process. Canada. These renewable Canada, like other countries around fuels are already being Buildings the word, is faced with meeting real 11% Electricity easily incorporated into the energy challenges while at the same Agriculture 14% current transportation fuel time confronting global environmen- 10% infrastructure. tal problems. Last month, scientists Waste reported that heat-trapping carbon 7% dioxide had reached an average daily Emissions Intensive Transportation level of over 400 parts per million – a Industries 24% concentration not seen on the earth 11% The federal government – and many provincial governments – has rightly for millions of years. Essentially ev- Oil & Gas ery car ride, bus commute, and air- 22% put renewable content regulations plane trip adds carbon dioxide to the into place. These regulations mandate environment. In Canada, our trans- that part of the fuel come from a re- portation sector accounts for about newable and sustainable source. Fed- one quarter of Canada’s greenhouse erally, our national mandates for re- gas (GHG) emissions and is the larg- Source: Environment Canada distribution newable content in gasoline and the est source of GHG emissions. For this of greenhouse gas emissions by economic distillate pool are at 5 percent and 2 very reason, deploying alternative sector, Canada, 2010 percent respectively. Some provinces fuel technologies to reduce emissions have reached even further, increasing from our transportation fuel presents the percentage of fuel which must be a practical and essential solution. anada is perfectly positioned renewable content. Right now, our fuels and climate are to be a world leader in re- On a life-cycle basis and depending on linked together in a way that, left un- C sponsible, clean energy. Our feedstock, biofuels can reduce emis-

June/July 2013 64 ward establishing facilities that will ON A LIFE CYCLE BASIS, AND DEPENDING ON FEEDSTOCK, BIOFUELS CAN produce the next-generation of re- REDUCE EMISSIONS BY AS MUCH AS 99% WHEN COMPARED TO PETROLEUM newable fuels at a commercial stage. BASED FUELS. This fund is a beacon for companies that are transitioning from an ad- 100,000 vanced demonstration stage toward a pathway to commercialization. This 80,000 fund has to be given the opportunity to succeed – and as construction on 60,000 these plants begins, the economic im- pact will be re-invested into Canadian 40,000 communities. But for the program, however, these plants would not have 20,000 found their way to Canada. Every litre of renewable content which 0 is added to our fuel pool is one addi- tional litre of non-renewable content GHG Emissions, g CO2 eq/GJ -20,000 which we can conserve for the next

Tallow BD Palm HRD W Can BD generation, or export into a growing HWY Diesel Ont Soy BD -40,000 Ont Gasoline W Can Wheat international market for energy. Bio-

US Corn Ethanol fuels should be used in other transpor- Ont Corn Ethanol tation fuel sectors, for conventional energy generation, for generating heat – just like biomass was used by our forebears to help them subsist, so should we return to above-ground, sions by as much as 99 percent when In many ways, Canada’s biofuels pol- renewable sources for our modern en- compared to petroleum based fuels. icy has ensured that our country has ergy requirements. Similarly, unlike petroleum which kept pace with alternative fuel ini- As we strive to meet our energy and can only be developed and monetized tiatives around the world. We have climate demands in the years ahead, once, the farm fields from which bio- mandates, government programs, the economic and environmental fuels are sown can be responsibly har- and policy positions aimed at taking benefits of biofuels – for consum-

vested year after year. So far, Canadian advantage of our significant biomass 4,500 ers, our country, and ultimately our biofuels policies have reduced carbon availability. And while our domestic 4,000 planet – will become more important emissions by 4.2 Megatons, which is biofuels industry is a working success, than ever. So too will be the conse- equivalent to removing3,500 1 million cars the simple fact is that to meet our quences of failure. Biofuel producers from our roads. This demonstrates the growing energy needs and stresses, we 3,000 see the continuing need to use policy effectiveness of the biofuel products need to do more. As a country, recog- 2,500 levers such as required fuel content themselves, as well as value of mak- nizing our clean-energy potential is

Mtoe to drive the production of renewable ing domestic renewable2,000 fuel a central no longer sufficient, we need the cir- fuels and responsible energy produc- component of any1,500 low carbon energy cumstances by which to realize it. tion in Canada. Policy certainty, more strategy. 1,000 Maintaining policies that require re- than any other factor, will contribute Investments made500 in Canada to pro- newable content in fuel is essential to to ensuring demand for biofuels that duce renewable fuels0 are rooted in the build out our established renewable carry both the economic advantages mandated requirement2010 for 2015their use 2020– fuels platform.2025 2030 Much like2035 Canada’s oil we seek and the environmental ben- guaranteeing a market for a product OECD and gas sector, which has evolved into efits we need. which burns cleaner when compared one where hundreds of other products Scott Thurlow is President and CEO to petroleum based alternatives. As a have been born, our renewable fuels of the Canadian Renewable Fuels result of these mandates, Canada’s re- technology stands to create a wide Association. newable fuels industry is domestically range of advanced bio-based and agri- producing almost 2.1 1.8 billion litres cultural products. of ethanol and, by the end of 2013, over 400 million litres of biodiesel in he successful integration and Canada. These renewable fuels are al- commercialization of these ready being easily incorporated into T emerging technologies is the current transportation fuel infra- within reach. Sustainable Develop- structure. The net result is that con- ment Technology Canada’s Next sumers receive the benefits of cleaner Generation Biofuels Fund is another fuels, and Canada reduces its emis- vitally important policy mechanism sions while at the same time stimulat- for attracting foreign investment and ing economic growth that comes with technology into Canada. The fund, domestic biofuel production. created in 2007, will be deployed to-

Policy ABB Ad-Policy Magazine.pdf 1 5/22/13 2:27 PM

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