Canada’s Energy Sector is Under Attack (Again)
Canada’s oil and gas producers are struggling to stay competitive with their global competitors due to their inability to bring their products to market in a cost-effective manner. While carbon taxes are being heavily discussed and certainly part of the problem, the main issue is still the need to expand pipeline capacity.
While it may sound wonderful to be an “eco-warrior” and oppose all pipeline proposals, the fact is that Canada’s economy is still a resource based one and the shift to diversifying our economy to other industries will take some time. The oil and gas industries are vital to providing the tax revenue needed to pay for things like health care, education, social assistance programs and all of the other things that Canadians demand. Quite simply, you can’t demand more services while simultaneously oppose the main source of tax revenue that pays for them.
Canada has watched several pipeline projects fall apart in the past year including the Energy East line from Alberta to the east coast, the Mackenzie Valley gas pipeline and the Northwest LNG project.
Just last week (on Tuesday Jan 30th) the BC government has announced that they’re planning to fight the already approved Kinder Morgan Trans Mountain pipeline expansion that is set to nearly triple the capacity and provide a much-needed boost to our economy, both provincially and federally. You’ve likely heard about this in the news by now and are wondering what it all really means? This project represents the only pipeline plan left that is capable of diversifying Canada’s crude oil export markets beyond the United States and is absolutely critical in stabilizing our economy and giving us the ability to ship oil to Asia.
Faced with unreasonable regulatory risks due to a lack of a clear process to securing approval and the required permits, Kinder Morgan is considering scrapping the project all together. These job creators need to be able to trust lawmakers when they’re putting huge capital amounts into these projects.
Analysts and legal experts have already come out saying that the latest moves by the BC government to block the pipeline expansion are not legally valid and they likely won’t have the ability to actually enforce them, but these ploys are still costly and disruptive. Further delays in the pipeline expansion will result in little more than another blow to our economy and more unnecessary costs to the oil producers.
So, what does all of this mean for you? Firstly, the continued political “games” will no doubt hurt the resource sector further so a review of any investments you have in this area would be a good idea.
Second (and as I’ve warned you about before), the investment markets in Canada will continue to suffer as these things go on so anyone not sufficiently globally diversified should be doing so.
And finally, it is time to wake up to the fact that you can’t get everything for nothing and take some action of your own. The federal government had no problem stepping in to resolve Bombardier’s issues after significant public pressure in Quebec. The west remains largely forgotten out in Ottawa right now, but enough public pressure can change that. Make sure to speak up and let policy makers know that you care about the BC and the Canadian economies and you want to see them properly protected.