Economy—McKay and Monaco: Need for an Energy Strategy?—Bank of Canada Governor Poloz and Interest Rates—Trans Mountain Pipeline: Two Favourable Decisions But No Start Date
McKay and Monaco: Energy Strategy?
Last Tuesday RBC’s Dave McKay and Enbridge’s Al Monaco appeared together at a Canadian Club Lunch in Toronto to address the state of the energy industry in Canada and offer some solutions. The main theme of the talk as they explained was that Canada is at risk of squandering its energy advantage if it does not come together to tap the potential of its energy industry.
McKay offered that business leaders need to become stronger advocates for this sector. The key is for governments to take the political risk away from moving forward. The demand for energy produced in Canada is expected to grow, but Canada must be ready to take advantage of that demand.
Monaco explained that Canada has the advantage of proximity to major markets and we need to develop an energy strategy that utilizes the competitive advantages we have. The argument is that policies on climate, energy and Indigenous reconciliation and other related policy matters should be settled at a high level, not when individual projects are being reviewed.
As Monaco stated, once policies are set and we know the rules as investors, then we can say “I got the game plan” and I know I can build a project within the policy context.
McKay noted that energy makes up 10% of GDP and could add 1.1% to annual GDP if oil and gas get access to the right markets and investments. He argued that it would be the “equivalent of putting a new auto sector in Canada right in front of us.” It would result in $200 billion coming in revenue as well as tax revenue over the next 10 years. He said “we risk ceding that dividend to others instead of taking control of it and building the world around us that we envision.”
They noted that Canada is losing players in the energy field over too much regulation and lack of infrastructure. The exit of Devon Energy in the last two weeks from the oil sands is an example. Monaco said “we’re squandering an opportunity here to really drive our economy and supply energy in the most sustainable way.”
If Canada doesn’t step up and provide the supply of energy, others will step in to fill the void. No one is sitting around waiting for Canada to get its act together. The development, and export of LNG by the U.S. and Australia is proof of that.
Almost a decade ago, there was a movement by the energy industry, some think tanks and some environmental groups to develop a Canadian Energy Strategy that would form the policy basis for the development of all types of energy in Canada. While it was championed for a time by a number of provinces, it never caught on with the federal government.
McKay and Monaco are right when they say that investors and project proponents should know the rules before a project is submitted for approval. Bill C-69(no more pipelines bill) is an example of legislation that has a number of hurdles for developers to jump over, but the hurdles could change depending on political interpretation. They become a moveable feast. An all-encompassing energy strategy would address the elements that need to be dealt with and how they may be satisfied when a project is being developed.
It is an idea and concept worth considering.
Bank of Canada Governor Poloz and Interest Rates
In a speech to the Montreal Chamber of Commerce last Thursday, Bank of Canada Governor Poloz stated that interest rates as they stand now are low enough to deliver stimulus to the Canadian economy. He also noted that it was uncertain when they would rise to be within his ‘normal’ band of 2.5% to 3.5% even in a stronger economy.
He said that the Bank will scrutinize incoming data in relation to a number of important subjects. They are matters such as the impact of higher interest rates on indebted Canadians, housing markets adjusting to higher borrowing costs and stricter mortgage guidelines and whether business is picking up the pace in a “highly uncertain” global trade environment.
This uncertainty kept interest rates unchanged in January and as Poloz said “we will remain decidedly data dependent as the domestic and international situations evolve.” The Bank is likely to continue with rates where they are until the energy sector builds new momentum.
The next date set for interest rate adjustment is Wednesday, March 6 and at this time, the view is that rates will remain where they are.
Trans Mountain Pipeline: Two Favourable Decisions
Last Friday the National Energy Board delivered a report to Natural Resources Minister Sohi which although finding that the proposed pipeline presented “significant adverse environmental effects” to the West Coast and marine life, it should be built as it is in the national interest. The benefits include increased markets for oil, more jobs and investment, development of Indigenous businesses and communities and significant tax and royalty revenues for various levels of government.
The NEB provided 16 recommendations which if accepted will form part of the approval for the pipeline. They include management of the Salish Sea, measures to offset increased underwater noise and increased strike risk to Species at Risk listed marine mammal and fish species, marine oil response, marine shipping and small vessel safety, reduction of GHG emissions from marine vessels and the establishment of the Indigenous Advisory and Monitoring Board for the project.
Premier Notley when asked about this decision on Power and Politics said it was a “good first step.” The issue now is to get this report and the one that is coming on Indigenous consultation before cabinet as soon as possible. Notley believes if cabinet deals with the reports in a timely fashion, construction could start again in the fall.
There is, of course, another view and that is represented by Grand Chief Stewart Phillip, Chief of the Union of B.C. Chiefs. After the NEB decision was delivered he said “this pipeline, as I’ve said on many, many occasions, will never see the light of day.” When the cabinet decision is appealed to the courts, as no doubt it will be, the issue for the federal government will be whether to continue construction or halt it one more time.
As the Canadian Energy Pipeline Association said in response to the NEB report “until we get the oil flowing, we don’t have a pipeline.”
A court challenge brought by the B.C. government concerning Alberta’s fuel restriction law was dismissed by a Calgary judge on the grounds it was premature.
The Alberta ‘Preserving Canada’s Economic Prosperity Act’ allows the Minister of Energy to state whether a company needed an export licence to send oil or gas outside Alberta’s boundaries. This act has never been proclaimed to be in force but remains in place to be used, if needed.
B.C. argued that it could not replace the oil that is imported from Alberta. This applies to both diesel fuel and gasoline. The argument was that with cutbacks on supply, prices in B.C. would increase and civil unrest could be the result. Given these arguments, one wonders why B.C. is so vehemently opposed to twinning the pipeline.
--today, the House of Commons Justice Committee meets this afternoon with academics as witnesses in order to discuss the Shawcross Convention and remediation agreements. One way to deal with these matters would be to review the evidence from last week and put fact situations as described by witnesses to the academics in order to try to determine when, or if, a line was crossed. Former Minister Wilson-Raybould is to appear before the committee this week on either Tuesday or Wednesday. Questioning in QP today should focus on whether the prime minister will waive cabinet confidentiality and solicitor-client privilege in this matter; although the Clerk last week offered that solicitor-client privilege does not apply to this fact situation.
--today, voting results in various byelections
--today, NHL trade deadline
--February 27, CPI numbers for January to be released
--February 27-28, Kim-Trump meeting in Vietnam
--March 1, GDP numbers for December to be released
--March 6, Bank of Canada deals with interest rates
--March 6, Ms. Meng is scheduled to be back in court on the extradition matter—bc