Economy
Red tape and uncertainty hurting oil and gas investment in Canada
From the Fraser Institute
By Julio Mejía and Elmira Aliakbari
Investment in the sector fell from $76 billion in 2014 to $35 billion in 2023
Global oil demand is set to reach record highs this year, with growth in natural gas demand on the horizon—and Canada’s oil and gas sector could be a major source of clean and reliable energy, if policymakers help make the country a more desirable place to invest.
While investment in Canada’s oil and gas industry has increased steadily since 2020, it remains far below record levels achieved in 2014. In fact, investment in the sector fell from $76 billion in 2014 to $35 billion in 2023. Less investment means less money to develop new energy projects, infrastructure and technologies, and consequently fewer jobs and less economic opportunity for Canadians. While many factors are at play, investors point to Canada’s policy barriers as major deterrents to investment.
According to a recent study published by the Fraser Institute, which surveys oil and gas investors on the investment attractiveness of 17 energy-producing jurisdictions in Canada and the United States, Wyoming remains the top jurisdiction in terms of investment attractiveness followed by North Dakota and Saskatchewan, the only Canadian jurisdiction ranking in the top five.
Alberta, Canada’s largest oil and natural gas producer, ranked 9th while Newfoundland and Labrador and British Columbia are among the least attractive jurisdictions, ranking 14th and 15th respectively. Put simply, with the exception of Saskatchewan, Canadian provinces are less attractive for oil and gas investment compared to U.S. states.
So, what policy factors hinder Canada’s oil and gas sector?
In short, uncertainty about environmental regulations, disputed land claims, regulatory duplication and inconsistencies, the cost of regulatory compliance and barriers to regulatory enforcement.
More specifically, according to the survey, 100 per cent of respondents for Newfoundland and Labrador, 93 per cent for British Columbia and 50 per cent for Alberta indicated that uncertainty concerning environmental regulations was a deterrent for investment compared to only 6 per cent for Oklahoma and 11 per cent for Texas. Overall, on average, 68 per cent of respondents were deterred by the uncertainty concerning environmental regulations in Canada compared to 41 per cent in the U.S.
This negative perception of Canada’s regulatory environment should come as no surprise. In 2019, the Trudeau government enacted Bill C-69, which introduced subjective criteria including the “social impact” of energy investment and its “gender implications,” into the evaluation process of major energy projects, causing massive uncertainty about the development of new infrastructure projects. While the Supreme Court declared this bill unconstitutional, the energy sector still grapples with uncertainty as it awaits new legislation.
Similarly, the Trudeau government passed Bill C-48, which bans large oil tankers carrying crude oil or persistent oils (including upgraded bitumen and fuel oils) off B.C.’s northern coast and limits access to Asian markets. The Trudeau government also created an arbitrary cap on greenhouse gas (GHG) emissions from the oil and gas industry (while all other GHG emissions were exempt) and introduced new rules on methane emissions. Energy industry leaders have also expressed concern over Ottawa’s clean-fuel standards, which mandate that firms selling gas, liquid and solid fuels reduce the amount of GHG generated per unit of fuel they sell.
Clearly, Ottawa’s aggressive regulations are hurting Canada’s oil and gas industry. In light of the vital role the energy sector plays in the economy, including job creation and government revenues, the federal government should eliminate barriers and implement reform to enhance the sector’s appeal to investors. Otherwise, Canada will keep losing opportunities to the more attractive investment climate south of the border.
Authors:
From LifeSiteNews
Saskatchewan has become the first Canadian province to free itself entirely of the carbon tax.
On March 27, Saskatchewan Premier Scott Moe announced the removal of the provincial industrial carbon tax beginning April 1, boosting the province’s industry and making Saskatchewan the first carbon tax free province.
Under Moe’s direction, Saskatchewan has dropped the industrial carbon tax which he says will allow Saskatchewan to thrive under a “tariff environment.”
“I would hope that all of the parties running in the federal election would agree with those objectives and allow the provinces to regulate in this area without imposing the federal backstop,” he continued.
The removal of the tax is estimated to save Saskatchewan residents up to 18 cents a liter in gas prices.
The removal of the tax will take place on April 1, the same day the consumer carbon tax will reduce to 0 percent under Prime Minister Mark Carney’s direction. Notably, Carney did not scrap the carbon tax legislation: he just reduced its current rate to zero. This means it could come back at any time.
Furthermore, while Carney has dropped the consumer carbon tax, he has previously revealed that he wishes to implement a corporation carbon tax, the effects of which many argued would trickle down to all Canadians.
The Saskatchewan Association of Rural Municipalities (SARM) celebrated Moe’s move, noting that the carbon tax was especially difficult on farmers.
“I think the carbon tax has been in place for approximately six years now coming up in April and the cost keeps going up every year,” SARM president Bill Huber said.
“It puts our farming community and our business people in rural municipalities at a competitive disadvantage, having to pay this and compete on the world stage,” he continued.
“We’ve got a carbon tax on power — and that’s going to be gone now — and propane and natural gas and we use them more and more every year, with grain drying and different things in our farming operations,” he explained.
“I know most producers that have grain drying systems have three-phase power. If they haven’t got natural gas, they have propane to fire those dryers. And that cost goes on and on at a high level, and it’s made us more noncompetitive on a world stage,” Huber decalred.
The carbon tax is wildly unpopular and blamed for the rising cost of living throughout Canada. Currently, Canadians living in provinces under the federal carbon pricing scheme pay $80 per tonne.
As the federal government removes the consumer carbon tax, the Canadian Taxpayers Federation is calling on all party leaders to oppose all carbon taxes, including the hidden tax on business.
“Canadians fought hard to force Ottawa to back down on its consumer carbon tax and now the fight moves to stopping the hidden carbon tax on business,” said Franco Terrazzano, CTF Federal Director. “Canadians can’t afford a carbon tax on business that pushes up prices at the gas station and makes it harder for our businesses to compete while they’re already struggling with a trade war.”
Today, the federal government cut the consumer carbon tax rate to $0. This will reduce taxes by about 17 cents per litre of gasoline, 21 cents per litre of diesel and 15 cents per cubic metre of natural gas.
The federal government still imposes an industrial carbon tax on oil and gas, steel and fertilizer businesses, among others.
During the Liberal Party leadership race, Prime Minister Mark Carney said he would “improve and tighten” the industrial carbon tax and “extend the framework to 2035.”
Just 12 per cent of Canadians believe businesses pay most of the cost of the industrial carbon tax, according to a Leger poll commissioned by the CTF. Meanwhile, 70 per cent said businesses would pass most or some carbon tax costs on to consumers.
Conservative Party Leader Pierre Poilievre said he will “repeal the entire carbon tax law, including the tax on Canadian businesses and industries.”
“Carbon taxes on refineries make gas more expensive, carbon taxes on utilities make home heating more expensive and carbon taxes on fertilizer plants increase costs for farmers and that makes groceries more expensive,” Terrazzano said. “Canadians know Poilievre will end all carbon taxes and Canadians know Carney’s carbon tax costs won’t be zero.
“Carney owes Canadians a clear answer: How much will your carbon tax cost?”
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