Ottawa’s Regulatory Assault on the Extraction Sector and Its Impact on Investment

Business investment is a foundational requirement for a prosperous economy. It provides the resources to establish new companies, expand existing ones, and invest in new factories, machinery, and technologies. Business investment in Canada has declined markedly for over a decade. It is a major reason why Canadian living standards are stagnating in absolute terms and declining relative to many peer countries, particularly the United States.1

One factor behind declining business investment is the heavy regulatory burden imposed by the current federal government on the extraction sector, which includes: mining, quarrying, and oil and gas. Since 1990, this sector averaged 17.3 percent of total non-residential business investment, and reached as high as 28.7 percent of the total in 2013.2

The federal government has been particularly critical of the oil and gas sector. As an example of such sentiment, in a 2017 speech Prime Minister Trudeau said it would take time to “phase out” the oil sands, indicating the long-term goal of the federal government to eliminate the fossil fuel industry (Muzyka, 2017). The prime minister’s comments were followed by a number of new regulations that directly or indirectly targeted the oil and gas sector:

• In 2019, Bill C-69 amended and introduced federal acts to overhaul the governmental review process for approving major infrastructure projects (Parliament of Canada, 2018). The changes were heavily criticized for prolonging the already lengthy approval process, increasing uncertainty, and further politicizing the process (Green, 2019).

• In 2019, Bill C-48 changed regulations for vessels transporting oil to and from ports on British Columbia’s northern coast, effectively banning such shipments and thus limiting the ability of Canadian firms to export (Parliament of Canada, 2019).

• Indications from the federal government that a mandatory hard cap on GHG emissions would eventually be introduced for the oil and gas sector. In 2023, such a cap was introduced (Kane and Orland, 2023), excluding other GHG emitting sectors of the economy (Watson, 2022).

• In early 2023, the government announced new fuel regulations, which will further increase the cost of fuels beyond the carbon tax (ECCC, 2023).

• In late 2023, with limited consultation with industry or the provinces, the Trudeau government announced major new regulations for methane emissions in the oil and gas sector, which will almost inevitably raise costs and curtail production (Tasker, 2016).

The growing regulatory burden has a number of implications that impede or even prohibit oil and gas investment, by increasing costs and uncertainty, making it less attractive to invest in Canada. Both a 2022 survey of mining companies and a 2023 survey of petroleum companies identified the same three risks as inhibiting investment in Canadian provinces—uncertainty over disputed land claims, protected areas, and environmental regulations.3

It is also important to recognize that the Trudeau government introduced a carbon tax in 2016, which conceptually should replace regulations related to greenhouse gas (GHG) emissions such as those listed previously rather than be an additional policy lever used to manage GHG emissions.4

The regulations discussed above, as well as direct decisions by the federal government had tangible effects on the oil and gas sector:

• In late 2016, the Northern Gateway pipeline running from northern Alberta to Kitimat, British Columbia was cancelled by the Trudeau government, further limiting the ability of firms in Alberta to get their products to export markets (Tasker, 2016).

• In 2017, TransCanada Corp. cancelled its $15.7 billion Energy East pipeline, which would have transported oil from Alberta to Saint John, New Brunswick. The project was cancelled in large measure due to changes in national policy regarding the approval of large infrastructure projects (Canadian Press, 2017).

• While the Trans Mountain pipeline from Edmonton to Burnaby, BC was approved, Kinder Morgan exited the project in 2018 due to uncertainties and questions about the economics of the project, forcing the Trudeau government to take the ownership. The cost of the project has since increased by more than four times the original estimate to $30.9 billion (Globe and Mail Editorial Board, 2023).

• In 2019, US-based Devon Energy announced plans to exit Canada’s oilsands to pursue more profitable opportunities in the United States (Healing, 2019).

• In 2020, Teck Resources abandoned its $20 billion Frontier oilsands mine in Alberta because of increasing regulatory uncertainty (Connolly, 2020).

• In 2020, Warren Buffett’s Berkshire Hathaway decided not to invest $4 billion in Saguenay LNG, a liquified natural gas plant and pipeline, due to political and regulatory risks (CBC News, 2020).

The divestitures above are not an exhaustive list. Other companies including Norwegian Equinor (formerly Statoil), France’s TotalEnergies SE (formerly Total SA), US-based Murphy Oil, and ConocoPhillips have all reduced their investments in Canada’s oil and gas sector.

The government’s mounting regulations and hostilities towards the oil and gas sector did not go unnoticed outside of Canada. A 2018 article in The Economist listed the many failures to develop pipeline infrastructure in Canada to bring much-demanded oil and gas to market. Indeed, the piece called it a “three-ring circus” that risked “alienating foreign investors who are already pulling back from Canada” (Economist, 2018).

It is first important to acknowledge the overall decline in business investment in Canada since 2014. Overall, total non-residential business investment (inflation-adjusted) declined by 7.3 percent between 2014 and 2022.5, 6

The decline in business investment in the extractive sector (mining, quarrying, and oil and gas) is even more pronounced. Since 2014, business investment excluding residential structures and adjusted for inflation has declined from $101.9 billion to $49.7 billion in 2022, a reduction of 51.2 percent (figure 1).7

A similar decline in business investment of 52.1 percent is observed for conventional oil and gas, falling from $46.6 billion in 2014 to $22.3 billion in 2022 (inflation-adjusted) (figure 1). In percentage terms the decline in non-conventional oil extraction was even larger at 71.2 percent, falling from $37.3 billion in 2014 to $10.7 billion in 2022.8

Simply put, the declines in the extraction sector are larger than the total decline in overall non-residential business
investment between 2014 and 2022, indicating the magnitude of the overall effect of the decline in business investment in this sector.

The importance of business investment to the health of an economy and the rising living standards of citizens cannot be overstated. One of the major challenges facing Canadian prosperity are regulatory barriers, particularly in the oil and gas sector.

In that light, much of the regulatory burden added over the last eight years to the oil and gas sector should simply be eliminated. In some ways this is already being forced on the federal government through court decisions. For instance, in October of 2023, the Supreme Court of Canada ruled that parts of Bill C-69 were unconstitutional as they infringed on areas of exclusive provincial jurisdiction, requiring revisions to the Act (Dryden, 2023).

A careful and clear analysis is needed of the costs and benefits of the regulatory measures imposed on the oil and gas sector, including Bill C-48, the recent methane regulations, and the emissions cap. Based on this analysis, the regulatory measures should be adjusted to help improve the ability of Canada’s energy sector to attract and retain investment.

Author:

Kenneth P. Green

Senior Fellow, Fraser Institute

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Canada holds valuable bargaining chip in trade negotiations with Trump

Published on January 30, 2025

Todayville

From the Fraser Institute

By Alex Whalen and Jake Fuss

On the eve of a possible trade war with the United States, Canadian policymakers have a valuable bargaining chip they can play in any negotiations—namely, Canada’s “supply management” system.

During his first day in the Oval Office, President Donald Trump said he may impose “25 per cent” tariffs on Canadian and Mexican exports into the United States on Feb. 1. In light of his resounding election win and Republican control of both houses of congress, Trump has a strong hand.

In response, Canadian policymakers—including Prime Minister Justin Trudeau and Ontario Premier Doug Ford—have threatened retaliation. But any retaliation (tariffs imposed on the U.S., for example) would likely increase the cost of living for Canadians.

Thankfully, there’s another way. To improve our trade position with the U.S.—and simultaneously benefit Canadian consumers—policymakers could dismantle our outdated system of supply management, which restricts supply, controls imports and allows producers of milk, eggs and poultry to maintain higher prices for their products than would otherwise exist in a competitive market. Government dictates who can produce, what can be produced, when and how much. While some aspects of the system are provincial (such as certain marketing boards), the federal government controls many key components of supply management including import restrictions and national quotas.

How would this help Canada minimize the Trump threat?

In the U.S., farmers backed Trump by a three-to-one margin in the 2024 election, and given Trump’s overall views on trade, the new administration will likely target Canadian supply management in the near future. (Ironically, Trump has cried foul about Canadian tariffs, which underpin our supply management system.) Given the transactional nature of Trump’s leadership, Canadian negotiators could put supply management on the negotiating table as a bargaining chip to counter demands that would actually damage the Canadian economy, such as Trump’s tariffs. This would allow Trump to deliver increased access to the Canadian market for the farmers that overwhelmingly supported him in the election.

And crucially, this would also be good for Canadian consumers. According to a 2015 study, our supply management system costs the average Canadian household an estimated extra $300 to $444 annually, and higher prices hurt lower-income Canadians more than any other group. If we scrapped supply management, we’d see falling prices at the grocery store and increased choice due to dairy imports from the U.S.

Unfortunately, Parliament has been moving in the opposite direction. Bill C-282, which recently passed in the House of Commons and is now before the Senate, would entrench supply management by restricting the ability of Canadian trade negotiators to use increased market access as a tool in international trade negotiations. In other words, the bill—if passed—will rob Canadian negotiators of a key bargaining chip in negotiations with Trump. With a potential federal election looming, any party looking to strengthen Canada’s trade position and benefit consumers here at home should reject Bill C-282.

Trade negotiations in the second Trump era will be difficult so our policymakers in Ottawa and the provinces must avoid self-inflicted wounds. By dismantling Canada’s system of supply management, they could win concessions from Team Trump, possibly avert a destructive tit-for-tat tariff exchange, and reduce the cost of living for Canadians.

Alex Whalen

Director, Atlantic Canada Prosperity, Fraser Institute

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Business

StatsCan Confirms Canada’s Middle Class Is Disappearing Under Liberal Mismanagement

Published on January 30, 2025

Todayville

Dan Knight

A new Statistics Canada report reveals widening income inequality and a shrinking middle class, all while Trudeau’s Liberals push policies that benefit the wealthy and punish working Canadians.

A newly released report from Statistics Canada on household economic accounts for the third quarter of 2024 confirms what many Canadians have long suspected—while the wealthiest continue to rake in profits, middle- and lower-income families are left struggling under the weight of economic policies that seem designed to work against them. The report, released today, paints a stark picture of a country where financial inequality is not just persisting, but growing.

The numbers don’t lie. Income inequality has increased, with the top 40% of earners pulling even further ahead of the bottom 40%. The gap in disposable income between these two groups expanded to 46.9 percentage points, up from 46.3 just a year ago. The highest-income households saw their disposable income rise by 6.8%, largely driven by soaring investment gains, while the poorest Canadians saw only a 3.7% increase, barely enough to keep up with the cost of living. Meanwhile, middle-income earners experienced sluggish wage growth of just 2.7%, well below the national average.

Despite declining interest rates, lower-income households found themselves paying more on mortgages and consumer credit, while the wealthy reaped the benefits of higher investment yields. The data shows that middle-income households, who are already feeling the squeeze from inflation and stagnating wages, saw their share of national income shrink.

The most revealing statistic is in net worth distribution. The top 20% of wealthiest Canadians control nearly two-thirds (64.7%) of the country’s net worth, averaging an eye-watering $3.3 million per household. Meanwhile, the bottom 40% hold just 3.3%, barely scraping by with an average of $83,189 in assets.

However, the real estate market has provided a rare silver lining for some lower-wealth households, as they were able to take advantage of slightly more favorable conditions to buy homes, increasing their net worth at the fastest pace. But even that gain is tempered by the reality that housing costs remain unaffordable for many, and young Canadians under 35 continue to pull back from homeownership altogether.

Let’s be clear—this isn’t happening by accident. This is what happens when you let a government of self-serving narcissists run the country into the ground. Justin Trudeau and his Liberal Party have spent nearly a decade dismantling the Canadian economy, pushing a radical, ideologically driven agenda that benefits their elite donor class while leaving working Canadians behind. And now, as the country crumbles under the weight of their incompetence, Trudeau is running for the exits, leaving the mess to whoever’s foolish enough to take the job.

And what do they do on the way out? Do they work to secure our economy? To make life more affordable? To protect Canadian workers? No. Instead, they decide to pick a fight with the United States. Donald Trump, who actually puts his country first—imagine that—announces a 25% tariff on Canadian imports, a move meant to address drug trafficking and illegal immigration, and what’s the Liberals’ response? Do they try to work out a deal? Do they negotiate in good faith to protect Canadian jobs? No. Instead, Chrystia Freeland comes out swinging, proposing retaliatory tariffs that will hurt Canadian businesses just as much, if not more, than they’ll hurt the U.S.

This isn’t about protecting Canada. This isn’t about securing the border or fighting for our economy. This is about pure, partisan politics. The Liberal base wants conflict with the U.S. Not because it’s good for the country, but because their fragile, self-righteous worldview depends on it. They hate Trump, and they hate that his America-First policies are actually working for American workers. So instead of finding a solution, they escalate. They antagonize. Because their base loves it. Not because Canada benefits, but because Liberals benefit.

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And meanwhile, what’s Jagmeet Singh doing? The man who loves to talk about standing up for the working class? He could pull the plug on this corrupt government today with a non-confidence motion. But he won’t. Because, like every other member of the political elite in this country, he’s more interested in protecting his own position than actually doing his job. He makes noise about fighting for Canadian workers, but when the moment comes to act, he folds—again.

So here we are. The economy is in shambles. The wealth gap is growing. The middle class is getting squeezed to death. And the people in charge are too busy playing partisan games to do anything about it. Trudeau is leaving, but his legacy of economic destruction, division, and incompetence will live on through the same out-of-touch Liberal elites who put us in this mess.

But here’s the thing—Canada is better than this. We are a nation built on hard work, freedom, and opportunity, not on government control, reckless spending, and endless excuses. We are a country that thrives when its people—not bureaucrats in Ottawa—decide their own future.

It’s time for Canadians to take their country back. It’s time to put an end to this cycle of economic ruin and government failure. We don’t need more empty promises, more excuses, or more Liberal arrogance. We need an election. We need leaders who believe in the strength of Canadians, not the power of government.

Enough is enough. If we want a future where hard work is rewarded, where families can afford to buy a home, and where our economy is built to benefit all Canadians—not just the elite—then we must act. This country belongs to you, not the Liberal Party, not the special interests, and certainly not the self-serving political class in Ottawa.

Canada deserves better. And the time to demand it is now.

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