Oil executives are right (kind of…)
National energy strategy needed
I seldom agree with the policy suggestions of corporate CEOs, particularly oil and gas executives. Their proposalsare usually a self-serving brew of tax cuts, subsidies and deregulation expertly wrapped by high-paid spin doctors in the maple leaf to fool Canadians into supporting initiatives that are contrary to the broader public interest.
Thus, I am surprised to support the call of oil and gas CEOs for a national energy strategy, despite the questionable motives of the messengers.
Canada needs a national energy strategy. Over the last few decades, our national energy priorities have been set by money men in Toronto, New York, Calgary and Houston. Projects are being fast-tracked, not on their merit, or public benefit, but on whether their promoters think they can make a buck. This has led to the insane pace of extraction proposed for the tar sands and in BC.
Financial markets may do some things well, but left to themselves they do not function well in protecting the commons-the air we breathe, the water we drink, the biodiversity that sustains us, or the climate that we all, humans and non-humans alike, have adapted to.
As with most things, the devil is in the details. The corporate CEOs want a national energy plan because after years of having their candy handed to them freely by the governments in Alberta , Ottawa and Victoria, problems are developing.
For example, the owners of oil and gas in Alberta, Albertans, have begun to realize that they have been accepting criminally low royalty rates for their resources. A recently released independent review of provincial oil and gas royalties in that province has recommended a substantial increase, and Alberta Premier Ed Stelmach is under intense public pressure to follow through.
In the review, Alberta’s royalty rate was compared to that of other oil-producing countries. Turns out that Alberta has among the lowest royalty regimes in the world, especially in the tar sands. Everywhere, from Texas to Norway, to Venezuela and Russia, the owners receive a bigger share than Albertans do. This has had the effect of turning a generally corporate-friendly populace in Alberta against the oil and gas companies.
Meanwhile, Premier Danny Williams has successfully negotiated a five per cent equity stake for Newfoundland in three offshore oil deals (along with the release of Newfoundland’s 35-year energy plan that calls for a ten-per-cent stake in future projects).
So we are beginning to hear calls from corporate CEOs who want Ottawa to intervene to push back what they consider to be uppity provinces digging too deep into corporate profits.
Sensing an opportunity, BC is now actively promoting its own criminally low royalty rates to attract investment from corporations grumbling about other province’s calls for a fairer sharing of revenues. Over the last few years BC has created royalty incentives aimed at encouraging the industry to pursue non-conventional energy sources such as tight gas, coal bed methane, and the new energy play of the month – shale gas. Most recently, they did this under the guise of the new ‘net profit royalty program’; the title of course being designed to deflect questions of under-compensation: ‘don’t worry, BC is still making a profit’.
Strangely then, BC seems to be trying to replicate Alberta’s out-dated royalty system just as it is coming under legitimate and well-reasoned fire. Under the new rules in BC royalties will be calculated on a sliding scale ranging from 2% of revenue at the start of production until all capital costs have been recovered, rising to 35% of profit (or 5 per cent of revenue) after capital costs plus 105% have been booked.
All of this has made BC something of a flavor of the month province for fossil fuel CEOs; but conflicts are brewing here as well. While a massive expansion of oil and gas development has occurred under Minster of Energy Richard Neufeld’s watch, his attempts to launch coalbed methane as a viable industry in BC have failed. Community after community has rejected coalbed methane, from Fernie to Smithers to Hat Creek and the Comox Valley. Major campaigns are building to protect the Sacred Headwaters of the Stikine, Skeena and Nass from Shell’s proposed drilling there, and from BP’s coalbed methane ambitions in the Flathead Valley.
Major NGOs are coming together to ratchet up pressure on Shell, BP and the BC government. And coalbed methane is being positioned to be the icon of a massive campaign exploiting the contradictions between Minister Neufeld’s pro-fossil fuel agenda and Premier Campbell’s promises to make BC a global leader on climate change. That circle can’t be squared; BC can’t be both a global leader on climate change and a low cost shopping mall for oil and gas companies.
In addition to increasingly uppity provinces, fossil fuel executives face strong challenges from western First Nations who are challenging projects they believe are not compatible with their interests. The Deh Cho, Dene Tah, and Carrier Sekani have challenged proposed pipelines in court, and an increasing number of First Nations are following suit and engaging politically and in the markets. This creates more uncertainty for the fossil fuel industry.
For these reasons, CEOs now want Ottawa to intervene. They say they want Ottawa to “deliver regulations, infrastructure investments and immigration and education policies.” This is CEO code-speak for: ‘please deal with the uppity provinces and First Nations’.
While the CEOs are calling for a national energy strategy, they don’t want it to address and develop policies that would resolve any of the following questions:
- Should we continue to subsidize oil and gas companies that are recording record profits?
- How much carbon are tar sands companies allowed to release as air emissions and how quickly are they going to be required to reduce emissions?
- Should both the federal and provincial governments set up legacy funds to funnel some of the revenues generated by oil, gas and coal production towards the globally required transition to renewables?
- What percentage of Canadian oil and gas can we continue to export when the terms of NAFTA prevent us from reducing the percentage, even to address domestic needs?
- How many pipelines should be built to export tar sands oil to the US?
- Should we continue to export unprocessed fossil fuel products (and jobs) to the U.S. refineries?
While a national energy strategy is necessary, the CEO’s calls for one will likely fall on deaf ears as long as there is a minority government in Ottawa. No federal party is likely to take on the difficult task of proposing a comprehensive energy strategy in this fragile political environment.
And therein lays the problem: Just when we need national leadership to step into the fray and address big picture energy issues, no one is likely to accept the challenge.
So despite the rhetoric the suits on Howe, Bay and Wall Street, along with the CEOs in Calgary and Houston, will continue to set Canadian energy policy; until we as Canadians demand a reckoning.
Let’s start in BC.