CDN NEWS | 
US NEWS 
By David Yager
In the summer of 2021, the Quebec government decided to show the world how to decarbonize energy.
In July, the province declined approval for the $14 billion Energie Saguenay LNG project export project which would move natural gas from western Canada to a liquification and export terminal in Saguenay Quebec. This would require a new high-volume gas pipeline 780 km. from northern Ontario. By using hydroelectricity for energy, the promoters figured it would result in an 84% reduction in GHG emissions compared to a similar project in the US.
CAC Premier Francois Legault was originally supportive, but last summer Quebec denied all permits for several reasons. One was an increase in emissions in Canada to supply the gas. Another was local opposition including a politically active and vocal cadre of environmentalists.
The impact on global emissions if this LNG replaced coal, or that this LNG was cleaner than other sources, was never considered.
This is because Quebec is, well, Quebec. Considering matters beyond its borders except exporting hydroelectricity is rarely considered.
The federal government rubber-stamped Quebec’s decision on February 8, 16 days before Russian tanks and troops rolled into Ukraine.
Last September Quebec doubled down on its anti-hydrocarbon mission by announcing that no oil and gas production would be permitted in the province. Ever. All existing licenses and permits were cancelled. This became law on April 14. The next day a CTV News report opened, “Quebec became the first jurisdiction in the world Tuesday to explicitly ban oil and gas development in its territory after decades of campaigning by environmental organizations and citizen groups.”
This occurred seven weeks after the Russian invasion of Ukraine on February 24. It also followed a meeting of the International Energy Agency on March 24 at which Canada and other countries agreed to help Europe replace Russian supplies of coal, oil and natural gas.
A March 24 Global News report read, “Canada has capacity to increase oil and gas exports by up to 300,000 barrels per day (bpd) in 2022 to help improve global energy security following Russia’s invasion of Ukraine, Natural Resources Minister Jonathan Wilkinson said in a statement on Thursday. Canada is also looking at ways Canada could displace Russian gas with liquified natural gas (LNG) from Canada after requests from European countries, the minister added.”
According to all maps and written Canadian history, Canada includes Quebec. Except when it doesn’t, which is because Quebec often regards itself as a separate country.
In August when German Chancellor Olaf Scholz visited Canada looking for fuel to save Europe from economic and energy destruction this winter, Prime Minister Trudeau said there was no business case for exports of LNG from Atlantic Canada.
But sometime in the next few years our country might be able to supply “green hydrogen” derived from the once improbable combination of wind turbines, seawater and ammonia.
That will keep Europeans warm. At least the ones who survive.
With two LNG projects in Atlantic Canada already seeking gas supplies, money and approval – and Energie Saguenay lobbying to revive its project due to changing geopolitics – the only question was if this was the dumbest thing Justin Trudeau has ever said, or yet another addition to an extensive list.
But everybody knew what was going on – Quebec’s October 3 election campaign. And Trudeau’s home province is off limits for criticism at tender moments like this regardless of what might be going on in the rest of the world.
But that’s over. Legault won by a big majority and for the next four years there are no votes at risk if he reviews some past decisions.
So now that the rest of the world is quickly reversing nearly all the anti-carbon political decisions made in 2021 and prior years, will Quebec join the real world on energy?
And the bigger question is, can Canada fulfill its G7, G20 and NATO obligations while continuing to ignore Quebec’s behavior? Or should the Prime Minister acknowledge he only speaks for nine provinces and three territories?
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“The greatest challenge the next federal government will face will come from Quebec.” So wrote Conrad Black on September 3 in the National Post. The title was “The Conservatives’ monumental task – saving our great nation.” The subtitle continued, “The next government will have a great deal to live down and a long way to catch up if Confederation is to survive in any recognizable and worthwhile form.”
Thomas Mulcair, former leader of the federal NDP, chimed in on September 6 with CTV News commentary titled, “Why should we care about the Quebec election?”
Mulcair spoke for many writing, “Who cares about Quebec?…you drive us nuts…Issues of Quebec politics have so dominated the national discourse over the past 50 years…’take a hike’…a not uncommon reaction.”
But what these English Quebecers share is the warning that CAQ leader Francois Legault is a stealth separatist who is gradually taking Quebec out of confederation.
Quebec creating political in turmoil in Canada is not new.
But having Quebec’s behavior reach well beyond our borders is.
Black focused on economics. “Formerly a separatist provincial cabinet minister, Legault saw that in the referendum campaigns of 1980 and 1995, not even an approval to negotiate a trick question…could be sold…in order to succeed, Quebec sovereigntists would need to escape the equalization regime…Quebec could only become independent if it were able to demonstrate that it had practically nothing to lose financially.”
Mulcair’s concerns were social policy. Citing a 2018 interview with Legault Mulcair wrote, “In it he simply acknowledged the obvious: separation in one fell swoop had been tried twice and failed. He’d be taking a new approach: more powers in matters of language, culture and immigration. This was what he called ‘getting there’ step by step. ‘There’ being a sort of de facto separation.”
Both writers blamed the current federal government for allowing Legault’s administration to pursue policies in its own interests, regardless of the consequences.
Black wrote, “The only way to maintain Quebec’s interest in Canada is for Canada’s national government to behave like the government of a great nation…The country is in a shambles.”
Mulcair zeroed in on language rights and immigration stating, “There’s only one person in Canada who can do something and his name is Justin Trudeau…Legault claims to have unilaterally amended the 1867 BNA Act, the founding constitutional document of our nation. He purports to have removed the equality of English and French before the courts. Trudeau’s reaction? Crickets! He’s terrified of Legault and won’t do the obvious: challenge Québec’s law.”
Writing in the Financial Post September 7, former Alberta cabinet minister and oil executive Donna Kennedy-Glans explained why Alberta and Canada need a new deal on energy in light of changing world conditions.
She wrote, “Ottawa is politically afraid of Quebec and will stand by and watch rather than challenge Premier François Legault’s exercise of a veto on pipelines or future oil and gas development in Quebec.”
All three commentaries made the same point. How could Canada pretend to act like a nation when a major block of real estate was controlled by a provincial government indifferent to the institutions and economic success of the rest of the country?
Or with a federal government far more interested in its own political future than that of the country or its western allies?
Quebec’s preoccupation with itself is hardly new.
The bigger problem is Ottawa’s refusal to intervene as Quebec charts its own course, one contrary to our national – and now international – interests.
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LNG briefly became a campaign issue during the Quebec election on September 1 when Progressive Conservative leader Eric Duhaime called the Energie Saguenay cancellation a “monumental mistake.”
Radio-Canada.ca, in a follow-up story in French, wrote, “Behind the scenes, the outgoing Minister of the Economy, Pierre Fitzgibbon, is keeping the door open, Radio-Canada has learned. According to our information, the CAQ government recently let the federal government know that it is still open to the realization of the project.”
This was promptly denied by Legault. But Energie Saguenay may not be entirely dead. It’s just the CAC’s pursuit of votes was more important during the election than Europe’s pursuit of energy.
However, reversing the decision to ban oil and gas production in the province is headed for court. In June Utica Resources Ltd. of Montreal sued the province for $18 billion in damages for rendering its assets and investments in Quebec worthless.
Why the big number?
Because beneath the eastern townships south of the St. Lawrence River between Montreal and Quebec City – called the St. Lawrence lowlands – lies the northern section of the Utica shale, the resource play that has sparked major gas development on the other side of the Canada/US border.
The reserve figures are huge. Following several promising gas discoveries and the proven commercial viability of extended reach horizontal drilling and hydraulic fracturing to unlock gas from shale deports, a 2015 report by the Canadian Energy Research Institute quotes various sources that put the Original Gas in Place in the range of 135 to 235 tcf, with recoverable gas between 6 and 55 tcf. The generally agreed upon figure is 18 tcf, a massive resource by any measure.
There are two major players – Utica and Questerre Energy Corporation of Calgary. Utica says its reserve reports indicate its properties hold $67 billion worth of recoverable gas. $18 billion is the discounted net present value.
Questerre’s valuations are more reserved. Questerre controls the assets previously owned by Talisman/Repsol and Forest Oil. It carried its Quebec resource on the books at $104 million until December 31, 2021, when it wrote them down to zero because of its permit cancellations.
However, Questerre cites Quebec’s 2009/2010 provincial budget which read, “Exploration work done in this region in 2008 has produced impressive results: Québec’s gas shale could contain between 35,000 and 163,000 billion cubic feet (35 to 163 tcf) of natural gas. If one quarter of the gas shale potential were recovered, production could satisfy Québec’s needs for more than 40 years. At the February 2009 price, this represents a value of $45 billion.”
Questerre has done everything it can think of to persuade Quebec to allow it to develop its resources. CEO Michael Binnion learned French as an act of good faith. The company has proposed an electric drilling rig and frac spread to get the wells producing with the lowest possible carbon footprint.
Quebec’s compensation offer for rendering these legally purchased and developed private sector assets worthless is a joke. The government offered only $100 million to the owners of 62 wells to cover 75% of the decommissioning costs. One can only assume the leaseholders must pay the rest. A Financial Post article June 24 say developers have invested $500 million the past 15 years.
As noted above, as recently as 2010 the Quebec government under Jean Charest was sufficiently enthusiastic about the province’s natural gas potential that it introduced royalty incentives to spur development.
Because Quebec loves its natural gas. The original TransCanada gas pipeline went all the way to Montreal. The TQM pipeline then carried gas to Quebec City. When the rail blockades in early 2020 shut off shipments of propane to Quebec, this was the definition of a true national emergency. This product is shipped to Ontario via Enbridge Line 5 then by rail to Quebec.
In 2015 a group of local and international companies received approval from the Quebec government to build the Stolt LNGaz natural gas liquefaction plant development at Bécancour near Trois Rivieres. It was intended to produce 500,000 tons of liquefied natural gas a year and distribute it via tanker to Quebec businesses further down the St. Lawrence beyond the end of existing pipelines. Operations were planned to commence in 2018.
Questerre CEO Michael Binnion says that this approved LNG liquification and export project is only 10 km. away from some of his company’s existing gas wells.
This makes the Prime Minister’s bizarre comments that there is no business case for Atlantic LNG exports even more difficult to comprehend.
It is unlikely that the current federal government will exercise its constitutional authority to force Quebec to behave in the best interests of the country.
But the bigger issue is global. One of the largest sources of lower carbon natural gas in responsible hands close to Europe is the Utica shale in Quebec. How long can Quebec say no?
Worse, can Canada still walk tall on the world stage and make energy commitments as a country when, in fact, it isn’t a real country as far as Quebec is concerned.
Will the country with the largest untapped oil and gas resources in responsible hands in the world continue to deny them to our allies?
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Reality has hit home in the EU. On October 11 EU High Representative for Foreign Affairs and Security Policy Josep Borrell gave a speech that should resonate in Quebec City and Ottawa.
“Our prosperity has been based on cheap energy coming from Russian gas – cheap and supposedly affordable, secure and stable. It has proved not to be the case. And the access to the big China market, for exports and imports, for technology transfers, for investments, for having cheap goods. So our prosperity was based on China and Russia – energy and market…Russia and China are no longer the ones that (they) were for our economic development…access to China is becoming more and more difficult.”
For energy security Borrell stated, “…we have to find new ways for energy from inside the European Union, as much as we can.” For military security he said, “…we delegated our security to the United States…You – the United States, take care of our security. You – China and Russia – provided the basis of our prosperity. This is a world that is no longer there.”
Apparently, this reality is also finally hitting home in Ottawa. On October 12 at a speech at a Brookings Institute Event in Washington, Finance and Deputy Prime Minister Chrystia Freeland told the audience that western countries must realign trade and cooperation to build an alliance of democratic nations much less dependent on Russia and China.
Referencing the cooperation in sharing vaccines during the pandemic, Freeland said, “Canada must and will show similar generosity and fast tracking, for example, the energy and mining projects, our allies need to heat their homes, and to manufacture electric vehicles.”
Goldy Hyder, president and CEO of the Business Council of Canada, was in the audience. In a National Post article Goldy said, “Freeland’s speech was encouraging because it shows the government is focused on the changes ahead. It was a genuine attempt to be serious and contemplative at a time that requires that. It’s encouraging that we are trying to re-establish and reassert our capacity for Canada to be a serious player and help shape the world in which we live.”
But Hyder also criticized Canada’s recent blunders on supplying Germany with LNG which caused that country to go elsewhere for secure gas supplies. He also attacked the regulatory approval nightmare for new resource developments saying, “Any business anywhere in the world looks for a form of political stability, a form of regulatory predictability and a society with some social cohesion that respects the rule of law. The bigger problem here right now is a regulatory regime is unpredictable and unstable…”
Quebec’s arbitrary cancellation of legally purchased natural gas development licenses and political flip-flops on LNG exports clearly meets the definition of “unpredictable and unstable.”
The world is changing fast. Europe needs our help. Is it not possible that this is finally more important than domestic politics?
David Yager is an oil service executive, oil and gas writer, energy policy analyst, and author of From Miracle to Menace – Alberta, A Carbon Story. Find the book at www.miracletomenace.ca. He is President and CEO of Winterhawk Casing Expansion which has commercialized a new technology for improving wellbore integrity.
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