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Where have the Liberals been for the last nine years? They speak of pipelines but are mute when it comes to abolishing the environmental approval system that makes building them virtually impossible.
Only a Conservative government with a majority mandate will generate more pipeline & energy project investment confidence.
By Jim Warren
Donald Trump’s tariff threats have sparked a flurry of optimism among supporters of western Canada’s oil and gas sector. The potential threat to oil exports got industry analysts busy identifying and ranking the changes in Liberal legislation and regulations required to revive cancelled pipeline projects.
The changes they’ve identified don’t involve a lot of new discoveries. We’ve known which regulatory barriers needed to come down when the Justin Trudeau’s government first imposed them. Those changes are clearly necessary. But they are, nevertheless, insufficient; more things need to change before we can expect a revival of significant investor confidence in new pipelines.
There are simply too many moving parts and critical unknowns in both geopolitics and federal politics here in Canada to make surefire investment bets on expensive new pipelines—at least right now.
There have been few times in the past half century when so many important facets of economic and political life in the developed world were this volatile and the future so uncertain. We can hope that heightened international tensions will soon be resolved, but knowing how and when remains a mystery. And, we’ll have greater certainty about government policy here in Canada after the upcoming federal election.
A few short months ago Canadians were all set to elect a Conservative government with a huge majority. If recent polls are to be believed, the Conservative majority is shrinking. That being said, the results of some recent polls are highly suspicious. A couple of prominent Liberals including Mark Carney and Jonathan Wilkinson have made comments in favour of building new pipelines to the east and west coasts, but their sincerity is seriously in doubt. Where have these guys been for the last nine years? They speak of pipelines but are mute when it comes to abolishing the environmental approval system that makes building them virtually impossible.
And then there is the “even if” problem. Even if the Conservatives win a majority in the upcoming election, will a single term in office provide the time required to launch new pipeline projects? It will likely require two consecutive Conservative majorities to ensure projects are approved and completed or nearing completion. Politicians might hope to work quickly, but the gears of bureaucracy and the courts turn slowly.
And then there are the Donald Trump problems. His positions on international institutions and conventions are dangerously erratic. Will there or won’t there be tariffs? Was he kidding about annexing Greenland and Canada—probably, but who knows? Was the disgusting February 28 beat down of Volodymyr Zelenskyy in the Oval Office just a bit of negotiating theater, but nothing for Ukraine and its allies to worry about? Is NATO a dead duck? And so on…
People like Steve Bannon have spilled the beans on Trump’s “flood the zone” strategy. Make five or more attention grabbing, sometimes outright shocking announcements every day. The media are assumed to be too dumb and lazy to cover more than one or two stories at a time. They will chase one or two of the shiniest objects to report on while Trump goes on to implement one or two of the ideas that might actually matter to him.
Tomorrow you can count on five new and equally bombastic Trump proposals. The point is to keep the pot stirred, and everyone disoriented, unsure and guessing. It seems to be working, which doesn’t do a lot to boost investor confidence.
Gwynne Dyer, among others, has described Trump’s use of the “madman strategy.” This is the idea that it is best to enter negotiations with your counterpart believing you are so crazy you are capable of anything even if it means hurting your own country when you do it. It turns geopolitical negotiations into a game of chicken that can take countries to the brink of disaster, but hopefully no further. Some deluded strategists in Moscow and Washington during the Cold War were advocates of the madman approach.
Dyer cautions that when matters approach the brink of catastrophe, the potential for overreaction and error on the part of excited and confused people along the chain of command goes way up. Not so good when the countries playing chicken have nuclear weapons.
The option of obtaining nuclear weapons to ensure Canada isn’t bullied by its competitors and adversaries has some allure. But it doesn’t make a lot of sense if it will result in international trade sanctions. And having nukes may not end well if you are actually dealing with a madman.
There is mounting uncertainty about the health of green transition initiatives around world. The failure of emissions reductions measures in meeting the aspirations of the international conferences which proclaim them, suggests the oil and gas sector have a much brighter future than environmental activists and climate alarmists predicted. That’s a plus.
On the other hand there are troubling signs the international environmental movement is gearing up for another assault on fossil fuels in Europe and Canada. Environmental activists have recently won two lawsuits in the UK canceling formerly approved oil field developments and have launched another 13 similar suits just this past month.
If Canada winds up with another Liberal government, the activists can count on being able to wage another well-funded, anti-oil campaign. Equally troubling is the possibility major Canadian oil producers will fail to effectively defend the industry—as was the case when Keystone XL, Northern Gateway and Energy East were under attack. It turns out donating money to people who are suing you and claim your industry is killing the planet doesn’t work.
There are things Canadians can do to encourage and support investment. They include taking some of the well-known, necessary steps to improving the fortunes of the energy exporting provinces in the west. The most critical at the moment is to elect a Conservative majority and ideally keep it in office for two or more terms.
It’s not just me saying this. Last week, one of Canada’s foremost oil industry analysts claimed the biggest impediment to pipeline investment is our domestic political situation. He said, “If Canadian voters get with the program and dump the Liberals later this year, then it’s an open road.”
Nevertheless, if the political pendulum swings back to the Liberals at some point, will the guarantees afforded pipelines built after 2025 be sufficient to prevent them from being forced to shut down.
By the same token, there are still international issues inhibiting investment over which we have minimal influence or control. Anyone who presumes to guarantee a brighter future because they are certain about how and when some of today’s global problems will be resolved is likely deluded. What we can more reasonably hope for is that some of the answers we’ve been looking for will be made clearer in the next few months rather than years.
People who tell you they can confidently predict the future with detailed precision 30 years out are often fortune tellers, con artists and writers of science fiction.
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