The rejection of major development projects is producing economic harm for all Canadians and undermining the reputation of Canada as an attractive place to invest. Many Canadians appear to be oblivious to the personal and national harm caused by the rejections and protracted delays that have become a feature of our regulatory process and associated political second-guessing. Sadly rejection and protracted delays inflict real, not abstract or theoretical, consequences including higher unemployment and slower economic growth.
Too many Canadians have been misled by the shrill exaggerations and unsubstantiated fear-mongering of development opponents. While much of the heated rhetoric is swirling around oil and gas development proposals, we should remember that other development projects have been scuttled as well. For example, the Matoush Uranium Mine project was scuttled by the Quebec government, after exaggeration of environmental impacts, despite federal government approval and support for the project.
Before we delve into the bad news, let’s give credit to Prime Minister Trudeau for approving the expansion of the Trans-Mountain pipeline and the replacement of the aging Line 3. He’s absolutely correct in saying: “I’m convinced it is safe for B.C. and right for Canada”. I’m delighted that Trudeau has dialed back on his previous rhetoric that seemed to encourage some groups that hold extreme anti-development views.
We need to break through the project approval logjam and make Canada an attractive place for development and investment. Canadians need to speak up to tell our leaders that they’ve been listening too much to extremist, exaggerated, unsubstantiated opinions for too long. Here’s how to create a better future for Canadians.
The increasing cost of preparing development projects for regulatory approval followed by expensive and protracted delays are causing companies to invest outside of Canada. For example, the Northern Gateway project has so far cost Enbridge and its supporters about C$400 million. So far no return is evident.
Companies have responsibility to shareholders to achieve financial returns. They cannot wait interminably for Canada to make up its mind on approving development projects. Investors have many alternative investment opportunities.
TransCanada and Enbridge have for decades made significant investments in Canada. Where have they made recent investments? TransCanada acquired Columbia Pipeline Group for US$13 billion in March 2016. Enbridge Inc. and Spectra Energy Corp entered into a definitive merger agreement valued at C$37 billion in September 2016.
We need to make Canada attractive for investment by:
- Keeping corporate taxes low. Unfortunately, the Alberta NDP government chose to reduce the long-standing Alberta Advantage by hiking corporate taxes.
- Being cautious about over-regulation. Unfortunately, the federal government is introducing regulations to reduce methane emissions from the oil and gas sector that are administratively costly while only producing only a modest reduction in methane emissions.
- Clarifying restrictions on foreign investment. Unfortunately, the federal government approval guidelines, introduced after the CNOOC acquisition of Nexen, remain somewhat opaque.
Increase economic growth
Every rejected development project means the anticipated investment and its associated contribution to economic growth evaporates.
Canada’s economic growth rate is largely set by the health of the USA economy, currently excellent, and global oil prices, currently at an unusual low, that are controlled more by OPEC than anyone else.
However, Canada is in a unique position where we can develop our energy reserves and other natural resources to boost our economic growth and to insulate ourselves from global factors we cannot control by:
- Extending our oil pipelines east to displace oil imports.
- Increasing the capacity of our oil pipelines west to sell more of our oil to the Asian market.
- Encouraging and approving reasonable development projects.
For an excellent local example of successful development that delivers economic growth while respecting the environment, we need to look no further than the Industrial Heartland Region anchored by Strathcona County east of Edmonton, Alberta. We need to learn how to encourage growth while respecting the environment from these thoughtful Albertans. That’s much more productive than demonstrating with protest signs and spreading misinformation.
Every rejected development project means the associated employment for construction and operation will not materialize.
For example, the Financial Post identified 35 projects worth C$129 billion in direct private investment that are struggling to move forward or have been sidelined due to various combinations of environmental, aboriginal and community opposition. I believe there are a large number of reasonable projects in this huge pile that can benefit all Canadians.
The increase in the unemployment rate attributable to the absence of these development projects appears significant to me. For example, the Calgary unemployment rate now exceeds 10%.
To move forward on approving development, I believe Canadians should support their politicians to:
- Clarify the regulatory process that actually works well and is envied by many other jurisdictions. Unfortunately, the federal government has now appointed the NEB Modernization Expert Panel. That panel gives the impression that it’s supposed to fix a problem when there isn’t and wasn’t one.
- Educate Canadians about the relationship between investment, employment and economic well-being. Unfortunately, the Alberta NDP government itself appears to be unclear on this relationship by focusing on subsidies and grants to counteract the damage its increasing taxes and regulations are creating.
Read more insightful analysis from Yogi here