Provincial squabbles threaten future energy exports, study says
Actions needed to remain competitive in global oil and gas sector in the future
OTTAWA, October 23, 2012 – Canada needs to think hard about its future energy exports and how it ensures that disputes between provinces do not become obstacles to our ability to export energy and maintain our standard of living, a Macdonald-Laurier Institute (MLI) study concluded today.
“Canada must be able to get its oil and gas and other energy products to new markets quickly and efficiently,” says the study, written by Ottawa trade consultants Laura Dawson and Stefania Bartucci. Dawson is also a Senior Fellow at MLI.
“Our ability to raise the standard of living for people across the country depends on it. Finding environmentally responsible and efficient ways to transport energy products is a lynchpin in our future success as a global energy leader.”
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Canada now may be the largest supplier of oil to the U.S. and the world’s third largest producer and exporter of natural gas. But shrinking U.S. demand for energy imports, inability to service Asian markets, distribution bottlenecks, inefficient regulatory processes and labour shortages are hampering growth in the energy sector, a leading producer of Canadian wealth and employment.
Existing mechanisms and institutions have the capacity and authority to deal with the competiveness challenges facing Canada in all areas but one – provincial disputes, the authors conclude.
The study warns that provincial disputes over revenues and risk such as the current squabble between British Columbia and Alberta are bound to continue to flare up as the energy sector grows and new infrastructure crosses provincial borders.
The existing system of equalization payments will not be enough to address grievances of provinces that believe that bearing a greater share of the environmental risk associated with new pipelines and infrastructure entitles them to financial compensation, the study says.
New mechanisms of cooperation between provinces may be required, it warns.
“Certainly, the current issues between Alberta and British Columbia will not be the last. The steps we take today will enable us to deal with similar challenges in the future, so that provincial disputes do not become obstacles to competiveness.”
Interprovincial peace is particularly important for Alberta. “Growth and production of the oil and gas sector, and thus the prosperity of the province, depend on the ability to export these products to new markets.’’
Still, the authors don’t believe Canada needs a comprehensive national energy strategy because the mechanisms needed to address challenges in the energy sector already exist.
They point to the Council of the Federation, consisting of provincial and territorial premiers, as a mechanism that has been used to foster and promote inter-provincial dialogue. “Reinventing this in a separate sphere would serve no purpose.” The authors also point to federal initiatives, such as the reforms to the regulatory process rolled out in Budget 2012, as examples of federal leadership in Canada’s energy sector.
The authors say every Canadian premier would insist their province’s interests must be represented in order to garner their support for a national energy strategy.
“It also shows the great risk of such a strategy becoming incoherent due to such divergent interests, or of becoming bogged down by interprovincial politics.”
So far Ottawa has been reluctant to get involved in the debate over which province is entitled to what. Nor has it been active in any discussion of a Canadian Energy Strategy.
“It’s unlikely that the federal government will get involved on the issue of a Canadian Energy Strategy unless the provinces request specific intervention pertaining to issues of federal jurisdiction,” the authors add.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government. It initiates and conducts research identifying current and emerging economic and public policy issues facing Canadians.
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