CCA BLOG: The future of energy and natural resource development in Canada

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by JOC News Services

Warren Everson of the Canadian Chamber of Commerce, Canadian Electricity Association CEO Sergio Marchi, Mining Association of Canada vice-president of economic and northern affairs Brendan Marshall and Canadian Association of Petroleum Producers (CAPP) CEO Tim McMillan all participated in the "The future of energy and natural resource development in Canada" panel on March 22 at the Canadian Construction Association's annual conference in Mexico.
CCA BLOG: The future of energy and natural resource development in Canada

Everson began by saying we are nearing the "end of the beginning" in terms of declining energy investment. He said the government will release a cautious budget, but the Liberals are starting to focus on stimulating economic growth, in part due to

In terms of U.S. worries, Everson said, renegotiation of NAFTA is a concern, though Everson doesn't think there will be fast action, and predicted NAFTA matters will hit the respective legislatures in 2018.

Tax reform is another concern, and he said those representing various sectors won't care about the impact on other U.S. states, let alone Canada. Everson predicted there will likely be "tit for tat" trade friction with the U.S. as well.

Marchi said electricity infrastructure investments are very important, and he said there has been an unprecedented "politicization" of energy rates, especially in Ontario. Heightened public attention on rates means pressure on governments, which translates on pressure on utility regulators to keep costs down.

"We should try to avoid a storm of short term thinking, quick fixes, and political u-turns," Marchi said. The factors driving these rate changes aren't short term, and long-term planning is an important part of the utility business.

Regulators want to keep costs down, but that also stifles innovation, Marchi said. And yet governments insisted on more innovation, so "we're caught in a ping pong match," he said.

Marchi said infrastructure funding for transformational funding will help bridge that gap, he said.

Modernization of existing infrastructure is also critical, Marchi said, and the current infrastructure is reaching the end of its life cycle.

It's also important to keep the customer onside, and so both the utilities and the government have to be transparent and open to explaining the need for these investments to the public. Moreover, one must resist the temptation to "race towards the bottom" and go for the cheapest price on infrastructure, Marchi said.

Obtaining the social license to build this infrastructure is also getting more difficult. There is increasing pressure from local municipalities to have veto on projects located in their area, but Marchi said national utility projects have to balance local against national interests.

The Paris climate change accord is a real shift, and Marchi said his sector has long called for reduction of carbon levels, and touted the low greenhouse gas (GHG) levels produced by electrical projects.

McMillan said the oil and gas industry invested a peak of $81 billion in 2014, and is down to a forecasted $44 billion in 2017.

But McMillian added that the industry is "on the way back up" and pointed out oil and gas are approximately 12 per cent of the value on the Toronto Stock Exchange.

The consumption of oil is growing, he said, but there is dramatic uptick in natural gas use. The growth is in India and China, with 62 per cent of crude oil use in those areas alone by 2040.

Under Obama, the U.S. underwent an oil revolution, McMillan said, and the country is now an exporter. Trump has further said he will reduce regulations, and McMillan said the prevalent attitude in the United States is to invest in itself first and the rest of the world later, and Canada is part of that 'rest of the world.'

Canada took one of the biggest hits when oil prices crashed, and when U.S. companies were hit the were les invested and recovered more quickly.

Marshall said at a high level there's good and bad news and a lot of uncertainty. The good news is that the industry is emerging from a painful downturn in commodity prices. But the bad news is that Canada is not as competitive as it used to be and is becoming less of a destination of choice for global mining investment.

Canada has lost ground in the majority of the commodities for which it has been a top-five global producer over the last five years, he added.

Regulatory reform occurred under Stephen Harper's government, and it landed the year before Trudeau was elected on a platform to revisit the previous government's regulations.

"SO we had five years of uncertainty, and now probably another three years, the better part of a decade, and that's driving business away," he said.

Infrastructure is key to opening up remote and northern regions up to further economic development, Marshall added. But resolving the regulatory hurdles will be key to this happening.

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