The trick with Canadian federalism,
as veteran NDP operative Brian Topp once said,
is to find the thread that unites the pearls.
This week, we saw what may well prove to be the dawning
of a new era of cooperative federalism,
and Mark Carney and the premiers met to discuss
driving forward nation building projects, in his words.
To discuss whether he's found the thread that unites those pearls,
I'm joined by doctor Heather Exner Perrault,
a senior fellow and director of the energy,
Natural Resources and the environment at the Macdonald-laurier Institute and
a senior fellow and advisor for the Business Council of Canada. Heather, welcome.
Yeah, great to be here.
So has Carney found that thread?
Do you think that, um,
the ideas that were put forward now,
we don't know the exact project list,
but we kind of know the general direction.
Do you think that will increase Increased national prosperity going down the avenue.
Avenue? We seem to be going down.
Or do you think that we may be pursuing white elephant projects that
either are unfeasible or technically and bureaucratically,
or they are just not economic?
Yeah, a little from column A and a little from column B. John.
So so there is you know,
the tone is markedly improved from the last Liberal government.
So there is some optimism.
There is a sense that the federal government will be a partner in building things,
whether, you know, for a long time we've thought that they were
blocking our ability to build things.
So so all a great start.
And Hodgson has said,
you know all the right things so far.
Now of course, you know,
this is so long that you can have a honeymoon period before things have to happen.
We actually have to see some action.
And we know that liberal governments are very good at
rhetoric and not so great at implementation.
So now you know,
the direction it's going is a little concerning in that,
you know, so far they want to, you know,
have a short list of nation building projects that they
determine if it's nation building and use the public purse,
I assume, for most of them to fund them
in cases where the private sector would not have stepped up.
And there may be a handful of projects where you feel that's justified.
You know, there's obviously a role for the government,
for governments to, to build infrastructure.
Um, but the low hanging fruit is obviously to improve our regulatory competitiveness.
We have very restrictive,
very burdensome regulatory processes.
Um, there's a lot of projects that proponents
want to do on their own without government help.
If the regulation was better,
if we had higher tax competitiveness,
better tax competitiveness with our competitors.
And so, you know,
I will tolerate a handful of these nation building projects.
I think, uh, if they if they make sense from a business side,
uh, but at the end of the day,
within, I would say,
you know, six months or a year,
we're going to need to see the regulations improved and streamlined.
So two things on that.
on regulatory approval and on tax.
Mark Carney talked about a two year regulatory window.
And we're currently at what five times that.
So we're around ten years. 8 to 10 years.
That seems very ambitious.
First of all is that doable.
Secondly the tax competitiveness.
Are you suggesting that we either abolish or freeze the industrial carbon tax?
Yeah. Okay. Two different questions. So let's dig in.
Um, on the first one on regulation, it's, you know,
depending on what you're building,
will take more or less time,
depending on if you need a federal approval.
And a provincial approval will take more or less time,
the complexity and whether there's indigenous support.
So ideally, yes. I mean,
I think two years is a great target.
We should walk before we run.
You know, I guess, you know, for some of these things,
three years would also look pretty good.
Uh, but but two years is certainly feasible if we had
good processes and if we had good relations with the indigenous partners.
The concerns we're talking about six months.
And that just didn't seem feasible to me that you would never be able to
fulfill your duty to consult and accommodate in such a timeline.
So two years is ambitious,
but doable, and we should and we should reach for it.
Um, on on your other question,
which is the industrial carbon tax?
I mean, some of it is just, you know,
capital gains, you know,
that that was a whole brouhaha.
Um, and we all know at some there is a level at which the more you tax,
the less investment you come in,
and actually the less tax take you get.
And UK is finding out this lesson,
this economic lesson right now in real time.
And so again, a lot of Canadian capital, uh,
if you're talking about energy and resource sector, you know,
those are goods that you can invest in any mine or in any project.
And it has absolutely been the case that Texas in particular,
uh, you know, southern United States has been just an easier jurisdiction.
Uh, better regulation, better tax,
and that our capital has gone south.
And so we would like to bring some of that capital back home.
But at the end of the day,
investors are going to make those decisions based on the return that they get.
So yes, you know,
if we if we build those projects here,
we get the royalties, we get the taxes,
we get the jobs.
So let's make sure that our tax system is
competitive so that capital actually wants to choose Canada.
You mentioned the indigenous component.
And you know, 15 years ago I remember just about every project
was was ending up in court and essentially not getting built.
Has that landscape changed?
I mean, this this government's been very vocal about raising the amount
that First Nations can borrow as loan guarantees.
Um, everybody's talking about equity partnerships.
Does that change the picture fundamentally, do you think?
Yeah. And I just, you know,
just to take it back a step,
you know, in the 20th century,
I would say there was very little attention
paid to indigenous rights and indigenous concerns.
And they were railroaded and they didn't get really
benefits from projects in their territory.
When this really changed was when the Supreme Court affirmed the duty to consult and
accommodate in a series of decisions in 2004 and 2005.
And that's when the landscape shifted where
an impact and benefit agreement went from a nice to do.
Corporate social responsibility to a need to do.
And indigenous state rights holders start to really leverage the fact that, you know,
they could block a project,
they could delay it if they weren't satisfied with the outcome.
And that has been a real struggle.
And it's been painful and it's been expensive.
But over the last 20 years,
industry and indigenous stakeholders,
rights holders have come to some,
you know, have found some models that actually work.
And the loan guarantee is probably the best example.
Um, and we've seen it work exceptionally well in Alberta.
It really helps with utility kinds of projects, pipelines,
transmission and power generation where it's pretty low risk.
You get, you know, you usually have a long term contract.
So that helps pay off the loan.
It's a you know,
no one's going to default.
It's not as useful for things like upstream oil and gas production or mining development.
And so we need a suite of tools,
not just the loan guarantee,
but for sure for the kinds of things I think Carney is talking about
energy corridors, transmission railroads, pipelines.
That loan guarantee model is very good.
It has been very successful.
There's very little risk to the taxpayer and it does help advance that reconciliation.
So we've been talking pretty generically till now.
But let's get specific.
Take a look at the map of Canada from moving from east to west,
and look at potential projects that could be put forward for this list.
Do you think a bitumen pipeline should be a priority,
and if so, which one?
Well, a bitumen pipeline to the west coast should be a priority.
So sorry John. We have to start west, not east.
I think I said did I say west to east?
I hope that's what I meant to say.
I meant to say West to east.
Yeah. This this is this is true fact.
Danielle Smith has said it.
But, you know, my analysis suggests it's absolutely true.
There is nothing that will change the economic growth,
the GDP, the productivity per capita in this country as much as bitumen pipeline.
And so so you know,
we have we have some egress.
We have most of it. Everyone knows now that goes to the south.
We finally added Trans Mountain about a year ago.
That's at 90% utilization right now in one year.
And people can I just point out because not 40%,
which is what Steven said.
I heard that one too. Uh, it's at 90.
That's in the golden male from straight from
Trans Mountain in their financial statements to the government last week.
So that's a very high quality source.
So in one sense it's amazing.
Our producers filled it so fast.
There's clearly demand we're seeing most of that demands come from Asia.
The majority which we didn't know if it would come from California or Asia.
So strong demand in global markets for Canadian heavy oil.
But also concerning that, you know,
we added this pipeline and we're already,
you know, staring down at the barrel of running out of egress.
And so there does you know,
there isn't there is urgency,
I would say from the producers that we need to start thinking about the next pipeline.
And we know it's not you know,
I don't I don't think we're going to get
Northern Gateway in two years if everything went well,
probably four for years.
And that's why we have to start saying it now and planning for it now.
We can also expand Trans Mountain with a few improvements.
And if we can actually add a couple hundred thousand barrels to Trans Mountain,
that'll give us some breathing room.
And if we want to send more south,
we can also again expand some of those existing pipelines where you don't have
to build a whole new pipeline and get a couple hundred thousand barrels.
But we're still looking at, I would say,
2027, we better know, you know,
we better have starting to,
you know, plan that next big pipeline.
I spoke to Ian Anderson,
who was the head of TMX during the build,
and he mentioned this northern leg,
which was which is part of the original plan.
It was then shelved in 2005 or 6,
but is still feasible.
And he said he could build it in 2 or 3 years.
If you had First Nations support,
it would go to Kitimat.
So it would basically be a branch off the the main TMX, I guess.
Is that something that people are talking about?
I mean, if you went to Calgary and said,
we'll build this pipeline,
no one's going to say no to any pipeline.
But if I were just to choose,
I would say, you know,
and again, I think Ian has said that that would add maybe 3 or 400,000 barrels.
Yeah. And, and it would, you know,
ideally then, you know,
which would be great.
Ideally we're going to add, you know,
let's have a million barrel pipeline,
uh, to the West Coast.
And so I'm certainly wouldn't be opposed to that.
I think there's only so much political capital and
financial capital to build pipelines in this country.
So I would, you know, if I had my,
my way, I would have a bigger pipeline.
And and whether it goes to Kitimat or Prince Rupert.
Prince Rupert's a little bit further.
The politics might be a little bit easier.
Uh, Kitimat is the home for a lot of the big LNG projects.
That will be a busy place. Um, so we'll see.
It ends up, uh,
but there's plan A, plan B,
plan C, plan D,
uh, the first thing you have to do is get rid of the oil tanker ban. Zero.
Well, you bring that up. So B.C.
is objecting to the objection to the tanker ban remains,
according to David Eby.
But but, you know,
none of these premiers exist in a vacuum,
and the opinion polling was an Angus Reid poll which suggested the majority of
Canadians are in favor of a of a pipeline to the West Coast or reviving Northern Gateway.
In fact, the majority of British Columbians are too.
So presumably, if the federal government and
all the other provincial governments and the people of British Columbia are on side,
Mr. Eby would have to think again. No.
I I'm finding this hard to understand,
because BC has actually done
some constructive and progressive things on the economic development side since January,
since Trump was inaugurated,
and Eby has almost been the most vocal, you know,
the maddest, you know,
a little bit and wanting, you know, the elbows up.
And he said he stood there in February and said,
if we don't sell Canadian oil and gas,
they will just get it from places like Venezuela.
And I thought, wow, this guy has,
you know, he's had a, you know, the light bulb moment.
He knows what's up.
Um, and now to hear this
two and a half months later is actually, frankly, quite disappointing.
Now, a lot of this is federal jurisdiction, actually, you know,
so we want the feds to get out of the way,
but not in interprovincial pipelines,
because that is clearly federal jurisdiction.
And we know from Trans Mountain when BC, if you recall,
BC said we will use every tool in the toolbox to stop this project.
And they did, but it still wasn't there.
Right. And so we do know from a lot of court precedents, yes,
the feds can say yes to a pipeline,
but yes, the feds can overturn the oil tanker ban.
That's their jurisdiction.
But what proponent really wants to step into a situation where, again,
a provincial government is going to use every tool in the toolbox to stop your project.
And so it's obviously not bullish for
investment to have this kind of political disagreement on the ground,
which is extremely, extremely frustrating.
It is our most prized resource,
our most valuable resource.
There's only one economic reasonable way to get it to tidewater.
That's to BC.
And BC. Is the bottleneck.
Still on the pipeline.
Um, in the meeting of premiers and,
uh, Mark Carney last week, uh,
Alberta Premier Danielle Smith and Carney both talked about
this grand bargain where inverted commas,
decarbonised bitumen would be shipped to the West Coast.
And the theory, as explained by Danielle Smith,
was it would be decarbonised by carbon capture and storage, uh,
the Pathways Alliance project,
which presumably the federal government would, would fund.
Is this a feasible is this grand bargain feasible? Do you think.
It is feasible?
And I have an article coming out next week on this.
So I have all the facts at hand, John.
But, um, you know,
the emissions cap is just preposterously expensive way to reduce emissions.
Um, at a minimum,
it's about $2,000 a ton per carbon,
and it's all in the paper next week, as you can see it.
But but the things that the industry
itself has proposed is carbon capture and also using some,
some solvents to reduce emissions missions they've done since, you know,
in the last 11 years,
have actually reduced carbon intensity emissions per barrel by
30% and an absolute basis have reduced it,
I think, by 25kg a barrel.
So they are doing the work.
Uh, a lot of the carbon comes from natural gas input to heat the bitumen.
That's an expense.
There's every every reason why they would rather,
you know, not have to pay that kind of money and find ways.
But right now, the oil sands, uh, on a,
on a life cycle basis is
only about 1 to 3% higher emissions than the global average barrel, the average crude.
And if you compared it to other heavies,
they'd actually be, uh,
you know, less than the average heavy.
But if we did this carbon capture,
if we did some of the solvent, uh,
innovations that they're using,
they would actually be below the global average on a lifecycle basis.
And so and so there is a grand bargain to be had.
Industry itself has been advocating it.
I've heard it in closed doors.
It's not just propaganda,
it's just it's not marketing.
I've heard it behind closed doors.
Them saying we want this.
We're very competitive on an economic basis basis.
We want to be competitive on a carbon basis.
So there's great work to be done.
I think there's a grand bargain with Danielle Smith is saying is if
you have no point of view on increasing your production,
where is the money going to come to spend probably $20 billion on these technologies?
If you know you're going to get another pipeline and you can
increase your production of 8 million barrels a day.
Well, now there's more revenue coming in and there's a there's a justification.
But if you have to spend billions of dollars
and you can't increase production, the math does not match.
These are publicly traded companies.
They get investment just like everyone else.
That investment can go to Nvidia,
it can go to meta, it can go to Volkswagen,
it can go to any other company.
And so they have to have that return.
And if all your profits have to be driven into carbon capture,
you're just not going to get any investment.
So what's the stumbling block. Just the amount
of federal dollars that are going to be put in.
Yes, yes. And so I think that's where
the negotiations are trying to figure out how much does industry pay,
how much does the province pay,
how much do the feds pay.
And from industry's perspective, I think they want to be,
you know, good, good players, responsible players.
But all of this is cost.
None of this is profit.
And again, like I say,
they still have to have a certain level of return for the investors or
the investors will just take off and you won't have any money to put into carbon capture.
The money has to come from somewhere.
And so figure out what is that magic formula
of dividing where the Canadian oil sands sector can be competitive.
Meanwhile, by the way,
paying royalties, paying taxes,
having the best paying jobs in the country,
increasing our exports, that supports our dollar.
So there's a lot of benefit to having them grow and being competitive.
And so, you know who's who's who should pay.
Is it a public good. Is it a private good. All that kind of thing.
Moving east, you've been particularly
skeptical about Arctic ports being commercially viable.
You noted that the feds and the province have
spent more than half $1 billion on the Port of Churchill,
and it's still not attracting shippers that invest
or are investment in the Northwest Territories.
They're trying to make up for
a diamond mining industry that's nearing the end of its lifespan.
It's proposing this Arctic security corridor,
which is a road from,
I guess the road from Alberta to Yellowknife exists,
but then Yellowknife to the Arctic Ocean,
terminating at Grays Bay in Nunavut.
Um, the problem with both of these is that the shipping season is pretty short.
Um, global warming has increased it marginally,
but not significantly, and has also shortened the seasons for,
uh, for ice roads.
So is all this just a pipe dream on
the part of premiers who are looking for economic activity?
Yes. So? So I hate to be in this position because I'm, you know,
I if I would describe myself like I'm
indigenous and northern and rural development is the thing I care about the most.
Now I'm in a position to say why northern development is a bad idea.
It's a terrible idea for oil. Terrible idea.
And it's a very bad idea for liquefied natural gas for the reasons you mentioned,
is we're talking about a three.
You know, in a perfect world,
four month shipping season,
you're just never you will never get a return on your investment to build that pipeline
east to a seasonal port where there's much more environmental complexity,
where, again, you can just go west.
You know, it's shorter, it's easier, it's faster.
You're going to the Asian market,
which is the world's biggest energy market,
fastest growing now, now.
But we do want northern development.
We do want those regions to prosper at a local level.
I don't think that this is going to turn,
you know, this is not the thing that's going to grow our GDP.
This is not the thing that's going to help Canada diversify its exports away.
But a port in Churchill and a port in Grays Bay can be useful
for helping local mining development happen.
Um, and that's important for jobs, for taxes,
for royalties for those communities,
economic health, the port of Churchill.
You also need just for resupply.
Uh, so there's, you know,
there's a reason it's a public good to provide some basic infrastructure,
basic transportation, access for the people that live there.
And critical minerals is very different thing from oil where you can mine.
And we see this with with private led sectors in Mary River in,
in in Nunavut with Raglan nickel mine in northern Quebec with Boycie's Bay and Labrador.
You can mine you can produce all year and stockpile it.
And then in that short shipping season you can ship it out.
And it's not very expensive just to just to have it
sitting there while the shipping season is closed.
So so energy corridor. That makes no sense.
Even when they say port to port,
like there's nothing you're shipping from,
from Burnaby to Churchill.
Nothing. Um, but anyways.
But anyways, yeah, I think from a from a northern development perspective,
but not a, not an export diversification perspective.
Moving east again to Ontario.
Doug Ford's priority is the Ring of fire.
Um, that was a gleam in the Premier's eye when I was at Queen's Park,
and that was more than 20 years ago.
It doesn't seem to have progressed much since then,
And if I remember rightly,
it was a low commodity price at the time that really stymied development.
You think prices are at a sufficient level to justify the investment now?
So there's so many things to unpack with Ring of Fire.
And in one way, I hate like it's a worst case scenario.
Not every mining project,
not every development is like that in Canada.
And and not everyone has, you know,
the the adversarial nature with local indigenous nations,
with the provincial government.
It doesn't have to be that way.
It's unfortunate. Ring of fire.
The real impetus, I think,
for Ring of Fire was that, you know,
we were so focused on the EV supply chain and that supply chain security,
that why, you know, if you're going to build the EVs
and that's your future for your auto manufacturing,
don't be importing that stuff from China when you have it in your own backyard.
So I think really about having that total independence for that supply chain, um,
for EVs and whether the commodity price is justifying that is,
of course, a different question.
Right now, Ring of Fire is a road project.
You know, it's what we're trying to get built as a road,
and that would unleash some mining later.
But for but I have to say this for the mining sector,
this is an inherently cyclical, uh, commodity.
You know, all these all these are cyclical,
and the timing matters a great deal.
And that, yes, the prices may not be there today,
but they need to be able to strike when the iron is hot.
And so, you know,
have the regulations in place to see a line of sight to be able to attract investors.
So the when the price starts to go up to a certain point,
you say ours is the next best project.
Ours is the one that should get built.
So let's help those guys be prepared for when the commodity price is ready.
The other thing that Doug Ford mentioned was was nuclear.
And in Ontario,
Ontario power generation is now put a price tag on its small nuclear reactors.
Um, is this the future for nuclear or is it for power generation,
or is this still such an Such early stage that we don't really know how it's going to go.
This is the one area where I'll just go full socialist, you know,
where I just think like, yes,
this is a nation building project.
We should lead on smears.
And there's so many strategic reasons we can do it.
One is that we have the uranium source.
You know, the world's number two exporter,
number two, producer of uranium.
We have just phenomenal deposit in northern Saskatchewan.
There's a twin basin in Nunavut.
You know, for 100 years from now when we start to run out of that.
Uh, and so, you know,
we could dominate the supply chain and the technology and energy is big business.
And we are building the first,
as you know, Stephen Lecce will say,
the first G7 and the first smart in the G7.
It has taken some public money to get there.
Uh, but there is, you know,
there is a line of sight where being the first mover really does
accord you some benefits as you try to sell these models in the future,
there will only be so much room for so many models.
Uh, and so getting in at the ground floor is very helpful.
Um, and so it does take money,
but I do think it's the future.
It's like I'm not a huge, you know,
go ahead and do wind and solar,
but there's a limited use case.
There's only so much wind and solar that you can do.
Even in hydro in Canada,
we have tremendous hydro.
We're we've neared the end of,
of of really big mega mega projects for hydro that are economically competitive.
And we've seen the last few where boondoggles in
their own right in Manitoba and BC and in Newfoundland.
And so where, you know,
where can we go next?
Nuclear really has the potential if you get the cost curve down smears.
The whole purpose of an SMR is to get the cost curve down.
To start doing this in a modular fashion,
in a factory fashion.
Um, and again, it's baseload clean energy that has actually
very little land and very little material inputs.
And so in 100 years do I think we'll be doing mostly nuclear?
Yes, I honestly do.
And the potential for the North with Microreactors is so phenomenal. Also.
Just to finish off moving east again into the Maritimes.
Um, you mentioned wind power.
Nova Scotia's big project is West Wind,
which is a wind energy cable linked to linked going west, I guess.
Um, so how feasible is that?
And and energy East. Is that dead?
So on wind again you know you know it's wind is not looking good globally right now.
It has you know has not been attracting investment.
It has been very expensive in the UK.
Um, and so you know,
show me the math.
But if it's just a project that just requires federal funding,
then I would say, you know,
we should look at other projects.
And then if we get to green hydrogen and the idea of
shipping green ammonia across Europe at a competitive rate,
I just don't see it.
Um, and I think we spent a lot of money already,
you know, and hardly any private sector money has, has,
has been attracted in and these, you know,
this this isn't the I don't think this is the future for Atlantic Canada.
I don't think it'll make it a prosperous region.
But of course, they have tremendous oil and gas reserves. And I have to say it.
And actually, the, um, you know,
Eastern Energy Conference is happening in Saint John's right now.
Um, and so if we do want to get so,
which is why which brings it back to Energy East,
very expensive and very difficult to build
a pipeline from Alberta all the way to the east.
Uh, when you have oil and gas out there already.
And so, you know,
we do want Atlantic Canada to proceed,
to succeed, to prosper.
There's nothing like oil and gas revenues that helps provincial governments,
uh, you know, budget.
And so let's I would say let's focus on developing Atlantic Canada's oil and gas.
If we want to provide our allies in Europe with energy security.
If we want to have more of our own energy security,
get off Saudi American, uh, imports,
for example, to the Saint John refinery.
So let's develop what we have all across the country.
Let's serve Asian markets.
Let's serve European markets.
But we don't need to just have a, you know,
a small pie of olive oil going across the whole country.
I mean, Newfoundland put out some good news on its Jeanne d'Arc,
uh, natural gas reserves. Right. Its basin?
Yes. And that was, you know, I guess,
the big announcement coming out of this conference so that,
you know, they have you do have to do the work and the government has been supporting it.
The provincial government and I support that of doing some feasibility.
So you can kind of direct, you know,
proponents of where to go, what's looking good,
what is what is, you know,
the size of the potential product.
And that's gas.
Uh, even more competitive on oil.
And it is a nice light oil.
It is closer to what we refine is closer to what
Norway produces and Norway oil and gas production,
it's offshore is probably peaking this year.
And so they will need some replacement uh,
for Norwegian kind of quality of crudes.
And I think that can come from Newfoundland,
which is why Equinor,
the Norwegian owned oil and gas company,
is investing in Newfoundland,
was there in Saint John's.
And the big project that they have their eyes on for the next project is Bay du Nord,
and that would be an oil project, right?
Just to wrap all of this up,
I mean, at the end of the day,
85% of Canadians voted for parties that are advocating
resource corridors and speedy development of nation building projects.
I mean, the premiers know this,
which is presumably why they're they've all become singing,
holding hands and singing Kumbaya.
Um, do you think this is a a good.
I mean, it's clearly a good omen, but do you think it's.
Decisive enough moment that we could actually break
through the logjams and actually get things done this time?
I mean, God help us if we don't.
If we return to our complacency after what we've seen and what we've gone through.
Uh, you know that God help this country.
But the conversation right now, again,
is focusing on a few projects and even,
you know, offer us governments,
offer us your projects,
and then governments will decide which projects Objects and and you know,
I'll, I'll be tolerant of this.
Like I say, maybe for a handful of projects and for a handful of months.
But if we don't improve our regulatory systems and we
all like it's no one's being coy about what the problems are with our regulatory systems,
especially at the federal level.
We know what we want to see.
That is where we need to see movement.
That is where, you know,
the the the rubber will hit the road.
Um, and so, you know,
I, we just can't keep going down this path though, John.
You can't just not build things.
You can't bring in new people at the rate we bring in new people.
Um, and you can't be dependent on China at the rate that we're dependent on China,
at the rate the United States is dependent on China,
that cannot keep going on.
And we could do it in a good way now,
or we can do it in a very hard way later, I think.
Well, listen, thank you very much for your time and your expertise. Be well.
Thanks, John.