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2012/13

Notes for a Speech by

The Honourable Joe Oliver, P.C., M.P.
Minister of Natural Resources

Calgary Chamber of Commerce

“Forging New Paths Toward Canada’s Energy Future”

January 25, 2012
Calgary AB

It's been a few months since I was in Calgary, and I'm happy to say the hopeful economic signs we were talking about during Stampede are becoming more common. In fact, the latest forecast from Scotia Capital is predicting Alberta will lead the country in economic growth this year and next.

Economy

With the highest business sector labour productivity in the country, it’s easy to see how Alberta’s GDP grew by 3.5 percent per year over the last two decades. It has the lowest corporate provincial taxes and the lowest cost of doing business.

Unemployment in Alberta was 4.9 percent in December 2011, and last year 77,500 jobs were created in this province alone. That's half the new jobs created in Canada.

Today, energy accounts for one quarter of Alberta’s GDP, nearly 70% of Alberta’s exports and 35% of Alberta Government revenues. I think we can agree that's good news, and I can assure you our government wants Albertans and all Canadians to continue to hear that kind of news.

As it has been from the beginning, the economy remains our top priority — putting in place the fundamentals that are the foundation for long-term growth, prosperity and economic resilience.

We've lowered personal and corporate taxes. We're paying down debt and reining in spending. We're cutting red tape, investing in innovation and promoting free trade.

The results speak for themselves. Forbes Magazine calls Canada the best country in the world in which to do business. Both the IMF and the OECD predict Canada's economic growth will be among the best this year and next.

Real GDP is now well above pre-recession levels. Our economy has generated some 600,000 jobs since July of 2009. Moreover, Canada is the only G-7 economy to have more than recovered both all of the output and all of the jobs lost during the recession.

While others are raising taxes to pay down deficits, Canada can offer the lowest overall tax rate on new business investment in the G7.

Where some are looking to protectionism to stabilize their economies, Canada has the flexibility to lower trade barriers.

While some countries find themselves forced to make drastic cuts to their public sectors, Canada is able to take measured steps without undermining our most important social services and other programs.

Make no mistake, these are still uncertain times. The economic and fiscal difficulties in Europe are worrisome, and slow recovery in the U.S. is a reason for caution. But Canada has a lot of advantages, and our government is committed to making the most of those advantages to the benefit of all Canadians.

This is perhaps the most basic responsibility of government: to foster the prosperity that underpins our quality of life.

Energy, the oil sands and our economy

There is no question one of Canada's greatest advantages, one of the keys to our prosperity, is energy. Energy accounts for a sizeable and growing share of our gross domestic product. Its importance as an economic driver will increase in the future because Canada is an energy superpower.

We have abundant energy resources of all kinds. We are the second-largest producer of uranium. We are the third-largest producer of natural gas and hydroelectric power. Canada is the world’s sixth-largest producer of oil. We have a growing renewable energy sector. And we are, by far, the largest supplier of energy resources to one of the world’s largest markets, the United States.

And of course, Alberta is home to the oil sands, the third-largest proven oil reserve in the world — a huge economic and strategic resource that will likely grow with technological innovation.

You know that, and I want to make sure all Canadians know that. For far too long, it seems like we've been hearing only one side of the story. That's why I've made it a priority to tell the other side of the story as often and as forcefully as I can.

The oil sands are one of this country's great success stories. Less than 50 years ago, the idea that anyone could find a cost-effective way to extract oil sands crude was a technological fantasy. But Canadians figured it out, and today, the oil sands are one of the most important economic engines in the country. This resource has attracted more than $137 billion in capital investment and, of that, more than $116 billion in the last 10 years alone.

Directly and indirectly, the oil sands will mean hundreds of thousands of jobs a year for Canadians over the next twenty five years, jobs right across the country, in every sector of the economy: skilled trades, manufacturing, clerical jobs, the financial sector — everywhere.

The oil sands are also a key source of revenue for governments at all levels. Over the past five years, the oil and gas extraction sector has added an average of $22 billion a year to government revenues.

$22 billion a year — that's enough to cover the City of Calgary's operating budget for close to a decade.  And it's $22 billion a year for government to invest in the things that matter most to Canadians: education and health care, roads and bridges, cutting-edge research — and lower taxes for Canadian families. But there is the potential for much more.

Expanding and diversifying markets

Right now, 98 percent of Canada's oil and petroleum product exports go to the United States. And it is perhaps not as well-known as it should be in Canada or the United States that we are a major contributor to U.S. energy security and economic stability.

Imagine the impact on the U.S. economy and U.S. national security without the 2.5 million barrels of oil that flow across the border from Canada every single day. That's close to 15 percent of total U.S. consumption for crude oil and petroleum products.

The U.S. imports more oil from Canada than from Saudi Arabia and Venezuela combined, and our reliability as a friendly energy supplier is important to North America’s energy security. The recent threat by Iran to close the Strait of Hormuz is but the most recent reminder, to say nothing of the anti-American sentiments coming from Hugo Chavez.

In fact, Canada's emergence as an energy superpower underscores the economic importance of having the pipeline infrastructure to get our oil to market.

We are very disappointed with last week's announcement by President Obama regarding the Keystone XL pipeline. We continue to believe this project is beneficial to both countries, and so we are hopeful it ultimately will be approved.

Yet this decision underlines the critical importance of diversifying our markets to ensure the prosperity and security of Canadians for decades to come.

The Asia–Pacific region offers that opportunity. I was in China last fall, and the message was clear: the world’s largest consumer of energy very much wants and needs our energy exports, both oil and gas. So, energy will likely be among the topics discussed when Prime Minister Harper makes an official visit to China next month.

Acquiring a significant share of the energy market in China and elsewhere in the Asia–Pacific region will be central to growing our energy exports over time, sustaining and expanding investment in our resources and ensuring jobs and growth for all Canadians.

Infrastructure

But for that to happen we need the infrastructure to deliver our resources to these new markets.

Under regulatory review is Enbridge’s proposed $5.5 billion Northern Gateway pipeline that would deliver oil sands crude to Kitimat on the West Coast. As well, Kinder Morgan is gauging interest in an expansion of its Trans Mountain pipeline that, if successful, would mean an additional investment of $3.8 billion.

The long-term benefits of access to the Asia–Pacific market are enormous. Research done here at the University of Calgary’s School of Public Policy estimates that the oil price differential alone could add up to $17 billion to Canada’s GDP between 2016 and 2030. Those are more than dollars, those are jobs and security and prosperity for Canadians.

The expanding economies of Asia are also obvious markets for Canada’s natural gas through ports on the west coast.

Regulatory improvement

Infrastructure projects are among the $500 billion in potential new investment in energy and mining projects in Canada over the next 10 years.

That’s half a trillion dollars in potential investment in the space of a decade — investment to support the creation of hundreds of thousands of jobs and generate economic activity in communities across Canada for years to come.

But that level of investment is by no means guaranteed. Canadian projects must compete for capital in the global market.

Our Government has worked hard to create a Canada that is a magnet for foreign investment and, to a very large extent, we have succeeded. But one wild card remains: an unpredictable, often unnecessarily lengthy and needlessly complex regulatory process. Bad process does not produce good environmental outcomes.

Providing a regulatory regime that is both efficient and effective is a basic part of offering a stable, predictable climate for investment. Inefficient regulation leads to unnecessary and unpredictable delays, delays that compromise the economic viability of projects that are vital to the creation of jobs and economic growth in Canada.   

Many of the inefficiencies in the system can be blamed on its design or, I should say, its lack of design. We have a process that was developed and added to over the course of many years, and in numerous jurisdictions with little consultation amongst them. As a result, it is complex. There are numerous instances of duplication and overlap. We often see both federal and provincial environmental assessments for one project, and these processes are also often out of sync. 

Which is why regulatory improvement has been a priority for our government from the beginning. We have implemented a number of innovations to enhance the performance of the regulatory system for major projects, and we have done so without compromising environmental protection.

The Major Projects Management Office and targeted changes to the Canadian Environmental Assessment Act through Budget 2010 have begun to address some of the key problems. But we recognize there is more to do. The really fundamental modernization we need to make requires system-wide legislative changes, and lots of them. 

My provincial and territorial counterparts agree. When I met with them in Kananaskis last July, we reached broad agreement on the need to step up our cooperation on regulatory improvements. The ultimate goal is simple: one project, one review, in a clearly defined time period.

Make no mistake, the Government of Canada is committed to a regulatory system that ensures sound environmental protection and respects the right of people with a legitimate interest, including Aboriginal rights. We can do that and also have realistic timelines to facilitate economic prosperity.

These goals are not mutually exclusive. We can protect our environment; we can protect Canadians; and we can develop our natural resources to the benefit of all Canadians.  

But we cannot fully realize this potential under the current regime. It takes an average of almost two months to complete a review of even a small project, and there are thousands of small projects every year. We need to focus our resources where it matters most, that is, on larger projects that potentially have the most environmental impact as opposed to reviewing thousands of small projects with minimal environmental harm.

Australia — our biggest competitor in the uranium business — recently approved a major uranium mine expansion in less than two years. Similar projects in Canada have taken twice as long. We can't afford to give our competitors that kind of head start.

Even in natural resource–rich Canada, and no matter how attractive the potential returns, investors will not wait forever. They want to put their money to work. And if we put them off for too long, for no good reason, they will go somewhere else. If Canada's regulatory system cannot compete, the money — and the jobs — will go elsewhere. If Asian partners cannot get the oil they want from Canada, they will get it somewhere else.

Conclusion

That is why I am so passionate about ensuring that reviews of key investment projects be efficient and effective.

There is a risk of abuse — the Prime Minister used the word “hijacked” — by those who oppose the development of hydrocarbons on purely ideological grounds.

Some claim the development of the oil sands, which is responsible for one-one thousandth of global emissions, will destroy the planet. Yet they are upset to be called radicals.

These people are ignoring two important realities. First, they seem to think the world does not need oil, that if we don't produce it, the world will somehow magically find a replacement.

The reality is, even under the most stringent greenhouse gas policy scenario, the International Energy Agency, the IEA, predicts that oil will remain the world's dominant source of energy for the next twenty-five years. In fact, far from declining, the IEA projects that global oil consumption will rise by more than 13 percent over the next quarter century.

Second, those who would deny Canadians the benefits of their natural resources refuse to acknowledge that Canada is a world leader in clean energy and environmental responsibility. You won't hear American special-interest groups, celebrity environmentalists or champagne socialists acknowledge that Canada's oil sands are subject to the toughest environmental monitoring and regulation in the world. We are working to identify gaps with respect to monitoring, and the government is working to remedy this.

They don't mention the billions of public and private sector dollars invested in the development of new technologies and techniques to limit their environmental impact and accelerate the adoption of clean energy technologies throughout our economy.

And that's really what this is all about: the United States, Asia and other parts of the world need oil. With the right infrastructure in place, they can meet a significant part of their needs with oil from Canada — oil that has been produced to the highest standards of environmental and social responsibility — or they can, and must, get it from somewhere less reliable, less stable and less friendly.

The OPEC cartel, which drives up prices at the pumps, is concerned about the discovery of non-conventional sources of oil and gas. How they must smile in amazement to see North Americans fight to kill projects that could compete with their oligopoly.

I have called Canada’s infrastructure projects nation builders, and they are. But in a global context, they are more than that, because they have geopolitical implications which can be positive for Canada and Western democracies.

That is why our Government is committed to a system through which we make timely regulatory decisions based on facts, science and, ultimately, our national interest, not rhetoric — a system that ensures sound environmental protection and respects Aboriginal rights.

We can do the right things for our economy, and we can do the right things for our environment. It's not a matter of trading one or the other.

Let's not sell ourselves short. We are a smart people. We can protect, and we are protecting our environment. We can respect, and we are respecting, Aboriginal rights. And we can, and we will develop our natural resources to the benefit of all Canadians.