Prime Minister Mark Carney meets with Alberta Premier Danielle Smith in Calgary last Thursday. The Canada-Alberta agreement offers a permission structure for more oil production.Jeff McIntosh/The Canadian Press
“We all know what to do, but we don’t know how to get re-elected once we have done it.”
That’s how Jean-Claude Juncker, former president of the European Commission, once described a common political dilemma. It’s Prime Minister Mark Carney’s dilemma. And Canada’s.
Canada is the world’s fourth-largest oil producer. We pump more than Iran or Iraq, and among the members of the Organization of Petroleum Exporting Countries, only Saudi Arabia’s production exceeds ours. Canada produces twice as much oil as Kuwait, three times as much as Mexico and 10 times as much as Alaska. We also have the world’s fourth-largest proven reserves.
Canada is not trying to become an oil superpower. We are one.
Most countries would welcome such good fortune, but Canada is not most countries. For the past decade, we had a federal government that treated a foundational aspect of our economy as a problem and an embarrassment.
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On one level – the “we all know what to do” – it made no sense. But it was essential to the “how to get re-elected” part of the equation. The Trudeau Liberals may have been in denial, but so were a lot of voters. Liberals didn’t win in Metro Vancouver, Greater Montreal and the Greater Toronto Area – the source of most of their seats – by promising to boost the country’s chief export industry or by insisting on the need for new pipelines to get its product to market.
Oil was the Canadian economic fact that dared not speak its name. Federal policy was a mix of don’t ask/don’t tell – denial and repression.
But then Canadians got mugged by economic reality. The federal government, too.
Part of the mugging was our own doing: Peter Tertzakian of Studio.Energy calculates that price discounts caused by lack of pipeline capacity cost Canada $49-billion over the past 15 years. The other assault came from U.S. President Donald Trump, whose tariffs have left Canadians worried about their prosperity and our economy, and questioning the logic of deliberately hamstringing our most important export sector.
Doing what had to be done was a political loser. It could now be a political winner. Maybe.
The grand bargain signed last week between Mr. Carney and Alberta Premier Danielle Smith marks a sharp turn in federal policy, and a radical change in language. The previous government had a kind of omerta on the use of the word “oil,” yet the new Ottawa-Alberta memorandum of understanding says, right there in black and white, that the national interest lies in “increasing production of Alberta oil and gas to reach Canada’s export and national security goals.”
More oil is now a vital national asset, not a national shame.
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To make it possible for oil production to rise, the federal government will scrap its sector emissions cap – whose effect would have been to limit or halt additional oil production.
To encourage the private sector to invest in more production, there’s a commitment to building one or more new pipelines, in addition to further expansion of the Trans Mountain pipeline, to move “at least one million barrels a day” via “a route that increases export access to Asian markets as a priority.” If necessary, Ottawa may lift the moratorium on tankers using ports in northern British Columbia.
The other side of the equation is a commitment to lower per-barrel emissions through industrial carbon pricing, technologies such as carbon capture and storage, a 75-per-cent reduction in methane emissions by 2035 and other measures.
There’s also a pledge to “providing meaningful opportunity for Indigenous rights-holders to participate in consultation processes and economic opportunities through Indigenous ownership, partnerships and benefits.”
I’ve long argued that Canada should aim to be like Norway – a country that produces a lot of oil and gas, and stands ready to produce more, but which also has a better environmental record and more stringent emissions rules than Canada.
Norway uses oil to get rich – thoughtfully and without shame. The country has essentially practised “drill baby drill.” It has produced and exported as much oil and gas as the world will buy, treating global demand as out of its hands, and shutting in its own production as benefiting nobody save alternative suppliers such as Russia.
But at the same time, Norway has pursued a green policy at home. The country has high carbon taxes to reduce demand for fossil fuels – a litre of gasoline in Oslo costs almost $3 – and electric vehicles are widespread.
The Canada-Alberta agreement offers a permission structure for more oil production, and it incentivizes more production by promising new pipe to prevent new oil from becoming stranded. At the same time, it gets Alberta to commit to significant steps on emissions, though the steps are necessarily less ambitious than what the Trudeau government once targeted.
I believe that economic logic, and the national interest, argue strongly in favour of this approach. But can the PM get re-elected on it? Many believe he just signed away seats in B.C. and Quebec. Perhaps, but don’t count the votes just yet. Public opinion has been shifting.
Politics aside, we know what had to be done. Mr. Carney just did it.