SIMSA 2024: Oil and gas is a “cornerstone of our financial prosperity,” says CAPP CEO Lisa Baiton

REGINA – To rectify Canada’s sinking economic status, we need to fix our energy regulatory framework to be timely, predictable and simpler. Along the way, we need to include Indigenous people and their investments.

Those were the messages by Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers, in her keynote address to the 10^th annual Saskatchewan Industrial and Mining Suppliers Association (SIMSA) Energy Forum. The event was held in Regina on Oct. 2, and almost 300 people attended.

Baiton is originally from Swift Current, where her family ran an oilfield services business in trucking and earthmoving. “So I know first hand what companies like yours do for the Canadian economy, for the provincial economy, for our communities and for individual families,” she said.

Baiton focused on the foundational role that the oil and gas industry play in Canada’s economy.

“This sector is a cornerstone of our financial prosperity, and it is a key driver of numerous other industries. The direct benefits are substantial. We have high paying jobs. We generate massive tax revenues and royalties, and our contributions to GDP are unlike few other sectors can match. And these contributions ensure that families across the countries have the opportunities for financial security and growth,” she said.

“Most of you here, today, understand the important contributions of the natural gas and oil industry and what it delivers, here, in Saskatchewan. You and your businesses are a direct part of the supply chain and play a role in helping the people of Saskatchewan realize the great value that is derived from our natural energy resources.

“But even beyond its immediate economic impact, the oil and natural (gas) industry supports a wide array of other sectors. Here in Saskatchewan, we have operators, not only in the upstream production, but in midstream, pipelines and refinery, in petrochemicals, agriculture, fertilizer, steel, among others.

“And let me just give you a few stats our industry, the upstream oil and gas industry in Canada, onshore, offshore, conventional, unconventional, employs directly and indirectly, 450,000 jobs from coast to coast in every single province. And when you factor in induced jobs, that’s 800,000 jobs.

“Petrochemical, third largest manufacturer in Canada, generates 108 billion in shipments and supports 190,000 jobs. Fertilizer and agriculture. It boasts a GDP contribution of over $31 billion and 250,000 jobs. Midstream, I’ll just pick pipelines and refineries, but I’ll just give you an example with the most recent trans mountain expansion. That one project alone has generated a 0.25 per cent increase to Canada’s GDP, which equates to $4.25 billion per quarter, or $17.2 billion a year.”

She said the interdependency of the oil and gas industry to the country’s economy is crucial to making informed policy decisions, adding that oil and gas underpins the entire economy.

“it’s a good news story that should resonate with all Canadians, because truly, Canada is built on oil and gas,” Baiton said.

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Worried

“But before we look to the possibilities of the future, we must understand the challenges of the present, and we have to understand the problem. And the problem is Canadians are worried. Recent polls have shown that the top concern of Canadians today is centered around the economy. Canadians are worried about paying their mortgages. They’re worried about their children’s ability or inability to buy a house or find a place to live. They’re worried about the rising cost of groceries, electricity, gas for their car or whether they’re going to have a job next month.

“They’re worried about their health care system and if it’s going to be able to support them and their loved ones when they need it most. But what Canadians are actually feeling is the impacts of a decade of declining investment and lowering productivity and an increasing population without the economic growth to sustain it,” Baiton said.

She said Canada’s place in the world is even more worrisome, noting our country is foaling behind on numerous fronts including quality of life, innovation, research and development,

as well as militarily.

 

“Canada’s competitiveness globally is falling far behind on the most meaningful economic indicators. So let me pause a moment on that point, because I spend a lot of time traveling coast to coast. And I really find that Canadians as a whole don’t really grasp where, where our country is at.”

Noting data tells a story like it is, she said, “I can tell you looking back over the past five years, Canada’s per capita GDP growth is flatlined with less than one per cent growth. By contrast, the average growth for all of our OECD counterparts over the same period was 5.6 per cent. So Canada is less than one per cent, and are all of the other OECD countries 5.6 per cent. Looking forward, the OECD is projecting Canada to be the worst performing economy, dead last out of all 38 advanced countries over the next 40 years, achieving the lowest real GDP per capita growth. So you heard me correctly, Canada is dead last.”

She continued, “Canadian living standards are falling, as is their hopes for future opportunities. A recent Pew Research poll found that 75% of Canadians believe that their children will have a lower standard of living than themselves.”

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Why?

So why’s this happening? She explained through CAPP’s lens.

“What I can tell you is one of Canada’s, and one of Saskatchewan’s greatest competitive advantages in the global economy is our energy advantage. Canada and Saskatchewan are blessed with a world-class resources base. We are the fourth largest oil and gas producer, the fourth largest oil producer and the fifth largest gas producer in the world. Our oil reserves are larger than Russia’s.

“But our competitive energy advantage isn’t just about resource wealth. What distinguishes us from some of the larger oil and gas producing nations like Saudi, like Russia, is that Canada produces our resources with among the highest human rights and environmental standards in the world.

“Canada and Saskatchewan has a unique combination of a commitment to environmental action and capital investment in clean technology innovation. We have workers with the talent to produce our resources cost effectively and responsibly. We have a stable, democratic system of government, and we have systems in place that ensure the final financial benefits from the resources Canadians own are shared across the country.

“Realizing these advantages has the potential to position Canada as a leader in developing innovative technology to lower global emissions while exporting secure risk. Produced oil and natural gas to offset higher emitting sources. It has the potential to position Canada as a reliable source of energy security, not just for ourselves, but for our allies. And it has the potential to position Canada as an economic powerhouse, investing in the technologies of tomorrow and benefiting all Canadians along the path to get there.”

Our business fundamentals are strong, she said. “There is a growing market for Canadian oil and natural gas resources. Looking at the future, global energy demand is going nowhere but up population and economic growth will require much more energy from all sources, including oil and natural gas.”

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With population growth expected to add another 1.7 billion people globally by 2050, energy demand is expected to continue to rise, Baiton explained. “We are going to need all sources of energy.”

She continued, “As we sit here today, it’s hard to see how Canada is going to fully realize that opportunity, and that’s because the greatest barrier we have, here, in Canada to seizing that energy advantage potential is our uncompetitive and complex federal regulatory environment. It’s an environment that sees Canada languishing in an ever-more competitive global economy. It does not acknowledge the critical importance of the Canadian oil and gas sector to domestic and Western energy alliance, or as an economic powerhouse for this country, or as a pathway for meaningful Indigenous economic reconciliation, or as a critical player in lowering global emissions.

“It’s an environment that ignores the time value of money and the need for critical infrastructure and a permitting process to move with speed and certainty, particularly in a capital-constrained environment. It’s an environment that takes in a punitive approach to regulation when our biggest competitor next door, the US is using market-based incentives to drive

investment and create jobs.”

 

She noted a lack of clarity around carbon capture, utilization and storage tax credits.

“There’s a lack of vocal support for LNG trading partnership requests, despite a growing list of countries coming to Canada, like Germany, like Poland, like Japan, like Greece. And it could be, could have been, could still be one of the biggest economic developments in Canadian history.

“The proposed federal emissions cap framework is an unnecessary policy layer on top of an already unwieldy stack of regulations on the oil and gas sector. And that cap, if implemented, will lead to production cuts, and that, in turn, is going to have negative impacts on the sector, and your sectors and the Canadian economy.”

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She said the cap is because the government feels the industry is dragging its heels on decarbonization.

“I can tell you nothing could be further than the further from the truth. But I’d like to talk to you about the decades long, meaningful track record we have on that. But I can’t, because yet another policy was implemented in in stealth over the summer, and it’s called Bill C 59 that precludes my industry from talking about our environmental achievements. So I can’t talk to you about that.”

“So why does policy complexity matter in the context of innovation and productivity, and how does it impact Canada’s place in the world? That’s simple. To develop new technologies, to build projects, to export goods, to create jobs and opportunities for a growing population, we need successful and growing businesses, and in particular, we need our biggest GDP generators and our biggest job creators to be successful,” Baiton said.

A lack of regulatory certainty is stifling investment in Canada. Drawn out and uncertain regulatory approvals discourage investors.

A report CAPP commissioned “showed that a stringent emissions cap would force significant cuts to production in the conventional oil and gas sector, which in turn, will kill thousands of Canadian jobs, lower our contribution to trade, lower our contribution to GDP and drive out the investment this country needs to rebuild our economy and boost our productivity,” she said.

“We have to be eyes wide open that capital is global. It’s agile, it’s mobile, it will naturally flow to countries where there are predictable regulatory and policy environments, and that is the issue we here have here in Canada.”

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Pragmatic approach

To revive our economy, she said, “We have to take a pragmatic approach to the energy transition that’s underway, and to meet targets set by the federal government, investment in technology, in facilities and other major infrastructure must happen at a scale never before seen in Canadian history. The federal government’s own estimates suggest that Canada, Canada will have to invest between $125 and $140 billion every year, between now and 2050. Right now, Canada is tracking less than 1/5 of that investment amount. We need a plan with pragmatic timelines that considers what can actually be achieved and demanding more urgency without creating an environment for success, will only result in disorder and failure.”

She went on, “Second, we need to fix our approach to major projects and ensure that approvals and permitting can happen in a reasonable time frame currently.”

“I guess it’s coming up on two years ago, you had the German chancellor come to Canada looking for Canadian LNG. We had a government that said there was no business case for Canadian LNG. And Germany went back and under two years built count them, one, two and three, brand new, from conception-to-reality, LNG, import facilities. It is possible to do it, and yet we, like our international peers.

“Third, you cannot have investor certainty unless you have that regulatory uncertainty. And so we need governments to champion major investment opportunities like they do in every other jurisdiction around the world. And to achieve this, we need joint efforts by federal and provincial governments to remove the regulatory layers and policy complexity to achieve a cohesive national envision, national vision that enhances the well being of all Canadians, balancing energy security the economy, economy, affordability and environmental protection.”

Fourth, she said we need to leverage Indigenous economic reconciliation. She said, “The industry has long been a major employer of Indigenous peoples, in part due to the fact that our development is within indigenous territories, and the development in oil and gas facilities within the territories has created opportunities for indigenous owned businesses in the industry with experience in the industry, the indigenous communities are also taking a role in ownership. Since 2017 almost $4 billion of Indigenous equity positions have been taken in oil and gas projects like pipelines, like power plants, like LNG terminals and more. And the oil and gas sector is currently the largest source of Indigenous equity ownership in Canada with significant opportunities for the future.”

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Alternative vision

“There is an alternative vision, one that’s very much in our reach, in which, after 2050, Canada has the lowest emitting oil and natural gas products as long as there’s a demand. A world where Canada is positioned competitively as a most favored producing nation. A nation with a credible track record of building not just one or two projects, but multiple nation building projects that will ensure that Canadians receive full value for their natural resources and continue to grow and export our supply of responsibly produced oil and natural gas.

“In doing this, attracting investment into emissions reducing major projects that will allow Canadians to prosper in a lower carbon world.

“And to achieve this vision, we have to get the policy environment right. It needs to be clear. It needs to be pragmatic. It needs to be competitive with other nations. It needs to align across all provinces and federally, which means we need to collaborate across political lines and across industries.

“To build an environment that encourages rapid innovation and progress and attracts investment. The speed of permitting needs to match the ambition. And if we can get all of that right, we can ensure that the billions of dollars in investment comes to Canada, and unlocks decades of value to help Canadian Canadians and the Canadian economy grow and prosper, creating high value, high paying jobs, opportunities and prosperity for all Canadians for the decades to come. We can take our place as a leader again in providing secure oil and gas to help lower global emissions. We can enhance our geopolitical influence while ensuring our own energy and national security is increase is, is there an increasingly unstable world. And most importantly, we can recapture Canada’s position of economic strength,” Baiton concluded.

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