Leaving the ‘lost decade’: Major Projects Office a step toward certainty for resource sectors

Pumpjacks draw oil out of the ground near Olds, Alta., on July 16, 2020. THE CANADIAN PRESS/Jeff McIntosh

After 10 years in the wilderness, Alberta is finally getting the right kind of attention from the federal government.

Last week’s announcement about the Major Projects Office (MPO) located in Calgary and led by veteran energy industry executive Dawn Farrell is the first critical step to providing what the energy sector—and other resource sectors—have been looking for during the lost (sic) decade, if not longer: certainty.

Regulatory certainty is what unlocked billions in investment in Canada’s energy sector.

Investors from south of the border and Europe supported the growth in the oilpatch as the majors left Alberta in the 1990s, spinning off assets that were snapped up by those who knew where the opportunities lay—and how to build companies.

It’s how Suncor was able to announce its Project Millennium in late 1998—a year when oil prices averaged US$11.84 per barrel (dipping below $10/bbl in December of that year).

That investment decision, despite the immediate poor economics, was not only a “company-maker” for Suncor—arguably it set the stage for the exponential growth in the oilsands and today’s production of 3.5 mmbbls/d.

Having the MPO, which reports to Energy and Natural Resources Minister Tim Hodgson, in Calgary establishes a long overdue, direct and open line to Ottawa.

Back in 1989, Mac Van Wielingen, Phil Swift and John Stewart established what is now ARC Financial with the goal of supporting Alberta-based energy companies to raise money locally, rather than going east.

This move hearkens back to the reasoning that capital, expertise and decision-making need to be where the action is.

Alberta has been—and remains—critical to the economic future of the country.

It’s a province where big, complex projects have been built and that has what the world needs—energy and food.

Eliminating barriers to investment will pay huge dividends to all Canadians.

However, as the draft project list reported by The Globe and Mail on Friday shows, this office is not just about oil and gas.

Hodgson has emphasized that the MPO will also oversee nuclear, forestry, mining, liquefied natural gas (LNG) and other nation-building projects, including port and transportation infrastructure and energy corridors.

All of this is important for Canada to leverage its competitive advantage as a resource-rich nation and build prosperity across the country.

The numbers on the economic importance of the energy sector speak for themselves—as they often have, but just as often have been ignored.

According to the ARC Energy Research Institute, the oil and gas activity alone accounts for 450,000 direct jobs and 450,000 indirect jobs.

It contributes three per cent of GDP, pays $20 billion in royalties to provincial governments and is expected to generate revenues of $172 billion in 2025.

Mining and forestry similarly contribute billions and provide the backbone for economic activity in communities across Canada, with nuclear emerging as providing new growth opportunities.

But now comes the hard part: not only making sure the MPO is not perceived as siloed because of its location but also determining what needs to be in place for investment to be unlocked, which projects should be prioritized, whether they need to be de-risked to attract investment and ensuring the Indigenous communities are partners at the table.

By establishing the Alberta Indigenous Opportunities Corporation (AIOC), Alberta set the stage for a new era of meaningful economic participation—beyond impact benefit agreements—and lasting economic reconciliation.

The MPO is positioned to build on that.

Farrell, most recently as former president and CEO of TransMountain, intimately understands this opportunity and how to find a path forward that is both timely and inclusive.

What lies ahead are several opportunities.

LNG exports, which bring the ability to establish Canada as a price-maker in global markets in the long run; carbon capture and sequestration projects; and building out energy corridors and transportation infrastructure for all commodities, from lumber to potash, pulse crops and energy—to ensure reliable and efficient access to global markets.

Second, Canada can demonstrate to the world how to build a carbon capture and sequestration system with both private and government capital.

The Pathways Project, a carbon capture and storage network and pipeline designed to capture and transport carbon from multiple oilsands facilities for permanent underground storage, has the potential to remove up to 40MM tonnes of carbon produced from oilsands extraction by 2050.

Pathways aims to ensure Canada’s oilsands reserves can continue to be produced, generating the taxes and royalties that fund federal and provincial budgets for years to come.

Third is increasing oil exports to new markets.

The Trans Mountain Expansion, currently running at 82 per cent capacity, will return $1.25 billion to the federal government this year alone.

There are calls for more pipeline capacity, and yet, it won’t happen without the oilsands producers having the requisite certainty to invest capital to boost production for the long term.

Without more barrels, increased pipeline capacity is hard to justify—especially when existing infrastructure can be optimized to expand throughput.

The producers need assurances that span decades, not the news or election cycle; those investments to increase production must generate revenues, profits and returns to shareholders.

This is a condition precedent for increasing pipeline capacity.

Fourth, energy corridors and transportation infrastructure—both port and rail.

When the CEO of a major company says there is significant investment opportunity in Canada and in the same breath says one of the barriers is the lack of rail capacity to get products to the coast, we must pay attention.

The challenge is setting priorities amidst an increasingly unpredictable global order.

A recent agreement between China and Russia on natural gas and the prospect of LNG exports from Alaska to Asian markets suggest time is of the essence if Canada is to grow its global LNG presence.

There is nothing easy—or cheap—about what lies ahead.

But, as U.S. President John F. Kennedy said in 1962, “We choose to go to the moon… and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone and one which we intend to win.”

Pick your metaphor—if it’s calculus, Canada is at an inflection point, or in the mining vernacular, Canada is sitting in the angle of repose.

Either way, it behooves us to swiftly harness the best of our energies and skills for the benefit of everyone in this country.

The mandate and leadership of the MPO is an important first step in maximizing the economic opportunity of our resource bounty—from coast to coast to coast—for the benefit of everyone in this country.

Deborah Yedlin is the president and CEO of the Calgary Chamber of Commerce.