Mark Carney’s ‘energy superpower’ vision up against political hurdles

On the outskirts of Edmonton, the Enbridge oil terminal is a maze of pipes and tanks that embodies Canada’s fraught oil ambitions.“These are beautiful pipes,” mentioned Norman Omoth, Enbridge’s terminal co-ordinator, gesturing in direction of North America’s largest crude pipeline system that has despatched rivers of Canadian oil to the US since 1950.However the politics of what strikes via these pipes is as tangled because the community itself.Canada now provides about 60 per cent of US oil imports, or about 4mn barrels a day. Most of it comes from the large bitumen-rich oil sands of northern Alberta, residence to the world’s third-largest reserve of oil.The Canadian Affiliation of Petroleum Producers mentioned these shipments, which have doubled in a decade, would generate C$147bn ($105bn) this 12 months.Whereas Donald Trump’s punishing tariffs on Canada — the US’s second-biggest buying and selling companion — don’t have an effect on power, they’ve spurred Ottawa to hunt new clients.The previous US-Canada buying and selling relationship was “over”, Prime Minister Mark Carney mentioned after taking workplace in April. Mark Carney waves to supporters at a victory celebration in Ottawa, Ontario on April 29 © Dave Chan/AFP/Getty ImagesOnce a champion of world decarbonisation, the Liberal chief now needs fossil fuels to assist him buttress Canada’s economic system — turning the nation into an “power superpower” for the Trump period. Carney has mentioned extra pipelines to spice up exports are “extremely doubtless”, though he’s but to announce any, and vowed to ease rules to assist extra power manufacturing. If he pulls it off, Carney may have sheltered Canada from the insurance policies of the mercurial US president whereas easing frictions between Ottawa and Canada’s resource-rich western provinces, and between oil firms and First Nations. “It is a daring transfer by Carney to benefit from Canada’s abundance in power . . . to cut back the nation’s dependence on america,” mentioned Brian Rathbun, on the College of Toronto’s Munk Faculty of World Affairs and Public Coverage.“But what’s pure economically shouldn’t be simple politically since this step will generate opposition from environmental circles and indigenous rights advocates,” he mentioned.The centrepiece of Carney’s “grand discount” is his residence province of Alberta, the place conservative politics and suspicions of Ottawa run deep. Alberta’s oil sands area produces 3.5mn b/d, the majority of Canada’s output. Extraction of the bitumen is carbon intensive and virtually a 3rd of Canada’s emissions stem from its oil and fuel sector.Canada’s oil trade says it wants extra pipeline capability © Emily Welz/FTAs Financial institution of England governor, Carney warned of local weather dangers, and at Brookfield Asset Administration he led a multibillion-dollar transition fund shifting capital away from fossil fuels. However since taking workplace, his personal shift has been swift. Though Canada is lacking its local weather targets, Carney scrapped an unpopular client carbon tax and paused insurance policies selling electrical autos.In his first finances this month, he proposed chopping the contentious emissions cap on the oil sector if the trade and western provinces beefed up their carbon pricing. The strikes had been considered favourably by Canada’s fossil gas producers.Nonetheless, Lisa Baiton, president of the Canadian Affiliation of Petroleum Producers, mentioned firms wanted “larger readability” on local weather coverage earlier than investing.Underneath stress to wash up their operations, Alberta’s large producers have proposed the Pathways Alliance, a $16.5bn carbon seize mission to enhance the environmental document of the oil sands trade. However progress has been gradual whereas the businesses and governments argue over funding.Kevin Birn, chief Canadian oil markets analyst at S&P World, mentioned Canada’s oil provide economics “are engaging,” however Ottawa’s stance on emissions was an enormous unknown.“Buyers are searching for to know . . . whether or not an everlasting path could be carved out for current and future funding,” he mentioned. Some content material couldn’t load. Test your web connection or browser settings.One other struggle is over extra export pipelines, particularly to Canada’s west coast — infrastructure the trade says is important for any “power superpower” ambition. “To successfully use oil, Canada’s solely financial onerous energy, Carney must get not only one, however two pipelines constructed,” mentioned Adam Waterous, chief government of Calgary’s Waterous Power Fund, a significant oil sands investor. Canadian and US commerce negotiators have mentioned reviving the large Keystone XL pipeline mission to the US Gulf Coast that was killed by the Biden administration. Waterous urged Carney to make use of it as a bargaining chip to ease Trump’s punishing tariffs on Canadian metal, aluminium and autos — and mentioned he ought to again a brand new pipeline to the Pacific too. “By buying and selling oil however diversifying Canada’s market, Carney will return the nation to a extra balanced commerce relationship with the US” he mentioned.Earlier Canadian leaders have stumbled in selling an oil trade that accounts for about 20 per cent of the nation’s commerce, however is concentrated in a province that has its personal fringe Brexit-style motion. Conservative Prime Minister Stephen Harper spoke of Canada as an “rising power superpower” in 2006, however his desires led to a crude worth crash that delayed oil-sands progress for years.Justin Trudeau, whose father Pierre Trudeau’s Eighties nationwide power coverage nonetheless sparks fury in Alberta, ploughed billions of federal {dollars} into shopping for a pipeline to the west coast — however angered the trade by specializing in local weather change.Nearly the entire Enbridge oil terminal’s manufacturing is pumped south to gas the US economic system © Emily Welz/FTCarney additionally has to contemplate whether or not the world wants extra emissions-intensive heavy Canadian crude.Whereas the Worldwide Power Company expects oil demand to stay robust for many years, it has additionally warned of a “important provide glut”. Andrew Leach, an power economist on the College of Alberta, famous that even Canada’s personal producers had been hesitant. “There are not any pipeline proposals on the desk” to broaden capability, he mentioned.“The Gulf Coast market in Texas isn’t what it as soon as was for heavy crude,” he added. “Whether or not you could have sufficient manufacturing over the long run given present worth outlooks is a tough query.” All large Canadian oil producers declined to remark.Alberta’s premier Danielle Smith, who needs Canada to double its oil output of 6mn b/d, says Carney should scrap legal guidelines or restrictions akin to a ban on crude tankers off northern British Columbia — key to new export routes. “What good does it do to construct a pipeline in case you can’t load the boats?” she informed the Monetary Instances.Smith is hoping for “excellent news” on Monday with the anticipated announcement of a memorandum of understanding with Ottawa on a possible pipeline mission. However Carney has not clearly said his place on the matter.Enbridge’s Max Chan mentioned the corporate had discovered from the failure of previous makes an attempt to pipe oil to the west coast © Emily Welz/FTBC’s premier David Eby and a few native indigenous teams reject the concept and have urged Ottawa to maintain the tanker ban.“Defending our coast shouldn’t be a barrier to financial prosperity — it’s the supply of it,” mentioned Marilyn Slett, president of the Coastal First Nations.Canada’s power minister Tim Hodgson informed the FT {that a} new federal legislation, Invoice C-5, would give Ottawa ultimate say on fast-tracking main infrastructure initiatives regardless of environmental rules.“If a proponent brings ahead a possible mission, we’ll cope with it,” he mentioned. “We now have the instruments we’d like.”For now, proposals stay scant. Enbridge years in the past scrapped a plan to construct a line to Kitimat, in northern BC and is now targeted on boosting capability on its US traces, with no plan to construct a brand new one, mentioned Max Chan, head of its oil pipeline division.The prevailing oil export infrastructure to the west coast is the Trans Mountain system to Vancouver, which permits shipments to Asia. Justin Trudeau’s authorities bankrolled an enlargement, which got here on-line final 12 months at a price of C$34bn, wildly over finances.The federal government-controlled Trans Mountain Company’s boss Mark Maki has mentioned there can be “advantage” in a brand new west-coast pipeline, however no new proposal is being mentioned.Marilyn Slett, president of Coastal First Nations, mentioned indigenous individuals opposed a pipeline and oil tankers in coastal waters © Canadian Press/AlamyThat could depart an unlikely revival of the Keystone XL mission to Texas as a believable mission.Most Canadian approvals are in place and the trade believes it will assist Alberta’s producers fetch increased costs for heavy oil at US Gulf Coast refineries. It could be a win for Carney in Alberta, however deepen dependence on the US. “It makes Canada [the] USA’s oil colony as an alternative of utilizing our superior sources to advance our personal pursuits and values geopolitically,” mentioned Heather Exner-Pirot of the Ottawa-based Macdonald-Laurier Institute.Chan mentioned Enbridge was “cautiously optimistic” for the sector within the Carney period. “If you must supply your power from someplace, Canada must be on the high of the listing,” he mentioned.