Thank you very much, Mr. Chair, for giving me the time, literally.
Thank you, committee members, for giving me the opportunity to speak to you this afternoon.
For much of the last two and a half decades, I've provided advice to governments and industry on Atlantic Canadian energy and natural resource issues. Since I retired from the public service in 2010, I've remained active in the natural resources and energy fields, providing policy and business development advice to both the public and private sectors. I appear here today as an individual, and the opinions I express are my own.
Time permitting, I will outline my perspective on the Canadian situation, with a focus on petroleum fossil fuels. I will identify some threats to our position as an energy exporter, offer some advice on how we should use the benefits that come from export diversification, and identify some things we need to do to facilitate the integration of our domestic markets and to increase exports.
In the fall of 1957, Ernest Manning came to Ottawa to enlist the help of Prime Minister Diefenbaker to solve Alberta's oversupply of oil. He faced essentially the same problem we're facing today. Existing transportation infrastructure had been overwhelmed by new production from Leduc, and even then the east was a net importer of foreign oil. Fifty-six years ago, Canada might have developed a national vision that included energy corridors from coast to coast to coast. These could have supported market integration for all forms of energy.
Instead, we traded an integrated domestic market for a series of export-driven projects that, with the exception of the TransCanada natural gas pipeline, created infrastructure running north to south. These served important projects and producing areas but did little to create a national domestic market.
Canada's energy developments have been largely driven by and have benefited from demand from the largest single energy market in the world. But U.S. market fundamentals are changing and Canada is paying a price. According to a report commissioned by the U.S. government, U.S. transportation bottlenecks will cost Alberta producers as much as $65 billion a year by 2030, if they aren't addressed.
New technologies, which have enabled this production that has created the bottlenecks, as well as climate policies that are reducing demand are not unique to the United States. They're part of a global trend that we may not be able to outrun by simply changing our market focus, even if that new focus includes the rapidly growing economies of China and India. While many see the economy as a key preoccupation, others are seeing climate change return as a top-of-mind issue. The heads of the International Energy Agency, the IMF, and the World Bank have all stated recently that renewed action is required to curb the growth of emissions.
Just last month, the U.S and China struck a working group to foster low-carbon economic growth, and in its latest five-year plan, China has also stated its intention to peak its use of coal. And of course, this week, Minister Oliver is back in Brussels fighting the European plan for a low-carbon fuel standard.
While policy risk is all around us, the technology revolution is opening up new supplies worldwide. The U.S. Energy Information Administration has estimated that with new technology, China's recoverable shale gas resources could be 50% bigger than those of the United States. If China can deal with its internal inertia, it will have substantial gas supplies of its own to compete with imports from countries like Canada, though it will become the world's largest oil importer by 2030.
According to the IEA, new sources of supply coupled with a slowdown in emerging markets and generally lower demand growth “raises the prospect of a more comfortable supply/demand balance in the medium term”. This is, in my opinion, not a recipe for higher prices.
How can we remain competitive, then, if the upper end of our cost to production for new oil sands-derived crude overlaps the low side forecasts of the world price, especially when these new supplies and policy risks are factored in?
Market diversification is part of the solution in the near term, as it can buy us time to address high cost structure and environmental challenges, but we must also position ourselves with a counterbalance of supply sources. The oil sands, yes, but we must also invest in our offshore frontier. Newfoundland and Labrador production can compete with the best in the world, but we must encourage higher rates of exploration to replace declining reserves. The federal government, as a resource owner and co-manager of our offshore areas, needs to step up and match provincial efforts.
Domestic markets can provide new customers for western crude as well as for electricity from renewable sources across Canada. This can only occur with the support and cooperation, of course, of the provinces, and a willingness by industry to invest in the required infrastructure. We need a national energy corridor, one that can link our multiple domestic markets into a stronger whole, providing security of supply through diversification of sources, a corridor that allows Alberta bitumen to reach tidewater and allows Canadians to take advantage of renewables that are currently stranded away from major centres of demand.
Investors need certainty of regulatory process. They want to know what is required and when, with predictable outcomes. But we mustn't discourage involvement of ordinary Canadians in civil society. These projects must have a social licence. All of this would be helped, of course, by a national consensus on energy, one that ensures we are competitive both as a producer of energy and as an exporter of manufactured goods that are competitive because we have a domestic supply of affordable and sustainable energy.
Thank you.