Husky Energy’s (HSE.TO) chief executive officer says major energy projects are unlikely to move forward in Canada unless Ottawa does more to reduce political uncertainty and lengthy, expensive approval processes.
Speaking on a conference call following the release of the Calgary-based integrated oil producer’s latest financial results, Robert Peabody commented on the increasingly challenging environment for new energy infrastructure in Canada.
“Governments should make every effort to ensure that companies in any industry don’t invest significant dollars in a project, and in project applications, only to be derailed by policy or political uncertainty at the very last moment,” he said on Thursday. “That certainly is a situation that has to be rectified if people want projects to move ahead.”
His remarks come in the wake of Teck Resources’ (TECK-B.TO)(TECK) decision last Sunday to pull the plug on plans for a $20 billion oilsands mine in northern Alberta. The company said the full potential of Canada’s energy sector will not be realized until the government reconciles conflicting natural resource development and carbon reduction priorities.
Teck began the regulatory process for the planned Frontier mine in March 2008. Last July, the Alberta Energy Regulator and the Canadian Environmental Assessment Agency recommended approval of the project. The federal government was expected to issue its decision by the end of the month.
“All you have to do to frustrate large project investment is make the regulatory process longer than sort of five years,” Peabody said. “What killed Teck, ultimately, was a regulatory process that just went on and on and on.”
While Teck had not deemed the project viable given current commodity prices and the lack of take-away capacity in Canada’s oil patch, the project became a political flashpoint, pitting Ottawa’s commitment to reduce carbon emissions against the need to support Alberta’s long-suffering resource economy.
Teck warned last week that it would face a $1.13 billion impairment charge if the plan did not go ahead.
The abandoned Frontier mine plan is the latest casualty in a long line of energy projects impacted by regulatory hurdles and environmental opposition, including the Trans Mountain pipeline expansion sold to the government by Kinder Morgan (KMI), and TC Energy Corp’s (TRP.TO)(TRP) Keystone XL pipeline.
The latest pressure point has been TC’s Energy Coastal GasLink pipeline in Northern British Columbia. The project aims to transport natural gas 670 kilometres from near Dawson Creek to a facility near Kitimat, where LNG Canada will prepare the gas for export to global markets.
While the project has the approval of all 20 elected Indigenous band councils governing the route, the Wet’suwet’en hereditary chiefs have not consented. They insist their authority trumps governance structures created under Canada’s controversial Indian Act.
Nationwide protests in support of the hereditary chiefs have erupted in recent weeks. Demonstrators have blocked trains on key rail arteries, resulting in a range of setbacks for businesses across the country, including temporary layoffs.
A new poll by the Angus Reid Institute found 78 per cent of Canadians feel the country’s reputation as a prime destination for investment has taken a hit as a result.
Goldy Hyder, chief executive officer at the Business Council of Canada, said the disconnect between the Wet’suwet’en hereditary chiefs and their elected counterparts adds another layer of complexity to the already challenging process of building energy projects in Canada.
He said the federal government keeps “moving the goalposts” on project approvals, and his members in the energy sector are getting fed up.
“‘What else do you want from us?’ That’s what I hear,” Hyder told Yahoo Finance Canada.
His advice for the government: “Don't politicize regulatory processes. Build the regulations strong enough that you are comfortable that you are getting the policy outcomes that you want.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.