MNI: Canada Can Backfill Russia Energy in Europe- Ex-Ministers

Canada looks set to ramp up production to displace Russian oil and gas in Europe and in the short run needs to send the product via pipelines into the U.S. to "backfill" that market as America's overseas exports climb, former ministers told MNI.

Different levels of government are starting to better coordinate approval of major energy projects according to Lisa Raitt, a former Conservative minister of natural resources, transport and labor who left Parliament in 2019. Even before the Russian invasion, central bank officials and private sector economists said Canada was losing potentially tens of billions of dollars a year after failing to develop pipelines to markets fetching the highest price.

“We're turning a corner” on this, Raitt said. “I also have seen a big change in government in the last five to 10 years provincially, municipally and federally, where it's not about trying to slow down a project anymore and in fact, it's being cognizant that projects are necessary and investment is actually welcome.”

The federal government recognizes it will take time to shift from fossil fuels to greener and renewable sources, says Anne McLellan, a former minister from the energy-rich province of Alberta who served as Deputy Prime Minister from 2003-06. Canada's goal of net zero emissions by 2050 doesn't strictly gap production so long as pollution wanes, she said.

“There's no reason why Canada cannot help deal with the shortage of natural gas or oil” McLellan said. “We will probably backfill what America sends to Europe, because we do not have pipelines that flow to our coasts.”

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Canada's pipeline network will soon grow somewhat when construction to expand the Trans Mountain pipeline to the west coast is finished, McLellan said. Canada also recently approved a natural gas project off the east coast, and said in the short term it can supply and extra 300,000 barrels a day. Canada has the world's third largest crude oil reserves and is the sixth largest natural gas producer, according to the federal energy regulator.

A carbon capture incentive from the April 7 budget is one example of a policy that will help boost energy production and meet climate change targets, McLellan said. Raitt and McLellan, former ministers with Conservative and Liberal governments, serve on the nonpartisan Coalition for a Better Future, a body of business and social groups seeking durable long-term economic growth. They were optimistic Canada can avoid economic populism that has roiled other industrialized nations, and earlier this week hosted Natural Resources Minister Jonathan Wilkinson.

Others are less sure about government backing for big energy projects even to address Russia's invasion of Ukraine. Former Revenue Minister Perrin Beatty told MNI the government needs to "get serious" about developing the projects and cited a longstanding lobby against the energy industry.

“We are going to be using hydrocarbons, and the key is to make the hydrocarbons emit less, not about never using hydrocarbons again," Raitt said. "Governments are moving in that direction and companies are there as well, and geopolitics are incredibly important.”

The Bank of Canada and the federal banking regulator OSFI earlier this year released a first-ever scenario analysis showing that meeting climate targets will be pricey and the cost will rise if action is delayed. DBRS Morningstar said this week Canada’s emission targets will be expensive for industry but the plan is “not sufficient enough to trigger changes to our credit ratings.”