Within months of winning his first term as prime minister in 2006, Stephen Harper jetted to London and gave a speech to a business audience touting Canada as an “emerging energy superpower”. He described at length the country’s vast reserves and prodigious exports of oil, gas, coal, uranium and hydro power, highlighting Canada’s lofty ranking among global energy producers in all these sectors. It was a sales pitch Harper would repeat often over the next decade as his government welcomed global energy investors, supported energy infrastructure projects, dismantled some regulatory impediments to resource development, and pushed back hard against green political opponents – most notably in his successful 2008 election campaign against Liberal leader Stephane Dion’s “carbon tax on everything”.
Making Canada an “energy superpower” was unmistakeably a primary objective of Harper’s time in power. He expended a lot of political capital in his efforts to achieve it, and ultimately lost the 2015 election to opponents promising to make environmental protection one of their main objectives. But history will record that during Harper’s tenure, Canada’s production and export of energy products grew – in some cases quite dramatically. So did investment in the energy sector, which fuels the continuing growth projected in today’s long term forecasts.
So by most measures, Harper made real progress in growing Canada’s energy outputs. But his term ended, perhaps not coincidentally, with a crash in global energy prices, and today the country’s future as an energy producing giant is far from certain. Any combination of a sustained period of low oil and gas prices, unresolved infrastructure constraints, and the imposition of new carbon taxes and regulations could dramatically impact future Canadian energy production and export capacity. Harper’s successors are suggesting that Canada’s energy output potential was actually constrained by his failure to properly balance resource development with environmental protection. Time will tell if they do any better, but in the meantime, what follows is a summary of the performance of Canada’s energy sectors during the Harper era.
The oilsands boom…
Canadian crude oil production increased 44 percent since 2006. Alberta, by far the country’s largest provincial petroleum producer, saw its crude production rise by 64 percent. Oil sands production nearly doubled, from 1.25 million barrels per day (bpd) in 2006 to 2.22 million bpd in 2014. Conventional oil production increased just four percent over the same time frame, with production of conventional heavy crude decreasing 11 percent while light and medium crude production grew by 13 percent.
Exports of Canadian oil rose nearly 60 percent between 2007-14. The increasingly difficult political challenge of building new pipeline capacity to transport rising exports triggered a 400 percent increase in the amount of crude transported by rail since 2006. The Canadian Association of Petroleum Producers (CAPP) expects crude by rail transport to rise another 224 percent over the next several years, from 185,000 bpd last year to 600,000 bpd by 2018.
…and the natural gas bust
Although Canada remains one of the top five natural gas producers in the world, production has declined by about 11 percent since 2006 during a prolonged period of excess supply and low prices. Harper arrived in office around the time the so-called “shale gale” began with the development of new fracking technologies that made it possible – and economically feasible – to recover large amounts of natural gas from “tight” shale formations. The industry took off particularly around the huge Bakken field in the U.S. Midwest. Though Canada is estimated to have the world’s fifth largest recoverable reserves, last year only 4 percent of the country’s natural gas was produced from shale. This number is expected to rise to 28 percent of Canadian natural gas production by 2035, but the overall production forecast for that year is only equal to the volume produced in 2000.
Canada produces far more natural gas than we consume and the surplus is exported south. But the shale boom in the U.S., which elevated that country to the world’s largest natural gas producer in 2012, resulted in Canadian natural gas exports to the U.S. falling an average of 5 percent a year since 2007. The domestic industry hopes to replace those lost American customers with new ones in the Asia-Pacific region. But low prices and regulatory hurdles have prevented the construction of pipelines and west coast liquid natural gas (LNG) terminals needed to access new Asian markets. The National Energy Board has received 38 LNG export facility applications in recent years; construction has not started on any projects.
Coal miners’ blues
Canada, and in particular western Canada, is blessed not only with oil but also an abundance of the world’s most plentiful fossil fuel – coal. Ninety percent of Canada’s coal deposits are in B.C., Alberta and Saskatchewan. Canada produces a roughly fifty-fifty split between thermal coal, mainly used for domestic coal fired electricity generation, and metallurgical coal, which is used to make steel. The majority of the metallurgical coal we produce is exported; Asia is our biggest customer. Like natural gas and other commodities, price influences production. Canada’s total coal production was relatively steady between 2006 and 2011, then dropped 23 percent in two years. Last year, production climbed back to traditional levels.
Fairly or unfairly, coal has become the bete noir of carbon fuels among governments seeking to prove their commitment to reducing greenhouse gas emissions in the fight against climate change. Alberta’s new NDP government has just announced an accelerated plan to phase out coal power in the province, following the lead of Liberal governments in Ontario, and the Obama administration in the U.S. Slower growth in Asian economies has also depressed demand for Canadian coal, leading to mine shutdowns and significant job losses. History may record that the Harper era was the last gasp of the Canadian coal industry.
Out-nuked by Kazakhstan
Canada’s nuclear power production capacity has declined by nearly five percent since 2006, due to Quebec’s decision to permanently close its Gentilly plant in 2012. All but one of Canada’s 19 operating plants – Point Lepreau in New Brunswick – are located in Ontario, where they provide 50 percent of that province’s electricity. By 2020, a further 22 percent of Canada’s installed nuclear power generating capacity will be removed, when Ontario closes its six Pickering reactors. According to Natural Resources Canada, there are currently no plans to build any new nuclear power plants anywhere in the country.
About 15 percent of the uranium mined in Canada fuels domestic reactors; the remainder is exported to the U.S., Europe and Asia. When Harper took office in 2006 he boasted that Saskatchewan had the fourth largest global uranium deposits in the world, and Canada was the world’s largest producer. But by 2009, Canada had fallen to second after it was surpassed by Kazakhstan. Our production declined seven percent between 2006 and 2014, but should increase in 2015 with the start-up of the Cigar Lake mine in northern Saskatchewan. But Kazakhstan’s production is also slated to rise over the next several years, so it is unclear if Canada will reclaim the top spot in uranium production.
Harper boosted hydro
When promoting Canada’s energy sectors, Prime Minister Harper always made sure to highlight renewables, especially hydro power. According to the World Energy Council, in 2008 only China produced more hydropower than Canada. However, in 2011, we were overtaken by Brazil, and dropped to third.
Still, Canada’s hydropower generation increased by about 10 percent since 2006. This allowed the amount of domestic electricity generated by hydro to rise from about 58 to 63 percent. The majority of Canada’s electricity exports to the U.S. consist of hydroelectricity; total electricity exports to the U.S. rose 56 percent from nearly 43 million megawatts per hour (MWh) in 2006 to 67 million MWh in 2013. President Obama evidently did not factor these increased clean energy imports from Canada into his decision to veto the Keystone “dirty oil” pipeline.
Canada’s greenest prime minister?
As prime minister, Stephen Harper presided over a massive increase in the production of wind and solar power in Canada. As 2006 began, there were just 47 wind farms in Canada, with the capacity to produce about 580 megawatts (MW) of power. Today, Canada has 239 wind farms with 10,425 MW of capacity, representing a 1,700 percent increase on Harper’s watch. His home province of Alberta is the country’s third largest wind energy producer.
Canada ranks 10th globally in terms of installed solar power generating capacity after a decade of rapid growth in the (still admittedly small) sector. In 2006, we had 20 MWp capacity; by the end of 2014, there was 1,170 MWp, an increase of 5,750 percent. However, most of the credit for this goes to the Ontario government’s decision to eliminate coal-fired electricity by implementing incentives for renewable energy. The decision is also credited, at least partly, with doubling the province’s electricity prices between 2006-15.
A foreign investment superpower, at least
Harper started his term in office openly criticizing human and democratic rights abuses in China, going so far as to say that his government would never sell out its principles on these issues for the sake of the “almighty [Chinese investment] dollar”. He was widely criticized by opposition parties and business groups and Chinese government officials and eventually relented somewhat. Still, after allowing the $15 billion takeover of Calgary oil giant Nexen by a Chinese state-owned company in 2012, the Harper government vowed it would not allow further big purchases of Canadian resource assets by foreign state-owned enterprises.
Nonetheless, over the span of Harper’s reign total foreign direct investment (FDI) in Canada, in all industries, grew by 68 percent. FDI from the U.S. grew the least (36 percent) while investment from the Asia-Oceania region increased the most (165 percent). In 2006, investment in oil and gas extraction accounted for 11 percent of total FDI, in 2014 it made up 16 percent.
Total FDI in oil and gas extraction more than doubled during the last decade, from nearly $50 billion in 2006, to more than $119 billion last year. In 2006, the U.S. accounted for 80 percent of FDI in this sector; last year it made up less than half (48 percent). European FDI rose from $1.6 billion in 2006 to $23 billion in 2014. Asia-Oceania, which didn’t even register in Statistics Canada FDI reporting in 2006, contributed 22 percent of oil and gas extraction FDI in 2014. Figures are similar for the mining and oil and gas service sectors, where total FDI increased 74 percent; investment from the U.S. in these sectors fell from 80 to 63 percent while Asia-Oceania went from negligible to 16 percent.
This drop in the share of FDI coming into Canada from the U.S. for oil and gas extraction projects is unsurprising, because U.S. investors now have more domestic energy investment opportunities. U.S. crude oil production grew by 80 percent since 2008 and shale gas, which accounted for 10 percent of U.S. natural gas production in 2007, makes up 56 per cent today. The increased investment in Canada from Asia as well as Europe suggests that Harper’s pitch to investors outside of North America was successful and timely.
In terms of renewable energy, Canada’s ranking in the Ernst and Young Renewable Energy Investment Attractiveness Index improved from eighth in 2008, to sixth in 2015. However, our global ranking for clean energy technology exports – things like wind and solar as well as equipment to reduce pollution in other resource consumption processes – dropped from 14th in 2005 to 19th in 2013.
And then it was over
In 2015, as world oil prices remained stubbornly mired below $50 a barrel, Canada’s seven biggest oil producers collectively reduced capital spending in this country by 39 percent ($12 billion). Canadian majors Cenovus and Canadian Natural Resources Ltd. have recently released 2016 budgets with capital spending projections that are lower still. While the country’s largest oil and gas producer – Suncor – stands out with a plan to increase spending by 15 percent next year, it is also projecting a 5 percent production decrease, and has already shed about 1,200 positions this year. Indeed, Harper’s hometown of Calgary is experiencing waves of layoffs not seen since the 1980s; CAPP estimates about 35,000 oil sector jobs have been lost this year in Alberta alone.
Canada’s new progressive provincial and federal governments are blaming the Harper administration for the downturn, claiming its neglect of environmental concerns cost the country its national and international “social licence” needed to win support and approval for new energy projects and associated transportation infrastructure. This ignores not only the genuine progress that occurred in overall energy sector expansion on Harper’s watch, but also the global energy supply gluts, depressed prices and tax and regulatory disincentives that are increasingly handicapping Canadian energy development today. Whatever the future holds for the industry, history will show that Canada’s march toward energy superpower status stalled with the fall of the Harper government.
Naomi Christensen is a policy analyst at a think tank based in Calgary. She holds a masters of public policy degree in energy and environmental policy.