Trudeau Walks a Thin Tightrope Between Fossil Fuels, Renewables

Under Prime Minister Justin Trudeau, Canada’s government is playing both sides of the fence in its national energy strategy.

During Trudeau’s first 16 months, three energy projects -- a pipeline and two export terminals -- were approved by the government with the aim of helping drillers ship their products abroad from the resource-rich West Coast, a boost to the country’s economy. At the same time, he has consistently expressed his support for development of renewable energies, becoming a forceful voice in the campaign against climate change at a time when U.S. support is waning.

"When we go camping, we light our fires before the sun goes down. And that doesn’t mean we’re anti-daylight," Trudeau said Thursday at CERAWeek by IHS Markit, the Houston energy meeting that annually draws executives from around the world. "It’s exactly the same with energy. Innovating and pursuing renewables isn’t somehow in competition with those traditional resources."

In his comments, Trudeau noted both his government’s approval of new pipelines and the country’s plan to put a price on carbon. And he focused throughout on the economic and historical trade connections between the U.S. and Canada.

"Nothing is more essential to the U.S. economy than access to a secure, reliable source of energy. Canada is that source," Trudeau said. "We have the third largest oil reserves in the world, and provide more than 40 percent of America’s imported crude."

Electricity, Uranium

Canada’s contribution to the U.S. economy extends beyond oil, according to Trudeau.“We supply you with more electricity and uranium than any other country, too,” he said.

Trudeau has long pushed the idea that energy growth and a safe environment can co-exist and grow together, said Kevin Birn, a senior director at IHS Markit, an energy industry consultant. “It is a very centrist approach," Birn said in an interview. “But that means you also get tackled from both sides."

Trudeau’s comments acknowledged the path taken by his government has sometimes been controversial.

"So people who are happy we’re moving forward on climate change often are angrier that we’re moving forward on pipelines," Trudeau said. “And the people who are angry that we’re moving forward on putting a price on carbon are angrier about that than they are happy about the pipelines. There are voices on either side."

Canada is "trying to have it all," he added. “We’re trying to make sure that yes, we are being climate leaders and we are also moving forward on pipelines, which quite frankly are a hell of a lot safer and less polluting than oil-by-rail, for example."

Natural Gas

Two projects are now in the works to export liquefied natural gas and liquefied petroleum gas to the West Coast, where it can be shipped to Asia. The government is also in the process of evaluating the re-purposing of an out-of-service gas pipeline to haul crude to the other coast, opening the valve for East Coast exports to Europe.

"We want to expand our export markets," said James Gordon Carr, Canada’s energy minister, in comments at CERAWeek on Wednesday. "Ninety-eight percent of Canadian oil and gas exports goes to the United States. We love you! But we want to love others, too."

Trudeau’s comments came the same day Calgary-based Canadian Natural Resources Ltd. said it will spend C$12.7 billion ($9.4 billion), its biggest purchase ever, to buy Alberta oil fields and facilities that process the sticky bitumen from oil sands from Royal Dutch Shell Plc and Marathon Oil Corp.

Expansion Projects

Canadian drillers have announced expansion projects in the past five months that will add a total of 110,000 barrels a day of capacity when completed in 2019. The industry has long been hampered by a lack of adequate transport options to move its crude to market. A series of proposed pipelines -- and renewed support in the U.S. for the Keystone XL project -- may help to ease the bottleneck.

Even as the energy industry offers the promise of a stronger economy, Trudeau’s government has taken actions to solidify his support for environmentalists. In November, for instance, Trudeau’s government sped up Canada’s planned elimination of coal-fired power plants, promising to phase out traditional coal power by 2030.

"While developing our resources for the economic benefit of Canadians, we must also look to the future," Trudeau said Thursday.

Canada, which already draws 80 percent of its electricity from non-emitting sources, is pressing ahead with plans to cut greenhouse gas emissions amid warnings from Trudeau’s political opponents that doing so will create a competitive imbalance with the neighboring U.S., where President Donald Trump wants to back out of climate pledges and boost coal production.

“Phasing out coal-fired electricity and expanding clean power sources will create new jobs and opportunities,” Environment Minister Catherine McKenna said a the time. Eliminating smog caused by coal power generation will also reduce health impacts, she said.

"That’s so different than a year ago, or two years ago," before Trudeau took office, Birn said, “Environmentalists see policy moving forward in a way they’ve wanted for a while."
At the same time, oil producers have been willing to accept the regulations that go with it, with the prospect of getting pipelines constructed, according to Birn.

"We would not be on this path, not even close, if we as a government had not insisted that environmental protection and resource development go hand in hand," Trudeau said in Houston.