Fraser Forum

Trump at two weeks, and what he could mean for Canadian energy

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It has been two weeks since the world order (and some of my research agenda for the next four to eight years) was thrown into complete turmoil by the election of Donald J. Trump as president of the United States. (I hope at this point that sentence is not still triggering people.)

So what did Trump promise, and what does it portend for Canada? Well, for Canada, there’s actually a bit to like. For Canada’s governments, perhaps not so much.

Under his Energy Policy section of his campaign website, Mr. Trump promised to:

• Make America energy independent
• Make the American energy “dominance” a strategic goal of his government
• Fully develop America’s shale oil and gas resources, as well as its “clean coal” resources
• Become totally independent of the need to import energy from OPEC or countries hostile to U.S. interests
• Open U.S. federal lands to energy production
• Encourage the use of natural gas and reduce the cost of energy

These would all be mixed blessings for Canada’s energy sector. Canada is not listed among the countries that the U.S. is to become “independent” from, which is a blessing, given that the U.S. is currently Canada’s sole market for energy exports.

However, making U.S. energy less costly could be something of a problem for Canada, as we already pay more for energy than many American markets, at the cost of our competitiveness and prosperity. If Canada’s governments continue to pursue policies that widen the gap, the situation can only worsen. And to the extent Mr. Trump’s policies spur another energy boom in U.S. oil and gas production, Canada can expect its single market to shrink, while efforts to build pipelines to tidewater continue to stumble over an endless series of roadblocks thrown up by oilsands opponents.

In Mr. Trump’s America First Energy Plan, he also states he will ask TransCanada to resubmit its application to build the Keystone XL pipeline, and from his condemnation of its rejection by President Obama, it’s safe to say he would approve it.

Unfortunately, as we wrote before, Mr. Trump’s position on the pipeline is somewhat problematic. As the Globe and Mail reported Mr. Trump saying in May, “I want it built, but I want a piece of the profits…That’s how we’re going to make our country rich again.”

As my colleague and I wrote previously, this position would be of benefit to no one:

Mr. Trump’s assertion that he wants “a better deal” to get a “piece of the profits” in order to “make America rich again” appears to convey a misunderstanding of both the benefits currently derived from the Canada-U.S. energy relationship and of how the pipeline would benefit all parties.

While the development of unconventional oil and gas through hydraulic fracturing has certainly unleashed an energy renaissance in the United States, America still imports almost as much oil as it produces. For example, in 2015, the U.S. produced 3.44 billion barrels of oil and imported 3.43 billion barrels of oil. Crucially, Canada provided 40 per cent of all oil the U.S. imported in 2015—in stark contrast to the 31 per cent of oil imports from all OPEC countries combined.

Subsequently, the relationship between Canada and the U.S. on energy already provides an excellent “deal” for Americans by giving refiners and consumers access to the third largest oil reserves in the world. They also come from a secure developed country with some of the world’s best human rights and environmental protections.

Mr. Trump also seems to have overlooked the State Department conclusion that Keystone XL would result in “substantial” increases in property tax revenues for counties with facilities related to the pipeline. So, greater access to abundant and secure supplies of oil, and revenues for counties along the pipeline. Sounds like a pretty good deal for Americans. But the deal is even better when safety is considered.

At two weeks post-election, it seems Mr. Trump’s positions in regard to Canada’s energy sector are mostly favourable, but this presumes that Canadian governments will ensure that Canada’s energy markets are open and competitive.

On environmental policy, the news doesn’t appear to be particularly good for Canada. Mr. Trump has pledged to drop the Paris climate change agreement, which means the U.S. will not be “following Canada’s lead” on a national carbon tax or cap-and-trade system. With Republicans in charge of the congress, and most state governments as well, Canada’s current aggressive climate action plans could well put our environmental policies (and the viability of our energy sector) at odds with our massive neighbour to the south. This could not turn out well for Canada’s competitiveness.


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