Saskatchewan drops out of world’s top 10 most attractive jurisdictions for oil and gas investment
After more than five years in the global top 10 most attractive jurisdictions for oil and gas investment, Saskatchewan is no longer a top-ranked jurisdiction. According to the recently-released 2018 Global Petroleum Survey, Saskatchewan’s dropped from 7th (out of 97) last year to 18th (out of 80) this year. This province’s drop in the rankings is largely attributed to regulatory concerns based on the results.
Last year, there were six U.S. and two Canadian jurisdictions (Newfoundland and Saskatchewan) in the global top 10. The majority of Canadian jurisdictions dropped in the rankings in 2018, including Alberta 43rd) and Saskatchewan (18th). In contrast, most U.S. jurisdictions experienced an increase in their rankings.
So why did Saskatchewan drop in the rankings? Increased concern over environmental regulations (+21 percentage points), regulatory enforcement (+20 percentage points) and the cost of regulatory compliance (+16 percentage points).
Interestingly, the opposite trend was observed for many U.S. jurisdictions due in part to positive perceptions about the regulatory environment south of the border. In particular, since last year more than half of the U.S. jurisdictions experienced significant improvements concerning labour regulations and regulatory duplication and inconsistencies.
Clearly, this year’s survey results highlight the stark contrast between the regulatory environment in Canada versus the United States. And the Trudeau government is on course to make the regulatory approval process in Canada more complex and uncertain. Specifically, Bill C-69, which is currently under Senate review, will add subjective criteria including the “social” impact of energy investment and its gender implications to the already onerous regulatory process. Meanwhile, the Trump administration has rescinded or scaled back several Obama-era regulations including regulations on hydraulic fracturing on federal lands.
The U.S. has also enacted sweeping business tax reform to attract investment. And while Ottawa recently introduced some measures (including accelerated capital cost write-off provisions for businesses to address competitiveness concerns), these measures may help but won’t fix our competiveness problems.
Finally, the federal government is moving forward with its carbon-pricing plan whereas many U.S. states have moved away from a carbon tax.
Investment dollars will flow to jurisdictions with competitive tax rates and streamlined and predictable regulatory processes. Policymakers must adopt competitive policies to restore investor confidence in Canada’s energy sector.