U.S. states more attractive to energy investment than Canadian provinces including Alberta
Canada has one of the largest reserves of oil and gas in the world, and a world-leading industry to harness it. Despite these advantages, self-inflicted policy failures continue to make Canada a less-desirable place to invest.
Specifically, investment in the oil and gas sector fell from $76 billion in 2014 to $29 billion in 2022. This means less money and resources available to develop new energy projects, infrastructure and technologies. While many factors are at play, in the eyes of energy investors, our unattractive policy environment continues to be a major deterrent to investment.
According to a recent study published by the Fraser Institute, which surveys oil and gas investors on the investment attractiveness of 15 energy-producing provinces and U.S. states, all top-ranking jurisdictions for investment attractiveness are in the United States led by Wyoming, Texas and Oklahoma.
Not one province made the top five. Saskatchewan—Canada’s highest- ranked province—was 6th followed by Alberta (12th) and British Columbia (14th).
Why is this happening?
In short, uncertainty around environmental regulations, disputed land claims and the cost of regulatory compliance. Consider that, on average, 62 per cent of survey respondents for Canada indicated that uncertainty over disputed land claims was a deterrent to investment compared to 24 per cent for the U.S.
Investors also have a more positive view of the regulatory regime in the U.S. For instance, 73 per cent of respondents for Canada cited the cost of regulatory compliance as a deterrent to investment compared to only 35 per cent for the U.S.
And 63 per cent of survey respondents for Canada indicated that stability, consistency and timeliness of the environmental regulatory process scared away investment compared to only 38 per cent in the U.S.
Investors are also concerned about nationally-imposed regulations that affect provincial-level energy sectors. In 2020, the Trudeau government enacted Bill C-69, which inserted subjective criteria—including the “social impact” and “gender implications”—into the evaluation process of major energy projects, creating more uncertainty over the federal approval of projects.
Similarly, the Trudeau government passed Bill C-48, which bans large oil tankers carrying crude oil or persistent oils (including upgraded bitumen and fuel oils) off B.C.’s northern coast and limits access to Asian markets.
And the government created an arbitrary cap on greenhouse gas emissions from the oil and gas industry (while all other GHG emissions were exempt) and new rules on methane emissions. Energy industry leaders have also expressed concerns over the federal government’s clean-fuel standards, which mandate that firms selling gas, liquid and solid fuels reduce the amount of greenhouse gases generated per unit of fuel they sell.
Clearly, Ottawa’s aggressive regulations are hampering the competitiveness of the Canadian oil and gas industry, which fuels the economy and produces jobs in Alberta and across the country. Given the importance of the energy sector to the economy, the federal government should remove barriers and introduce reforms to increase the sector’s attractiveness to investors. Otherwise, Canada will keep losing opportunities to the much better investment climate south of the border.