As Canada’s oil and natural gas industry struggles with transportation capacity and market access issues, a new study prepared for the Canadian Energy Pipeline Association (CEPA) by Ernst & Young LLP (EY) takes an in-depth look at the layers of regulations imposed, at both provincial and federal levels: Regulatory Competitiveness in Canada’s Pipeline Industry.
CEPA member companies take pride in the fact that Canadian pipeline systems are among the safest in the world, and regulations play an important role in ensuring that safety. But, in an increasingly complex regulatory environment, it’s now a long and complicated process to get new pipeline projects off the ground, and even operating existing pipelines has become increasingly difficult. The repercussions for Canada’s pipeline industry – and Canadians – are significant.
In this three-part series, we’ll get a glimpse of the EY report, especially how the current regulatory landscape is undermining competitiveness. And, we’ll look at ways regulations can support a competitive business environment to build Canada’s energy future.
Lance Mortlock, Strategy Partner and Canadian Oil and Gas Leader, EY Canada, who recently led the CEPA-commissioned analysis of the regulatory competitiveness in Canada’s pipeline industry, is explicit about why good pipeline regulations are important.
“Effective pipeline regulations that are clear, certain and predictable make for a clean environment and a strong economy, and that’s beneficial for all Canadians,” says Mortlock.
Federal, provincial and territorial governments set regulations to safely develop and transport Canada’s abundant, but largely landlocked, oil and gas resources to markets across the country, to the United States, and eventually, emerging markets outside of North America.
Layers and complex overlaps that result from both provincial/territorial and federal governments having separate pipeline regulations present the biggest challenges. An illustration of the complexity of regulatory layering in Canada is evident in this graphic pulled from the EY report:
The report reached three conclusions on regulatory complexity that have implications for Canada’s pipeline industry and, ultimately, its global business competitiveness:
Mortlock notes, “The bottom line is, pipelines bring energy products to market. And that helps support the quality of life and day-to-day well-being of all Canadians. Although operators pay up-front for the costs related to duplication, complexity and uncertainty, the costs of decreased competitiveness and regulatory confusion are eventually passed on to consumers and taxpayers.”
Canada’s energy future is not dependent on a single energy source. Oil, natural gas, wind, solar, nuclear, geothermal, hydro – together they all play an important role in providing Canadians with reliable and affordable energy going forward. However, regardless of the energy source, when investors look for jurisdictions to invest their capital, they’ll consider the business environment and compare it to other jurisdictions on a variety of levels. Investors need regulatory certainty, clarity, and predictability to be able to confidently invest in Canada.
In next week’s post, we look at the impacts of regulatory complexity and the reasons why regulatory burden on the industry matters to Canadians.