Costly regulatory delays loom over Canada’s energy industry

Last week Kinder Morgan projected that the Trans Mountain pipeline project could be a year behind schedule as it continues to face permitting delays. The company initially expected the $7.4 billion project to be in service by late 2019, but has pushed back the start-up date to December 2020 depending on regulatory, permit and legal approvals.

Kinder Morgan reiterated its position that if the project continues to face “unreasonable regulatory risk” it may not be able to proceed with building the pipeline. The reality is that excessive regulatory processes come at a high cost for companies and can impact the viability of major energy projects.

So how does the regulatory burden in Alberta and British Columbia compare to other jurisdictions? The answer: it’s excessive.

According to the 2017 Global Petroleum Survey, which highlights policies (royalties and taxes, duplicative regulations, political stability, etc.) that make a jurisdiction attractive—or unattractive—to upstream oil and gas investment, Alberta and B.C. perform poorly compared to other provinces and U.S. states in terms of the high cost of regulatory compliance.

In fact, 81 per cent of survey respondents cited the high cost of regulatory compliance as a deterrent to investing in B.C. compared to only 29 per cent in Saskatchewan. In Alberta, 70 per cent of investors cited the high cost of regulatory compliance as a deterrent to investment compared to only 9 per cent in Texas and 24 per cent in North Dakota.

And in overall survey rankings, Texas (1st), North Dakota (3rd) and Saskatchewan (7th) rank far above Alberta (33rd) and B.C. (76th).

What does this mean for Canada’s energy industry?

Simply put, the high cost of regulatory compliance in Alberta and B.C. puts the energy industry in those provinces at a disadvantage relative to their U.S. counterparts. Excessive, lengthy and unpredictable regulatory processes will only push future investment away from Alberta and B.C.

Clearly, regulatory processes must be streamlined to allow Canada’s energy industry to compete for investment dollars.