Carbon levies will make it tough to compete with U.S. firms: Enbridge executive

November 22, 2016


The Globe & Mail

Company’s vice-president of international operations tells London energy conference that expected U.S. regulatory changes will also harm sector

Canadian companies will be at a disadvantage when competing against Americans if the federal government pursues its carbon-pricing strategy, says a senior executive of Enbridge Inc.

Ian McFeely, vice-president of international operations at Enbridge, told an energy conference in London on Tuesday that imposing a carbon tax in Canada will make the country less competitive, especially since president-elect Donald Trump is expected to lower business taxes and eliminate regulations in the United States.

“Can we compete if we have a carbon tax? I don’t, personally, believe we can,” Mr. McFeely said at the Canada Europe Energy Summit.

The federal government is moving ahead with a sweeping climate-change plan that includes phasing out coal-fired plants by 2030 and requiring provinces to adopt a $10-per-tonne carbon tax in 2018, rising to $50 by 2022, or adopting a cap-and-trade plan that meets or exceeds Ottawa’s targets. Most provinces have agreed to the measures.

Mr. McFeely said Canada “would be in a tough spot,” if it imposed a carbon tax, given the opposition to these kinds of taxes in the U.S. and elsewhere. Not only is Mr. Trump opposed to climate-change measures, he said, but voters in Washington state soundly rejected a carbon-tax proposal this month. The British government is also under pressure to scrap its carbon tax, currently pegged at £18 per tonne ($30 Canadian) until April, 2021.

“I don’t know the actual impact, but our oil sands is already a fairly high-cost basin, so if you layer another cost on to it, can we compete?,” Mr. McFeely said in an interview, noting that nearly all Canadian oil exports go to the U.S. “Especially if [Mr. Trump] starts opening up federal land [to oil production] like he’s talking about and really increasing their supply.” He added that “it would seem to me you can’t put another tax on it; you will be less competitive.”

Mr. McFeely also said he doubted pipeline construction in the U.S., including TransCanada Pipelines Ltd.’s Keystone XL project, will proceed very quickly under Mr. Trump. Keystone would bring oil from Alberta to refineries in Texas, but it was quashed by President Barack Obama amid growing opposition from environmental groups. Mr. McFeely said that while Mr. Trump backs Keystone, his heavy-handed, deal-making approach won’t work with environmentalists or First Nations groups. That’s a lesson Enbridge has learned from its much-delayed Northern Gateway pipeline project across Alberta and British Columbia, which has run into similar opposition.

“We’re seeing the same kind things happening on the U.S. side now as we see in Canada, whether it’s First Nations or environmentalists. You can take a heavy-handed approach with them … which is, I think, [Mr. Trump’s] way of speaking. But I don’t think it will work.” he said. “We learned through the Northern Gateway [project] that you need to engage, you need to be inclusive or else…you just run into a brick a wall.”

During the conference New Brunswick Premier Brain Gallant agreed that there could be economic consequences if Canada proceeds with a carbon tax. But he said he supported the measures because “it’s the right thing to do.” He also said Canadian companies will have an opportunity to develop climate-change technologies that Americans may adopt later under a future U.S. administration.

After the conference, Mr. Gallant said the federal government’s announcement this week concerning the phasing out of coal plants was significant for New Brunswick, which has a 450-megawatt plant. However, he said the provincial government was already considering a recommendation from a non-partisan panel on climate change that called for the plant to be closed by 2030. The federal plan offers flexibility because it allows some plants to stay open longer if equivalent emission reductions are achieved elsewhere.

Mr. Gallant also expressed confidence that TransCanada’s proposed Energy East pipeline, running from Alberta to refineries in New Brunswick, will go ahead even if the Keystone project is revived. There have been concerns that if Keystone proceeds there won’t be a need for Energy East. Mr. Gallant said Energy East offers Canada a chance to expand its energy market beyond the U.S., and that doesn’t change if Keystone proceeds.

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