Canadians are blue-eyed sheiks who rank among the world’s five biggest exporters of energy. About $13.4 billion worth of uranium, coal, electricity, natural gas and oil left the country in 1987, representing 11.8 per cent of everything sold abroad. Approximately 386,000 Canadians work in the energy sector, and 17.4 per cent of all business investment is made by companies in the energy field. But even though harnessing Canada’s bountiful energy supplies, particularly oil and natural gas, has been an engine of economic growth, the nation’s socalled energy policy is in disarray.
All too often, expensive energy sources have been exploited at the expense of cheaper, safer deposits, due to ignorance, politics or a desire to develop remote regions of the country by developing frontier oil and natural-gas deposits. And sometimes finance departments or economic nationalists have used energy policy for other ends. There was the National Energy Program, which was implemented in 1980 and which was designed to encourage Canadian ownership of the oil and gas industry. It included a series of federal taxes, incentives to encourage exploration and a new pricing and revenue-sharing formula for provinces producing oil and gas. The Conservative government eventually dismantled it because the taxes brought the industry to its knees and grants were too expensive to continue.
Last year, then-Energy Minister Marcel Masse commissioned a sweeping study into energy issues. Unfortunately, the report was released in August on the eve of the federal election and has gathered dust ever since. Called “Energy and Canadians into the 21st Century,” it is a fascinating survey whose mastermind was Thomas Kierans, a Toronto investment banker who is the son of former Liberal cabinet minister Eric Kierans.
The 127-page report received scant media attention despite the fact that it did a remarkable job of pulling together all the issues for the first time, from environmental concerns to
Canadians are blueeyed sheiks who rank among the world’s five biggest exporters of energy. But Canada’s policy is in disarray
jurisdictional disputes. Now, given the appointment of new Energy Minister Jake Epp, it is worthwhile to look back at what the report revealed and recommended.
In the area of electricity, nuclear generation and uranium production, the report says that Canadians have enjoyed a competitive advantage. As a result, in some provinces, electricity rates are one-fifth of what they are in some parts of the United States.
Indeed, power should be the cornerstone of Canada’s industrial strategy. Cheap, rehable power is the main reason why Honda Canada Inc. located its huge assembly plant in Alliston, Ont. Attracting such companies as Honda with cheap, reliable power is what Canadian utilities should do, and these new-generation facilities can be paid for, in great measure, by selling power to the United States.
While power exports are desirable, provincial ambitions in the area have led to nagging problems, including Quebec’s long-term contract that forces Newfoundland to provide $800 million worth of power each year at a fraction of market values from Churchill Falls. In 1987, Newfoundland asked the courts to rescind the contract, but failed. Kierans recommends that the deal be renegotiated in the
interest of fairness and that the Atlantic provinces merge their power systems. This would enable them to export more power to the United States and develop what could be the free world’s cheapest source of hydro—the socalled Gull Island project in Newfoundland, which involves the diversion of a major river and construction of a series of dams.
Kierans and his group favor nuclear power and warn against any further pruning of Atomic Energy of Canada Ltd. A victim of continuing budget cuts and the inability to export more of its acclaimed Candu reactors, Atomic Energy must be kept alive and encouraged to enter into joint ventures with Japan and others to sell its reactors. Nuclear reactors should be built in Atlantic provinces to replace the burning of environmentally damaging oil and coal.
Ontario Hydro may end up taking over Atomic Energy Canada. But that is hardly surprising, because 72 per cent of the giant utility’s production will come from nuclear plants by the early 1990s, the same level as that produced by France, the world’s largest producer of nuclear energy.
Canada is also the world’s foremost exporter of uranium and produces 27 per cent of the world’s supplies at Elliot Lake, Ont., and northern Saskatchewan. Apart from the problem of disposal, the Kierans report says that the nuclear option is the most benign from an environmental point of view.
In the fossil fuels sector, Kierans says that coal is North America’s most plentiful energy source, and his report strongly recommends research and development funds to find ways to reduce the highly negative impact of coal on the environment. Right now, almost nothing is spent doing so, even though coal is burned by most utilities to generate power.
After coal, Canada’s second-most-plentiful energy source is the tar sands, vast deposits of heavy-oil-bearing sands in northern Alberta. Kierans opposes future tar sands megaprojects because oil prices are too low to justify developing them unless oil prices increase or there is a breakthrough that makes oil production from the tar sands more economical. And the report questions the very future of the oil and naturalgas industry. It cites Japanese forecasts that the so-called Age of Oil will end by 2030, because of the wide range of energy alternatives that should be available at that time.
Until that happens, Kierans says that “American and European diplomacy will be aimed at destabilizing the Persian Gulf area in order to keep the prices of imports low.” If that is indeed the strategy of the future, Kierans has grave doubts about the long-term economic environment surrounding the Hibernia oilfield off Newfoundland. “Most megaprojects are only justifiable as regional development programs,” he said. As an alternative, he said that the arctic offshore has greater potential because vaster quantities of both oil and natural gas have been found there.
The Kierans report clearly documents the fact that the blue-eyed sheiks hold some spectacular cards in the highest-stakes game in the world. But, as the report warns, no matter how good a hand, players can still lose.
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.