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For a prime minister not known for his stirring oratory, it was a phrase that made headlines

By John Schofield

The date was July 14, 2006. Invited by the venerable Canada-United Kingdom Chamber of Commerce, Stephen Harper was making his first speech as PM to a business audience outside Canada. The high-powered dinner crowd at London's luxurious Jumeirah Carlton Tower Hotel listened intently as Harper delivered a wide-ranging speech on Canada-UK relations. About halfway through the lecture, the bookish prime minister delivered a line that was more of a sales pitch to investors than a grand vision. But in news reports the next day, it captured the lead. "One of the primary targets for British investors has been our booming energy sector," he told the blue-ribbon audience. "They have recognized Canada's emergence as a global energy powerhouse - the emerging ‘energy superpower' our government intends to build."

"Superpower" is not a term normally associated with Canada. It's a notion that makes some Canadians uneasy and that others would reject entirely. But in terms of energy, the country's enormous wealth gives it entry to an exclusive group of nations. Canada is the fifth largest producer of energy in the world, exceeded only by Russia, China, the United States and Saudi Arabia. By some estimates, Alberta's oil sands contain the largest oil reserves on Earth, although the International Energy Agency ranks Canada's proven reserves third behind Venezuela and Saudi Arabia. Canada is the world's second largest producer of ­hydroelectricity, the second largest ­producer of uranium and the fourth largest producer of natural gas. But five years after Harper's provocative ­pronouncement, Canada is still struggling to define a vision for its energy ­future. "We can and should be an ­energy superpower," says Nick Parker, the Toronto-based co-founder of Cleantech Group, a ­leading clean-energy consulting firm. "The question is what kind of energy and how do we get there as a country."

In a hopeful sign, the country's energy ministers gathered in Alberta's beautiful Kananaskis Country in July to begin charting a national energy ­strategy. The effort was a response, in part, to pressure from industry and business groups, including CME, the Canadian Council of Chief Executives and the Energy Council of Canada, an Ottawa-based association that ­promotes a national energy strategy. After two days of talks - sponsored by 11 energy companies and associations - the ministers issued a final communiqué promising to cooperate in opening new markets for Canadian crude oil, in streamlining the approval process for energy projects, and in ­improving energy efficiency and electricity reliability.

But within days, the wheels began to fall off. Ontario Premier Dalton McGuinty criticized the communiqué's reference to the "responsible and sustainable" development of the oil sands and took aim at federal subsidies for Western Canada's oil industry. B.C. Premier Christy Clark was non-committal about the province's support for Enbridge's Northern Gateway pipeline, which would carry oilsands crude from Alberta to the West Coast for shipment to global markets like China. And Quebec Natural Resources Minister Nathalie Normandeau insisted that energy strategy should be strictly a provincial matter. "Kananaskis was instructive in showing we need to start working together despite jurisdictional limitations," says Greg Schmidt, president of the Energy Council of Canada. "A national energy framework can't be imposed from above, and until they all agree to play, I guess we're not going to have one."

Without a national strategy, most experts say, Canada will not realize its energy potential and achieve superpower status. But knitting together the wide range of competing interests into a national energy vision is a daunting task, says CME President and CEO Jayson Myers. "There's an awful lot of parts to the puzzle," he says. "In reality, it's a pretty complicated issue."

The stumbling blocks to a ­strategy come from both inside and out. Canada's constitutional structure gives jurisdiction over energy to the provinces and territories. The infamous National Energy Program, an initiative by the Liberal government of Pierre Trudeau in 1980 that ignited a firestorm of protest in Western Canada, made Ottawa reluctant to take the lead in energy policy in subsequent years. It was repealed in 1984. But officials in the energy sector argue that a lack of provincial cooperation creates a cumbersome, costly approvals process that has bogged down projects like the proposed Mackenzie Valley natural gas pipeline for years. Provinces frequently lock horns over conflicting energy priorities, or quickly switch direction with a change in leadership. Case in point: In the lead-up to Ontario's election in October, the provincial PC Party is vowing to dismantle the Green Energy Act, which Ontario's Liberal government claims has created 20,000 jobs since its ­introduction in 2009.

A truly national energy strategy would also need to incorporate the concerns of First Nations communities and environmental groups. Their opposition to the Northern Gateway pipeline explains much of the B.C. government's reluctance to support the project. And increasingly, opposition to the oil sands from environmental groups outside Canada is shaping the country's approach to energy. One of the most contentious issues among US environmentalists is Calgary-based TransCanada Pipelines' proposed $7 billion, 2,700-kilometre Keystone XL pipeline, which will carry heavy crude from the oil sands to refineries along the Texas Gulf Coast. That project received the green light in August. "We don't get in this country," says Parker of the Cleantech Group, "the degree to which people are uncomfortable with the oil sands."

The issue of carbon pricing also remains controversial. There's a growing consensus in the energy sector and political circles that a more national system for pricing carbon is inevitable, but what form that would take is still a question mark.

A debate also continues to simmer over whether Canada should even seek energy superpower status. Experts on international relations define energy superpowers as nations that supply large amounts of energy to a range of trading partners, which gives them the potential to influence world markets and gain a political or economic advantage. By this definition, only Saudi Arabia and Russia are recognized as real energy superpowers. In a 2003 New York Times article, Rice University geophysicist Manik Talwani argued that Canada and Venezuela also have the potential to become energy superpowers, but each would need to invest $100 billion or more to increase oil production to superpower levels. But Harper has ­criticized Russia's attempts to use its energy wealth to manipulate other countries. And 98 per cent of Canada's energy exports go south, says Ed Whittingham, executive director of the Calgary-based Pembina Institute. "I don't think it's occurred to Canadians to use our clout when it comes to ­energy," he says, "because we rely on one client, and that's the United States, and we try to keep relations good with that customer."

Adding to the confusion is the fact that experts are by no means agreed on which forms of energy should be emphasized and managed in a national strategy. Many concur that Canada can't afford to squander its huge oil wealth, but needs cleaner, more efficient hydrocarbons - and that will require huge investments in research and new technology. Whittingham says Canada also needs a plan for a transition to clean energy because that's where the future is. "If we're simply rooted in producing a better hydrocarbon," he says, "we're a superpower with blinkers on."

Some experts tout natural gas as the ideal fuel to carry Canada through the transition to clean energy because it produces less greenhouse gas. But environmentalists warn that the hydraulic fracturing, or "fracking," process used to extract controversial shale gas could lead to water contamination, increased air pollution and increased water consumption. Keith Hipel, a senior fellow at the Waterloo, ON-based Centre for International Governance and Innovation, argues that nuclear energy, which emits no greenhouse gases, is the only technology that would enable Canada to reduce its dependence on oil fast enough to meet its emissions targets and slow catastrophic climate change. But in the wake of Japan's Fukushima nuclear disaster, ­governments around the world are ­reassessing the role of nuclear in their long-term energy strategies. And some say the federal government's sale of Atomic Energy of Canada Ltd. earlier this year to Montreal-based SNC-Lavalin Group Inc. effectively puts Canada out of the nuclear game, which is shifting away from megaprojects to smaller, more cost-effective modular reactors.

Clean, green hydroelectricity remains a bright spot on Canada's energy landscape. About 60 per cent of the country's electricity comes from hydro. But Canada still lacks a national grid to move power from coast to coast, says Hipel, and the current network needs to be updated. Provinces are spending billions of dollars to improve electricity infrastructure. The International Energy Agency estimates that Canada needs to invest $10 billion a year between now and 2030 to upgrade its ­electrical system. As a result, power rates are ­increasing, and are expected to go higher.

In a world where energy consumption is only increasing, Canada's future rising prosperity will depend on a sound energy strategy. There's a global energy ­innovation footrace going on, says the Cleantech Group's Parker, and Canada is falling behind. In China's 12th five-year plan, approved in March, three of the seven strategic ­investment areas are clean energy, energy conservation and clean energy cars. The plan calls for an investment of 11.1 trillion yuan ($1.7 trillion CAD) in the power industry over the next 10 years, with a particular focus on hydro, smart-grid development, wind, solar, biomass and ­potentially nuclear.

Canada's health system - still a source of pride despite its challenges - offers proof that Canadians can forge a unified vision on important ­issues, says Daniel Gagnier, a former senior ­executive with Alcan and ­vice-chair of the Calgary-based Energy Policy Institute of Canada, which also promotes the development of a ­national energy strategy. On energy, "I think we'll do the typical Canadian thing," he predicts. "We'll hmm and argue and debate and talk about our differences. But, in the end, we'll arrive at areas where we can better ­collaborate."


 

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