Rejecting Natural Gas Wealth: Quebec’s Missed Opportunity
As a progressive party with green tendencies, the Parti Québécois minority currently at the head of the Quebec provincial government is no friend of the natural gas industry. And that’s to the detriment of ordinary Quebecois.
It was made self-evident from the moment of the party’s election in September 2012, when Martine Ouellet, the Minister of Natural Resources, unilaterally banned the exploration of natural gas throughout the province. She and her party allies have long decried the controversial retrieval method known as hydraulic fracturing, or fracking, and even campaigned on revoking drilling permits from companies engaged in the practice.
Lone Pine Resources, a US energy firm with operations all over Canada, took the government to court over the moratorium last fall, blaming it for nearly CAN$250 million in lost investments. This month, the company filed for Chapter 15 bankruptcy in the United States. Industry experts predict more cases to flow through the courts in the ensuing months.
Despite the initial investments worth hundreds of millions of dollars from national and international firms, the vast fields of shale gas in Quebec’s underground remained shuttered. Closed for business.
Now, as the National Assembly floats the idea of a 5 year moratorium on natural gas drilling, the battle for Quebec’s energy future is put on full display.
The province contains extensive untapped reserves of natural gas, specifically in the Bas-St-Laurent region and L’île d’Anticosti, and is more clearly defined by its overwhelming production of hydro-electric power, largely in Quebec’s uninhabited north by Hydro-Québec, the state-subsidized energy conglomerate.
The energy powerhouse makes up 5 percent of the total Quebec economy, and exports at least 25 percent of its electricity to other provinces and US states, according to Hyrdo-Québec’s 2012 annual report. It paid out almost CAN$2 billion to the Quebec government in 2011, but that figure was reduced to $645 million in 2012, due to the closure of the Gentilly-2 nuclear power plant, and is slated to decline further as exports taper.
In 2014, Quebec’s energy consumers will face a 5.8 percent rate hike by Hydro-Québec, hoping to make up for the decreased payout to the government.
Ouellet, an engineer who cut her environmental teeth at Hydro-Québec, has clearly crafted policy to maintain the dominance of hydro-electricity in la belle province. However, it’s a stance many political and industry leaders find untenable, especially as the explosion of natural gas production in the United States sways energy prices to its favor.
Sophie Brochu, CEO of Gaz Métro, one of Canada’s largest gas companies, has warned Quebec politicians against rejecting the economic prospects of natural gas wealth.
“Protection of the environment shouldn’t be transformed into hostility against economic development and smart extraction of our natural resources,” she said at Montreal’s chamber of commerce. She further warned against Quebec taking the “false path” which could lead to the province getting “poorer” with less businesses.
At least one former prime minister and party leader has criticized the government’s stance, doing so in his short-lived tenure as president of the Association Pétrolière et Gazière du Québec.
“I have no doubt that we’ll get there, but it’ll take time,” said former Quebec Premier and Parti Québécois leader Lucien Bouchard. “Energy will be at the center of the big political questions in Quebec in the next few years.”
His campaign to demystify the natural gas extraction process has been met sourly by the left-leaning Quebec press, academia, and powerful contingents of environmental activists, eager to bar foreign energy investment from Quebec’s territory.
“What we’re talking about are actions which would allow a phenomenal transfer of wealth from Quebec citizens toward a small group of investors from gas and oil companies, mostly foreign,” writes Pierre Batellier, a sustainable development researcher at École des Hautes Études Commerciales de Montréal.
This deep strain of anti-foreigner bias and economic nationalism is precisely what propelled the province to nationalize the electricity industry more than 70 years ago. The government first took control of the Montreal Light, Heath and Power Company in 1944, and the rest of the electricity sector two decades later, under the guidance of Liberal Minister of Natural Resources René Lévesque.
Lévesque, who later founded the Parti Québécois, smartly coined the 1962 election slogan Maîtres chez nous (masters of our own home) to convince Quebec to accept the agenda of all-out energy nationalization.
More than 70 years later, this attitude has to change.
All being said, Quebec has huge potential to become a net exporter of energy, in both hydro-electric power and natural gas. It could become one of the the most energy-rich regions in the world, helping bolster the province’s uncertain demographic future and colossal debt and tax burden. This uneasy mélange of economic nationalism and environmentalism holds the province back from achieving true growth and potential.
Companies are frustrated with so much uncertainty and deadlock in Quebec’s energy infrastructure, and this prevents the expansion of millions of new jobs and investments all over the province.
If Quebecois truly want to be “Maîtres chez nous” then they need the levers of government to encourage economic growth and natural resource extraction, not dissuade it.