Cenovus Energy CEO Jon McKenzie sharply criticized the federal-Alberta agreement that links support for a West Coast oil sands pipeline to carbon capture and storage (CCS) and industrial carbon pricing. He described the industrial carbon tax as “insidious” and said industry has been clear that it should be revoked. He also noted that the Pathways Alliance CCS project itself carries an estimated cost as high as $30 billion.
Without addressing core regulatory barriers and enabling real investment and production growth in Alberta’s oil sands, he warned, neither the pipeline nor the CCS project “really make any sense.”
Structural contradictions in federal policy
McKenzie’s complaint is operational. A structural one: Ottawa intends to price carbon to discourage production, subsidize capture to permit production, fast-track a pipeline to move production, and suspend electricity rules to power it. The staggering cost of these contradictions is borne by Canadians.
In 2022, former prime minister Justin Trudeau waved away the idea of Canadian LNG export to Europe by saying there was “no business case” to do so. Moreover, Ottawa had bet big on green hydrogen in Atlantic Canada, and there was no room left to back the resource the world actually wanted.
Carney's same errors on energy and climate
Prime Minister Mark Carney is making the same errors on energy and climate policy. More than a year into his tenure, his signature innovation has been federal fast-tracking through the Major Projects Office. What began as a well-intentioned emergency measure carries a risk of becoming a permanent substitute for systemic reform, with a few favoured projects bypassing the mess and the rest left to rot.
No one wants to be a bad team player, jeopardizing their own eligibility or that of sectoral allies, so it has also gotten the least critique from industry despite being a straightforward admission that the underlying process is irrevocably broken.
Market failure or Bermuda Triangle?
When major projects stall or capital sits on the sidelines, the typical federal explanation is “market failure.” It has become Canada’s Bermuda Triangle. Instead of missing airplanes and sailboats, we contend with billions of dollars of foregone capital investment. Strange how the same global investors who can underwrite a copper mine in the Democratic Republic of Congo apparently lose the ability to read a spreadsheet the moment it crosses north of the 49th parallel.
The Trans Mountain Expansion was our costliest lesson in recent history, and the most familiar. The same logic is playing out right now in the Pathways standoff and on British Columbia’s electricity grid.
The Trans Mountain cautionary tale
A private company, Kinder Morgan, was prepared to finance the project. Years of regulatory delays, court challenges and political opposition ultimately broke the business case. When the company walked, the federal government bought the pipeline system for $4.5 billion, and nationalized the expansion. Under government control, costs exploded from original estimates to more than $34 billion.
