Tariffs, Tankers, and Data Centre Tensions

The podcast is back after the summer break! Peter and Jackie begin with the escalating U.S.–Canada trade war, including renewed calls to use Canadian energy exports as leverage by reducing exports or imposing tariffs. Both approaches would hurt Canada more than the United States. They also discuss Canada’s new counter-tariffs, which take effect on September 8.

Next, they examine oil markets as the Strait of Hormuz closes again. With tanker traffic low and difficult to track, and refined-product markets tight, uncertainty remains high, with risks seemingly skewed toward higher oil prices in the near term.

They also discuss growing opposition to data centres, including permitting pauses in several U.S. states and local concerns about Meta’s planned development in Sturgeon County, Alberta.

Peter and Jackie then review Canadian LNG and oil pipeline developments from over the summer.

Finally, Graeme Edge, founder and CEO of Energy Disruptors, joins the podcast to preview the conference taking place in Calgary on September 28 and 29.

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Episode 335 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back. Well, I’m glad to be back. It’s the fall. I miss our podcast. It’s been fun.

Jackie Forrest:

Yeah, back to school and back to the podcast. No, it was nice to have a break, but yeah.

Peter Tertzakian:

Yeah. Yeah.

Jackie Forrest:

I miss being able to comment on all the news. It certainly wasn’t a quiet summer when it came to things to talk about.

Peter Tertzakian:

There was no shortage of news. But before we get to that, what did you do this summer? I know you’ve got some book. I’ve got a library of books on hiking, as well, but there’s a book you have that identifies the 50 major hikes?

Jackie Forrest:

Yeah. So I’ve had this book for way too long, and I picked it up at the tourist shop, or I guess Parks Canada Shop in Banff years ago, and it was like the 50 top hikes in the Banff National Park. I started working on it, first of all, doing the easy ones, and now I’ve got very few left, but they’re all the super hard ones, and ones that nobody wants to do with me. Yeah.

Peter Tertzakian:

So yeah, you’re trying to tick the boxes and do all 50 hikes.

Jackie Forrest:

I’m very close. I didn’t get totally done this year, but I still have time. But I did get quite a few of them done. It still amazes me for the number of years I’ve lived in this area, how there can be these beautiful places just so close to where I am-

Peter Tertzakian:

Yeah, they’re amazing.

Jackie Forrest:

… That I’ve never seen. For example, I did one called Quarry Pass, and it’s a hard one, but it’s right outside of Banff, and it’s just so incredibly beautiful. And so when people say, “The parks are so busy,” that’s because people go to the same three places, like go to Louise, but there are so many beautiful hikes.

Peter Tertzakian:

… somebody told me at Johnson Canyon, there was an hour long lineup just to see the falls at the very end of the bottom of the hike. There’s so many other places you can go that are not as congested.

Jackie Forrest:

There really are. There are so many beautiful places that aren’t as famous. So anyway, I’m hoping that by next year I’m going to celebrate finishing every hike in this book. Now, one unfortunate thing this summer was there was a lot of smoke, so my pictures aren’t as good as I would’ve liked, but still, we’re lucky that we didn’t actually have the forest fires here.

Peter Tertzakian:

Well, the downside is that there’s nowhere you can go now without being out of touch digitally, between satellite messaging, Starlink, and what have you. I’m sure you didn’t take a Starlink up there, but the news is relentless. And so let’s talk a little bit about that. Obviously, front and center is the economic trade war between Canada and the US, but the oil market situation is still unstable, with the Strait of Hormuz still being in some state of closure. There’s all sorts of things happening with data centers, and opposition. We’ve got all sorts of things going on behind the scenes with a memorandum of understanding with the West Coast oil pipeline. That’s been hibernating a little bit, but I think it’s going to kick back into high gear as we go into the fall. So, let’s start talking. Where do you want to start?

Jackie Forrest:

Let’s start with the trade war. That’s obviously the biggest news.

Peter Tertzakian:

Yeah.

Jackie Forrest:

Let’s do recency bias first.

Peter Tertzakian:

Yeah.

Jackie Forrest:

So as we saw last week, the trade war got pretty heated. Doug Ford was hurtling insults at President Trump, and now we know that Trump renames Lake Ontario-

Peter Tertzakian:

Lake of America. Yeah.

Jackie Forrest:

Yeah. Apparently breaking news this weekend, Google’s going to change it. When we’re in the US and we look at our Google Maps, it will say Lake of America on it.

Peter Tertzakian:

Well, yeah, I mean, I think the whole renaming thing is just sort of juvenile, to be honest with you. What I want to say is that this is really an uncomfortable situation for two countries that have been friends for so long. It’s just not healthy at all. But I do want to say that personally, I have a lot of American friends. I’ve met so many wonderful Americans over the years in business. And so, I hope people refrain from vilifying the American people, because I really feel that this is sort of like, at the very highest levels, people are not acting like adults, in terms of what’s going on.

Now, I fully appreciate that there’s economic realities in the world, and we can talk about all of that, but to bring it down to changing names and hurling insults at each other, I mean, that just really degrades the arguments that are being made, some of which are quite valid, I think on both sides of the border, as it relates to economic policy.

Jackie Forrest:

Yeah, no, last week was not a great week for Canada and US relations, and certainly some of the things that were being said aren’t helpful. Now, one thing that isn’t helpful when it comes to energy markets is, we thought that this whole tariffing or cutting off energy was sort of something we talked about at the beginning of 2025, and everyone realized that was a really bad idea, and people stopped talking about it, but that kind of creeped into the conversation last week.

So we had Doug Ford, and even former Alberta premier Jason Kenney suggesting using oil and gas as a lever with the Americans. Now, Ford wants to withhold oil exports. Jason Kenney considers a modest tax to remind the Americans that what they’re undertaking is counterproductive. So just put a bit of pressure on them. And of course, Premier Danielle Smith saying cutting off Alberta energy exports is not a viable option, and then she’s going to the US this week, actually.

Peter Tertzakian:

Yeah. Well, I tend very much to side with Danielle Smith. It’s not really a viable option. I think it’s one thing to say, “I’m not going to buy the stuff in your fridge,” but it’s another thing to turn the power off on the fridge altogether. The grids, both the pipeline grids, the transmission grids, and everything else is so intertwined in our collective economy that it’s just escalating the war to a level that really serves no useful purpose and has, as we’ve discussed in prior podcasts, a high probability of boomeranging right back at us by driving our own costs up, or in the worst case, the Americans just saying, “Okay, you cut off our energy, we’ll cut off yours.” Reminding people that Central Canada is very much dependent upon American energy products, including more recently, and I may be sort of stunned at one of the charts that you’ve put together here, Jackie, that electricity, we used to be an overwhelming exporter of electricity in the United States, but just recently, there are now moments where we were becoming a net importer.

Jackie Forrest:

That’s right. So just in the last… This is data kind of up until late 2025, but we see that late 2025, Canada was a net electricity importer from the US. So I think Ontario might be okay, but if they cut off the electricity, other parts of Canada may find that they don’t have electricity when they need it. And even then, most of our provinces, even if they are net exporters at times of the day, are reliant on electricity flowing the other direction, too. So that’s electricity.

I will say for oil, we’re very interdependent. We talked about this before, but I did want to do a shout-out to the new improved CAPP Data Hub. Over the summer, CAPP, they’ve had this data hub with all this data about Canadian oil and gas, but they made it even better to extract data, to find data. I will put a link, because they have a summary of Canada’s reliance on the US for crude oil and natural gas. As a reminder, about half the natural gas Quebec and Ontario consume is imported from the US, and Ontario depends entirely on crude oil delivered via the US. Quebec relies on about 60% of its crude coming via the US. And so, there’s no option of, if we cut off the crude from Alberta, well, it stops flowing into Ontario and Quebec as well. So as a reminder.

And then due to our lack of alternative markets, and if we put a tariff on either side of the border, because the refiner now has to pay more for Canadian crude, they might just use a little bit more domestic crude, that will cause a bit of a buildup of inventory in Western Canada, and lower prices. And we talked about this in a lot of detail on a podcast we’d done on January 14th of 2025, which I will put a link to in the show notes-

Peter Tertzakian:

Yeah.

Jackie Forrest:

… Because I actually re-listened to it. It goes through all the mechanisms of why, no matter what side of the border these tariffs come on, it results in Canada accepting lower prices, because we don’t have enough alternative markets. Now, if we had this one million barrel a day oil pipeline, plus the Trans Mountain, we’d be a bit more resilient to not having to absorb these price discounts.

Peter Tertzakian:

Far more resilient.

Jackie Forrest:

But we don’t have that today.

Peter Tertzakian:

Yeah, that’s why we need the diversification of our markets, and that’s what the West Coast oil pipeline, potentially plus more, including the Trans Mountain expansion, and why it’s necessary, is because we are not actually playing with a strong hand continentally, when we talk about energy in this economic war that we have entered into.

Jackie Forrest:

Yeah. Yeah. Like Eastern Canada, because their crude oil is on tidewater, if the Americans are going to put a tariff on it, and the refiners, they say, “Oh, your crude has to be cheaper, because I have to offset this tariff cost,” then they can just go sell somewhere else, but we don’t have that option here. So maybe the silver lining, if there can be one… I’d prefer not to be in this situation, but if there is a silver lining to it, is that hopefully Canada will accelerate creating this infrastructure for exporting our goods to other markets, not just oil and gas, but everything.

Peter Tertzakian:

Everything. We have to expand the rail, and the pipelines, LNG, you name it, and agricultural products on rail. It’s really imperative, and I think this is the… Well, I don’t think. I know this is what the prime minister is putting forward, in terms of the major projects office, and the infrastructure built, and the necessity of it, and this economic war that we have now entered into with our neighbor just amplifies it yet again.

I mean, if you wind back 18, 20 months ago, when the Trump administration first started saber rattling with the tariffs, and slopping tariffs right and center, it was a wake-up call, but it wasn’t really outright warfare, economic warfare as it is now. And so this hopefully is the real catalyst for us to accelerate the diversification of our markets.

Jackie Forrest:

Yeah. The news over the weekend, I think you saw that Venezuelan news that the Americans apparently have some control over 65 billion barrels of resource. Now, of course, we don’t know the deal. We don’t know how fast they could get investment into the country, and grow that into production. It’s one thing to have reserves. They’ve had reserves for decades, but turning that into production is something else. But that, to me, is another catalyst for us to create alternative markets, because that Venezuelan oil is going to come into the Gulf Coast, come into our traditional market, create more competition for us, create lower prices if we don’t have alternative markets. So, there’s so many signposts to me that we just got to move very quickly on diversification.

Peter Tertzakian:

Yeah. Here’s the good news, and we have also talked about this on prior podcasts, is that we should not be afraid to compete. We’ve got great resources, we’ve got great infrastructure to be expanded yet, and we have great people, and over a century of tacit knowledge, in terms of being pioneers of extraction, and marketing of our hydrocarbon products. In fact, all sorts of products that are in our resource space.

So I think that, yeah, on the surface, Venezuela certainly is of concern, and we’ll talk about that more in subsequent podcasts as we find more information about the fiscal terms that are being proposed. But frankly, I’m not scared, having been in and around this industry, to compete. In fact, competition is a good thing. It sharpens our senses and makes us more prosperous.

Jackie Forrest:

Yeah, but I would like to compete by having alternative markets-

Peter Tertzakian:

Well, of course. Yeah, that’s part of it.

Jackie Forrest:

… Not having one option to go to the exact market that they’re going to. Another benefit, hopefully, will be that we can increase our interprovincial trade, especially, we’re thinking about energy as transmission lines. I don’t know if you caught the news of the big Quebec and Newfoundland Labrador announcement, something like a $70 billion Churchill River expansion. Of course, there was an agreement in 2024, but it was put on hold after the Newfoundland and Labrador election. But this new plan is even bigger than the previous plan. The plan, I think, for a lot of the electricity was to go to the US, but could we not build a transmission line, so that could be used in other parts of Canada? Because guess what? We’re short electricity in many provinces in Canada, as well.

Peter Tertzakian:

Yeah. To be honest, I haven’t really followed the interprovincial trade barrier story that much over the course of the last, oh, I don’t know, six months, anyway. I know that there was a big push to try and reduce interprovincial trade barriers. I hope that’s still moving along, because I think it’s critical that we not have interprovincial trade barriers. I mean, why is it that, I think wine is tariffed across borders, and so on and so forth. I mean, it’s just absurd.

Jackie Forrest:

I think it’s improved, but I think it hasn’t improved nearly as much as it could.

Peter Tertzakian:

Yeah.

Jackie Forrest:

I’m not an expert here, either, but just reading articles, I was talking to someone who’s in the business of alcohol, and they said it was easier to sell the booze into the US than into Ontario and Quebec. So we still have, I think, barriers that could be broken down.

Peter Tertzakian:

Yeah. Let’s work on the things we can control, and not concern ourselves with the trivialities of what people are naming things. If they want to name it… I don’t care what they name it. It doesn’t matter. You’re just actually falling into a trap that’s being baited for us. The best thing to do is just say, “Fine, that’s the way you want to run your country. Great. I’m not going to pass judgment on how you want to run your country. Let’s control what we can control, diversify our markets, and get on with trading with the rest of the world.”

Jackie Forrest:

Okay. Well, one thing we did do is announce counter tariffs, which will be effect on September 8th, depending on the goods. It’s not all goods, but it’s a long list of goods. You could have tariffs of 15, 25, and 50%. I will put a link in the show notes to the actual full list.

Peter Tertzakian:

Sure.

Jackie Forrest:

It’s very long. But it will increase the cost of energy projects. For example, things like wired cable, steel products, containers for liquefied gas are tariffed at 50%.

Peter Tertzakian:

Okay. But if we were to reduce our interprovincial barriers, and source steel, because there’s no shortage of iron ore in this country, so there should be no excuse why we shouldn’t be able to create all types of steel. We also have no shortage of nickel, and other things used to make steel. So to me, it’s questioning why we are putting these counter tariffs on. Are we putting the counter tariffs on because we’re trying to hurt the Americans, or are we putting the counter tariffs on to try and stimulate greater interprovincial trade to expand our own GDP, and diversify our markets to elsewhere? Because to me, the latter is what we need to be doing, and this is the perfect opportunity to do it.

If you think about why the Americans are putting tariffs on their industries, it’s to basically stimulate their own industries within their own country, recognizing they’ll probably have to pay more, but the benefits are to create more employment, and have more investment in the factories domestically, for resilience, and other reasons. So why are we not adopting the same kind of attitude? And to think that we are going to be able to harm the American economy with small tariffs here and there, and get into a trade war, I think is absurd.

Jackie Forrest:

I think it will hurt us more in the short term.

Peter Tertzakian:

And is counterproductive. Yeah.

Jackie Forrest:

For sure. Yeah.

Peter Tertzakian:

Let’s try and think constructively about how we can use the privileges we have in this country. And what I mean privilege, resource privileges. We have almost unlimited number of the vital resources, whether it’s agricultural, forestry, mining, minerals, oil, gas, wind, sun, you name it, we have it. And so, there’s no excuse for us not to be more competitive in the broader world, and we’ve got three oceans that we can access. It just seems to me like there needs to be a better appreciation for the opportunity that is in front of us to take this moment, and turn it into a constructive argument to make our subsequent generations prosper.

Jackie Forrest:

Well, and I think though, we’re a small country, so we have to maybe pick the areas that we can do well in. But I agree. I think if we can stimulate creating some of the stuff here, I think there’s a lot of specialized things out there, and we can’t do it all, though. And also, I think in order to facilitate the growth of those industries, we are, for example, maybe going to have to build ports that can take-

Peter Tertzakian:

Sure.

Jackie Forrest:

… Let’s take containers for liquified gas. If we want to get into that business, we got to create the rail infrastructure, and the ports that allow us to export, because just to do it for Canadians is not going to be a big enough market for a lot of these sort of industries.

Peter Tertzakian:

No. No, it isn’t.

Jackie Forrest:

So I think it needs to be a holistic plan in some of those areas.

Peter Tertzakian:

Sure.

Jackie Forrest:

But, I will say though, when it comes to the cost of projects here in Canada, the announcement did talk about that if you can show that you could not reasonably source the equipment from Canada, or a non-tariff country, you may be able to get a refund. So it may not necessarily result in our projects being super expensive. Assuming the process to get these refunds is not too onerous.

Peter Tertzakian:

Sure. Yeah, I’m fine with that. I mean, I think we have to recognize that there’s pain being inflicted, certainly in the near term, near term being measured in years. But when you think about the long term, that’s to make the investments today that are necessary to become more sovereign, more independent, more part of a global economy, rather than a bottled up North American economy, the opportunity is staring at us in the face.

Jackie Forrest:

But it’s going to take some investment, I think, by the government in it.

Peter Tertzakian:

Well, investment and strategy in terms-

Jackie Forrest:

Yeah. Yeah. Building that infrastructure.

Peter Tertzakian:

Yeah.

Jackie Forrest:

Okay. Well, from that prickly situation, let’s go to another difficult situation, the oil market. Today, as we’re recording, it’s August 31st. It’s around 9:30, and last I looked, we’ve got WTI oil price in the mid-80s. Okay, so lots has happened since our last podcast in mid-July. We had the Iran and US MOU falling apart. We had the resumption of kinetic war, and now the Americans are saying, “No, we’re going to do an economic war strategy.” Although over the weekend, they started firing stuff again.

A little inconsistent, but ideally, I think the plan right now is more of these sanctions, and that’s going to get Iran to be a little bit easier to negotiate with. We’ll see. But as a result, the flows through the Strait of Hormuz, they were high, but they are low again, and there’s a lot of uncertainty about actually how much is transiting the Strait of Hormuz, because there’s these dark ships. So we have people like Secretary Chris Wright believing the volumes are much higher, like nine million barrels a day transiting, but other experts saying it’s more like four to six.

We’ve also had another development over the summer where Saudi Arabia, who was bypassing the strait, using its east-west pipeline, and through the Red Sea, now the Houthis have blocked the southern flows of oil out of the Red Sea, and now you got to go north, and there’s limited capacity. All is to say, I would say it’s even more opaque than it was before, in terms of nobody can really know exactly how much oil’s flowing out of the region.

Peter Tertzakian:

Yeah. No, I mean, nobody really knows, unless you have night vision goggles sitting on the shores of the Straits of Hormuz to know what’s going on. But price is an indicator of what’s going on, and it would seem that it’s not well supplied, but not poorly supplied, the current situation at the moment.

Jackie Forrest:

At mid-80s.

Peter Tertzakian:

I think the greater concern is, I do believe… Well, first of all, I do believe there’s probably more ships making out of it than we know about, tankers. But I looked at a chart that compared tankers going out versus tankers going in, and there’s not a lot of tankers going in. I know that there was a lot of tankers that were just anchored waiting to get out. I don’t know who would want to go back in, to be honest with you. A lot of ship owners are probably wandering, and the rates for ships to go back in must be astronomically high, given that there’s probably no insurance premium that can cover it.

So I don’t know where this is all leading. I would say that it’s not in a boil situation, but it’s certainly simmering. I think it’s going to simmer a long time without a lot of resolution. In the meantime, the strategic petroleum reserves are not healthy. As I said, there’s not a lot of ships going into this vital area. So, I tend to think that the price of oil is going to stay in this range, at a minimum, for a while, for an unforeseeable future until something gives.

Jackie Forrest:

Yeah, yeah, because there’s a lot less supply. But another thing that’s happened, and become more clear over the summer is market tightness in refined products. This is really the result of a bunch of things. Russia’s lost a lot of refining capacity as the Ukrainians have been striking their refineries. Of course, the Middle Eastern refining capacity, it’s there, somewhat damaged, possibly, but it’s there, but it’s trapped behind the straits, so it really kind of is out of the market. And China has limited their product exports. They were actually a big supplier of refined products.

So all this together has meant that we have very high prices for refined products. And so, even though the crude oil price is like $85, because refineries, the margins they’re making, the profits they’re making are three times higher than typical, the equivalent oil price today is actually over $100 when you look at what consumers are paying. And so, that might be something that kind of helps moderate things in that demand may start to be reduced by these high refined product pricing.

Peter Tertzakian:

Yeah. Well, yeah. I mean, consumers don’t buy crude oil. They buy diesel, gasoline, and other refined products. Diesel in particular is under a lot of strain. And so, farmers, to construction companies that buy diesel to operate their equipment are having to pay more, and the paying more ultimately trickles downstream into the consumers, and in the food that comes to our table, and so on. I’m not following it closely enough to know how much of the high diesel prices have trickled into the grocery stores, and else… Some have, but I believe that as time goes on here, and as the diesel prices continue to stay high, it’s not going to ease up. In other words, the inflationary forces on our consumables.

Jackie Forrest:

I looked at the US, so currently diesel, now this is the average for the country, is around $5 per gallon. I went back and I thought, “Well, what is a very high price that might cause a recession or something like that?” So we went back to the financial crisis, and at that time, diesel prices were over $7. So we’re still a long ways, I think, from the type of pricing that might kick into an economic slowdown.

Peter Tertzakian:

And that’s not even inflation adjusted, right?

Jackie Forrest:

No, that was inflation adjusted. Yeah.

Peter Tertzakian:

Oh, that is inflation adjusted. Okay.

Jackie Forrest:

Because I just wanted to get a sense, how high is high? Is this the price that we start worrying about?

Peter Tertzakian:

Okay, but what was it before the Iranian war?

Jackie Forrest:

Oh, before the Iranian war, we’re kind of more like 3.50, $4 kind of range.

Peter Tertzakian:

Yeah.

Jackie Forrest:

Yeah.

Peter Tertzakian:

So it’s a pretty significant, like 70% increase, or something.

Jackie Forrest:

Yeah.h.

Peter Tertzakian:

So it’s pretty severe, especially if you’re a farmer, rancher, whomever who’s got equipment that you got to run, and you’re already running thin margins.

Jackie Forrest:

And we’re coming up to a period where diesel is actually a high demand period, because of the fall harvest time in North America and Europe. And so, we’re not out of the woods yet. With gasoline, the summer is kind of the big demand season. For diesel, it kind of extends into the fall. So we’re not out of that high period. Plus, we’re coming into a period as we get into later in the fall, where there’s more refinery maintenance, because these refineries that are available to the world market are going as fast as they can. The utilization rates in the US are like… The refineries are working as hard as they can, and they do need to have maintenance periods.

So this is something to watch, because even if the oil price may be below what we think is the threshold for, say, kind of healthy market, and not a big impact to economic growth, refined product prices are kind of a different level. So the bottom line’s we, and many others predicted a 2026 price spike, and it was mitigated by a lot of different things. The SPR releases, workarounds getting more oil out of the strait, lower Chinese imports, demand destruction, higher inventories.

As we get into the fall, some of those things we’re less certain about. We don’t have as much in the SPR. Inventories are a little bit less. So maybe the market will continue to muddle through as it has been, but there certainly is, to me, a real risk of very high prices, recession, kind of that price spike that was predicted in 2026 that didn’t happen, if these refined product shortages get worse, or if the crude oil markets get tighter, because less is getting out of the strait. So, really uncertain situation still.

Peter Tertzakian:

It’s uncertain situation with a bias towards strengthening prices potentially, as we get into the fall. We shall see. But the situation is not really biased towards getting better in the very near term.

Jackie Forrest:

No. It looks like the strait situation is more of a long-term issue now.

Peter Tertzakian:

Yeah.

Jackie Forrest:

By the way, six month anniversary just happened since the start of the war, if you can believe it.

Peter Tertzakian:

Wow.

Jackie Forrest:

I think for a lot of the folks, for the first three months, you thought there’ll be some resolution and it’ll all just go back to normal. I think there’s starting to be greater recognition that this might be the new normal. I think that’s actually why you’re seeing more countries take the risk of getting the crude oil out, because there is no plan B now. This is the world they live in, and now it’s like, “Well, how do we get our oil out in this situation?” And maybe we’ll see more of these dark transits continuing to get more oil out.

Peter Tertzakian:

Right. Well, there’s going to be a lot more to talk about on this, so let’s table it for the moment, and move on to data centers.

Jackie Forrest:

Yeah. So this was the summer of data center opposition, not just in North America, or the United States, but even here in Alberta, we saw some opposition. So several US states have put limits on new data centers as politicians are under pressure. Texas and New York are two of the top ones over the summer. Here in Alberta, that metadata center in Sturgeon County, which we actually finished our podcast on before the summer break, talking about how it was announced during Stampede, it has also seen some opposition, including some protests, and there’s been some town halls that UCP has arranged around it in Ponoka and Sturgeon County. I don’t know if you saw any of the video footage or any of the reports on that, but certainly, a lot of people concerned about the project showing up at these town halls.

Peter Tertzakian:

Yeah. Yeah, there’s almost hostile receptions to these things.

Jackie Forrest:

Yes. Yeah.

Peter Tertzakian:

There’s a lot of emotions running high, and the AI frontier labs and others like Meta and Anthropic, OpenAI, and so on, in the US have been accused of handling the situation poorly, and I agree. I mean, I think that they were not getting ahead of these kind of stories. And so, now it’s spilling over into other places like Canada, that are seeking to build out the data centers. I think the data centers need to be built here, if nothing else, again, for the sovereignty issue, to have our own computing capacity, so foreign entity that has our data, our Canadian data, whether it’s personal, corporate or governmental, does not have the ability to flip a switch and turn off our access to our own data. We need our own data center-

Jackie Forrest:

But what happens if they’re all American companies, and maybe they’ll flip it off anyway, because they’re American-

Peter Tertzakian:

Well, I mean, these are the big issues that we have to think about, because data becomes so much more valuable in this world, and intelligence, artificial intelligence, and the things that run all our machinery and ultimately our economy, this is the new world that we live in, and we have to have some sense of control over the digital machinery that operates this stuff.

Jackie Forrest:

Right. By the way, I don’t know if you saw the Calgary Herald article, August 20th, that speculate Anthropic may be… Developer of Claude, may be the next big company that comes here. These are all American companies.

Peter Tertzakian:

Yeah.

Jackie Forrest:

Well, we’re going to actually have a podcast to cover these issues in full, because I’ve been digging in to some of the opposition’s concerns, and even I am not sure what’s facts here. I mean, the premier did put out a video with six questions on it to answer the six questions people have around data centers. I think we should go through each of those. I will say it’s interesting though, here in Alberta, our premier’s taking a very pro data center stance, but in the US, we’re actually seeing a lot of politicians flip on that. For example, the Texas governor was pro data center, and now is putting a hold on new data center permits.

Peter Tertzakian:

But Texas is a bit of the extreme, isn’t it? I mean, they just have so many applications, and so many data centers popping up in people’s backyards. It’s not surprising that they’re saying time out.

Jackie Forrest:

Yeah. I think there’s just so much public opposition for these politicians. It’s like if everyone’s not going to vote for you because you’re pro data center, you have to kind of put on the brakes. So, I mean, here it’s smaller, but I will say it’s our opportunity, by the way, too, because if we can do this right, I think it’s harder and harder to build these data centers other places. So if we can do it right and do it in a way that the public and stakeholders feel that we’re protecting the risks and things like that, maybe it’s a great opportunity for Alberta as well. Right?

Peter Tertzakian:

Yeah, it is a great opportunity for us, and I agree, doing it right, and understanding what that word means, right, and strategizing around it is going to be important. Because we can’t have a situation, whether it’s based on energy, in other words, where’s the gas going to come from to power the generators, to power the data centers, to all sorts of other questions, including noise, and environmental imprint, and indigenous stakeholder issues, water.

Jackie Forrest:

Water. Water’s a big one.

Peter Tertzakian:

I mean, you name it, it’s all got to be covered off. But I think if we put some thought into it, and have some rational discussions around it, we can have data centers that can be of tremendous value, economic value, in terms of their construction and operation. And then also, the value add of having these things in our own jurisdiction to run our economy, which is increasingly becoming digital, I think it’s a necessity, so we have to do it right.

Jackie Forrest:

Right. So for the strategic value, as well as the economic value.

Peter Tertzakian:

The strategic value. Yeah, we cannot fall behind on these things. No country can fall behind in this world, because AI is such a powerful tool. It’s so powerful in improving productivity of the economy, admitting that there’s all sorts of negative baggage, but not having AI in your backyard also has a lot of peril.

Jackie Forrest:

Well, let’s talk about this on a future podcast.

Peter Tertzakian:

Yeah.

Jackie Forrest:

We’ll talk about some of the opposition, and some of their concerns, and actually their lack of trust in these companies. Actually, I mean, we talked about this last time, the oil and gas industry has come a long ways in terms of that. So, maybe there’s something to be learned there. But let’s finish off with the news for the Canadian oil and gas industry. I’ll start off with the lack of news. We’re still waiting on the final investment decision on LNG Canada Phase 2. Was hoping to get that this summer. Haven’t heard of it yet, but I hope we’ll get that in the fall. And then, of course, the Ksi Lisims, I wasn’t expecting that one over the summer, but still hopeful we’ll get a final investment decision on that, because those two big projects, along with the existing under construction and existing LNG Canada project would get us to six BCF per day of exports by the early 2030s.

Peter Tertzakian:

Which is a tripling, right?

Jackie Forrest:

Yes. Yeah. We’re about 1.8, probably less than that on average-

Peter Tertzakian:

Right. Right.

Jackie Forrest:

… But when the plants were fully running, 1.8 right now.

Peter Tertzakian:

And it gets us close to that 50 million tons per annum target that also will help really reduce our dependency to the North American market, our natural gas, which is deeply, deeply discounted in its price.

Jackie Forrest:

Yeah. We’ve had another horrible summer. I think the AECO price, which is the Alberta price, has kind of averaged about $1.50 Canadian. Very, very cheap gas, giving our gas away. And so, I do believe, and we’re going to actually have a podcast on the gas markets to talk about this, but we are setting ourselves up for prices that are more reasonable. Still low in the global context, even in the North American context, but higher than what we’ve been seeing over the last several years.

Peter Tertzakian:

Yeah, there is a sweet spot for the price, where it’s very competitive because energy is an input to so many industrial processes, especially natural gas, from petrochemicals, to data centers, to all sorts of other things. But you don’t want it too expensive that it harms consumers, and chases away industrial consumers.

Jackie Forrest:

Yeah. But I think there’s a sweet spot there that we can get, where we still have low prices, but they’re the prices that allow natural gas producers to make some money.

Peter Tertzakian:

Yeah. I’m not surprised we haven’t heard anything over the summer. I mean, summer is not typically the time, when a lot of people are away on vacation, to make all sorts of announcements. I think September is going to be an announcement heavy month.

Jackie Forrest:

Okay. Well, let’s wait and see.

Peter Tertzakian:

Yeah.

Jackie Forrest:

I mean, I think for LNG Canada, I’m hoping for the FID, at least before the end of the year, for Ksi Lisims, there was a number of announcements around long-term offtake contracts, and hopefully we’ll see more of those, because that’s going to be important for that project.

Peter Tertzakian:

Yeah. Yeah.

Jackie Forrest:

Okay, crude oil. Of course, after the big news of the one million barrel a day oil pipeline during Stampede, as you said, Peter, things went a little quiet. The only real news on the project was the start of a consultation on if the project should be made a project of national interest. The comments are due in mid-September, and the decision will be made October 1. I’m not even sure why we need this consultation. To me, it’s pretty obvious that it should be a project of national interest. So I don’t think that’ll be a big surprise. I think it will be made that on October 1.

Peter Tertzakian:

Yeah. Between this situation with the trade war, and Venezuela, the arguments are pretty compelling that this is in the national interest, given that the oil industry kicks out $40 billion in royalties and taxes, and that is vulnerable.

Jackie Forrest:

Yeah, for sure. So to me, I don’t know why we need this process to get to October 1, but anyway, I’m looking forward to that news. Other news that I tracked over the summer was the South Bow and Bridger Pipeline. A couple of news items on that. News that the Montana regulators have revoked a waiver that would allow the pipe to admit submitting some environmental and financial information for its permitting process. And so, I’ll put a link to the article from Pipeline and Gas Journal.

Peter Tertzakian:

Just for our audience, I mean, this is the rebranded Keystone XL, right?

Jackie Forrest:

Well, it’s interesting, because that’s another piece of news. I mean, I think the proponents like to get away from that name, but it more or less follows the same right of way, but not exactly. It omits some of the more difficult parts that the Keystone was going through. And it’s smaller. It’s 500,000 barrels a day right now. I think it could be expanded. But I’m sure you caught President Trump, when things were going better between US and Canada back in August 19th, that seems like a lifetime ago, he put out on social media, “The great Keystone XL pipeline, long ago killed by sleepy Joe Biden, maybe awoken from the grave.” And he included a cartoon of himself, and I’m sure you saw this, pulling the pipeline from the grave, and it had Keystone on it, not just Keystone XL. All very confusing. Nobody knows what he’s talking about.

Peter Tertzakian:

Yeah.

Jackie Forrest:

I’m wondering if he’s talking about this South Bow and Bridger Pipeline project, because there’s really no Keystone XL project being proposed.

Peter Tertzakian:

Well, the graveyard is on the American side of the border, because the pipe has been built all the way to the American border in Alberta.

Jackie Forrest:

Yeah, if we’re talking about this one. Oh, yeah. Even when it was the Keystone XL, right. Yeah. So he wants to pull it from the grave. Let’s assume he’s talking about the one that’s actively being progressed. I see this Montana thing as a bit of a signal that while the US federal government is moving fast to build pipelines, and Trump wants to heroically pull them from the grave, and get them going, the state level opposition exists. This particular opposition came from Montana residents who challenged the waiver. So this project may not go as smoothly as the federal government may like. There’s still some room for opposition here, I think at the state level. We’ll see if this happens in other states, but these projects are controversial on both sides of the border.

Peter Tertzakian:

They are.

Jackie Forrest:

Okay. Another thing I’m following, Peter, is the new incentives for growing oil production to fill the pipeline. So, a Daily Bulletin article on August 25th said that the Alberta government is working on royalty changes for greenfield oil sands developments for investment. So, any insights on that process?

Peter Tertzakian:

Well, it is definitely something that we’re going to have to follow, because we published at Studio Energy, the paper back in October of last year, the question, which comes first, the pipeline or the oil wells and facilities to fill the pipelines? That question was answered over the course of the last few months. The pipeline comes first, because the MOUs have been signed, including the trilateral MOUs, although definitive agreements are still to be had, and the target date for those definitive agreements to be signed is somewhere in the mid-November timeframe.

Between now and then, the question is, what are the conditions precedent needed in terms of the fiscal regime and other factors to make it conducive for oil producers in particular to go out and spend a hundred plus billion dollars to explore, develop, and fill the pipelines? And so stay tuned on that. We have a new paper that we published just recently, The Pipeline Comes First, that sort of characterizes everything that’s happened between last October and now. We’ve got more papers coming out, in terms of understanding the nuances behind all that.

As we get more clarity on how the fiscal terms may change, it’s not just royalties, there’s tax and other potential changes that are required to make it, including regulatory and so on, which would come out of the whole, again, the definitive agreements that we signed in the Major Projects Office. So stay tuned. I think that there’s a lot more coming, a lot more to write about, and a lot more to talk about on this podcast.

Jackie Forrest:

Okay. Well, we will put a link to The Pipeline Comes First, answering that question, and we’ll follow that. We’ll cover some of that research as we head into the fall from Studio Energy.

Peter Tertzakian:

Yeah.

Jackie Forrest:

So with that, we’re going to switch to a new topic. We’ve got an exciting new conference coming to Calgary this fall called Energy Disruptors UNITE, September 28th and 29th. And both you and I are going to be part of it.

Peter Tertzakian:

Yeah.

Jackie Forrest:

And we wanted to spend a little bit of time letting our audience know about this great conference that’s coming to Calgary, and we want to welcome Graeme Edge, founder and CEO of Energy Disruptors to tell us about the conference. Welcome.

Graeme Edge:

Thanks so much guys for having me on.

Peter Tertzakian:

Yeah. So tell us a little bit about the conference. I know I’ve been given the honor, thank you very much, yet again, of providing the opening keynote, but tell us a little bit about the overall themes.

Graeme Edge:

Yeah. So firstly, I want to say thank you to both of you for being part of it, and especially obviously Peter, for your opening, again, for us. This is going to be the fifth edition of Energy Disruptors. We’re convening at, obviously, a really interesting time. There’s a lot going on in the world of energy. If I go back to the original premise of what we’re trying to do with the summit, the original idea was we wanted to put oil and gas in the same room as renewables, as nuclear, people from the world of batteries, people from the world of finance. We also wanted to bring in the arts and creative sectors. So think the world of electrons, and molecules kind of colliding under one roof. And we wanted the programming to be engaging, and quite broad, and eclectic.

Peter Tertzakian:

Yeah. So now you have to bring in politicians, and economists, and everything else that’s going-

Graeme Edge:

We do. Exactly.

Jackie Forrest:

And authors.

Peter Tertzakian:

And authors, and everything else that’s unpredictable in the world.

Graeme Edge:

That’s exactly it, right? So what we see normally is that an energy event tends to be very heavy on economics and technology, which is obviously really important, but we also want to dig into societal change, politics, policy, geopolitics. So it’s really going much broader than just purely about the economics and the technologies.

Peter Tertzakian:

Yeah, it’s going to be a great event. You’ve got some… As usual, because each subsequent one of your Disruptors conferences has escalated the prestige of the speakers. So tell us a little bit about the speakers that are coming this time, if you can.

Graeme Edge:

Yeah. So one of the things we knew, so when we started this, obviously, none of us have ever produced an event before. Started as an idea on a flight that I had about 10 years ago. We knew that we needed really good talent that was going to hopefully draw people in to attend the summit. So as we’ve done this more and more, we’ve tried to continue to elevate the bar of the people that we’ve been working with.

This year we have former UK Prime Minister David Cameron, who’s going to be speaking on day one. We have Margaret Atwood. We have one of the world’s most high profile economists, a guy called Tyler Cowen. I think when this is out, I’ll be able to share this, but we also have Jeremy Hansen, who’s the Canadian astronaut from Artemis II, in addition to about 80 other speakers. So it’s a really incredible lineup this year, and you’ll see more of the next couple of weeks, as we announce additional speakers.

Peter Tertzakian:

And lesser known, you’ve got also some very esteemed people from energy companies, including Bob Galyen from CATL, the big battery company out of China.

Graeme Edge:

Yeah, that’s right. So Bob retired from CATL, he’s ex – CTO, but I mean CATL, for people who aren’t familiar with the story of the company, I think it’s one of the most remarkable energy companies in the world. They’re the world’s biggest battery company. They produce almost 40% of the world’s lithium ion batteries. But the most amazing thing is the company was only founded in 2011, in China, and today they employ almost a quarter of a million people. They have 21,000 battery scientists and engineers as part of their team. Bob was one of the early employees. He moved to China from the US in 2012, and he really had a front row seat, and was one of the architects of their scale up. So yeah, it’d be very interesting to hear from Bob about everything that’s happening in the world of batteries right now.

Jackie Forrest:

Well, and exciting news is we’re going to actually have a podcast at the event with Bob. So, all of our listeners are going to hear a little bit about Bob’s perspective, because battery technology, I tell you, that’s one of the things that could really change the pace of the energy transition. It already is.

Peter Tertzakian:

It already is.

Jackie Forrest:

Yeah. But things like solid state that are coming. I mean, there are some new battery chemistries that could really change the economics, and the utility of batteries over what we see today, which is still miles better than what it was 10 years ago, but the leap could be even greater over the next 10 years.

Peter Tertzakian:

Yeah. Well, thanks for coming, Graeme. You’ve already given us enough to tease our audience, I hope. No more spoiler alerts here. So tell us the dates, and how people in our audience can sign up and come to it.

Graeme Edge:

Dates are September 28th and 29th. It’s a Monday and Tuesday at the BMO Center, here in Calgary. If you go to energydisruptors.com, you’ll find more information on tickets, on program, and keep an eye on our socials for speaker announcements, as well.

Peter Tertzakian:

Yeah, fantastic.

Graeme Edge:

Thanks for having me.

Peter Tertzakian:

Yeah.

Jackie Forrest:

For sure. We’ll put a link to that in the show notes, as well. For those that can’t find it online, come to our show notes.

Peter Tertzakian:

Yeah.

Jackie Forrest:

So with that, I think we’re going to call it a wrap. We’ve got lots to talk about in this fall season, as we get going again. So thanks, Peter.

Peter Tertzakian:

Yeah, it’s great. Glad to be back.

Jackie Forrest:

Yeah, and thanks Graeme. We’re looking forward to the conference. And to our listeners, thanks for listening. If you enjoyed this podcast, please write us on the app that you listen to, and tell someone else about us.

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Tariffs, Tankers, and Data Centre Tensions

Episode 335 transcript

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