Mind the Energy Security Gap: How Dependent is Canada on the US?
This week, Peter and Jackie discuss Canada’s energy security weaknesses for crude oil, natural gas, refined petroleum products, and electricity.
First, they cover recent news, including the latest on US tariffs, the Canadian Prime Minister’s Canada-US Economic Summit held on February 7th, Mark Carney’s Climate Plan, interprovincial trade barriers, and the need to attract private capital to invest in expanding Canada’s energy infrastructure, such as ports, pipelines, rail, and transmission lines.
Next, Peter and Jackie consider Ontario and Quebec’s heavy reliance on crude oil and natural gas transiting through the United States. They also discuss Canada’s imports of refined petroleum products and cross-border electricity trade.
Content referenced in this podcast:
- Mark Carney Climate Plan
- CAPP Data Centre “Canadian Imports of US Crude Oil, Natural Gas and Refined Products”
- Peter Tertzakian’s story “The Long Way Around” also on Apple Podcasts
- Financial Post, July 2020: “Cenovus first to announce it’s shipping Western oil to Eastern refineries through the Panama Canal.”
- EIA blog that Canada and US trade in electricity is close to balanced (November 2024)
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Episode 272 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. So I think we have to endure talking about tariffs yet again, but I promise our audience next week we’re going to have a little more fun.
Jackie Forrest:
That’s right. Wait for that.
Peter Tertzakian:
Wait for next week. But we are on the, it’s not even the eve, we’re on the… Just recording this as President Trump is announcing his reciprocal tariffs. So we’ll see where that takes us. But there’s plenty to talk about even without him announcing those.
Jackie Forrest:
Right. So it’s February 13th and we are running this podcast a little later, so keep that in mind if there was breaking news after.
Peter Tertzakian:
I guess this is his Valentine’s Day present to all his trading partners.
Jackie Forrest:
Yeah, yeah, that’s Trump’s-
Peter Tertzakian:
Showing some love. Showing some love.
Jackie Forrest:
All right, well let’s get into the news, so much to cover. First of all, I was fortunate, and Peter, you also went to the Prime Minister’s meeting-
Peter Tertzakian:
The summit, yeah.
Jackie Forrest:
…summit last Friday in Toronto where he brought together people from across the country to talk about what we could be doing in the face of the situation with the Americans. Of course, our prime minister announced that we are going to do countervailing tariffs, now we’re finding out today we’re going to be getting reciprocal tariffs. It’s like tariffs on tariffs on tariffs now. But the discussion was more around, well, what else should Canada be doing? What can we do that’s in our control? And it was about 150 people there and it was interesting just to hear from other sectors .and unfortunately there’s a lot of commonality. Things like we just can’t get stuff done, things take too long.
Peter Tertzakian:
Yeah.
Jackie Forrest:
Hard to attract capital. So that was not great to hear, but also great to hear that we’re actually trying to solve some of these problems.
Peter Tertzakian:
Yeah, I think the idea, and I think this is now an overused word, wake up call has resonated amongst the audience, which was composed of business leaders, union leaders, all sorts of other stakeholders in the Canadian community that were assembled in Toronto with the Prime Minister and also the Prime Minister’s Council on US-Canada relations, which I was also appointed to.
And yeah, I thought it was a really good opportunity to interact with other industries and people. Particularly I found our interaction with the agricultural sector very interesting because there’s such commonality in terms of the issues of trying to transport food and agricultural products for export, the challenges that are faced, the inter-provincial challenges, and this whole idea of how much GDP and productivity we can liberate if we just figured out how to trade amongst ourselves as provinces without inter-provincial tariffs and barriers.
Jackie Forrest:
Yes, yeah.
Peter Tertzakian:
That was a huge thing. And actually, okay, I’ll use the word again, a wake -up call for me. That, okay, I knew this was an issue, but until recently I didn’t realize how big an issue inter-provincial barriers are.
Jackie Forrest:
And actually some of the, it’s all micro details, some of the stories people said were just crazy. Like semi trucks needing to stop between provincial borders to change tires because the tire requirements are different. Change warning labels, sometimes they’re allowed to only travel at night, other places only in the day. The inefficiencies we have in our economy and that we just haven’t solved. And by the way, after the meeting I looked at inter-provincial trade, there are estimates that it could increase GDP if we could just get rid of all of these barriers, it could increase GDP about 4%, where the Trump tariffs, the first 25% would reduce our GDP by 2%. So we could more than offset the impact of something like a 25% tariff from the Americans by just trading freely amongst ourselves. Why aren’t we doing this?
Peter Tertzakian:
Well, it also solidifies or strengthens, I think is a better word, our own internal supply chains, which is really important in a de-globalizing world. And we’ve talked about that. It’s just super important that we become much more secure in our own ability to serve ourselves. Whether there is external factors like pandemics and things where we found ourselves short of certain types of products that we had to import. But maybe that’s not a good example, but certainly the world of energy, of oil and gas. I mean the idea, again, we’ve said it so many times in the shows that we are the largest exporter to the United States. You’d think we would be energy secure in central Canada, particularly Ontario, Quebec and New Brunswick. But no, they import the bulk of their oil and have their natural gas from the United States. So we’re hostage to that situation. If we had cross-country energy ease type pipeline, we would be far more energy secure, have sovereignty and control over our resources in the event of macroeconomic or global geopolitical events.
Jackie Forrest:
All right, and we’re going to get to that in more detail actually. That’s the second part of this podcast is to explain. Because what we’re also finding in our conversations over the last few weeks is although you and I have been talking about this quite a lot, this lack of energy security, it’s not well known across Canada.
Peter Tertzakian:
No, not at all.
Jackie Forrest:
So we want to talk about that in more detail. Another term that came out of the meeting last Friday, that’s the February 7th meeting with the Prime Minister, we need more trade enabling infrastructure. So that’s pipelines for our gas and oil, but also apparently our rail is really bottle-necked and we could use way more capacity on rail. And our ports-
Peter Tertzakian:
Our ports.
Jackie Forrest:
…need a lot of capacity. And then transmission lines. So there was an idea that was raised at the meeting, we need an emergency order just like the Americans are doing. They’re saying wartime measures, emergency order, we’re going to build things very quickly. Could we do that? And I’m going to get into it, but I was doing some research about our energy security and our Trans Canada mainline, that’s the gas line that travels on Canadian soil from Western Canada all the way to Ontario above the Great Lakes-
Peter Tertzakian:
Yeah, over the shield, yep.
Jackie Forrest:
…providing energy security, that was built in two years. Okay, so we can… And that’s going through the rock and everything. How do we get back to building things in two years, not 10 years?
Peter Tertzakian:
Yeah. How do we permit in less than, what is it, 7 or 10 years with no guarantee that it is not going to be challenged. The granted permits are not going to be challenged in a court or otherwise obstructed. I mean this is challenging. It’s not even getting to an investment decision, let alone construction .like power lines, I’ve heard numbers like to get a big transmission line approved takes seven years. And that’s not probably every single one, but a lot of them. And if you wanted to build a cross-country energy corridor and electrical power, then you have all sorts of cross-provincial border regulatory considerations and permitting and all sorts of things. We need to streamline this.
And actually that was a consensus in that meeting last Friday or Friday the 7th of February. That yeah, we need to figure out how to speed things up because time is money.,Time that drags on is uncertainty and nobody’s going to invest in that kind of thing.
Jackie Forrest:
Yeah. And we need to attract capital to this country because you know what? It’s all going other places, especially now with the Americans making investment potentially a lot easier while rolling back some of these requirements. Another thing that was talked about was finding new trade partners. And after the meeting I did a bit more research on that and it was interesting to find out, in 1930, the Americans did the same thing to us. 19% tariff on Canadian imports of something like 20,000 goods. And at that time we as a country went out to the UK and our Commonwealth partners and really tried to increase our trade and we massively increased our trade with some of our [inaudible 00:07:47] partners. And I think that has to be another thing. And the prime minister talked about that.
Peter Tertzakian:
Yeah, I think that that’s important, increasing trade. But to do that, you need to build the infrastructure to get the goods overseas-
Jackie Forrest:
Right, we need the ports. Yeah.
Peter Tertzakian:
…you need the ports and things. And that was a big part of this conversations that I had, you had at the summit. So the will is there, definitely there was a patriotism in the room, there was a will in the room, there was a sense of urgency in the room. But I think that’s all fine, now we actually have to act. We have to act and follow through because we’re going to need the investment dollars to pay for it all. And we don’t necessarily want to dip into our deficit-ridden treasury to do that. We want private capital to come in, even our own private capital, get our investors confident enough to invest in these sorts of projects. Our companies are big companies, whether they’re big pipeline companies or rail or other companies, to have the confidence that if they get a permit, for example, that permit is a final decision.
Jackie Forrest:
Mm-hmm. And they don’t have to wait by the way, five years and spend hundreds of millions, if not a billion dollars, trying to get that permit only to find out that they got a no. So we’ve got to change this so that private capital actually wants to go here. It cannot look like the trans mountain where it took over 10 years and it ended up costing three times more. And throughout that 10 years, more and more requirements came on the project. It has to be very clear up front what is your requirements and then you can know what it’s going to cost and you can build it quickly. Because extending out these construction periods is a way to make things more expensive.
Peter Tertzakian:
Right.
Jackie Forrest:
So doing it quickly, it’s easier to stay on track.
So talking about trying to attract more capital to this country, Mark Carney, who is in the liberal leadership process right now, put out a climate plan. And I have to say, I don’t think this climate plan is going to be attracting money into Canada. And so I thought we should talk about it a little bit in terms of the details.
Peter Tertzakian:
Yeah, I think it’s important that everyone understands the different positions of those that are running in the liberal leadership. There’s Mark Carney, Chrystia Freeland are in the leadership. I mean, Mark Carney is appearing to be the anointed one and we’ll have to wait until March 9th to know that he has put up on his website his latest policy position.
But if you look at what’s happening in the United States, okay, that’s extreme pulling out of the Paris Climate Agreement, shredding all sorts of policies. But if you look at the Europeans, even yesterday there was articles… There’s almost an article every day about how the Europeans are realizing, okay, if we are going to get their own infrastructure built in the geopolitical realities that they are going to also have to relax. And maybe relax isn’t the right word, I would argue the right word is rethink their carbon policies to be more investor friendly for the expansion that’s needed.
Jackie Forrest:
Mm-hmm. And we have to compete for capital, because people are going to put their money in the US by the way, where you don’t get all these tariffs or maybe there’ll be some countervailing tariffs here, but I think there’ll be less tariffs. And we’re just learning, we’re getting layers and layers of tariffs here with the poor steel industry having 25 and now an additional 25 and now another reciprocating one. So we have to be even more competitive than ever. And so let me just go through and I will put a link to this. It’s quite a detailed policy platform actually.
Peter Tertzakian:
This is Carney’s, is it?
Jackie Forrest:
Carney’s, yeah. So he’s talking about replacing the retail consumer carbon tax with subsidies that consumers can buy green technology. Okay, that sounds good. People don’t like the carbon tax and he’s kind of ran on this position that he’s getting rid of the carbon tax. But actually we’re going to get a lot more carbon policy because he’s going to strengthen the industrial emitter program, make it more stringent, put in things like more methane rules, implement the oil and gas cap, have industry pay for consumers to buy green technology. So the burden of this, the carbon problem, is going to fall on industry. That’s more cost for industry. He’s talking about a new taxonomy for companies that are operating in Canada around greenhouse gas and a mandatory reporting requirement. And here’s another really big one. He wants to put a carbon border adjustment tax so that everything that comes into the country, if it’s not low carbon, you’ll have to pay a carbon tax. That’s like a tariff on everything coming into this country, a carbon tariff you could call it, but increasing the cost for Canadians for buying imported goods that are not the lowest carbon goods.
So I’m very concerned by that, especially because the reason you put a border adjustment tax on is because inside your country the carbon policy is very stringent and adding more cost to your industry. And so you don’t want imports to come in from other countries that don’t have that and therefore are more competitive than yours. But here’s the thing, we are a net exporter of almost everything. So you’re going to impose a bunch of very strict and costly industrial carbon tax on our companies. We’re not going to be protected by a border adjustment tax because we need to sell more than we… We don’t just sell to consumers in Canada.
So I’m really concerned by, again, this is a bygone era. We’re in a world where we need to compete for capital. And this is concerning to me.
Peter Tertzakian:
Yeah. Now this does not necessarily mean that we can’t have a carbon emissions reduction trajectory as a consequence of this. It just means that you have to rethink how that’s going to be done. And if you think about, say countries like China and others, they don’t have carbon taxes, they don’t have carbon [inaudible 00:13:10] drilling. Yet they are leaders in batteries, EVs, solar panels, I mean you name it. That is in the world of decarbonization or clean tech or whatever you want to call it.
They’re achieving that through industrial policy. They’re achieving that through subsidization and incentivization of their big industries and their companies to be leaders in the space. And so to me, as I look at the history of energy transitions, this is a far more effective and what I would call a stronger force of change when transitions are done as a consequence of industrial policy, particularly if that industrial policy is affected by geopolitical realities such as we are in today as opposed to energy transition that is a consequence of environmental policy, which on its own historically is a relatively weak force of change.
So we have to rethink how we approach this. And if we have the mindset here of implementing an industrial strategy, that serves also the purposes that we talked about earlier, building out the infrastructure and the ports. So obviously the podcast is too short here to really get into the details, but I would just offer to you a complete rethink is necessary. And I think that rethink is going on in other western regions and countries. And if we stick to the old paradigms, I think we’re going to lose certainly capital, we’re going to lose all sorts. We’re not going to become competitive in the world that’s emerging.
Jackie Forrest:
Well, let’s just talk about our reality here, the new reality. The Americans are talking about taking us over. We need urgently to get people to build pipelines, to expand our ports so that we can sell more things to other people and become more resilient. And now we’re talking about putting border adjustment taxes on, and we know the government can’t pay for all of this. We need to attract capital. So anyway, I’m really on my soapbox with this one, Peter, but this one’s got me fired up. It’s just like it’s a new world where Canada sovereignty has to be something that is a focus.
Peter Tertzakian:
Yeah. Well, let’s talk about that sovereignty again. I know I touched on it in the introductory part of the podcast. We’ve talked about it so many times before. Let’s talk about it again. Because at the summit there was many people that were surprised to know, many people from the Toronto area or Toronto, Montreal, that were surprised to know that they are getting most of their oil and gas from the United States.
Jackie Forrest:
Yeah, so let’s talk about that. And we are going to put a link in the show notes. CAPP, the Canadian Association of Petroleum Producers, put out a slide deck on their data center, the CAP data center, and it actually goes through a lot of the details. So I encourage people who are interested in this topic to go through that slide deck. We’ll just hit the kind of highlights of it.
But we are really dependent on the US in a couple of key areas for crude oil, natural gas, and refined products. So for crude oil, New Brunswick imports about 165,000 barrels a day of crude oil from the US. I see that as less of an energy security issue in that they could import crude oil from other places if the US somehow wasn’t going to sell it to us anymore. Because they’re on the Tidewater, so they have options.
But Quebec and Ontario are actually the concern. And if you just look at the US import data, it actually understates the reality. Because Ontario gets all of the crude oil that they consume transited through the United States. Actually, the majority of that crude oil is Canadian produced crude oil, but it comes under the Great Lakes and comes back around and crosses into Ontario between Lake Huron and Lake Erie for one of the major pipelines.
And so this is the concern is that in the case, worst case scenario here where the Americans are taking us over, they want to really kind of hurt our country, they have the ability to stop all crude oil flows to Ontario. And then this pipeline, it’s called Line Nine, it actually continues on and delivers crude oil into Quebec, into Montreal. So about 60% of the crude oil that’s consumed in Quebec is also transiting through the United States and then through this pipeline called Line Nine that delivers into Quebec.
Now, Quebec does have more options in the worst case scenario because they have the St. Lawrence there, and they can deliver crude oil through the St. Lawrence in the worst case scenario. But Ontario has no real near term options.
Peter Tertzakian:
There’s no real recourse. I think the message is we lose control of it because we don’t have sovereignty over those pipes.
Jackie Forrest:
It’s just probably worth mentioning that this Line Nine that connects Ontario with Montreal today and takes the Western Canadian crude oil out to Quebec was built after the oil crisis and the OPEC embargo as a way to bring Western Canadian crude oil into Quebec. Because what we found, and I’m going to get to your story the long way around, is there was no way to get Western Canadian crude oil to Eastern Canada. But the problem with it is it’s only energy secure if the Americans are our partners and friends, because it goes through the US and so it is a big vulnerability.
So Peter, you wrote a story called The Long Way Around. We’ve actually talked about it on the podcast before-
Peter Tertzakian:
We’ve talked about it, yeah.
Jackie Forrest:
….we’ll put a link to… You have both the audiobook and the written-
Peter Tertzakian:
Yeah.
Jackie Forrest:
…book on your website. But just tell us a little bit about it.
Peter Tertzakian:
Yeah, well, I wrote the story, I don’t know, half a dozen years ago. It’s always intrigued me. I first caught onto it probably a dozen years ago. Because during the 1973 and ’79 oil price shocks, particularly the ’79, countries started to hoard oil. And so we did not have access in central Canada, Ontario and Quebec in particular, to Western Oil when we needed it the most. So what happened was the oil that went through the Trans Mountain Pipeline at that time to Burnaby, we leased some Greek tankers and those Greek tankers basically took the oil through the Panama Canal all the way around to the east coast of Florida, up the coast and delivered to Canada by ship/
Jackie Forrest:
Right.
Peter Tertzakian:
[inaudible 00:19:05]-
Jackie Forrest:
It was 14,000 kilometer journey versus 3,600 kilometers if we could have just gone direct.
Peter Tertzakian:
Yeah. So I’ve always thought that this is just absurd. We are not energy secure, I’ve been saying this for a long time. When the oil price shocks retreated and the hoarding stopped, then we were maybe be able to get back to normal. But we didn’t really learn the lesson that we need to be more energy-secure.
Now, recently I’ve changed my thinking. Oh and by the way, another important thing is that in 2020, Cenovus and Irving Oil redid the route.
Jackie Forrest:
On Canada Day.
Peter Tertzakian:
On Canada-
Jackie Forrest:
In 2020.
Peter Tertzakian:
…in 2020.
Jackie Forrest:
Yep.
Peter Tertzakian:
And we can post an article on that as well where they took oil from the Trans Mountain pipeline, the yet unexpanded Trans Mountain pipeline, all the way around the Panama Canal up to an Irving refinery.
So again, it just pointed to me that, okay, that’s interesting. It seems absurd that we have to do that 14,000 kilometers versus just straight across. But what’s interesting is that you can ship oil anywhere on a tanker for around two bucks a barrel at most, right?
Jackie Forrest:
It might be more expensive through the Panama Canal though ’cause you need smaller ships and there’s a cost for going through the Panama Canal-
Peter Tertzakian:
Okay, Whatever it is, two bucks, three bucks. It’s actually probably cheaper than the cost of even amortized of building the pipeline.
Jackie Forrest:
Yeah, but it doesn’t have a lot of energy security.
Peter Tertzakian:
No it doesn’t-
Jackie Forrest:
If we’re in war.
Peter Tertzakian:
…have nearly as much energy security. But if we wanted to have greater independence and less potential influence of our oil as it transits through the United States, if things get really heated up, we could do that. We could do that. And we could do that fairly quickly. It would involve having to reverse Line Nine from Quebec City all the way back to Sarnia
Jackie Forrest:
Yeah, to get the oil into Ontario. So that same line that today is taking crude oil from the Enbridge main line into Ontario, this Line Nine into Quebec. Could be reversed. It wouldn’t meet all of the crude oil requirements. It’s not quite large enough.
Peter Tertzakian:
Yep.
Jackie Forrest:
But it could meet a big part of it. You’d probably need rail as well for Ontario. And then of course our eastern refineries, they can get access to tankers. But yeah, it’s not the most efficient.
Peter Tertzakian:
Look, it’s not optimal, it’s not efficient. In the worst case, and we were talking about this by the way, when there was talks that Michigan was going to shut down Line Five. When was that? That was sort of-
Jackie Forrest:
’21, that was a big threat.
Peter Tertzakian:
2021 [inaudible 00:21:33].
Jackie Forrest:
So this is not a new thing.
Peter Tertzakian:
It’s not a new thing. So tariffs or no tariffs, there is a real vulnerability here. And so to me, okay, we do have an out with this, particularly if we work to expand Trans Mountain pipeline, that would give us multiple benefits or gateway and others to the West Coast-
Jackie Forrest:
But those are going west, right?
Peter Tertzakian:
Those are going west, yeah. But it allows us to tap into global markets like the Asian markets to give us the best price possible for our crudes, diversify our customer base, but also expand our potential rapid energy security sovereignty issues by, yeah, we can put it on tankers and do that route that we did in the 1970s.
Jackie Forrest:
Right. Except the Americans might control the Panama Canal, but I guess we could always go all the way around.
Peter Tertzakian:
We’ll go around the Drake Passage and-
Jackie Forrest:
As you know.
Peter Tertzakian:
Yeah. Okay.
Jackie Forrest:
By the way, we’ve been studying this for a long time. I actually found there was a government report in 1959, so it’s not just 2021 or back in the Arab embargo, that rejected building an Edmonton to Montreal pipeline. The reason in large part because overseas oil, even though it’s coming from places like Saudi Arabia, Libya, and Iraq, was deemed more plentiful and lower cost. Because that’s the issue, it’s actually just cheaper to buy the foreign oil than to do all this long way around or build the pipeline.
Peter Tertzakian:
Well, it’s like we’ve got to think of our future generations. Yeah, it’s cheaper. It’s cheaper, and that’s why we’ve never built these east to west oil pipelines. But there’s no insurance policy here. There’s no insurance policy. And by the way, central Canada does not have an SPR, strategic petroleum reserve.
Jackie Forrest:
Yeah, not like the Americans.
Peter Tertzakian:
There’s only two countries in the 31 country international energy agency that did not build a strategic petroleum reserve as a consequence of the 1970s oil price shocks. And those two countries are Canada and Norway. Now, Norway has its energy security and it has access to global markets through its coastline. Canada does not have energy security, as we’ve just discussed, or sovereignty over its pipes, nor does it have a strategic petroleum reserve. Which for the fourth largest producer of oil and gas in the world seems rather ridiculous.
Jackie Forrest:
Well, and you know what? Sometimes you got to pay a little bit more, like you say, you pay for insurance because you have that security. And that’s always been the issue in Canada when it comes to energy. We always go with the cheapest option and not the most energy secure. And why? Because we always trusted our American neighbor to never do anything that would impact the flow of that energy. And I think we’re just waking up to a new reality that we can’t trust them.
Peter Tertzakian:
Yeah. Or we gambled. I mean, let’s be clear. I mean before the United States used to be the conduit for most of our oil and gas in central Canada, there was a lot of oil that actually came in from the Middle East and other parts of the world. And so at that time, which was not that long ago I think, when did Line Nine get reversed? It was only in the last, what, half dozen years?
Jackie Forrest:
In the mid 2010s… We talked about when it was originally built, it was actually in the direction it’s flowing today, to bring crude oil from the US, Canadian oil coming through the US outside Montreal. But it wasn’t being used because that wasn’t a very economic route. So it was reversed. And then just in the mid 2010s, it was reversed, changed again. Because now there’s ample amounts of cheap crude in the inland of the US and Canada and now that was the cheaper crude. The offshore crude was deemed to be more expensive.
Peter Tertzakian:
But whatever. I mean, the 2010s were an unusual period, and it was geopolitically very quiet. And so again, we were gambling that nothing would undue levy would happen like the 1970s oil price shocks. But if it did happen, then again, we would be out of luck, certainly in central Canada because of the lack of a strategic petroleum reserve.
Jackie Forrest:
Right. Yeah, and the reliance on a pipeline that transits through the United States.
Peter Tertzakian:
And by the way, a lot of people say, “Well, we shouldn’t be doing this because it’s the end of oil. Electric vehicles are going to accelerate and we are not going to need oil anymore.” Well, this is nonsense because only a fraction of the barrel, what is it, 30% of a barrel, it’s a significant fraction. It goes to vehicular transportation. I mean, there’s all sorts of industrial inputs. I mean, oil and petroleum products are a feedstock for all sorts of industrial processes for manufacturing.
Jackie Forrest:
Yeah. And then it’s also used in heavy haulers, airplanes. Yeah, we still use a lot of oil.
Peter Tertzakian:
Airplanes and things like that. So I mean, this isn’t just about combustion and engines, it’s about securing a vital commodity that is an input into other parts of a manufacturing and sophisticated economy.
Jackie Forrest:
Right. Well, and also we don’t have the electricity infrastructure to support all electric cars today. We’re going to grow that.
Okay, well, if you don’t think I’m fired up yet, we’re going to talk about natural gas. Because this one really fires me up because we actually have a pipeline connecting western Canada on Canadian soil over top of the Great Lakes. I told you it took two years. Yes, two years to build this pipeline.
Peter Tertzakian:
The main line, yep.
Jackie Forrest:
And it had to go through the Rocky.
Peter Tertzakian:
The Canadian Shield.
Jackie Forrest:
That’s right, the Rocky Canadian Shield. And my favorite historical minister, he never was a prime minister, C.D Howe. He fought for that oil pipeline to not go through the United States. He lost that battle. He wasn’t going to lose it on this natural gas pipeline. And there was the great pipeline debate of 1956 in the House of Commons. He worked hard to get us energy security. And of course the pipeline was built shortly after.
Now this pipeline brought gas into Ontario, and then it was extended to go into Quebec. And that was good for a long time. But what happened was over time we built more pipelines into the United States and it was a better economic path to go through the United States. And this main line started not running at its full capacity. And because it was a regulated pipeline under a regulated system, if you have less through [inaudible 00:27:32], your tolls go up. If you have half as much running through the pipeline, then your tolls are kind of double. This is just simplifying it. But what happened was it became uneconomic to start moving gas through that pipeline because these pipelines that went through the US were cheaper. And the more gas that went through the US, the more expensive our pipeline got, the TC main line.
And so what we did is we actually lost a lot of market share. So if you go back to the mid 2000s, most of our gas was coming through our own pipeline and not very much was coming from the US. Today about half of the gas that’s supplied to Ontario and Quebec and consumed in Ontario and Quebec is coming through the United States. And our main line, the one that’s on our soil, is only about half used. So this is an example where as a country, we should have said, you know what? We need to find a way for this pipeline over our own soil to be competitive with the alternative. But we didn’t. Instead we lost market share in Eastern Canada, we gave the economic incentive for people to build more pipelines in from the US. And today we’re in a big bind because if the Americans were to cut off our natural gas, we wouldn’t have enough natural gas into Quebec and Ontario.
Peter Tertzakian:
Yeah. So the main line that you’re talking about, the one that [inaudible 00:28:44]-
Jackie Forrest:
The Trans Canada, or [inaudible 00:28:45]. Yeah.
Peter Tertzakian:
…have, yeah it’s not actually one pipeline, it’s actually six. From my understanding.
Jackie Forrest:
Yeah, there’s many different lines there, that’s right.
Peter Tertzakian:
That are sort of in the trench or beside each other. I don’t exactly know how it goes. It’s just sitting in the ground doing nothing and probably need some maintenance and overhaul if we’re going to get it going again.
So it’s doable. It’s doable that we can be energy secure. And by the way, those are the same pipes that were going to be repurposed for oil for energy east. And so this is the beauty of the thing is that actually, whereas you said it took two years to build this thing, I don’t think it would take that long if we had the will to actually put up the capital, again this gets back to investment, and make ourselves a lot more secure both on the oil and the gas side and consume our own products internally to contribute to our own GDP rather than see it go south and north and south and north and create this sort of dependency.
Jackie Forrest:
Yeah. Well C.D Howe would be rolling in his grave to think that the pipeline he fought for was half empty and we were relying on American gas.
Peter Tertzakian:
Yeah, so-
Jackie Forrest:
But it is an asset that we have today. And I do think there’d be the ability, because it is a fairly big, there’s a lot of pipe there, that there might be the potential to really reduce our reliance on US gas and at the same time use it for our oil problem as well.
Peter Tertzakian:
So you know that I have in my personal library a typewriter-typed copy of the original document that outlines those pipeline debates at the time.
Jackie Forrest:
Really? I’ll have to come over and read this. I’m not allowed to touch it probably.
Peter Tertzakian:
No. It’s cotton gloves. But I’ll take a photo of it, we can maybe posted it on the podcast.
Jackie Forrest:
Okay, that would be great. All right, so there. I mean, the good thing is because of the decision in the ’50s, we have options. None of them are near term, not tomorrow kind of thing. But I think there’s assets there that we can take advantage of.
And we’ll just finish off the podcast to talk about refined products. We actually import refined products from the United States into Quebec, Ontario, and British Columbia. And so we have all their vulnerabilities on refined product side too.
Peter Tertzakian:
Yeah. I know we’ve talked a lot about our vulnerabilities and even threats of being cut off from the United States, but I also want to say that there’s tremendous benefits of the continental energy pipe grid trading back and forth with the United States. We should not diminish the importance of that. In fact, we should embrace it and hopefully can even expand it. But we should also think as Canadians of how we can ensure that we have the security that we want and increase the cross Canada trade of all products, whether it’s oil, gas, and then there’s electricity too.
Jackie Forrest:
Yeah, I’m glad you said that because electricity, most people view us as being big hydro dams and that we’re sending all this electricity down to the United States. That used to be the case, but the last couple of years, our trade has actually been quite balanced and we need them as much as they need us. And I will put a link to an EIA, a little blog that explains that.
But hey, here’s another one. When we’re talking about inter-provincial trade, why don’t we trade electricity? Instead of sending it all north-south, why don’t we build this east-west big transmission line? Most of the regions of Canada are projecting that they won’t have enough electricity. And also if we want to get more renewables on, it creates a lot of resiliency to have more big transmission lines. So on these big bold plans that we’re talking about, I don’t want to forget electricity.
Peter Tertzakian:
No, we shouldn’t-
Jackie Forrest:
East-west electricity quarter.
Peter Tertzakian:
…because we want to get back to my favorite subject, which is data centers and how something’s going to have to give because the projections for data center electricity consumptions are so high. But we’ll get back to that. And we’re not going to be able to fulfill the dream of being an AI superpower without trying to figure out how to get our electricity moving across this country.
Well, Jackie, we got you all fired up. This is a time where people are getting emotional. We do need to keep calm and also look at as the big picture of what’s going on. But there’s no question that as Canadians, this is an opportunity to really take advantage of the situation and this thing becoming more Canadian in terms of our cross-country trade, increasing our exports to be more diversified. These are all very positive things that are an outcome of these tariffs. So that is the silver lining to this whole thing. Always great to chat about this stuff. Thanks.
Jackie Forrest:
Thank you. And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Announcer:
For more ideas and insights, visit arcenergyinstitute.com.
Canada’s Opportunity for Fortune
This article was originally published in The Hub.
If Canada is to reduce its economic dependency on the United States it must attract significant investment—billions of dollars. Ideally, these funds will come from investors and corporate capital, rather than our deficit-ridden treasury.
The good news? Canada has been an attractive investment destination before. It’s time to position ourselves as one again—quickly.
A February 1955 edition of Mechanix Illustrated offers historical context. Akin to Popular Science, the magazine provided American readers with a glimpse into Canada’s resource potential.
At the bottom of an unremarkable cover about houseboating, a teaser headline would catch the eye of any adventurous capitalist: “There is a fortune to be made in Canada.”
Turning to the featured article, page 55 presents a black-and-white photo of an oil refinery with the bold headline: “Our lusty neighbour to the north offers the chance of a lifetime to men of vision.” Flipping the page, readers encountered a yellowed map of Canada, annotated with the nation’s prized resources: gold, silver, uranium, iron, and oil in Western Canada. The article raved about abundance, opportunity, and the promise of riches—a clear call for investment.
Looking at that article and the map in today’s context, the desirability of our mineral resources is more evident than ever. Yet, what happened to Canada’s once “lusty” appeal to make a fortune? In the oil and gas industry, investor capital is leaving the economy, not coming in—the net exodus in 2025 is likely to exceed $35 billion.
Without investment, Canada’s undeveloped resources sit idle in a geopolitically charged world.
President Trump’s repeated tariff threats and remarks about Canada becoming a 51st state highlight the fragility of our economic sovereignty. His past references to the Canada-U.S. border as an “artificially drawn line” point a spotlight on the vulnerability of our trading relationship. But this isn’t theatre. Canadians shouldn’t view tariffs, stagnating investment, and capital flight as if they’re part of some reality TV show.
Reducing dependence on U.S. trade requires investing in infrastructure to boost interprovincial commerce and global exports. Energy must be a priority, given its major contributions to our economy and government revenues. In 2025, Canada’s upstream oil and gas sector is projected to generate $177 billion in revenue, with over $100 billion going back into the domestic economy.
Energy security is a big issue: Western Canada exports most of its oil and natural gas to the U.S., while Central Canada imports most of its supply from pipelines that transit south of the border, meaning we don’t have jurisdictional control over our vital supply lines. Even before tariffs, Michigan wanted to shut down the Line 5 artery into Ontario. Also of concern, we often sell oil and gas to the U.S. at discounted prices and reimport equivalent energy at higher prices.
Since the Mechanix Illustrated article, investors and multinational corporations have poured fortunes into Canada’s resource economy. Over seven decades, the upstream oil and gas industry has made an estimated $2 trillion in cumulative investment—this includes both capital from foreign investors and internally generated funds. Without the influx of foreign capital to supercharge the spending, the oil and gas industry would not have reached its current scale. All in, the investments have made Canada the world’s fourth-largest oil and natural gas producer and created an industry that is expected to deliver over $45 billion in royalties and taxes this year.
The north-south trade relationship with the U.S. has long been the foundation of our energy industry. The recent expansion of the Trans Mountain pipeline marks the first meaningful shift toward diversification, opening pathways to Asian markets. Yet, it’s only a first step in reducing dependency on a single customer.
Tariff talk has reignited discussions about long-stalled infrastructure projects like Energy East, Northern Gateway, and further Trans Mountain expansions. For LNG, there is increased interest in export capacity on the west coast and new capacity in Quebec. The opportunity to diversify is real—but ambition alone won’t suffice. Building infrastructure demands more than patriotic resolve; it requires substantial investment, including from global multinationals.
This brings us to the core question: Why was Canada a magnet for energy investment in 1955, and why isn’t it now?
Global oil demand in the mid-1950s was 18 million barrels a day and growing rapidly, so there was an obvious incentive to invest. Today, on a percentage basis demand growth has slowed down, yet consumption is stubborn at over five times the size, 103 million barrels per day, and still growing.
In 1955, Canada had an entrepreneurial spirit, where risk-takers could develop resource projects with relative ease. Today, that efficiency has been replaced by a bureaucratic maze of permitting delays, court challenges, and layers of burdensome, incomprehensible, and tangled carbon policies. While some are well-intentioned, these regulations are discouraging rather than encouraging investment.
Ironically, Canada’s rigorous environmental and regulatory standards should be an asset. Instead, they’ve become a deterrent. Investors don’t just want a fair and competitive playing field; they want a jurisdiction where risks and returns are predictable, where the time value of money is respected (permits must be granted or denied promptly), and where regulatory decisions are fair. Instead, Canadian project proponents can spend hundreds of millions, if not a billion dollars, advancing a project through the multi-year approval process, only to face rejection due to political calculations rather than a project’s merit. These are the high barriers to building energy infrastructure and are scaring capital away instead of attracting it.
Governments—provincial and federal—must act urgently to lower barriers to investment. Industry, regulators, financial institutions, and other stakeholders must convene to rebuild Canada’s investment climate.
In 1955, Canada’s appeal was strong enough to be featured in an American magazine. Seven decades later, our potential remains undeniable—Trump’s 51st state comments validate that notion. Our resources—critical minerals like lithium, cobalt, uranium, and rare earth elements, alongside oil and gas—are highly desirable globally and regionally.
To preserve prosperity and sovereignty Canada must become attractive for investment again—not just for multinational corporations, but for domestic entrepreneurs, business leaders, and financiers. That doesn’t mean selling out on environmental or social values. It means that we become a competitive jurisdiction again, a place that’s open for business, a place where the promise of “a fortune to be made in Canada” is not just a relic of the past, but a necessity that supports our prosperity for future generations and preserves our sovereignty too.
Anne Applebaum on Autocracy Inc., Trump, and US-Canada Tensions
This week, our guest is Anne Applebaum, a Pulitzer Prize-winning journalist, historian, and New York Times bestselling author. Her latest book, Autocracy Inc.: The Dictators Who Want to Run the World, explores the global rise of authoritarianism.
On February 6th, 2025, Anne spoke at the University of Calgary’s Haskayne School of Business annual PETRONAS International Energy Speaker Series. This episode was recorded live at the event.
Jackie Forrest moderated the discussion with Anne Applebaum, which covered a wide range of topics, including the timing of her new book, the Trump administration’s early actions and executive orders, and the recent deterioration of Canadian-US relations.
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Episode 271 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, and something different today, no Peter Tertzakian. Peter couldn’t make it today, but we wanted to share with you an interview I just did with Anne Applebaum. For those that don’t know her, she’s a Pulitzer Prize winning author, and historian and a journalist. She’s written a lot about Russia, but also studied authoritarian states and democracies, and how governments change. And we just spoke, it’s February 6th, at the PETRONAS International Speaker Series. This is a series that’s from the University of Calgary’s Haskayne School of Business and PETRONAS, and they bring international speakers to Calgary, and we had a sold out show. So, thanks for all of you, I know some of our listeners were there that attended it.
So, I’m going to cut to this interview with Anne here right away, but it obviously is an interesting time for her to visit, a time when Canadians have renewed interest in learning from history about how governments can change. I mean, we’ve thought that the American government was always going to be the same, but we’re seeing today that things can change, a new president can get in, and the things that we’ve assumed for the last 30 years can be different. So, we’ll cut to the interview with Anne, and I will have some closing remarks at the end.
Okay. Well, you’ve written on this a lot. You have a new book, Autocracy Inc., for those that didn’t see it you can get a copy of it out in the foyer. How many books have you written, what number is this?
Anne Applebaum:
Oh my goodness, it depends how you count. It’s six or seven. I also wrote a cookbook, I don’t know, does that count? I wrote a-
Jackie Forrest:
Yeah, for sure.
Anne Applebaum:
Actually, my co-author is a Canadian, my co-author was Daniel Crittenden Frum. So, I wrote a Polish cookbook, but I’m not sure if that’s … Is it a book? It’s a book.
Jackie Forrest:
Yeah, it’s a book. For sure.
Anne Applebaum:
Then it’s more like eight, I think.
Jackie Forrest:
Okay, perfect. And I actually read The Twilight of Democracy, autocracy, you’ve been writing on these topics more recently. Why did you decide to write this book now?
Anne Applebaum:
So, this book is really the product of reporting, and traveling, and meetings that I’ve done really over the last decade. The book describes a group of countries who are not united ideologically, so autocratic countries, nationalist Russia, communist China, theocratic Iran, Bolivarian socialist Venezuela, whatever North Korea calls itself, and these are countries that don’t have a common project, they’re not part of a bloc, like the old Soviet Bloc. Nevertheless, they’ve begun to understand that they have things in common, and they begin to work together in very specific ways, transactionally when it’s in their interests, when they feel that they share things.
My understanding of them comes a lot from their opponents. So, I know well some members of the Venezuelan opposition, I’ve known a lot of the Russian opposition, Belarusian, Hong Kong activists, and they’re often very good at analyzing their own regimes and it was really from them that I began to see the pattern of how this group of countries collaborates, and it happens in different ways. Some of it is financial, the semi-private semi-state companies in one country invest in the semi-private semi-state companies, in another they sell one another surveillance technology. The Chinese are obviously particularly good at that, they help one another get around sanctions, they help one another navigate the world of money laundering and offshore bank accounts in order to take their money that they’ve stolen or acquired and move it quickly around the world.
They also now cooperate militarily. And this, of course we’ve seen in the war in Ukraine, I’m sure you’ll want to talk about that in a few minutes, and they also begin to cooperate ideologically. And this, I think is the most important point, which is that although probably most of us here in this room don’t wake up in the morning thinking about China or thinking about Russia, there are people in China and Russia who wake up every morning thinking about us. And they have concluded partly because their own opponents, so their own dissidents, their own political opponents at home, because they use the language of democracy, of rights and of the rule of law, of accountability, of transparency. They’ve concluded that it’s very important in order for them to maintain their power to push back against those ideas. And they do so through propaganda, through their political actions. So, they don’t have much in common in terms of what they want to build or create, but they do share a common enemy and the enemy is us.
Jackie Forrest:
Well, let’s go to the question of the day, everyone’s dying to hear your views. You’re visiting after a very angry weekend for most of us where we were glued to the TVs because the U.S. announced tariffs on all imports of Canadian goods, even though we have a free trade agreement, I guess that doesn’t matter anymore. Everything is 25% except for energy, which was 10%. And then shortly after that, our Prime Minister announced counter tariffs on about a third of our exports to the United States. So, while these tariffs are going to hurt the Americans through higher prices, they’re probably going to hurt us worse, we’re probably going to have a recession. And unfortunately we have 80% almost of our trade is with one country, the United States. And so, we’re very exposed here at this time. Now, the executive order blamed drugs at the border and it also blamed-
Anne Applebaum:
We know that’s not true.
Jackie Forrest:
There’s very few so we are suspicious, especially because on Sunday morning, Donald Trump puts out on his Truth Social, basically he said, “Without the U.S.’s massive subsidies, Canada ceases to exist as a viable country,” and that, “Canada should become our cherished 51st state,” something he’s been saying for about a month now. “You’d get lower taxes, far better military protection for the people of Canada, and no tariffs.” Large cap. Okay, so we’re all sitting here in Canada. What is his motivation? Is he trying to take us over? Is he just trying to make us more economically reliable on them? Because we are already completely dependent on them economically.
Anne Applebaum:
So, here’s where I’m going to tell you something that is very hard to accept and most people won’t accept it, which is that it’s very possible that there is no particular logic involved, that there isn’t a grand strategy, that this is a thing he got in his head that he would like to pursue. It could be a negotiating tactic. We know how he negotiates, he wrote about it, or his ghostwriter wrote about it in his book, The Art of the Deal. He makes a huge fuss, he creates this anger and hysteria, he makes everybody walk out of the room and then he does his deal. So, it may be simply that someone told him Canada would be a great state, or it may be that he’s going to want to negotiate about something else. Be careful of post-hoc rationalization.
So, I was in Denmark a couple of weeks ago where I went to write about a similar problem the Danes are having with Greenland, and I’ve told you this already but I arrived there on the morning after Trump had spoken to the Danish Prime Minister on the phone, and I had some appointments with the foreign minister and so on. And I wound up spending the morning walking from place to place, and eventually all my appointments were canceled because the whole city of Copenhagen was having a political meltdown because Trump had yelled at the Prime Minister on the phone, and he demanded Greenland and said, “We’re going to boycott Danish companies.” And Denmark, like you, has an enormous economic relationship with the United States, that there are a couple of dozen really big companies, Maersk, and Lego, and Novo Nordisk, which makes Ozempic, and lots of other companies.
But they make windmills, they do a lot of clean energy, and the idea of being cut off from the U.S. market is almost as great for them as it is for you. And the difficulty was, for all the Danes that I spoke to, eventually I found some who would talk to me, the difficulty is that there is nothing that the United States could possibly want to do in Greenland that it can’t do now. They have a base there, they kept nuclear weapons there in the ’50s, the Americans, they could drill for whatever minerals they want to drill for, they could monitor the shipping lanes, whatever you could imagine doing it’s possible now through Denmark. I mean, Denmark will allow you to do it. And what was bothering the Danes was a Kafkaesque sense that there’s no reason for this. They’re a logical people, they wanted an explanation and there wasn’t one.
And it was maybe Trump likes the idea of the map looking bigger, maybe he likes the idea of expanding America’s borders, maybe he’s got that into his head. And then there were a lot of post-hoc articles, people wrote about Greenland and suddenly everybody was writing about the history of Greenland and why it’s important to the United States. But it might be something even more surreal than that, it may just be that that’s what he got into his head. And I don’t know how to translate or explain that to people in a way that will make them believe me, that it might not be part of a big strategy.
Jackie Forrest:
Well, it is true, we all want a rational explanation and that’s human behavior. But there has been things, like his inauguration speech he had terms manifest destiny in there, which was a term about America going west and taking over North America. At one point he talked about territory expansion. He has said things that make us think that territory expansion is part of it-
Anne Applebaum:
I mean, he may have someone around him who’s telling him those things, and interesting. I mean those aren’t things he talked about during the election campaign, and if it makes you feel better I saw some polling, and it turns out most Americans don’t want Greenland and they don’t want Canada either. So, I think you’re safe from that point of view. But this is somebody who operates on a whim, it’s somebody who thinks … He doesn’t think in terms of win-win relationships, that we have a relationship with Canada and we both benefit and profit, and parts for cars go back and forth over the border eight times, and we have inter-compatible energy industries and so on, and that that’s good for both of us.
He thinks in terms of zero-sum, someone wins and someone loses in every transaction. And if you understand that about him, then I think that’s better than any kind of philosophy or strategy, that it’s always somebody wins and somebody has to lose. But to be clear, there are people around him that have, over the last eight years, have attached themselves to him and they have strategy. So, there are others in the Trump camp and in the administration who have more strategic ideas of-
Jackie Forrest:
Right, right. Okay. Well, and everything you said about Greenland you could say about Canada. We have military bases here, we have NORAD, they could come here. We want them to come here and bring their money to invest in our oil industry, if our government wouldn’t make it so hard. So, the same logic is here in Canada. What do you have that you would get more of if we were the 51st state, is a question mark.
Anne Applebaum:
I mean, nothing. No offense, but I don’t think it would be that popular, the idea of invading Canada and absorbing Canada.
Jackie Forrest:
Okay. Well, that’s good. You can all sleep a little easier tonight.
Anne Applebaum:
But it’s very important to get used to this idea of irrationality and illogic, and I know nobody wants to accept it and they all want to see a bigger game, but that’s now a part of the story.
Jackie Forrest:
All right. Well, onto Elon Musk, since you mentioned him, we’re all very curious about him. I mean, this recent shutdown of, is it USAID or USAID? How do you say it? I didn’t even know about this organization before-
Anne Applebaum:
Usually you say USAID, but I’m not sure why that’s true. I mean, you can say USAID if you want to.
Jackie Forrest:
Okay. And some of the Democrats are finally starting to complain, I’ve noticed, about this, because they’re saying he’s not the fourth branch of the U.S. government, he doesn’t have the authority to shut down something that Congress approved. What’s your take on him? How much influence will he have? Do you think that he’ll be gone in a few months because him and Trump are both very strong personalities, and it’s hard to see how they can work together? And obviously he’s doing some things here that seem, like you already mentioned, potentially illegal.
Anne Applebaum:
Oh, I think it’s very illegal. The idea that he walks into a U.S. government agency with a bunch of young guys who don’t give their names to anybody, and demands to download data from the system, or to have access to the U.S. Treasury Payments system, which pays people’s tax rebates and all kinds of other Medicare payments and so on. There’s no legal justification for it at all. Also, the idea that once again, the idea that you’re cutting waste or you’re looking for fraud, but you yourself don’t know what you’re looking at. I mean, if you’re looking at USAID for example, if you don’t know what the money you’re giving, I don’t know, a million dollars to X or Y organization or institution in Tanzania. I mean, if you don’t know what that organization is, and what it does, and who runs it, then how do you know whether that’s waste and fraud, or whether it’s legitimate?
So, these aren’t programs and institutions that you can legitimately reform that way. And so, therefore this is another kind of project, and we’re not all that clear yet what it is. There’s several different aspects of it that worry me. One, again, data. There’s now a lawsuit, there’s a group of civil service unions and some civil servants are now suing to block Musk from having access to the Department of Labor information systems, for example. Among other things, the Department of Labor produces all those, you know those statistics that move the stock market? You know the employment is up or down, or-
Jackie Forrest:
Gross domestic product?
Anne Applebaum:
… number of people who’ve changed jobs, that’s what the Bureau of Labor Statistics does. Imagine now that those statistics have been taken over by an outside person or group and can be manipulated, and Trump himself has complained about them in the past. They weren’t to his liking or they didn’t show the right results that he wanted. I mean, once we’re in a world where the U.S. government doesn’t produce statistics you can rely on, then we’re already almost in a different kind of country. The Soviet Union, before I wrote books about contemporary politics I wrote several books about Soviet history, and very famously they had corrupt statistics because Stalin, he didn’t want you to be able to read, see that there had been a famine in the statistics so he just changed the population numbers. I mean, that’s not the analogy I mean to make, but when you change statistics, when you politicize government departments, when you make people afraid to speak out or tell the truth about what’s going on in their departments, you also begin to change the atmosphere and the way that government works.
Jackie Forrest:
So, the last chapter of your book you have a concept, I think it’s-
Anne Applebaum:
Democrats unite.
Jackie Forrest:
Democrats unite.
Anne Applebaum:
Build coalitions.
Jackie Forrest:
And it basically says when you see behavior that is corrupt or that is from this playbook of the authoritarian leaders, or some of the stuff we’re seeing in the U.S., people need to really call it out. You need to have lawyers and different people challenge these things, take them to the court system. What I’ve seen so far with the U.S. is there isn’t a lot of voices speaking against some of this stuff yet, which has surprised me. And this is important for Canada, because we want to get our allies in the U.S. and our friends to complain that putting tariffs on Canada is bad for the Americans too. But even with the tariff situation, it’s been very quiet. A few groups have spoken out against the tariffs, but not as many as I would’ve liked to see. So, are you concerned that that we’re not seeing opposition?
Anne Applebaum:
So, it’s only been three weeks, or maybe it’s two weeks. Have you lost track of time-
Jackie Forrest:
It feels like a year. Has it only been three weeks?
Anne Applebaum:
No, no. It hasn’t been a very long period of time.
Jackie Forrest:
It’s the 20th of January, right?
Anne Applebaum:
Some of what is happening was expected and people were prepared for it. Actually, people were prepared for an assault on the civil service. Some of it has been surprising, I don’t think anybody expected Elon Musk and teams of recent high school graduates to go into the Treasury Department and demand to have access to the payment system, that wasn’t foreseen. And so, some of the delay is simply people being unprepared and not being ready to find ways of challenging it. I mean, as you and I were discussing, it’s clear to me that what he did was illegal but it’s not clear to me who’s responsible for stopping it, because the U.S. attorney, the federal attorney for Washington, D.C. is a Trump-appointed person who won’t stop it. So, is it the D.C. police who stops it? Is it the courts?
So, some of this is going to be people are going to work out what’s the path forward? What’s the right way to do this? You’re about to see a lot of lawsuits and a lot of judges trying to stop things, you will see some protests. You’re beginning to see several important senators and members of Congress are motivated. I mean, if you follow them on social media you will begin to see it build.
Jackie Forrest:
Let’s talk a bit about energy. The topic of energy, Canada has woken up to the fact that we’re actually that energy secure, especially in Ontario and Quebec. We depend on all of our crude oil transferring through the United States-
Anne Applebaum:
I’m amazed by that, I didn’t know that until you told me.
Jackie Forrest:
Yeah.
Anne Applebaum:
There you go, that’s-
Jackie Forrest:
And half our natural gas, even though we actually have our own natural gas pipeline on our own soil, it was cheaper to move it through the U.S. And so, half of the gas coming into Quebec and Ontario is coming through the United States as well today, and some of it coming from Pennsylvania where they’ve had the big gas fines there as well. We depend on refined product imports into pretty much every province, BC, Quebec, Ontario. Everyone thinks of Canada as having all this hydropower and exporting it all to the U.S., but the reality is that’s changed quite a lot and today our trade is very balanced. We need them as much as they need us in terms of power. So, if we got into a trade war and we talked about cutting off energy supplies, we’re very vulnerable.
Anne Applebaum:
The U.S. is vulnerable too, though. I mean the U.S. economy would also suffer.
Jackie Forrest:
Yes, for sure. But it wouldn’t be great for us, they probably have a few more options. But you’ve obviously lived through what’s happened in Russia, when Russia invaded the Ukraine, and then we had the recognition that, oh, we’re actually quite dependent on Russian gas and maybe that we thought that was a good thing but it’s really a vulnerability. And very quickly Europe has switched to new sources of supply for their natural gas. Would you advise Canada to diversify our customers for our energy, but also boost our own energy security?
Anne Applebaum:
So, I think diversification and coalitions are the way to begin thinking about the world actually. I’ve talked about it in other contexts as well. I mean, obviously we don’t want to be overly dependent on China or another country that could cut us off for any particular kind of trade. For Canada to have diverse people to sell to as well as to buy from is also … I mean, you have a sort of geographic problem, I mean-
Jackie Forrest:
We’re a big country, but we build big long pipelines through the U.S.-
Anne Applebaum:
I mean, you have one large neighbor, so it’s not like you’re Belgium with lots of options all around you.
Jackie Forrest:
True, but we have some coasts.
Anne Applebaum:
And there are ships and pipelines.
Jackie Forrest:
That’s right. We just have a province that’s closest to us that doesn’t really like pipelines, but-
Anne Applebaum:
Yeah, no, no, no. So diversification, also coalitions. I mean, Canada’s natural partners also are in Europe, in the European Union. In Asia, you have many potential Asian partners. In Mexico, in Latin America. And I think in an era when quite a lot of international institutions are breaking down as well, I mean, this isn’t just an American problem. The UN is like a shadow of its former self and is really not able to be a force for peace in most of the world. We’re really in an era when if you want something done, I mean, in my book I talk about pushing back against kleptocracy, for example, but if you want something done internationally, going through the old institutions might no longer be the way. If you want to create an energy alliance with the countries who you feel comfortable with, that might be the way to do your policy rather than sticking to NATO or just bilateral trade with the United States.
So, beginning to rethink. If there’s a problem you have internationally, beginning to rethink who are your natural partners? Who can you fix this problem with, and how can you do it? Focusing not so much on creating new institutions. I mean, I think the era of the international institution, meaning like a big building in New York or Geneva stuffed with bureaucrats, I think that’s probably over, but there is a future for international coalitions, and Canada is actually perfectly poised to be a member of several of them.
Jackie Forrest:
Well, and I mean, we offer diversity of supply for them too. Many foreign countries that have wanted to come here and invest in our energy sector to get access to our energy, and we haven’t been that welcome to that, but hopefully we’ll change that. I want to come to this UN thing, because there’s been a real change in the narrative around climate and net-zero, and it’s happened very quickly, really in the last three months I think. So, what are your thoughts around net-zero? Is it dead? And can groups like the UN really do anything anymore to reduce emissions? And because you’re coming from Europe, that’s the place where we think that the green policy is very stable, but even in Europe there’s a new EU parliament much more right leaning in terms of the makeup of it. Are we going to see some erosion in the green policies there, what’s there?
Anne Applebaum:
So, it’s true that the demand that people sacrifice something for green policies has not gone well. And actually the first conflict along those lines that we saw was the one in France, if you remember a few years ago the yellow vest protests-
Jackie Forrest:
Right, yeah. And that was over fuel prices, I think. Yeah.
Anne Applebaum:
That was over fuel prices. And that was people in rural and provincial France being angry about taxes and charges that were making fuel prices high, and the taxes and charges were there in order to persuade people not to use so much fuel. But if you live in the countryside, that’s much harder for you. And so, the conflict between people who care about climate change and who want to reduce emissions, and people who don’t want to pay higher prices for fuel and other things has become part of national politics in a lot of countries, more so in some places than in others. I mean, France is one where it is. The U.S. is one where you see that.
I would add to that something else though, which is that we, and this is back to some of your question about social media, there is a piece of the conspiratorial world, that the idea that climate change is complete fiction, that it’s something that’s been thrusted upon us by fake climate scientists. That it’s been promoted by left-wing bureaucrats, even that it’s a secret plot to against rural people, for example, by people in the cities. This is now very current online, and some of what you’re hearing from the Trump administration is reflecting that. So, they’re responding to what they read and what people are saying on podcasts, and on YouTube, and on the internet. So, it’s not just about economics, there’s also a cultural reaction against the idea that climate change is important.
Jackie Forrest:
Okay, we’ll talk quickly about China. Your book explains how China has developed effective systems to spy on people, and some of these new technologies are actually making these authoritarian regimes even more powerful, and this is one of them. And they’re even selling this technology now to other authoritarian regimes, another area of collaboration. But yet at the same time, things are not going as well for China. Debt levels are high, the economy isn’t growing, people aren’t continuing to get more wealthy, which was I think, part of the reason they were okay with giving up a lot of personal freedoms. Do you see China as having any issues in terms of changing government or changing the way they do things? Or do you see status quo from China?
Anne Applebaum:
Actually, one of the things that worries me about China is exactly what you just said, namely that like as in Russia 20 years ago, there is a deal between the government. I mean, it’s not an explicit deal, but there’s an understanding that you will accept the one-party state, but at the same time everybody continues to grow more prosperous all the time. Once that ends, and it did come to an end in Russia, then I worry that the Chinese Communist Party needs to offer people something else. And in the case of Russia, what Putin began offering people was nationalism, and an idea of Russian greatness, and we will build a new Russian Empire. This is the tricky moment for China if they made a decision that what they need to offer people is some kind of new triumph.
It could be, and we-
Jackie Forrest:
Like in Taiwan.
Anne Applebaum:
We could imagine that it could be Taiwan, we could imagine that it could be other things, that we would be in trouble. I mean, you remember also, maybe this is where we can finish because we don’t have that much time, remember also that authoritarian states are also deceptively weak. And we just saw an extraordinary collapse in Syria, a regime that had been in power for 50 years. A family dynasty that had been in power for 50 years collapsed overnight, and not because of a military loss, but because the soldiers, and police, and security officers who worked for the regime stopped fighting, and they stopped fighting because they weren’t being paid, because they too were part of society and they experienced economic suffering as well as they saw people being … Political repression was horrific, and they stopped supporting the regime and it collapsed from one day to the next.
There is a weakness built into those systems. Russia has an extraordinary weakness as well. I mean, you have here, if something were to happen to Putin tomorrow, if he were to fall out a window, for example, or fall down the stairs, who would be the next leader of Russia? So, not only do we not know who that person would be, we don’t know how he would be chosen. There is no committee, there’s no Politburo-
Jackie Forrest:
[inaudible 00:26:53]
Anne Applebaum:
… we don’t know how power would be transferred. And so, you would immediately have some kind of crisis, either exactly at that moment or some weeks later there would be a crisis. I mean, China had a system of rotating leaders, that worked for a long time. They’ve now changed it, and Xi Jinping has become a, in effect a single leader. But that creates a problem for China, when he becomes a problem, when people begin to doubt him or when something happens, when he falls out his window, then immediately he’ll have a crisis there too. So, there are weaknesses in these states that we also need to watch out for, and I would actually say that if there’s a black swan you should be thinking about, it’s an abrupt change in one of the big autocracies.
Jackie Forrest:
Well, that’s good, because after reading your book I was a little scared, so I’m glad to hear there’s some weaknesses because you talked about things like these spying systems, and social media, and cryptocurrencies and all things that are making these authoritarian leaders stronger, but I’m glad there’s a few weaknesses still. My belief was democracy was good and stable, and that communism and authoritarian states are not stable, they’re not going to last very long. And I think a lot of us are revisiting those beliefs, because we had a blind trust that the United States to our south was a democracy, the bellwether democracy, and they would always be the same, and we’re waking up to the new reality that democracies can change. And if we’d read your book earlier, we would’ve known that that was a reality. And I think we’ve had this blind trust in the American institutions, and we let ourselves become very vulnerable-
Anne Applebaum:
Have some faith in the American people. We like Canada. Americans don’t wish ill to Canada. And I think you’ll still find that your relationships with Americans and with American companies are going to be as good as they ever were.
Jackie Forrest:
Well, I hope you’re right. And I hope though, by the way, you come back here in four or five years, it may take that long-
Anne Applebaum:
And say I was wrong.
Jackie Forrest:
No, no, no. And you’re right, but also Canada has taken this situation and turned it into a benefit for our country, and we are spending more of our energy to international markets, and we’ve got rid of these foolish things like interprovincial trade barriers that we were talking about, and we’re a much more resilient country five years from now. And hopefully we’ll have you back.
Anne Applebaum:
Very often when you have a crisis and you take advantage of the crisis, you can emerge better on the other end. So, yes.
Jackie Forrest:
Well, thank you so much for coming-
Anne Applebaum:
Thank you. Thank you all so much for inviting me.
Jackie Forrest:
Well, I hope you enjoyed the interview with Anne Applebaum. It’s got me really thinking about how governments can change, and that actually democracies don’t really last that long if you look at history, especially reading some of her work. And it got me thinking a little bit, especially since February 1 when the U.S. announced that they wanted to put tariffs on Canada. Now they’ve given us a 30-day pause, but the threat is still very live. I’ve always thought democracy was really strong, and that comes from the beliefs I had growing up. In my childhood in the ’80s we had fear of communism, and then in 1991 the Soviet Union fell, so it was obviously a weak system. And then during my childhood, in grade 12 we signed the NAFTA agreement. And nothing that I understood, free trade was only good for Canada. Now, John Manley reminded us last week on the podcast that John Turner warned that free trade could make Canada vulnerable.
But I had bought into free trade being a stable thing that would last for decades. And in fact, it’s lasted for my entire career. So, my belief system was democracy is strong and lasting, and things like communism, authoritarian regimes and dictatorships are the weak ones. Now, Anne has showed us that some of these authoritarian regimes are actually getting stronger because of the technology that exists, like the systems that China has invented to spy on citizens, the use of social media for influence, things like cryptocurrency. But at the same time, they still do have weaknesses, as she explained at the end of her talk with us as well. But we have to recognize that democracies can be weak and can change as well, and that the American democracy is changing. And Canada had this blind trust really, that the U.S. institutions would never change, and so we’ve made ourselves quite vulnerable in terms of our trade.
I mean, 80% of all of our trade is with one country. If you think about that, if we were a company and 80% of all of our revenue was coming from one customer, that would be a problem and we’d be working very hard to diversify our customer base in case that one customer would leave us. And so, I hope that this tariff shock, and I hope that it ends just being a threat and not being real, but it has exposed vulnerabilities, and I hope that we’re opening our eyes to the new reality. We’re not energy secure in Canada, we’re going to talk about that in a future podcast. We’ve talked about that a lot in the past, but I think people are more interested in hearing it now. Even on the electricity trade, we are pretty exposed and needing electricity from the Americans as much as they need electricity from us.
And with two exceptions, the Trans Mountain and the Coastal Link pipelines, we have not built pipelines to export our energy to Asia, despite many foreign and domestic companies trying to come here and spend tens of billions of dollars and not being successful in doing that. So, we have to ask if we had all these energy pipelines and they were going to Asia and Europe, would Donald Trump be threatening us now? We’ll never know, but I would think we would be in a much stronger position. So, Donald Trump is providing a wake-up call to Canada that governments can change, and therefore we cannot let ourselves be vulnerable. Of course, we’re always going to trade with the U.S., our biggest partner and our closest neighbor, but we have to have diversity in our trade partners.
And I hope that over the next several years that Canadians start working towards making our exports more diverse, making our Eastern Canada more energy secure, and fixing other longstanding issues like not trading amongst our provinces. Well anyway, I’ve learned a lot from following Anne’s work. I hope you enjoyed this podcast. And of course, you can get her book Autocracy Inc., and we’ll put it in the show notes. If you enjoyed this podcast, please rate us on the app that you listen to, and tell someone else about us.
Announcer:
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