Progress on the Canada-Alberta MOU: A Conversation with Deborah Yedlin

This week on the podcast, we welcome back Deborah Yedlin, President and CEO of the Calgary Chamber of Commerce.

Deborah returned to the show to discuss the April 1 deadline for key deliverables under the Canada-Alberta Memorandum of Understanding (MOU), signed in late November 2025.

The conversation covered a wide range of topics, including:

The Iran conflict, the ongoing Strait of Hormuz closure, looming energy shortages, and global oil prices
Progress on the four key deliverables from the Canada-Alberta MOU, including the agreements in principle reached before April 1 on methane regulations and the “One Project, One Review” framework where Alberta would lead environmental reviews. The discussion also covered delays in reaching an agreement on carbon pricing and the large-scale carbon capture and storage (CCS) projects. While the latter two items missed the deadline, both Premier Danielle Smith and Prime Minister Mark Carney signaled confidence that agreements will be reached. The discussion also explored whether shifting priorities due to the global energy shortage and affordability concerns could lead to greater flexibility in these requirements
West Coast oil pipeline developments, including a discussion of the potential for alternative financing models for a greenfield 1 million barrel a day pipeline, considering the urgency and strategic importance of expanding export infrastructure for both Canada and Asian buyers at this time

Content referenced in this podcast:

Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/

Check us out on social media:

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LinkedIn: @ARC Energy Research Institute

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Episode 321 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 and welcome back, and welcome back, Jackie Forest.

Jackie Forrest:

Yeah.

Peter Tertzakian:

You’ve had a week off skiing, so I hear the snowpack is at record levels in Alberta.

Jackie Forrest:

It is. Yeah, I saw it at the very south of the province and up at Jasper, one of our largest northern resorts.

Peter Tertzakian:

Yeah. I know it’s good to have a big snowpack, because last year at this time we were talking about small snowpack and worries about drought, so at least we have water for irrigation. So we’ll follow that story as we get further into spring, but I will now give the obligatory timestamp. We are in the afternoon of Monday, April the 6th. We have WTI crude oil benchmark prices of $113, I’ll call it, just to round up. Notable, our Western Canadian select in US dollars, is now over $100, and we also have the OPEC basket price at $110. What we’re hearing also is that the trade of physical barrels in the Middle East in Dubai, it’s $127. I even heard of Omani Crude going as high as $150, so this is getting to be really serious. Really, really serious, and so we’re delighted to have back with us a return guest to also talk about the implications to all things economy and all sorts of other things, so welcome back Deborah Yedlin, President and CEO of the Calgary Chamber of diCommerce.

Deborah Yedlin:

Thanks for having me. I’m super excited to be here.

Jackie Forrest:

Yeah, Deborah. So, we had you when we originally talked about the MOU between Ottawa and Alberta, and that was back at the end of early December, I guess, and the agreement came out in the end of November, and we wanted to have you back to talk about progress on the MOU. Of course, we learned last week, some of the things are delayed, but we still think it’s worth revisiting the things we do know and talk a little bit about what’s coming. But before we get to that, I do have a couple of corrections and clarifications I want to make.

First of all, I have to apologize. I pronounced Francois Poirier’s name wrong from TC Energy, and we are going to talk about more of the work he’s been doing over the last week, his speech in Ottawa, and I will get his name right through the whole podcast. Then, second of all, I did have some questions on my comments last week on Secretary of the Interior Doug Bergman’s talking about getting a 20-day environmental impact statement. I did want to clarify, it was 24 days and it was under emergency rules, but I think it’s something we can talk about later. Could we not use emergency rules to get things done more quickly here? And he did talk about that that typically would take two years or longer.

Peter Tertzakian:

Well, we definitely are in an emergency. Shall we start out by talking a little bit about the Iranian situation?

Jackie Forrest:

Yes, of course. It’s hard not to with what’s been going on, especially with all of the threats being lobbed between either side, including Donald Trump’s latest Tweet with all the swear words.

Peter Tertzakian:

Yeah. Well, we’re beyond the point of no return, I think, here with over a month into the conflict, and it’s getting dangerously close now, where we have the last tankers that left the Gulf before the war started are now approaching their final destinations, be it Japan, Korea, places like that, so the supply chains are starting to dry up. There’s still almost nothing making it through the Persian Gulf. The rhetoric is amped up. The conflict is amped up. We have a deadline of tomorrow where Donald Trump is, pulling it politely, he’s going to say he’s going to obliterate infrastructure. The announcements from the Iranians are no less calm in terms of their positioning, so it seems like we’re a long way from any sort of civilized negotiated outcome, at least from our perspective. What do you think, Deborah?

Deborah Yedlin:

I think this is something that is going to take a lot of work to try and resolve, but I think where we’re at now is a generational energy crisis, and no matter what happens, the world’s changed from a supply perspective and a demand perspective. I think we are in new territory, and this is not going to be resolved the way it was, whether it was Kuwait, whether it was the war, the invasion of Afghanistan. We are in trouble.

Jackie Forrest:

Now, what about this news that Iran is making deals with some countries to start charging the toll? In some ways, short term, that’s good because we need more oil leaving the strait, but long term, that means they now have the right, if you agree to that, they have the right forever to start charging tools, and then you’re actually giving money to a regime that isn’t really in the best interest of the region.

Deborah Yedlin:

Well, and that adds costs. That means it’s inflationary, but it’s also interesting because the Saudis are now charging a $20 premium on every barrel they’re selling as well, and so the costs are starting to go up, no matter which way you look. Obviously, we need to figure out how to find a solution, and I keep thinking about the 1956 US crisis, and how that was resolved with a UN emergency force that was put together by Lester Pearson and oversaw the reopening of this US canal to enable the passage of oil and other goods, so are we back to the Suez crisis, but it’s exponentially bigger.

Peter Tertzakian:

We’re back to a crisis, but unfortunately, the UN is hardly ever mentioned. We have migrated from being in a neoliberal world into a realist world, where it’s every country for themselves and the UN, along with other organizations, like the World Health Organization and so on, have just become almost irrelevant.

Deborah Yedlin:

The UN’s been on shaky footing for quite a while. You’re right, Peter, but I think that I’m just sort of thinking about it in the broader context. This is 1956 Redux on a much, much bigger scale, so if we can figure out how to find a solution to move forward and not deal with Iran charging tools on everything that goes through the Strait of Hormuz, that’s actually what we need to be thinking about.

Peter Tertzakian:

So, what are they thinking of charging per tanker, Jackie?

Jackie Forrest:

I mean, some of the media reports say $2 million, but I’m like, “Why wouldn’t they charge more? I mean, or if they agree to two million today, why won’t it be $3 or $4 tomorrow?” Once they establish they have this power, why wouldn’t they keep increasing it? So, I do think it is not a great path to take, because it certainly establishes that as a norm.

Peter Tertzakian:

So, the VLCCs, like the very large crude carriers, carry a million barrels…

Jackie Forrest:

Oh. Some of them are 2 million barrels.

Peter Tertzakian:

Let’s just take the 1 million barrels, so $2 million, that’s $2 bucks a barrel.

Jackie Forrest:

Right, and maybe that gets absorbed by the seller, because all things the same, the price shouldn’t change and it should really increase the transportation cost. Maybe though, because it’s such a large amount of crude that gets impacted, it’s born between a little bit by the buyer and the seller. I don’t know, but definitely inflation or a lower net back for the producers.

Deborah Yedlin:

The bigger worry too is that they may allow some tankers to go and others not, depending on where they’re going, and so I think also, there’s a potential restriction there.

Peter Tertzakian:

I mean, it’s kind of odd that the announcement, that the Iraniards are letting the Iraqi tankers go through almost as if the Iraqis are brethren even though they had-

Deborah Yedlin:

Yeah. They had that war.

Peter Tertzakian:

The 1980 war, but certainly Kuwait, which is housed US air bases, the UAE, others are not viewed as being particularly friendly. So, which countries oil will be allowed to transit, particularly Saudi Arabia, and which won’t and which will have to pay? At the same time, as I said, we’re recording Monday afternoon, April 6th, President Trump coming out with the announcement that, under no circumstances, will Iran be allowed to charge anything free flowing barrels out of the Straits of Hormuz are a condition of a negotiated piece, so really, it looks like there’s a big gap between both sides.

Deborah Yedlin:

As there often is.

Peter Tertzakian:

Yes.

Deborah Yedlin:

And I think that this is the beginning of a negotiation process, in terms of where this goes, but I also think that it’s because the Gulf States are involved as collateral damage and because of their dependence on being able to transit, whether it’s LNG or accrued through the straight, I think they’re going to have to be involved as well. And so, what does that look like? Who actually emerges as the sort of representative of the Gulf States to help move this along? I don’t know who that is at this point, but we do know that they’re very unhappy.

Peter Tertzakian:

And if there is a negotiated deal, say before Tuesday evening, which is the deadline, or the most recent deadline anyway, that’s been set, that there’s this giant gap in the supply chain.

Deborah Yedlin:

And that is the problem, and I think one thing we have to just also note is that, right now, the Port of Vancouver becomes a very strategic port for the transit of heavy sour crudes to Asia, relative to the challenges that are happening in the Gulf right now, so all of a sudden you got a real interesting juxtaposition right now.

Peter Tertzakian:

So, the price of those heavy sour crudes could go far higher.

Jackie Forrest:

Yeah. Well, if we had infrastructure to connect us with that market.

Deborah Yedlin:

That’s another conversation.

Jackie Forrest:

Well, that’s a good lead in maybe to the MOU topic, and so Deborah, we did want to talk about, we invited you actually a while ago to come on this date because we thought we could talk about the MOU, and we certainly do have some things to talk about. So, there were four agreements or key commitments that we were looking for to be agreed to on April 1st. Two out of four have an agreement in principle, so I thought we could talk through those, and then we could then talk on what we’re waiting for, but then maybe have a discussion on this pipeline, because certainly seems more urgent than ever for Canada to provide a new conduit to provide oil to Asia.

Deborah Yedlin:

Well, I think that’s, when you look at the strategic importance of Canada today, relative to five weeks ago, the world’s changed and we actually have a moral obligation to figure out how to help support the global economy, to increase the production of our resources, and to get them to market.

Jackie Forrest:

Okay. Well, let’s talk a little bit about the methane rules, which seem fairly small in the whole thing.

Deborah Yedlin:

Why are we worrying about this?

Jackie Forrest:

Yeah, but anyway, I will say that the methane rules, there is an agreement in principle. We will put a link to it in the show notes. I did talk to some folks who think about methane a lot, and felt that this, of course, there’s still need for an official equivalency agreement, so it’s an agreement to make an agreement, but directionally having a 2035 date and having the ability to use offset credits to help finance those reductions was seen as constructive compared to before, so it seems like that one is supported by the industry here.

Deborah Yedlin:

Yeah. At the end, I apologize for being glib, but I do think in the context of where we are to talk about methane emissions seems to, like you said, a little bit not quite where our attention needs to be. Having said that, there is agreement, in terms of what this looks like, and there’s also an agreement in terms of who the third party is who will conduct the verifications on the part of industry, and so that’s also an important step forward. There is consensus.

Jackie Forrest:

Yeah, because there was always disagreement between Ottawa and Alberta in terms of what the right numbers were. I think a more meaningful one or maybe to the context of today is this plan to streamline assessments and impact assessments, and so there was an agreement in principle, but it’s a draft agreement, and so there was a consultation period which just closed, and so the draft agreement could change, but based on the agreement, Alberta can now lead one project, one review, and it removes the federal government over.

They still have their oversight, but they’re not leading, so in areas that the federal government has constitutional jurisdiction, like federal fisheries and other federal jurisdictions, they will look at what Alberta has done and make sure that it’s following what they think is the right thing to do, but this should make things go more quickly≥ when you think about the Impact Assessment Act, that was actually one of the big issues, is when it came out, so many more project types fell under the federal system than before. Before it was maybe just oil sands mining, but then there was like a real question about, was it hydrogen projects? Would the CCS project fall under it? Would in situ projects fall under it? So this, I think, provides a lot of clarity to proponents projects.

Peter Tertzakian:

So, this has become a distant memory, but the Impact Assessment Act is the old Bill C69?

Jackie Forrest:

Yes.

Deborah Yedlin:

Yes, yeah.

Peter Tertzakian:

Or it is Bill C69.

Deborah Yedlin:

Yeah, with a new name.

Peter Tertzakian:

With a new name.

Jackie Forrest:

And there were so many-

Deborah Yedlin:

Rebranded, Peter.

Jackie Forrest:

Yeah, but the thing about it, there were a lot of problems, but one was it just it really expanded the number of projects that would fall under it, which created a lot of uncertainty for project proponents, and so hopefully this means we can get things done more quickly.

Deborah Yedlin:

Well, and it goes back to what we heard at CERAWeek as well, the pressure on the permitting side and how the US is working very hard to decrease those timelines., And it’s imperative that we work towards that. Alberta’s regulatory system has been seen as being very robust over the years. Why not rely on what we have in place? And this is how systems should work, and so I think that the fact that we have that clarity that we did not have before-

Peter Tertzakian:

So, what about BC?

Jackie Forrest:

And one of those MOU requirements was that Alberta will collaborate with BC to make sure that they get benefits from the oil pipeline. I’m not sure how those discussions have been going or if they’ve been happening at all. We certainly haven’t seen any news on them, but that is an issue. BC today does not have this type of system. If you look at Ksi Lisims, they had two separate approvals that came out. Now, maybe it’s changing for projects that start now, but I think pipeline project that would go through BC, I’m not sure how, I don’t think that would be affected by this change. This would be for like, maybe we had a greenfield oil sands project, and maybe that’ll help the things within the border of Alberta, in my opinion.

Peter Tertzakian:

So, recall that we had Jason Kenny on our podcast, I don’t know how many months ago it was, and he basically said, constitutionally, the federal government can override any of this. Is that still in our thinking here?

Jackie Forrest:

Basically, he said there was like the Supreme Court decision that said that BC couldn’t stop the Trans Mountain.

Deborah Yedlin:

That’s right.

Jackie Forrest:

And so, he didn’t feel like if the federal government wants to build this project, as putting it forward, that they could stop it.

Peter Tertzakian:

Well, ideally, there’s some consensus building, that we get it done without those sorts of heavy-handed means to building a pipeline.

Deborah Yedlin:

Ideally, but I think the interesting thing was, being in Houston at CERAWeek again, we had Premier of Alberta, Daniel Smith, Tim Hodgson, Minister Natural Resources. There was nobody from BC that was visible, and I think that was telling, because as a province that really seems to hold the cards in terms of progress and how long things take to get done, they need to be at the table.

Peter Tertzakian:

Is that our Strait of Hormuz?

Deborah Yedlin:

Well, I don’t know if I’d go that far, Peter, but it is a constraint and it’s been a constraint, and thankfully we do have a body of law that has been established in conjunction with Transmountain, but we don’t have the luxury of time. We can’t have a 12-year process to have another Transmountain equivalent built. It just doesn’t work, especially not in this environment.

Jackie Forrest:

Well, and we’re going to get to, if we’re going to build this West Coast pipeline, how we finance it, and I’m sure it’ll be a lot harder to get capital providers if you can’t get this agreement and so they don’t feel that there’s risk. They certainly don’t want to go down a path, which means we have to sit many years waiting for the Supreme Court to make a judgment here or something like that, right? They want to have a clear green light.

Deborah Yedlin:

I think, to your point, there is a mechanism to override what needs to happen. The question is, under the constitutional, so you’re guaranteed your control over the development of your resources, and so there’s a quid pro quo that we have to really navigate.

Peter Tertzakian:

Okay, so let me just take the other side here for a minute, the whole WIFM, if I can use that, the what’s in it for me from BC.

Deborah Yedlin:

Going back to Christie Clark.

Peter Tertzakian:

I mean, it’s somewhat reasonable. Okay, so why should a pipeline cross our territory and our coastline, and expose us to environmental risk? So, let me take that position. What’s your answer to that?

Deborah Yedlin:

My answer to that is that the economic benefits that are generated not just for BC, but for the country, are really important to fund the things that we hold as important as Canadians, and that’s healthcare education, infrastructure, social services from coast to coast. I think that’s the dot that hasn’t been connected for so many Canadians, but in terms of how important this is to the Canadian economy, and certainly, Peter, you just released a study about that and what that number looks like, it’s not insignificant.

Peter Tertzakian:

No. It’s very big from a Canadian perspective, but the scale of the contribution, I don’t feel as well understood by the Canadian populace.

Deborah Yedlin:

Oh, that’s absolutely true.

Peter Tertzakian:

Is that true?

Deborah Yedlin:

Yeah, that’s absolutely true.

Peter Tertzakian:

Absolutely, and so I mean, you have a broad membership even within Alberta.

Deborah Yedlin:

Yeah.

Peter Tertzakian:

And that’s not all oil and gas by any stretch?

Deborah Yedlin:

No.

Peter Tertzakian:

And so, how would you say the general literacy in terms of the impact of the industry on the broader economy?

Deborah Yedlin:

It’s better in Alberta than it is across the country, for sure, but I think people still don’t understand how those dollars translate into funding budgetary requirements, whether they’re provincial or federal.

Jackie Forrest:

And there’s another imperative too, by the way, which is just in this time where the Americans are threatening us, having more trade partners should be a strategic imperative for the country. It’s going to grow our economy, but it’s going to create more strength to our country as well.

Deborah Yedlin:

Well, it’s economic sovereignty, and that’s the thing that we have to really focus on.

Peter Tertzakian:

Yeah, and I think that argument then changes from what’s in it for me, which has been sort of the question that all Canadians have been asking with respect to expanding export capacity for oil and gas, is what’s going to happen to me if we don’t do this, which is the prosperity question.

Deborah Yedlin:

It’s the existential question, right? If we don’t do this, what happens? And this is the time where we actually have to seize the moment, and that’s actually, it’s our moment to lead as a country. We have to set aside some of those challenges that we haven’t been willing to address and resolve.

Peter Tertzakian:

So, can I call it WNIFIM? What’s not in it for me?

Deborah Yedlin:

What’s not in it for me? Yeah, sure. Whatever acronym you prefer.

Jackie Forrest:

Yeah. Well, we all have to start getting alignment to get these things done, and hopefully the threats from Donald Trump and the Americans are helping with that, but like you say, we still haven’t had this strong message from BC that they would support the old pipeline.

Deborah Yedlin:

No.

Jackie Forrest:

Which is still a risk.

Deborah Yedlin:

There’s a lot of equivocating going on.

Jackie Forrest:

Of course, this agreement on the $130 carbon price was not made. There was announcement by both the Alberta Premier and the Prime Minister that was coming. The day before April 1st, it sounded like it was coming in a few days and we haven’t seen it yet, so maybe it will come out this week. I’m not sure, but we haven’t heard anything as of recording time. Then, this pathways carbon capture storage project, which would require a trilateral agreement between Ottawa, Alberta, and the Oil Sands Alliance, which was formerly known as Pathways Alliance, which is the five major oil sands producers. It makes sense to me the order of operations here. You can’t make a decision on the carbon capture storage project if you don’t know what the carbon pricing is, so it makes sense that that one comes later.

Deborah Yedlin:

Let’s just sort of insert a bit of reality into this conversation too. There is a bi-election happening on the 13th of April, and I would expect that we won’t hear anything until after the bi-election. That’s my bet.

Jackie Forrest:

Right, but they did give us an indication last week that it seemed like days away and-

Deborah Yedlin:

That’s what it felt like.

Jackie Forrest:

Yeah, yeah, yeah.

Deborah Yedlin:

But it was also a lot of really good telegraphing, in terms of don’t expect everything to be announced on the 1st of April.

Jackie Forrest:

Yeah, and let’s clarify this, so there’s three seats that are having by elections, if I understand, and if all three go liberal, then Mark Carney would actually have a majority.

Deborah Yedlin:

That’s correct, and so that changes-

Peter Tertzakian:

The calculus.

Deborah Yedlin:

The calculus.

Jackie Forrest:

Okay. Well, let’s come back to the urgency of building this pipeline, and let’s talk about this one million barrel a day West Coast pipeline to Asian markets. We’ll go back to the MOU, because ultimately that was the purpose of all of these conditions and agreements, is that if they were agreed to, the MOU declared that an Alberta bitumen pipeline to Asian markets would be a priority and it could be referred to by the major projects office for consideration under the Building Canada Act, which is the fast track, two-year process, and that it would be at least one million barrels a day of low emission Alberta bitumen and increase export access to Asian markets. If everything gets agreed to, this application could be put forward on or before July 1st of this year, so that’s what we’re expecting would come out of all of these agreements and why it’s important. Daniel Smith has actually indicated she would like to see it even sooner, put forward.

Deborah Yedlin:

Yeah. I think a lot of people would like to see it put forward, because it would provide some certainty in terms of signals for investment and a better understanding of who would be backstopping the pipeline and also would provide more clarity for the producers to start thinking about how they’re going to be increasing production, because that’s actually what we need to see as well, and we’ve talked about that before.

Peter Tertzakian:

We have, and that’s not a trivial expenditure. In fact, if the pipelines to build one and a half million barrels a day are, say, $30, $35 billion dollars, the capital expenditures are required to explore, develop, build facilities and get it to export markets is over $100 billion.

Deborah Yedlin:

Yeah, yeah.

Peter Tertzakian:

Right, and so the money can be found for that, but it’s not going to be deployed unless there’s some sense of guarantee that the pipeline’s going to be built, and given the history of what happened to Northern Gateway Energy, Keystone Excel, there’s a lot of skepticism, so that begs the question, like chicken and egg, which comes first, pipeline or filling the pipeline? Ideally, it has to be synchronously, so the production comes on at the same rate as the pipeline capacities are built, because it’s not necessarily just one pipeline. It could be an expansion of, say, Transmountain, plus a new pipelines, potentially some more downsells-

Deborah Yedlin:

And then they sell both.

Peter Tertzakian:

And so, it’s all an exercise, not only in collaboration, agreement, and getting things built quickly, but it’s also a synchronization effort with a lot of capital.

Deborah Yedlin:

Yeah. A lot of capital at risk. Yeah.

Jackie Forrest:

Okay. Well, I want to challenge you there on the, you need the production to grow in line with the pipeline capacity, because I would argue that that’s today’s model, but we could have different models in terms of it, build it, and they will come. So we build the pipeline, and then the supply comes. It doesn’t all have to happen at the same time, because I think it’s going to be very, very difficult to sort of see a million barrels a day all lined up at the exact same time you build this pipeline, and you have other new expansions coming on.

Peter Tertzakian:

No. You have to invest in advance. I mean, the pipe can’t sit empty for two, three years.

Jackie Forrest:

Well, it depends on who owns it, right? Could it be national oil companies who look at this very differently? The modern model that we have today is that you have these long-term contracting of shipper volumes for 15 or 20 years, and you have to get that, and once you achieve that, then the banks will give you some money. Maybe some national oil companies will say, “You know what? I’m willing to pay, I don’t know, $35 billion, whatever this thing’s going to cost, $25 billion, just for the option to be able to get more production from Canada because I want to have diversity of supply.” There was a March 3rd article, and I will put a link to it, where Danielle Smith said she expects foreign investment to play a role in funding a new pipeline, and she believes Chinese state-owned companies could put their money to work. Honestly, with what’s going on today, why wouldn’t it be other state-owned companies?

Peter Tertzakian:

Well, it was state-owned companies, multinationals, and a touch of sovereign wealth funds that actually provided the $180 billion-ish to grow the last 1.5 million, 2 million barrels a day 15 years ago. Actually, it started 20 years ago, between 2005 and 2015. That’s where the money largely came from. The multinationals have now gone. Their assets have been purchased out by Canadian companies, Synovus, Suncor,

Deborah Yedlin:

CNRL.

Peter Tertzakian:

CNRL, et cetera, and so the question is, will multinationals, state-owned oil companies, and sovereign wealth ones come back and invest? I would suggest that they have long memories, and so they have to have some conviction and certainty that we’re serious this time in reducing permitting regular times and having these pipelines actually built.

Deborah Yedlin:

And we also have to realize that the relative risk matrix has changed, and where they might have looked before-

Peter Tertzakian:

Sure.

Deborah Yedlin:

… Canada all of a sudden looks a whole lot better and safer, and I think they are, with reason, looking to Canada as a place that is understanding what needs to do from a regulatory and permitting standpoint. I mean, is it where we want it to be? No, but I do think we will see foreign investment. I think we will see sovereign wealth funds being part of this next round of both production growth of a pipeline, and let’s look back to the fact that Prime Minister Carney was at the UAE commitment of $70 billion. You have to think that some of that’s coming this way from an energy standpoint in order to now, especially, offset risk and-

Peter Tertzakian:

Yeah. I actually see it coming more from consumers that need it. I see more the Asian economies, certainly Korea, Japan, India, all the way around Southeast Asia there. They would be the ones that really want this.

Deborah Yedlin:

Well, and Cogas is already here with LNG, right? Japan’s already here.

Jackie Forrest:

China as well.

Deborah Yedlin:

China as well, so they’re already aware and comfortable with Canada as an investment jurisdiction. This is just a logical extension for them, but I do think we will see some sovereign wealth money too.

Jackie Forrest:

Well, and a couple of things. The Million Barley pipeline doesn’t have to be that day one. We could put a large pipe in the ground with smaller pumping capacity initially, and so it could be 400 or 500 at first. I do want to remind a few historical examples. The Enbridge mainline, now it’s been a long time, but in 1950, it was not built with these modern long-term contracts. It was built based on Imperial, and I understand there were some other producers at the time that put capital into the project, and they took the risk. Of course, they had the upstream side, so they could manage that risk quite nicely. Now there was a regulatory process that said, you’re going to get a guaranteed return on this, and so if the volumes were low, the tolls would be high, so that was risk to the producers, but maybe one they could avoid by increasing their production. But anyway, we do have an example of an oil pipeline here. Trans Mountain, the original Transmountain, was also done with not these long-term commitments.

Deborah Yedlin:

The market’s changed so much. I mean, when you think about how those were built versus now and how those contracts have to be in place and there’s just a different level of risk and also what companies need to do in order to move forward.

Jackie Forrest:

Yeah.

Deborah Yedlin:

And maybe the way we make decisions today versus how we did then.

Jackie Forrest:

And maybe because of what’s happened over the last few months, that companies and buyers look very differently at risk and reward, right? Getting access to another supply source, maybe if I had to put $20 billion, and yeah, I’ll take the risk that it’ll be less full, but maybe I could go into that country and fill it by investing in the upstream side. Yeah.

Peter Tertzakian:

There’s no question the global risk paradigm. I mean, we haven’t even begun to think about the long-term consequences of what’s happened, but one conclusion for sure, amongst many of these countries is, “Okay. We got to figure out how to get a more secure supply that’s not so concentrated in one region.” So, that’s from the buyer’s perspective. Now, but from our perspective, I want to get back to from our perspective, is there an analogy to be drawn from, say, railway building, the building of the hotels along the railways?

Jackie Forrest:

Yeah, I was thinking about that. Build it, and they will come. That model established Canada, right? Think about those CP hotels. I just prepared for this podcast. I went and looked at pictures of Calgary and Edmonton, and when you see the Hotel McDonald in Edmonton or the Palliser Hotel here, and you look, they were built around 1914, 1915. They were just ridiculous. To think you would come and build a building that large, and then there’s a small, little buildings around them, but these are communities that are really tiny, and you built these magnificent hotels, which still today are large in the context of the buildings around them.

Deborah Yedlin:

Yeah, that’s true.

Peter Tertzakian:

And the Banff Springs as well.

Deborah Yedlin:

And Chateau Lake Louise.

Jackie Forrest:

Yeah. So, somebody took a huge risk that we’re going to build these things., We built the railway, and people will fill them, and can we take that approach now as Canadians?

Deborah Yedlin:

Well, we saw the building of the railway as a nation building project, and who controlled the lands? It was CP, right? So that’s where the hotels sprung up, but I think also remember that BC joined Confederation on the condition that the railway would go through BC, and so I think there’s all sorts of historical precedents things that we have to consider, I think, in today’s context.

Peter Tertzakian:

And what about the Cecil Hotel? Remember that?

Deborah Yedlin:

I remember the Cecil Hotel.

Peter Tertzakian:

There’s many Cecil Hotels.

Deborah Yedlin:

Yes, there are.

Jackie Forrest:

Oh, really? Not just the one here.

Deborah Yedlin:

Well, there’s one in Calgary. There’s one in Edmonton.

Peter Tertzakian:

Well, I think you and I are dating ourselves, in terms-

Jackie Forrest:

Yeah, so I don’t know. I think, could there be a role for government to build it and they will come?

Deborah Yedlin:

The risk premium would be different, right? If the government steps into backstop, and I think that’s the world that we’re in today, is that when it comes to these kinds of projects, you do need to see that de risking by government at either, whatever level to provide the certain different investors to follow suit, and then that gives the government an investment as well, but it also gives the proponents on whatever side they’re on, whether they’re producers or they want to build the pipeline. It’s a different rate of return. It’s a different risk premium on the capital that they have to put into it, so I think it makes a lot of sense, and there is precedent for it. We’ve been reticent to go there, but it’s probably something that needs to be considered more seriously now.

Peter Tertzakian:

So, speaking about these hotels in Ottawa at the Chateau Laurier, coming back now, Jackie, to François Poirier, CEO of TC Energy, he gave a speech recently.

Jackie Forrest:

Yeah, so he was at CERAWeek, and Deborah and I saw him speak numerous times there, but here he was in Ottawa, urgently telling Canada they must move faster to capture this moment and get projects built and “To build more, Canada must quite simply make it easier to build,” is one of the quotes. He talked about the fact, if Canada became the number one LNG exporter in Asia, it could add 75 billion to GDP per year. That’s more than 2% increase to today’s GDP, so first of all, I think it’s great that we have leaders of Canadian businesses in Ottawa sending this message.

Deborah Yedlin:

And it was delivered at the right place, right? That’s a really strong message, but Peter, I listened to that speech and looked at what Francois said, and I thought about the study that you had just jointly produced with the ATB and Studio Energy, and so let’s take that $75 billion, and I’ll raise you the $31 billion. So, all of a sudden, you look at what that impact is on the Canadian economy, and it is something that you can’t really ignore those numbers.

Peter Tertzakian:

No, you can’t ignore the numbers. We pointed this out in the report, if we can get better interprovincial trade going and reduce the barriers to inter-provincial trade, that allows provinces to also come and be part of the building process and the filling of the pipe process, providing steel, providing the raw materials, and all sorts of other things to be able to do this, because quite often to build these places, we go out of the country to get the raw materials, but the GDP kick, if we can actually source the materials and the expertise internally, is huge.

Deborah Yedlin:

So, we are Ontario’s second-biggest customer. We should be Ontario’s biggest customer, and if we do think about it from a context of an infrastructure project, like a pipeline, and you source the pipe from Ontario, just think about what it does for their GDP, and I think what’s frustrating and what’s frustrated all of us for so long is that lack of support from other provincial leaders who understand that they actually benefit too when we build these kinds of things and actually get them offering.

Peter Tertzakian:

Yeah. I mean, I think the thing is what’s in it for me, as opposed to looking at it and saying, “Well, what’s in it for me?” as watching it like a reality TV show, you can actually be part of the process by thinking about, “How can I extract value across the country out of these not tens of billions, but potentially hundreds of billions of dollars?”

Deborah Yedlin:

So, there’s actually an interesting analogy, and just permit me for a second. I think we think about, we had a snapshot of that when we had people coming from Newfoundland to work in the oil sands, right? And so, that was sort of the first gambit in terms of understanding, this is what it can mean, because this was really important to Newfoundland. I remember hearing somebody saying that this was how it gave the Newfoundlanders their dignity.

Peter Tertzakian:

Well, it was a lifeline during the financial crisis, right?

Deborah Yedlin:

Right, yeah.

Peter Tertzakian:

In 2009 to 2011-ish, that period there. I mean, then the oil sands were ramping up and getting built, the labor pools that were tapped into for the maritimes were essential for the maritimes.

Jackie Forrest:

Yeah. Well, here is a plug for the latest studio energy paper. You’re saying that with the higher oil prices, that taxes and royalties paid across all jurisdictions are expected to increase by 21 billion relative to pre-conflict. You could argue that, by building these pipelines, there’s more royalties and taxes and that helps reduce deficits long term. For certainly, as Mark Parsons talked about in the podcast we had when you guys introduced the paper that putting money into things that create stuff is a lot better.

Peter Tertzakian:

Like I said, if you build a condo and a house, not that I don’t want to build condos and houses, we need to do that. But that’s where our GDP has largely been driven over the course of the last 10 years, is building houses and condos, but once the house and condo is built, there’s no productive capacity after that, whereas if you build a factory, it creates economic activity that delivers goods. If you export it, you get the benefit of exports, and then you get the royalties and the taxes if it’s resource driven.

Deborah Yedlin:

And that’s what funds government budgetary commitments, and I think we’ve been afraid to really think about it in bigger terms than we have, and now the time has come for us to think differently.

Peter Tertzakian:

Yeah, absolutely.

Jackie Forrest:

Okay. So Deborah, you were at CERAWeekend, and all of our listeners heard, or many of our listeners heard the interview with Tim Hodgson. When I asked him, “How fast can we build this expansion to the Trans Mountain?” And he said, “Well, I’ll share the date with you,” and it made me think it was going to be a short date, and he said two years. I want to come back to the Secretary of Interior, this idea that with emergency rules, they can do things that used to take 2 years and 24 days. Do you think we should be considering doing things faster? Because that will create more revenue faster, pay for some of these other things.

Deborah Yedlin:

Well, and it’ll send a strong signal that we are truly open for business and open for investment. I guess the question is, what kind of opposition would you be prepared to deal with if this is done under that construct? I’m not sure. We’ve never done it before. I’ve always had the probably during war-time, but I don’t know what kind of opposition we would have, and that could create some challenges, but if we could navigate that, we can move faster. I mean, we do need to move faster. That’s a given.

Peter Tertzakian:

I think it’s a given. I mean, I said on the last podcast that we are actually in a low grade World War III. That’s my personal view, like this is serious, what’s going on, and it’s about to get worse given the indicators that we see. So, we can’t dilly-dally, in my opinion. We’ve got a lot to offer here. It’s also a huge opportunity for us, and so we need to get on with it.

Jackie Forrest:

Well, and this is a unique one because the Trans Mountain’s already there. My understanding is they need to build pumping stations and maybe do some work at the terminal, but it physically should happen a lot faster than this one million barrel day pipeline. It could physically happen a lot faster.

Deborah Yedlin:

Yeah. All expectations are that it should take a whole lot faster to get it on stream and make sure that it can handle that extra 300,000 barrels a day. One hopes.

Jackie Forrest:

Yeah. It shouldn’t be 2028 or whatever the date is.

Deborah Yedlin:

No, but sometimes people like to under promise and over deliver, so maybe Minister Hodgson was setting the stage for, “Well, don’t get too excited, but maybe this is what you should expect. Maybe it’ll happen sooner.”

Jackie Forrest:

Yeah, let’s hope so. For sure, that would be a good signal to the Asian customers that we’re serious and help them at a time when they’re going to need additional supply, for sure.

Deborah Yedlin:

So, I’m a guest here, but I have a question for you both. That is, we haven’t talked about the carbon price, and we haven’t talked about the carbon price being condition precedent to constructing the pathways carbon capture system, and where’s that in this broader conversation?

Jackie Forrest:

Well, I would like to think that we could weaken some of those requirements because of the new world that we live in, but I did not get that sense from the politicians at CERAWeek, whether it be the Alberta government or the federal government, that that is something that they’re willing to do right now.

Deborah Yedlin:

No.

Jackie Forrest:

So, it would be nice to say, “Well, that 130, maybe it could happen over a longer time period,” or “Maybe it could happen for a smaller volume of emissions,” and maybe that’s still what’s being agreed to, but I hope that we can come to an agreement where the cost of the carbon policy isn’t prohibitive to investing in the upstream or the CCS project. I’d even like to consider a smaller carbon capture storage project. I hope that’s being considered, because we need to move forward on this in a very urgent manner and building one of the world’s biggest carbon capture storage projects.

Deborah Yedlin:

It would be the world’s biggest carbon capture project. I mean, that’s a lofty goal.

Jackie Forrest:

It is, especially in a world where a lot of people are weakening their requirements. Let’s be realistic. It’s adding cost. I would also argue, after being at CERAWeek and listening to some of the presentations in the Agora, I actually think there may be some breakthroughs in carbon capture, in that we’re putting in potentially an old technology, and that in five, six years, there could be better technologies that are lower energy and more efficient in terms of capturing carbon, so I also worry about that in terms of building such a large project right now.

Deborah Yedlin:

On the question too, is some of the things can we postpone what needs to happen from that sort of delay it? Maybe it’s lagged, in terms of carbon pricing so that you can allow the energy sector to move forward and not be constrained by this one particular issue.

Peter Tertzakian:

So, let me throw some numbers out at you. Okay, so the price of carbon in the UK is $40 a ton, $40 US a ton. In Australia, it’s $36 Australian dollars, which is even lower than the Canadian dollar. In South Korea, it’s $10 a ton. In the European Union, it’s $71 euros, which is over $100 Canadian a ton. What’s happening in Europe?

Deborah Yedlin:

They’re reconsidering all their policies right now, and their economics are challenged. We heard the German Minister of Economics and Energy at that CERAWeek, and she talked about how Europe took a path that has not been very constructive for its economy, and now they’re having to rethink a lot of their environmental policies, because the economy, broadly speaking, is stalled and they’re making decisions and backtracking on what they had decided to go forward with, call it a decade ago, and calling them bad ideas and mistakes.

Peter Tertzakian:

Well, it’d be interesting to watch, because they’re certainly, again, four years after the Russia-Ukraine invasion, in a situation where energy is scarce, and they have to make difficult choices. It’s a big dilemma, in terms of what you do, in terms of everything from North Sea drilling again to what you do with carbon prices, so it’s going to be interesting to watch how the world deals with these dilemmas, and ultimately how Canada deals with the dilemma.

Deborah Yedlin:

So, Europe could lift fracking bands, namely in France and in Germany and in the UK, but so far we haven’t seen that come forward. What’s fascinating is that the Europeans are quite happy to accept LNG, which is from frack gas from the United States, so there’s a real sort of irony there, but I think that’s something that needs to be put on the table as well. When they look about energy self-sufficiency and looking at ways to increase their sources of supply, it’s actually right there.

Jackie Forrest:

And I mentioned on the last podcast that I went to, that breakfast around Europe gas and there was discussion about, from an energy security perspective, we need to have it here in this region. I want to add one more, Peter. I just checked the latest auctions for California carbon allowances, are trading at under $30 US dollars per metric ton, so $130 is really way out there, except for maybe Europe, which maybe is going to be-

Deborah Yedlin:

An outlier too. Yeah, it’s a statistical outlier, and so Francois said, a number of times, capital goes to where can get the best return with the least amount of resistance. He used the example of a bucket of water sort of flowing, and that’s pretty much what we need to keep thinking, but we need to be competitive, and so if this is something that decreases our competitiveness, that’s problematic.

Jackie Forrest:

Okay. What about the question around clean energy? We want to be a clean energy superpower, and we need that carbon price to see investment in clean energy. That would be what a lot of people are thinking right now, hearing this discussion.

Deborah Yedlin:

And we’ve already been moving in that direction without the stick over our heads. When you think about how much the carbon intensity from the oil sands has decreased over the last 20 years, and certainly technology that is being developed, tested, and implemented as it has proved effective, people are making changes already. That was happening with the methane emissions as well in Alberta. We know that. Our circumstances have changed, and we have new information, and sometimes when those two things come together, you have to recalibrate the direction you’re going.

Peter Tertzakian:

Yeah. I think there’s going to be a lot to talk about in subsequent podcasts, in terms of what the post-Iran world looks like. The energy transition is going to take many forms, and the energy transition is going to happen probably a lot faster than it would have happened with carbon policy, and the transition will include more renewables, electrification, and all that kind of stuff, but it’s likely also to include some regressive transitions back to coal.

Deborah Yedlin:

Oh, it already has.

Peter Tertzakian:

And already has started in some places, so we have no shortage of things to talk about.

Deborah Yedlin:

No. Electrons, molecules.

Peter Tertzakian:

So Deborah Yedlin, president and CEO of the Calgary Chamber of Commerce, thanks for joining us.

Deborah Yedlin:

It was great to have this conversation, and I think that we’ll be having more.

Jackie Forrest:

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.

Progress on the Canada-Alberta MOU: A Conversation with Deborah Yedlin

Episode 321 transcript

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