How Newfoundland's Election Could Shape Canada's Energy Future

Fifteen years ago, Stephen Harper called Canada an emerging energy superpower. He was right. Today, we are the world's sixth largest energy producer. But how will we rank 15 years from now, in the coming world of renewable energy? That's a question that all Canadians should care about – and Newfoundland and Labrador may be the right place to raise it. (No, not Alberta.)Newfoundland's premier, Andrew Furey, won the Liberal leadership in August and called an election last week. Furey says he wants the campaign to be about finding solutions – to the pandemic and to the province's chronic economic problems.These are tough times on the Rock. The government's $9 billion budget includes a $2 billion deficit and the province's debt-to-GDP ratio stands at 55 per cent, the highest in the country. Furey argues that Newfoundland can escape its boom-bust cycle by diversifying away from commodities such as fish, lumber, oil, and minerals.[caption id="attachment_535647" align="alignnone" width="600"] Premier Andrew Furey calls the February 13th election “an opportunity to transform Newfoundland and Labrador.”[/caption]It's a fine idea, but diversification takes money and/or investors, and the province has neither. The oil industry, however, has both. Last year, it generated $5.53 billion or 18.2 per cent of the province's GDP; and exploration confirms there's more oil out there – lots of it.But these are also tough times for the industry. It is dealing with an international oil price war, a pandemic that has cut demand for fuel, concerns over global warming, and pressures for new energy sources. If for a brief, shining moment, oil looked like Newfoundland's salvation, today there is a sinking feeling that the province has hitched its future to a dying industry.The smart money, we are told, is abandoning oil and gas for renewable energy. In this view, people who insist that oil and gas still have a future – say, Jason Kenney – are whistling past the graveyard. But are they?In fact, most experts agree that the world will remain dependent on oil and gas for at least a couple of decades. The International Energy Agency estimates that global demand for natural gas will increase by 29% by 2040, supplying 25% of total energy consumed worldwide, and global demand for oil will increase by 7%, supplying 28% of total energy consumed.If so, maybe the “smart money” would be keen on a plan that leverages the resources, expertise, and skills of the oil and gas industry to help shape our energy future. Oil sands companies are already investing over a billion dollars a year in cleantech and renewable energy, such as hydrogen. With the right plan, maybe investors would drive this much higher.Prime Minister Justin Trudeau has talked openly about such a plan. His government's new climate plan even earmarks $3 billion to encourage research on clean technology.But time is of the essence. President Joe Biden's decision to cancel the Keystone XL pipeline could be a turning point. Trudeau wants to ensure that Canada's policies are aligned with those of the new Administration in key areas, and climate change is high on the list. If oil and gas CEOs aren't ready to help lead the transition, Trudeau may feel obliged to work around them.Fortunately, some CEOs seem to get it. They realize that they have a decade or so to reinvent their industry or it will die. But that message still needs to get through to others, and a premier from an oil-producing province might be just the person to deliver it – which brings us back to Newfoundland.The province is a microcosm of Canada's energy sector, with a compact and pragmatic population – a perfect petri dish in which to test the idea of a partnership on transition. If Furey wants diversification, why not use the election to test this idea?Such a plan would go beyond oil and gas. The province is also a huge producer of clean energy – hydroelectricity – through the Lower Churchill Falls project. The new Muskrat Falls project should be operational later this year, despite delays and massive cost-overruns. The challenge ahead is to find profitable markets for this energy.Biden's cold shoulder for oil and gas may be good news here. The president's green plan includes an ambitious goal to build a clean US power grid by 2035. This could open the vast US market to Canadian hydroelectricity – which was always the goal for Muskrat Falls.The Trudeau government also has ideas to expand hydroelectricity. Natural Resources Minister Seamus O'Regan is an enthusiastic advocate for the “Atlantic Loop,” a plan to build transmission lines that link the Labrador-Quebec grid to New Brunswick and Nova Scotia. Conveniently, O'Regan's riding is in St. John's and he could surely be counted on to support a provincial effort to transform Newfoundland's energy future.Indeed, if Newfoundland were to become the flagship for a groundbreaking partnership, the Trudeau government would have every incentive to help it succeed. This could jumpstart similar processes in other provinces.Some of the ideas we've raised here are already circulating in Newfoundland; others may be new. And so far, the premier has been quiet about his plans for energy. The Liberals' campaign platform has yet to be released.In his opening campaign speech, however, Furey declared that this election was about who Newfoundlanders want “to lead the province through the pandemic and the economic challenge [ahead]…who [they] want to sit at the table with the federal, Liberal government to strike a new deal…” This is, he mused, “an opportunity to transform Newfoundland and Labrador.”We think Canadians everywhere will be keen to hear more.Dr. Don Lenihan is Senior Associate at the Institute on Governance and an internationally recognized expert on public engagement, governance, and policy development. For more, visit his website at: www.middlegroundengagement.comAndrew Balfour is Managing Partner at Rubicon Strategy in Ottawa.