Royal Bank of Canada chief executive officer David McKay waded into the increasingly emotional national debate over the future of the country's oil and gas industry Monday with a passionate speech in favour of innovation and growth in the domestic energy sector, and building new pipelines.
Canadians will see their standard of living fall and economy falter if industry executives, politicians, First Nations leaders and environmentalists cannot work together on developing the country's oil and gas resources, Mr. McKay told the Edmonton Chamber of Commerce. It's unusual for corporate leaders to take sides in issues that evoke strong, opposing passions among clients and shareholders, and the head of the country's largest bank said he is "speaking out because Canada will not succeed if Alberta does not succeed, and Alberta will not succeed if its energy sector does not succeed."
"Unfortunately, Canadians are polarized more than ever about oil and gas, when we should be focused on how cleanly we can produce it, how safely we can transport it and how wisely we can consume it," Mr. McKay said. He said that while Canada can continue to be a leader in renewable energy and fighting climate change, "for all our strength in renewables, we also need to appreciate the strength of our oil and gas sector and how essential it is to our economy – and the 700,000 Canadians who rely on the sector, directly or indirectly, for their jobs."
"Our oil and gas production is critical to our economy and to government revenue; it will also be critical to helping finance the sort of innovation we need for a cleaner economy," Mr. McKay said.
In an interview following the speech, Mr. McKay said RBC opted to speak out now because the bank believes Canada is being left behind in development of its energy resources, with investors and corporations opting to put capital to work outside the country. He said the bank made a conscious decision not to speak on energy issues during the recent federal election campaign and the early months of the Liberal's mandate, but decided it now wanted to add its voice to the debate on energy policy because "we fundamentally believe that this is good for Canada."
Mr. McKay praised recent initiatives designed to make the costs and benefits of the oil and gas sector more transparent, such as Alberta's introduction of carbon pricing, and said: "If we work together, we have a chance to develop a new approach to carbon efficiency that will benefit every part of the country, and perhaps even provide a model for the world: The Canadian Model."
The RBC CEO also endorsed the plan to have a national floor price for carbon emissions, part of a federal proposal that Saskatchewan Premier Brad Wall and Nova Scotia Premier Stephen McNeil oppose. Mr. McKay said it should address competitiveness issues so Canadian industry is not disadvantaged and be revenue-neutral by ensuring that whatever revenues are raised, they would be offset by other tax cuts. He also stressed that any carbon price framework should be co-ordinated across the provinces, in part to prevent oil and gas companies from "gaming" the new system.
Speaking in the wake of protests last month that cancelled hearings into the development of TransCanada Corp.'s proposed Energy East pipeline, RBC's CEO was particularly critical of the lengthy approval process around pipelines, noting that Canada has not built a major pipeline since 2010.
"If we can't develop at least some additional pipelines to get our oil and gas to market, Canadians will lose jobs, face a lower dollar and have to find other sectors to tax if we want to cover the costs of health and education," Mr. McKay said. "Let's remind ourselves that no one – not Americans, not Canadians, not Mexicans, not Chinese – is using less oil and gas as a result of our decisions over pipelines."
"If we don't take on the energy infrastructure that we so clearly need, the world will move on, and we would lose our opportunity to help lead the global energy transition," Mr. McKay said. "The choice is ours: We can be a leader in the clean energy revolution or we can be a spectator."