Against all economic logic, and even environmental logic, the Quebec government finally decided yesterday, during the premier’s inaugural speech, to definitively ban fossil fuel exploration and development in the province. Just as the world is suffering through a natural gas shortage and prices are soaring, Quebec is thumbing its nose at the chance to become a leader when it comes to locally produced energy. It’s a slap in the face for an industry that has already been mistreated by previous governments.
The political crusade must end
In 2016, Quebec adopted the Petroleum Resources Act in order to create a regulatory framework for the production of oil and natural gas within the province. This sent a clear message to energy sector investors: Quebec is prepared to welcome you, as long as you respect the environment and our rules, which are among the world’s strictest. After all, it is in everyone’s best interests to protect the environment while enabling wealth creation.
Following the introduction of this law, companies submitted drilling applications and invested millions of dollars in preparation for the local production of fossil fuels. Unfortunately, though, the Quebec government then proceeded to reveal the secret ingredient of its special poutine sauce: the arbitrary and interventionist state control of the economy.
Despite the recommendations of experts from Quebec’s own Department of Energy and Natural Resources in favour of many projects, and respect for the regulations in effect, drilling permits were revoked by the government. This is what happened, for instance, to the Galt project in the Gaspé region which—are you sitting down?—was in fact a partnership with Quebec taxpayers through Ressources Québec. You just can’t make this stuff up.
But if you think the political crusade ends there, think again. After all these years of ambiguous regulation and improvised decisions that have cost Quebecers thousands of jobs and millions of dollars of tax revenue that could have helped reduce the tax burden or fund public services, the government is not planning to provide fair market value compensation to the companies it will expropriate with its ban on developing fossil fuels. The market value is taken into account when other sectors are expropriated, such as for the buyback of land, shopping centres, or taxi permits. Why should the energy sector be treated any differently?
The world is watching
While the Quebec government is busy provoking this family squabble, foreign investors from every sector have their eyes on us. They’re waiting to see if the government is really going to unfairly expropriate companies that have followed the letter of the law. If this does happen, it will send a very bad message, namely that in Quebec, the political class has no qualms about arbitrarily interfering in the economy and saying no to wealth creation and to millions of dollars of tax revenue.
Meanwhile, Quebecers will continue to import over 300,000 barrels of oil a day, and over $5 billion a year will be sent to Alberta and the United States to pay for the oil and gas we consume locally. There’s nothing wrong with interprovincial and international trade, of course. But when there are energy resources here, and companies that want to develop them, it’s the height of hypocrisy to prevent that economic activity from taking place, to the detriment of the local economy, all in the name of environmental protection.
While it may almost be the case that there’s no such thing as bad publicity for pop stars like Lady Gaga, the same cannot be said about the economic decisions of the government that have a negative impact on Quebec families’ bank accounts. Let’s not make a bad political decision even worse and turn ourselves into an object of international ridicule.
Miguel Ouellette est directeur des opérations et économiste à l’IEDM. Il signe ce texte à titre personnel.