Interview with Lorne Gunter, Political Columnist Edmonton Sun: How climate policies can impact investing

January 26, 2024No Comments

Introducing Lorne Gunter, Political Columnist Edmonton Sun

I wanted to introduce a very special guest [00:00:30] today. I contacted this guest because this is a man who is going to be able to talk about things that I am not super knowledgeable about and I am not always comfortable talking about. He is not afraid to talk about some of the issues that will affect Canadians in general regarding our economy (and investors specifically) in certain sectors of our markets, particularly the oil and gas field. So, [00:01:00] I want to introduce Lorne Gunter, and maybe some of you are familiar with Lorne. I follow his videos and his columns, and he’s been a Political Columnist for 30 years.

[00:01:11] So I’m bringing a Political Columnist onto the show. He’s been with the Edmonton Journal and the National Post, which is where I often follow his work. He’s also Senior Political Columnist with the Edmonton Sun, and he [00:01:30] does some work with the Toronto Sun as well. And, he covers a lot of areas like international security. He covers United Nations news, all that sort of stuff. So, he’s a political knowledge pool and that’s why we brought him on. So, I want to ask Lorne specifically about the climate policies that are coming out in Canada, Lorne, welcome to the show.

Lorne Gunter [00:01:55]: Well, thank you very much, Keith.

Keith Richards: I’m really thrilled to have you here. Because as I said, you’re going to talk [00:02:00] about stuff that is hard for me. So, I really want to get started by letting you set a background for the climate in Canada. I don’t mean the climate as in the weather, but the political climate in Canada for the country in general, but also specifically on the climate policies and how that’s going to affect business and the oil and gas, even [00:02:30] the kind of cars we drive and what your outlook is on this.

 

Political Policies in Canada

Lorne Gunter [00:02:35]: I think the first thing to keep in mind is that it’s my belief that among oil-producing countries, Canada has the most extremist anti-oil and gas policies of any country, even more so than Norway. We can get into Norway a little bit later, but here you have a Nordic country that’s infamous for its socialized economy [00:03:00] and for its concern for social issues. And we outdo them, I think, on our attacks on oil and gas. So, I think it is fair too to call it an ‘attack’. I think since the Trudeau government came in in 2015, and especially since Steven Guilbeault became the Environment Minister, there has been a deliberate attack on the oil and gas industry, not just the oil sands.

We are all [00:03:30] aware in the first few years of the Trudeau government, there was a focus on the oil sands. It’s now all oil and gas. I mean, you can see this in the announcement made late last year about a net zero power grid where we want to get all fossil fuel power out of Canada by 2050 and get it significantly reduced by 2035.

[00:04:00] In a country that is as cold as we are for as long as we are every year with unproven technologies, it’s good to keep in mind that wind and solar, as old as they are, are still very new technologies. And they have not proven themselves yet to be able to take on a huge, massive country that’s fully industrialized and replace coal, natural gas, oil, all of the fossil fuels. [00:04:30] But, there has been this attack on the fossil fuel industry since Steven Guilbeault became the Environment Minister. We’re now going into the third year of him as an Environment Minister, and it’s obvious that they have singled out the oil and gas industry.

 

Lorne Gunter’s view on Emission Caps

For instance, they talked about putting in a hard cap on oil and gas emissions near the end of last year. That hard cap would [00:05:00] be in the first stage, a 42% reduction in emissions from oil and gas in the next 11 years. In transportation, for instance, car making – and in the use of transportation – that cap would only be about 20%, about half of what the oil and gas cap would be.

So they’re singling out oil and gas because oil and gas and transportation [00:05:30] both contribute roughly equal amounts of emissions to Canada’s total. Oil and gas is about 24%, (although the government now claims it’s 28%, I think they’re padding those numbers a bit), but approximately a quarter of the emissions come from the oil and gas sector, the energy sector, and about 22-23% comes from transportation. So, if you’re looking to cut back emissions overall, we need to go after oil and gas and [00:06:00] transportation because together they make up just about half of all our emissions. But that’s not what the Trudeau government has done.

That’s not what Guilbeault has done. They’ve gone specifically after oil and gas. So, you have to think that it’s deliberate, that it’s targeted, and you also have to accept (certainly we in the West accept this), that if the oil and gas industry were in Ontario and Quebec, it would not be singled out the way it is in Alberta, and Alberta doesn’t vote [00:06:30] for Liberals. We have 34 seats, two of them are Liberal, and if you look at any of the detailed polling that’s gone on in the last year, neither of those Liberal MPs will be re-elected. So, the Liberals do their calculations – and every calculation they make involves their re-election. It’s not always the only factor they’re looking at, but it is always a factor. And so when you look at that, they say, well, we can win some seats in [00:07:00] downtown Toronto by looking like we’re very green and we’re not going to lose many seats in the West.

So, the balance for them of attacking oil and gas over transportation is a no-brainer for them. There is a tanker ban on oil off the West Coast, but it’s only Alberta oil. If you read the regulations carefully, it only applies to Alberta oil. [00:07:30] The Supreme Court told them that they had intruded into provincial territory on the no more pipelines, environmental assessment law that they passed. So, everything like this, so besides Saskatchewan and Nova Scotia to some extent too, Alberta is the only province left, that uses a lot of fossil fuels to generate electricity. We switched from coal in the 2010s to natural [00:08:00] gas because we were told, ‘Well, coal is dirty, but natural gas is clean’.

So, we spent billions of dollars redoing all of our power plants so that they run on natural gas, and now Guilbeault comes along and says, ‘No, no, no, no, no. You mustn’t use natural gas. It’s a fossil fuel that’s very dirty.’ We can’t have that. So, time and time and time again, you can see that we think they’re singling out Alberta and Saskatchewan and the West. Even if they’re not singling out this region, they’re singling [00:08:30] out the oil and gas industry.

If you look at the projections from TD Economics, from Stats Canada, if you look at the trend lines on investment in oil and gas from before Trudeau came in until now, it’s not hard to think [00:09:00] that Liberal policies have cost us about $200 billion in investment in oil and gas. Other countries that are oil-producing since the 2014-2015 price shock have climbed back well above their investment levels 10 years ago. We are not yet there. And so, you must think that some of that is a result of political policies from the current government.

Keith Richards: Oh, without a doubt. Without a doubt. [00:09:30] And actually, I was just thinking on your point of singling out voter-orientated policies versus what’s best for the country, the carbon cuts on natural gas out East, you know, and yet nowhere else.

 

Housing & Foreign Students

Lorne Gunter [00:9:47]: Right, exactly. And, there was an announcement this week, nothing to do with oil and gas, but the federal government is starting to look at maybe reducing the number of foreign students they allow every year. [00:10:00] When the Trudeau government came to office, there were 300,000 a year who were admitted to study in Canada. Now it’s 800,000 a year. And of course, that has to have an impact on the housing crisis because those 500,000 extra students have to live somewhere. And so, the government said, well, think about maybe reducing the number of foreign students.

That’s a purely political decision on their part, their desire, their policy desire would be to allow even more. But they realize that this is one of [00:10:30] the big problems they’re facing with maybe getting re-elected in 2024-2025. and so they’ve decided to go against their better judgment, their desire on the policy side because, on the political side, they’re taking a hit. And so, they haven’t gotten to that point yet with oil and gas. But who knows, maybe if they start realizing that all of this curtailed investment is having an impact on their bottom line and they’re not able to [00:11:00] curtail the national debt, they’re not able to fund all sorts of social spending that they would like to fund because they’re not getting all the money from the oil and gas sector, they may change their minds too.

Keith Richards [00:11:13]: Yeah, actually, it’s interesting. There was a bit of a meme or cartoon kind of thing I saw a while ago. It had Trudeau’s picture – and said, ‘If I can’t get re-elected, I’m going to import some more voters that will’, [00:11:30] or something to that effect.

 

 

Lorne Gunter view on EV Mandates

Is very much true. I want to focus just for a minute on, we were talking about the oil and gas industry, and that’s really a big part of this conversation, but with this new EV mandate by 2035, I think a lot of people are beginning to wake up that this isn’t realistic. I mean, cold weather is hitting us across the country right now in Canada, and people are finding out that their a hundred-kilometer or whatever it is, [00:12:00] journey to their work when they get caught in a snowstorm and it takes three hours versus one hour and they’re running the heat at full blast where in an EV, the heat runs right off the battery. It’s not coming as a by-product of engine heat. So, they run out of juice and they’re being towed or stranded or whatever. Not to mention the regular range problems.

I’m in Florida right now, and I’ll tell you even in the summer in Florida, everybody cranks their air conditioner both [00:12:30] in their house and their car. It’s the same problem. The range decreases incredibly. I know a few people that have Teslas and they all tell me, ‘July, August, and September our Teslas get half the mileage because they’ve got the air conditioning at full blast’. You don’t just stop for five minutes at a gas station and fill up, you know, and move on. You have to have a full-on recharge. [00:13:02] So, maybe you can offer your thoughts on that both from a practicality standpoint, but also the effect on industry in Canada.

Lorne Gunter [00:13:09]  Consumers are now starting to show they don’t have an interest in EVs. There was a bit of a surge in EV sales from about 2021-2022, through to the middle of 2023, but it’s slowed down [00:13:30] a lot since then. So much so, that manufacturers like Ford and General Motors, and then a lot of the European manufacturers are scaling back on their EV production. And I think because EVs were a second or third car for wealthier car drivers. I have a friend who has an EV, it’s his sixth car. So, if it gets cold and he hasn’t got the range with his EV, he just goes and gets one of the internal combustion engine cars that he has in his garage [00:14:00] and he uses it. And I think there are a lot of people who wanted to show how ‘woke’ they were among their professional social friends and they bought EVs and, oh, aren’t I conscious about the environment?

But that is only possible if you can have a second or third car that doesn’t need to go outside the city. They can be lovely urban vehicles for some people. I can see my wife [00:14:30] – who seldom uses her vehicle except to commute to her downtown office – I could see her at some point having an EV. I have no particular fetish for the internal combustion engine. I don’t care what you power my vehicle with, but it’s got to go as far as my current truck will go on a tank of gas, so that’s about 800 to 900 kilometers. It’s got to be able to work in cold weather, which the EVs don’t. And as you say, they don’t work particularly well in extremely hot weather either. And it has [00:15:00] to be able to be recharged in roughly the same amount of time that I can refuel.

Our son used to live in Vancouver, and from our house to his apartment was a little over 11 hours. I could make it with one stop in the middle of British Columbia and I would fuel up. I’d go in and get a soda and some jerky or something to tide me over until I got down to Vancouver, and I could do that in under 10 minutes. Well, you cannot recharge [00:15:30] an EV in under 10 minutes and you’re not going 600 kilometers before you must stop. You’re going to have to recharge it four times, whereas I refueled once. So, you’re looking at four hours wasted on refueling. When ordinary people start to look at that and they realize that EVs are a lot more expensive, they start to back away from it. If you have an ordinary middle-class job, you probably can’t afford [00:16:00] an EV.

And so that’s where it’s going to come in, I think with investors and with governments. Governments in Ontario and BC are already subsidizing EV purchases, and that’s one of the reasons why Ontario and BC have the highest concentrations of EVs. The other reason is that Toronto, for its ugly winters still does not have the same kind of brutal cold for as many [00:16:30] months as much of the rest of the country does. And so you can operate an EV without losing 50%, 60%, 70% of the battery life. I had a reader send me a note this past week when it was -40 across the prairies. He was in Thompson, Manitoba. It was -44. He has the fully electric pickup Ford F-150 Lightning. He went 18 kilometers [00:17:00] and lost 90% of his battery life. So, he had to turn around quickly and get back to his charging station.

So, it is just not practical. If I owned an oil service company and I was sending guys out into the bush to service transmission stations or to look at pumps or do whatever, I am not sending them out in January cold weather in EVs because you’re looking at sometimes 300 to 400 kilometers [00:17:30] out and there is no charging station at the other end. I talked to another guy who was sitting in his car charging at a public station, and he said it took twice as long, so it took closer to two hours to get a full charge because he had to run the vehicle to keep the heater on because it was so cold. And so there’s no practicality to this. To attract buyers, what’s going [00:18:00] to have to happen is that the government is going to have to spend a phenomenal sum of money to bring the price down to a point where ordinary people will put up with that kind of inconvenience, or they have to mandate, for instance, the closure of gas stations.

[00:18:16] I think somewhere down deep in the bowels of environment and climate change Canada, they’re already thinking about that. Another big problem I have with Steven Guilbeault, is that he lets environmental groups write [00:18:30] a lot of federal policy, and it’s not a hard sell within his department, which is also very, very extremist on climate change. But it’s certainly completely detached from where ordinary investors are.

So, how do you then convince investors that it’s okay to go forward with this EV mandate other than the government using its taxation power [00:19:00] to raise a ton of money to put into the sale and infrastructure of EVs? You are willing into existence a market that doesn’t exist on its own. The only way you can do that is through huge subsidies. I mean, look at the Volkswagen and the Stellantis battery plants in Ontario.

They are both being subsidized at a ratio of about 2:1 to their actual cost. The Volkswagen plant [00:19:30] is slated to cost about $7 billion. The Feds and the Ontario government together (mostly the Feds) are putting in $15 billion. Well, Volkswagen would be nuts to turn that down. Oh, here’s $7 billion free money. Of course, you couldn’t go back to your boardroom and say, ‘oh, they offered us $7 billion for nothing, but we turned it down. We said, no, that wouldn’t be right.’ That’s the kind of investment [00:20:00] thinking that the federal government doesn’t do. It just doesn’t think. It wants this to happen so badly. It will forbid the things it dislikes and it will subsidize through the nose (and out the ears and through the eyeballs), any of the things it does want.

Keith Richards [00:20:18]: Yeah, I made a T-shirt, and it says “Four out of every three liberals can’t do math.”

And that’s the math you’re talking [00:20:30] about. So, the point is, these aren’t going to be profitable. And by the way, from a pragmatic point of view, Hertz, the car company, just announced, I think it was 20% of their fleet is going to be replaced. They’re literally dumping the EVs and they’re replacing them again with internal combustion engines. And this is also happening across North America with ordinary people. They’re dumping their EVs because they found [00:21:00] all the problems we just mentioned. They’re impractical. Some reports of fires. I don’t know how often those happen, but whatever the case, if Trudeau’s allowed to do what he’s doing, and hopefully not through the next election, but if he is, then we’re going to have, it’ll eventually add up to yes, gas stations closing and the dreaded 15-minute city that we’ve always heard come out of Europe [00:21:30] with the great reset and all that.

I really do fear that. I want to go back to the policies just before we wrap up. You mentioned something about there’s a mandate of 40% reductions in emissions by 2035 [00:22:00] on the industry. And I’ve heard now Lorne, that some companies are already pushing back on this, even though Trudeau hasn’t been unelected yet. Is this something you’ve heard about?

Lorne Gunter [00:22:17]:  Yes, for sure. I mean, there are an awful lot of big oil and gas companies in Western Canada who will talk like they’re in [00:22:30] on the government’s mandate. But privately, they will admit to you that there’s no possible way they’re going to be able to do that. Maybe by 2050. They hope that they’ll develop technologies that will reduce their emissions enough that by 2050 they’ll be making a significant change in emissions. But by and large, no. They are keeping their fingers crossed, and if they’re religious people possibly [00:23:00] praying that within the next two years, there’s a change in government and they don’t have to even go through the motions on these ridiculous 2035 mandates for emission reductions and net zero power. There’s just so much disbelief among the oil and gas industry of this ever being possible.

Keith Richards [00:23:24]: So, I’m going to finish up with one last question for you, Lorne. Let’s just pretend that all these mandates carry on as Guilbeault wants them to, and Trudeau gets re-elected in a year and a half. That’s worst-case scenario. If that happens, in your opinion how is that going to affect the competitiveness of our oil companies compared to others? This is happening in other countries. [00:24:00] I like to talk about the great reset, but the reset is pushing a lot of countries to do this. But on a level of competitiveness, where does that put Canada versus others?

 

How Norway Handles Emissions

Lorne Gunter [00:24:11]: Well, I can only hope that whoever forms the government after the next election, even if it is the Liberals, that they smarten up and they do things, for instance, like they’re doing in Norway. In Norway, if they sell oil or gas to a country that is [00:24:30] currently buying it from elsewhere where the emissions are higher, where the oil and gas is dirtier to produce, they take credit off of their national emission score for the amount of emissions they’ve saved by selling cleaner Norwegian oil and gas to a dirtier country. We will not do that. We refuse. One of the reasons why the LNG project in at Coastal Link in BC has been delayed as long as it has, is [00:25:00] that the federal government simply refuses to give BC credit for selling natural gas, liquified natural gas to China to replace coal. China is still opening the equivalent of about two coal-fired power plants every month, maybe even more than that.

And we could be contributing cleaner natural gas to that, and cut down worldwide emissions. But we don’t take credit for that. And so, my [00:25:30] hope is that no matter who is elected, we’ll at least do smarter things like that. Now, Norway is often held up by the Liberals as an example of a country that has electrified its vehicle fleet. Norway is very, very long and narrow, and it has spent billions of dollars putting in charging stations in the middle of nowhere along their main highways. Do you know how they pay [00:26:00] for all of that infrastructure? From selling oil and gas to other countries, then taking credit for cleaning up the environment with their oil and gas. So, we’ve got to get grown-up right now. We are, I think, acting at the federal government level, like a bunch of idealistic university-age students, and we got to get more grown up about all of that.

Keith Richards [00:26:23]: Yeah, I totally agree. I mean, we weren’t going to talk about Guilbeault’s history [00:26:30] of climbing towers and being arrested for climbing on Ralph Kline’s…..

Lorne Gunter : Hanging banners from the CN Tower.

Keith Richards: Yeah, he’s a child and was a child. They’re both like liberal arts playboys. But whatever the case, I sometimes like to refer to the statement, ‘You just can’t make this stuff up’. Sometimes I blink [00:27:00] and I can’t believe it. So, I hope you’re right.

And you were making a statement there: I’m sorry. Your hope is that if the Liberals get re-elected, it’s another Liberal set, or hopefully a change to another government that has some sense of reality that we do need to work on the climate. We do need to make things better, but not the way these guys are doing it. I really appreciate you coming on, and I think as Canadian investors, we need to keep [00:27:30] this stuff in mind because guess what? We can buy oil and gas companies anywhere in the world. There are some big operations outside of Canada. And if it’s really not profitable, because as investors we’re pragmatic, we just want to make money. So if it’s not pragmatic, we look elsewhere and hopefully we don’t have to. Thank you, Lorne.

 

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