The Fraser Institute’s 2021 Canada-US Energy Sector Competitiveness Survey regarding barriers to investment in oil and gas exploration and production facilities in each country found Texas the most attractive jurisdiction for oil and gas investment. The Lone Star state was followed by Oklahoma and Wyoming. Seven other US jurisdictions also ranked in the top 10 this year: North Dakota, Kansas, Mississippi, Utah, Montana, Pennsylvania, and Louisiana.
The survey found no Canadian jurisdiction in the top 10. Saskatchewan (11th) was the highest-ranked Canadian province followed by Alberta (12th). In addition, Newfoundland & Labrador, which did not appear in last year’s survey due to low response rates, ranked 16th this year. British Columbia (18th) is no longer the worst-performing Canadian jurisdiction as this year the Northwest Territories (20th) posed the greatest barriers to investment among Canadian jurisdictions.
The survey had a total of 71 participating senior oil and gas executives. The responses have been tallied to rank Canadian and American jurisdictions according to the extent of barriers including high tax rates, costly regulatory obligations, uncertainty over environmental regulations, and the interpretation and administration of regulations governing the upstream petroleum industry, as well as concerns over political stability and security of personnel and equipment.
According to investors, regulatory factors continue to be a defining issue hampering Canada’s energy competitiveness. This year’s respondents pointed to the uncertainty concerning environmental regulations, regulatory duplication and inconsistencies, and the cost of regulatory compliance as key areas of concern in Canada compared to the UD. In 2021, only 13% and 20% of respondents indicated that uncertainty concerning environmental regulations in Texas and Oklahoma, respectively, was a deterrent to investment, whereas the proportion who indicated it was an issue in Alberta and British Columbia was 65% and 91%, respectively. On average, 76% of respondents for Canada are deterred by environmental regulations, compared to 49% for the US.
An Alberta/Texas comparison demonstrates how results vary by region considering that 71% of respondents identified regulatory duplication and inconsistencies as a deterrent to investment in Alberta compared to only 10% for Texas. Overall, investors expressed heightened concern over regulatory duplication and inconsistencies in Canada compared to the United States. The percentage of respondents indicating that this factor was deterring investment was, on average, 72% for Canada compared to 45% for the United States.
An Alberta/Texas comparison also shows that 56% of respondents identified the cost of regulatory compliance as a deterrent to investment in Alberta compared to only 9% for Texas. Overall, the cost of regulatory compliance is a significant concern for investors in Canada compared to the US. The percentage of respondents for the Canadian provinces indicating that this factor was a deterrent to investment was, on average, 70% compared to only 43% for the US.
Overall, the survey results indicate that negative sentiment of the industry’s senior executives regarding key factors driving petroleum investment decisions continue to be higher in many Canadian provinces than in competing American jurisdictions. The US performs better than Canada in 14 out of the 16 policy factors. However, all Canadian provinces improved their policy scores relative to the 2020 survey, largely driven by improvements in fiscal and taxation areas.
The full findings of the survey can be found here.
