From The Financial Post

Petroleum industry executives and consultants increasingly view Canada as a less attractive place to invest in oil and gas projects, especially in comparison to the U.S., according to a survey conducted by the Fraser Institute.

It marked the first year in which none of the top 10 jurisdictions, as viewed by industry insiders, were located in Canada. Nine out of 10 were located in the U.S. with Texas, Oklahoma and Kansas leading the way.

“The takeaway for Canada is we’re becoming increasingly less attractive to invest in than our neighbours, practically across the street,” said Ken Green, a co-author of the survey and resident scholar and research chair in energy at the Fraser Institute.

Within Canada, only Alberta is considered a “large reserve” holder as it has the third largest oil and gas basin in the world. Among large reserve holders, however, it ranked third in terms of its perception as a place to invest, behind Texas and Russia — but still ahead of eight other countries including Venezuela, Iraq and Nigeria.

The Fraser Institute’s 2018 Global Petroleum Survey polled 256 energy industry insiders, more than 50 per cent of whom said they were a manager or higher up, and looked at 160 jurisdictions including all province and territory in Canada, except Nunavut and Prince Edward Island.

Participants answered questions about regulatory enforcement, trade barriers and other areas and their answers, were then averaged into a “Policy Perception Index.”

As the survey is multiple choice and does not offer causal reasons for why any jurisdictions ranking dropped or rose, it is difficult to draw firm conclusions about declining scores.

Still, Green highlighted issues which he believes contributed to a declining view of Alberta as a place to invest, given that its ranking dropped to 43rd overall from 33rd last year.

“The concerns expressed by people are regulatory,” said Green. “It tends to be they’re concerned about the time it takes to weave through the regulatory forest.”

That said, not all the data was so clear: British Columbia and Nova Scotia both improved their overall scores; but the others saw their scores decline by margins large and small.

While Alberta dropped 10 rankings in one year, it had been ranked among the top 20 jurisdictions between 2012 and 2014. The report singled out higher personal and corporate income taxes, as among the reasons for its fall.

Green also mentioned the carbon tax as a possible reason but said the big problem today in Alberta is the lack of a way to move the oil out of the province.

“That is the dominant issue of the day,” he said. “We’re congested. We’re hemmed in, and virtually everything we have is a drainage system right into the U.S.”

Because there is a glut of oil in the U.S., it doesn’t command a fair price, he said.

On questions about fiscal terms, which includes licenses, royalty payments and gross revenue charges, roughly 30 per cent said this was only a mild deterrent to investment, 20 per cent said it was a strong deterrent and around 5 per cent said it was a reason not to invest in Alberta.

The remaining 45 per cent of the participants said it was not a factor or an encouragement to invest.

Interestingly, few participants viewed trade barriers as a deterrent to investment in Alberta, with around 15 per cent calling it a mild deterrent and around 10 per cent calling it a strong deterrent while the rest were either neutral or viewed it as an encouragement to investment.

Besides Alberta, only Newfoundland & Labrador and Saskatchewan and British Columbia have any significant oil production.

In Newfoundland & Labrador, around 10 per cent of those surveyed said the availability of skilled labor, or lack thereof, was a mild deterrent to investment, but the other 90 percent did not.

“Foremost, the takeaway from this report is it’s the first year in which Canada has not had a jurisdiction in the top ten,” said Green.

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