Trans Mountain pipeline expansion to enter commercial service May 1

Amanda Stephenson, The Canadian Press

After four years and more than $34 billion in costs, the Trans Mountain oil pipeline expansion will go into commercial service on May 1. 

The Crown corporation behind the massive project provided the start date in an update posted to its website Wednesday.

"The commencement date for commercial operation of the expanded system will be May 1, 2024," Trans Mountain Corp. said in the update.

"Trans Mountain anticipates providing service for all contracted (oil) volumes in the month of May."

The company also confirmed in its statement that it has resolved the construction-related difficulties that had slowed the project's progress in recent months. Trans Mountain Corp. had encountered an "obstruction" when trying to pull the pipe into the horizontal hole that had been drilled for it in an area of the Fraser Valley between Hope and Chilliwack, B.C. 

The setback forced the company to remove the pipe temporarily to address the issue, but on Wednesday Trans Mountain Corp. said it has resolved the challenge and the section of pipe has been successfully installed.

To complete the expansion project, "there are several remaining steps including obtaining outstanding approvals from the Canada Energy Regulator," the company said. 

"With the appropriate approvals and completion of remaining construction activity, Trans Mountain will commence transporting crude oil on the expanded system."

The Trans Mountain pipeline, which was bought by the federal government in 2018, is Canada's only oil pipeline to the West Coast. Its expansion will increase the pipeline's capacity by 590,000 barrels per day to a total of 890,000 barrels per day, improving access to export markets for Canadian oil companies.

While its completion will be celebrated by Canada's energy sector, the project has faced major hurdles to get to this point. 

The project's $34-billion price tag has ballooned from a 2017 estimate of $7.4 billion, with Trans Mountain Corp. blaming the increase on "extraordinary" factors including evolving compliance requirements, Indigenous accommodations, stakeholder engagement, extreme weather and the COVID-19 pandemic.

The federal government bought the Trans Mountain pipeline — Canada's only oil pipeline to the West Coast — in 2018 for $4.5 billion. The purchase was made to ensure the pipeline expansion was completed after previous owner Kinder Morgan Canada threatened to scrap the project in the face of regulatory hurdles and Indigenous and environmental opposition.

This report by The Canadian Press was first published April 3, 2024.

 

Why climate change on the farm means a big bill for Canadian taxpayers

Amanda Stephenson, The Canadian Press

To get an idea of the financial toll extreme weather is taking on this country's agriculture industry, look no further than the government of Saskatchewan's books.

The prairie province had forecast a more than $1 billion surplus for the fiscal year ending March 31, 2024, but fresh budget documents released last month show that surplus has completely evaporated, leaving Saskatchewan with an approximate $482 million deficit for the year instead.

The reason for this dramatic reversal? In large part, drought and a resulting increase in government crop insurance payouts.

It's an example of what some experts say Canadians can expect to see more of as climate change pressures agricultural production. Taxpayer money already supports the agriculture industry in this country to the tune of billions of dollars each year, and some say the bill will go up as climate change-driven natural disasters make it harder for farmers to eke out a living.

"We are going to see more droughts, more pests, the yields won't be as good," said Guillaume Lhermie, director of the Simpson Centre for Food and Agricultural Policy at the University of Calgary. 

"For me the question is, who should pay for that? I do foresee that government will be solicited more and more."

In Canada, crop insurance is available to farmers in all provinces to help cover production losses in the event of natural hazards such as drought, flood, excessive heat or snow and more.

It is part of a suite of business risk management programs, all jointly funded by the federal and provincial governments through what is called the Sustainable Canadian Agricultural Partnership.

But extreme weather — from drought to wildfires to "heat domes" to flash floods — has plagued farmers from coast to coast in recent years.

In Saskatchewan's case, last year's drought conditions strained crop production, resulting in a year-over-year output decrease of nearly 11 per cent and forcing the provincial government to spend nearly $1.2 billion more than budgeted through its Ministry of Agriculture.

For the coming year, provincial Finance Minister Donna Harpauer said in her recent budget address that as a result of the "challenging weather and soil conditions," Saskatchewan is budgeting $431.7 million this year — a 5.8 per cent increase year-over-year — to ensure crop insurance and other farm risk management programs are fully funded.

It's not the first time drought has thrust a wrench into the province's finances — in 2021, Saskatchewan farmers saw one of the largest production declines in the province's history (47 per cent year-over-year) due to extreme heat and drought conditions. The Saskatchewan Crop Insurance Program paid out a record $2.6 billion to farmers that year to help cover their losses.

Large crop insurance payouts have been an issue in other provinces as well. 

In Alberta, the provincial Crown corporation known as the Agriculture Financial Services Corp. paid out $2.1 billion in 2021 and $552 million in the 2022 crop year, with drought as the leading cause of loss for the vast majority of those claims.

AFSC has warned that Alberta farmers can expect to see higher crop insurance premiums for the 2024 crop year, mainly due to the program's financial losses in 2021 and 2022.

Above and beyond crop insurance, Canada also has a federal-provincial-territorial disaster relief framework that can be triggered when farmers encounter "extraordinary costs," such as the extra feed costs ranchers in Western Canada have had to pay in recent years as drought dries up their pasture lands.

For the three-year period ending Dec. 31, 2023, more than $1.4 billion was paid out to Canadian producers in the form of disaster relief under that framework, which is called AgriRecovery.

Keith Currie, president of the Canadian Federation of Agriculture, said while the disaster relief funding is welcome, severe weather events are becoming so commonplace that the entire system may need to be re-evaluated. AgriRecovery, for example, has been criticized as being too slow to respond in the wake of a disaster — he said it's not uncommon for farmers to wait months or even a year to receive funding.

"When we look at events like the 'atmospheric river' that happened in B.C., the hurricane impacts that have gone on in Atlantic Canada, or even the smoke damage from wildfires and how that's affected crops, we need better risk management programs to help farmers have some sort of assurance that they can survive these kinds of climate change impacts," Currie said.

While crop insurance will always be necessary, said Shannon Sereda, director of government relations for the industry group Alberta Grains, governments can mitigate against the financial toll of extreme weather by stepping up investment in agricultural research. 

"One of the best defences we have against climate change or extreme weather events is really investment in research," Sereda said, adding science can reduce climate-related crop failure through innovations such as the development of drought-resistant seed varieties. 

Stewart Oke, who farms in central Alberta east of the city of Red Deer — a part of the province nicknamed "Hail Alley" for its reputation for punishing storms — said he "couldn't operate" without crop insurance to protect him from unexpected losses.

But while he acknowledged that the program is costly for both producers and governments, he said he believes it is sustainable as long as investments in research and technology keep pace.

"With access to innovation, there's a lot of things that we can do as producers that will help keep our risk at a controllable level," Oke said.

Lhermie, the University of Calgary professor, said in the short-term, climate change means governments will have no choice but to pour more money into the agriculture industry to help it withstand extreme weather events.

In the longer-term, he suggested governments may want to consider making financial support for farmers conditional on certain environmental practices, such as soil health and biodiversity management.

"You could technically say that if you want to be insured then you have to be a good steward of the land. That's something that could be doable, in the future," Lhermie said.

"Because in Western countries, when these (agricultural disasters) happen, governments are intervening a lot — meaning they subsidize and cover the losses. But in the long run, that's just not sustainable for government spending. It costs a lot of money."

This report by The Canadian Press was first published April 4, 2024.

 

Jefferies, Japan's Sumitomo Mitsui expand alliance to Canada

Christine Dobby, Bloomberg News

A customer enters a branch of Sumitomo Mitsui Banking Corp., a unit of Sumitomo Mitsui Financial Group Inc., in Tokyo on Jan. 25, 2023. , Photographer: Kiyoshi Ota/Bloomberg

Sumitomo Mitsui Financial Group Inc., one of Japan’s largest banks, is deepening an alliance with Jefferies Financial Group Inc., with the two companies announcing plans to work together on corporate and investment banking deals in the Canadian market.

New York-based Jefferies started a full-service investment bank in Canada in December, opening a Toronto office with more than 40 employees. It recruited a number of investment bankers and equity research analysts from rival Barclays Plc’s Canadian operations, including its president and chief executive officer, Bruce Rothney, who is now CEO of Jefferies Canada.

“Jefferies will now align its extensive industry, M&A, leveraged finance and equity capital markets knowledge in Canada with SMBC Group’s deep banking and debt capital markets expertise and strong balance sheet to support and serve clients,” the two banks said in a statement Thursday.

SMBC Group, the commercial banking subsidiary of Tokyo-based Sumitomo Mitsui, has had a strategic alliance with Jefferies since 2021, when the Japanese bank provided US$2.25 billion in financing to the New York investment firm and purchased about 4.5 per cent of its shares. Last year, SMBC increased its economic ownership of Jefferies to 15 per cent.

The two firms have expanded their initial partnership to numerous geographies over the years, including Europe, the Middle East and Africa.

 CANADA

Dave McKay: failure to lower housing costs could 'put our entire economy at risk'

Daniel Johnson , BNN Bloomberg   Apr 5, 2024

RBC President and Chief Executive Officer Dave McKay says Canada’s housing crisis presents a longer-term risk to the overall economy. 

In an interview with BNN Bloomberg, McKay said many people are experiencing difficulty finding shelter within the country. He says high housing costs are one of the top issues the country faces and worries it could drive people away and impact the overall talent available in the Canadian economy. 

“If we don't solve it, we put our entire economy at risk, in that it's too expensive to live here, we don't attract the talent, we don't retain the next generation,” McKay said. 

• Top economic headlines, all in one place

He said the real estate sector currently faces a “catch-22” as higher interest rates deter development needed to increase supply. 

“There's a huge demand for housing,” he said. “As we know it’s stabilizing house prices in what would normally be a down market. But we can't satisfy that pent-up demand with more supply because rates are too high.”

McKay also highlighted that the permitting process takes too long and needs to move at a faster pace. 

“It's been a challenge for our country from business to construction. It takes too long to get permits to move forward,” he said adding that the slow process results in losing out on business to the U.S. 

‘Soft landing’ 

In the near term, McKay said elevated interest rates are working to bring inflation down, although the process is “a little slower than we would like.”

“Overall, we appear to be fully on a path to engineer a soft landing for the Canadian economy,” he said.

Previous moves by the Bank of Canada to tighten monetary policy are working to ease inflation, McKay said. 

“Higher rates have led to a repricing of business loans, have led to higher interest rates for mortgages, which has been difficult. That takes cash flow (out) of the economy and therefore the economy is slowing from a demand perspective as rates are working,” he said. 

Despite the easing of inflationary pressures, he added the impact has been “offset a little bit” due to government deficits and “a million new Canadians coming in from abroad.” Those two factors, he said, add slightly to inflationary pressures. 

“Still, we're on track for rate cuts this summer and into the fall. I think that relief will be welcomed by Canadians and will help bring down mortgage rates and bring down overall costs of servicing a mortgage for Canadians,” McKay said. 

However, even if interest rates are reduced, they are likely to still be high enough to weigh on the overall economy, he highlighted. 

“Don't forget, even if rates come down by 100 basis points or 50 basis points, that’s still tightening. A four per cent rate in the economy is still not an expansionary rate, it’s a tightening rate. And therefore that still will have an effect on the economy going forward,” McKay said. 

Homebuyers facing 'toughest time ever' to buy a home: economist

Daniel Johnson , BNN Bloomberg

Prospective home buyers are facing peak unaffordable market conditions amid elevated interest rates and high prices, says one economist. 

Robert Hogue, assistant chief economist at RBC, said in a report Tuesday that Canadians are experiencing the “toughest time ever to afford a home.” The report said the Bank of Canada’s historic interest rate hiking campaign, which began in March 2022, continues to weigh on the nation's housing market despite more recent moves to hold interest rates. Specifically, Hogue said higher rates have greatly diminished purchasing budgets among house hunters. 

“We estimate they’ve shrunk the maximum budget for a household with a median income ($85,400 at the end of 2023) by 22 per cent since the first quarter of 2022 to just under $500,000,” Hogue said adding that those figures assume a 20 per cent down payment and a 25-year amortization. 

While higher interest rates have worked to erode the budgets of prospective homebuyers, the report outlined that prices have not drastically moved lower. 

“Home prices, meanwhile, have fallen just 1.8 per cent over the same interval. It’s no wonder homebuyer demand has cooled so much. The ability of many Canadians to get into the housing market has greatly diminished,” he said. 

As a result of the poor affordability conditions in Canada’s real estate market, Hogue highlighted that many buyers are waiting for rates to go down before getting off the sidelines. 

However, the report highlights that Canadian homebuyers could see improving market conditions ahead. 

“An improvement in affordability could in fact come sooner if long-term interest rates ease ahead of our central bank policy pivot and household income continues to grow at a solid clip. The outlook will brighten the deeper the Bank of Canada’s cuts get next year,” the report said. 

While some improvements in affordability could “rekindle some buyers" enthusiasm,”  Hogue said they will be small when compared to the “dramatic loss of affordability that occurred during the pandemic.” 

“Under our base case scenario, the share of an average household income needed to cover ownership costs would only fall to mid-2022 levels by 2025.,” the report said. 

Canada's housing crisis will persist on tradespeople shortage, CBRE says

Thomas Seal, Bloomberg News

Canada doesn’t have enough skilled tradespeople to build its way out of its current housing shortage, threatening long-term damage to the country’s social fabric, according to a top executive at one of the world’s biggest real estate firms.

Housing is becoming the central issue ahead of Canada’s next general election, currently expected in 2025, with a lack of dwellings and rapid population growth driving up prices. The country needs an additional 3.5 million homes, which would involve more than doubling its pace of construction, according to a 2022 study from Canada’s national housing agency.

“The inconvenient truth is that we are not going to hit those targets — we will likely not get anywhere close to those targets,” Paul Morassutti, CBRE Group Inc.’s chairman in Canada, said at the Vancouver Real Estate Forum on Wednesday. “Even if we had approvals across the country to build thousands of units, we cannot physically build them, because we don’t have enough trades.”

Policymakers must “get something done, because this is definitely a crisis,” he said. There’s little sign that home prices will fall as supply-demand imbalances have only gotten worse, and they may even rise once buyers return to the market, Morassutti said.

“The scale of the problem, which has been many years in the making, is massive,” he said. “Income inequality and housing affordability are very pernicious issues. Left unaddressed, the damage to our social and economic fabric will only worsen.”

 

Trudeau creates fund for nonprofits to buy apartment buildings

Brian Platt, Bloomberg News

Prime Minister Justin Trudeau’s government is creating a $1.5 billion (US$1.1 billion) program to help Canadian nonprofit organizations buy affordable apartment buildings and keep the rents down.

It’s the latest in a series of pre-budget announcements focused on housing and affordability, as Trudeau tries to ease Canada’s severe housing crunch — and turn around his own sagging poll numbers.

The fund announced Thursday will provide $1 billion in loans and $470 million in grants to nonprofit groups for acquiring existing rental properties. 

“Instead of that apartment being sold to a speculator or profiteer, it can go to nonprofit organizations, community housing providers and the middle class,” said Trudeau’s office in a news release. “It’ll mean Canadians can live in the communities they love, with rent prices they can afford.”

This follows Wednesday’s announcement of a $15 billion top-up to an apartment construction loan program. The $55 billion program aims to finance the construction of more than 131,000 new apartments within the next decade.

Earlier in the week, Trudeau outlined a $6 billion infrastructure fund that provinces and municipalities can access — but only if they remove certain barriers to homebuilding, such as freezing municipal development charges and allowing up to four units on every lot.

The budget is set to be published April 16.

 

 

Trudeau pushes 3D-printed, prefabricated homes to solve supply crunch

Brian Platt, Bloomberg News

Prime Minister Justin Trudeau announced measures aimed at making it easier and cheaper to build new homes in Canada, with an emphasis on pre-fabricated modular housing.

The federal government will provide $50 million to a new fund meant to “support the scale-up, commercialization and adoption of innovative housing technologies and materials,” said Trudeau’s office in a news release.

A further $50 million will go through regional development agencies to help modernize homebuilding “through modular housing, mass timber construction, robotics, 3D printing and automation,” the release said.

Trudeau also announced $11.6 million to support the creation of a catalog of pre-approved home designs to reduce the cost and time it takes to build housing — a strategy first used during the Second World War.

Earlier this week, Trudeau announced a top-up to a $55 billion fund to provide low-cost financing for apartment building construction. On Friday he said $500 million of that would be used for new rental housing “using innovative construction techniques from prefabricated and modular housing manufacturers.”

The prime minister and his cabinet have made a series of announcements this week on housing measures that will be in the April 16 budget. Trudeau has been under fire over the past year due to Canada’s soaring cost of housing, and is trailing badly in the polls to Conservative Party Leader Pierre Poilievre.

Melissa Lantsman, deputy leader of the Conservatives, described Trudeau’s pre-budget announcements as “frantic” and accused him of re-branding and recycling policies that don’t get homes built. She said her party’s plan to provide a bonus to cities that increase homebuilding by 15 per cent annually — and fine those that don’t — would be more effective.

While Trudeau has pushed provinces and cities to allow up to four units on every lot, Lantsman said her party would allow communities to decide which types of housing work for them.

“We just want to see more approvals and less gatekeepers in the way,” she said.

WORKERS CAPITAL

Ontario pension fund preaches patience in private equity's long winter

Layan Odeh, Bloomberg News

Private equity firms have been slow to cash out of holdings and hand money back to their investors. Executives at Investment Management Corp. of Ontario say they’re ready if that trend continues.

“Most of our partners will probably say that the worst is over. We are just patient,” said Rossitsa Stoyanova, chief investment officer of the $77.4 billion (US$57 billion) Canadian pension manager. “We are prepared that we are not going to have exits for a while.” 

Private equity firms have seen a dramatic change in the investment climate since interest rates began their rapid climb in 2022. The high cost of borrowing has made it harder for them to finance new acquisitions, or find buyers for the assets they already hold at valuations they’ll find attractive. 

Still, there have been signs of a thaw in deal activity so far in 2024 now that it appears the Federal Reserve and other central banks are poised to start lowering interest rates. 

Overall, IMCO posted a 5.6 per cent return last year, underperforming the benchmark of 6.6 per cent, according to a statement Friday. The fund had positive returns in every major asset class except real estate, where it lost 13 per cent. It outperformed the benchmark in public stocks and fixed income, but undershot on private equity.

“It’s not that we saw something happening in 2023, or we were contrarians, Chief Executive Officer Bert Clark said in an interview. “We held to our long-term strategies and it worked.”

IMCO is a relative young organization, launched less than a decade ago to consolidate the management of a number of retirement funds for government workers in Ontario, Canada’s most populous province. As such, it’s still building up some of its investing programs, including private equity and private credit. 

Last year, the Toronto-based manager allocated $509 million to three new private equity partners, including European buyout funds managed by Cinven Capital and IK Investment Partners, and did nearly $1 billion in direct and co-investment PE deals. 

The fund has also been growing its credit business, investing in everything from investment grade credit to structured private credit through external fund managers and co-investments — including allocations to funds run by Ares Management, Carlyle Group and Blackstone. 

IMCO boosted its activity in private credit last year, raising it to nearly 50 per cent of the global credit portfolio as of December. Management plans to increase that to 70 per cent, according to the fund’s annual report. 

IMCO is also look for exposure exposure to the infrastructure that supports the energy transition and artificial intelligence, according to Stoyanova. Last year, the fund committed $400 million in Northvolt AB, a Swedish sustainable battery company, via convertible notes. And it invested $150 million in CoreWeave, a cloud-computing firm. 

Imco sold some of its stakes in infrastructure funds in the secondary market and may do the same in private equity funds in the future “to make room for direct investments or to commit to the fund manager’s next vintage,” Stoyanova said.     

Office buildings and retail assets were 53 per cent of Imco’s property holdings as of Dec. 31, with a heavy tilt toward Canada. 

IMCO, which inherited a big chunk of its property portfolio from the pension funds it assumed control of years ago, has been diversifying into European and U.S. real estate, according to Stoyanova. Last year, the pension fund disposed of around $1 billion in Canadian real estate assets. “Obviously in order to transform it, we need to dispose assets to get dry powder to buy new ones,” she said. 

Pensions giant to create UK superfund in boost for Hunt

Szu Ping Chan
Sun, 7 April 2024

The Chancellor has previously said he wants to boost returns for savers while directing more cash to higher-returning assets - Paul Grover for The Telegraph

Britain’s biggest long-term savings and retirement business is drawing up plans to launch a new superfund to back fast-growing companies in a boost for Jeremy Hunt.

Phoenix, which owns insurer Standard Life, is in the early stages of creating a multibillion-pound investment vehicle that insiders say will help turbocharge investment in high-growth sectors and lift pension returns.

This includes pooling cash to invest in life sciences and fintech businesses, as well as injecting long-term venture capital into unlisted companies in the UK and overseas.

The fund, which is expected to launch this year, will also help the FTSE 100 company to meet a goal of investing at least 5pc of its defined contribution (DC) workplace pension assets in unlisted companies by 2030.


It is understood that Phoenix, which has over £280bn of total assets under management and 12 million customers, currently has less than 1pc of the relevant cash invested in these assets.

This means it needs to plough billions of pounds more into investments such as science and technology over the next five years, which stems from the Chancellor’s Mansion House reforms unveiled last summer.

The fund will also enable thousands of smaller pension funds to gain access to venture capital and high-growth companies by contributing to the investment vehicle.

Smaller funds traditionally do not have the financial firepower to tap into these investments because of the higher costs charged by venture capital firms.

However, by handing over cash to the Phoenix fund, it is possible that even the smallest of Britain’s 27,000 workplace pension schemes will have access to these investments.

This idea has been partly inspired by similar investment funds in Australia, such as IFM which specialises in infrastructure investments.

Mr Hunt has announced he wants to boost returns for savers while directing more cash towards productive, higher-returning assets under plans first announced in last year’s Mansion House speech.

He claimed the reforms could boost individual pension pots by up to £1,000.

However, some pension funds openly warned the Chancellor against mandating UK-based investment, which they say could reduce investor returns.

Phoenix is said to be aiming for around 40pc of UK-focused investment as part of its Mansion House commitment, but sources suggested this was not a target and the focus would be on returns over location.

Britain’s largest local government pension scheme is also understood to be plotting a new UK-focused fund as part of a new £2bn investment drive into private markets.

Border to Coast, which manages the pension pots of local government workers from Bedfordshire to Teesside, will invest hundreds of millions of pounds of this pot into UK infrastructure, private equity and private credit over the next year. This will be achieved through a new “UK Opportunities” fund focusing on British assets.

Border to Coast is the largest local government pension scheme in the UK with just under £60bn in assets. Its new UK Opportunities fund will target projects including housing, transport and renewable energy, all of which money managers said would benefit UK communities.

The Chancellor also used his March Budget to force asset funds to disclose how much of savers’ money is invested in Britain, as he seeks to drive more domestic investment.

Poorly performing funds will also be blocked from taking on new business from workplace pension schemes under the plans.

Andy Briggs, the boss of Phoenix, has previously warned that British pensioners are not saving enough for retirement.

It is understood that the Government wants to increase the level of compulsory savings poured into pensions via workplace schemes to 12pc, but is yet to consult on the proposal.

Mr Briggs previously told The Telegraph: “The state pension just can’t cope in the way that it was originally designed to do.

“Effectively, state pensions are going to have to be paid later and at a lower level, and people are going to have to make greater personal provision.”

A Phoenix spokesman declined to comment.

 

Canada warns Trump 10% tariff risks sparking global retaliation

Eric Martin and Iain Marlow, Bloomberg News

(Bloomberg) -- Donald Trump’s campaign promise to hike import tariffs could trigger retaliation from other nations including trade partners, Canada’s ambassador to the US warned.

Ambassador Kirsten Hillman said in an interview Friday that Canada thinks the US-Mexico-Canada Agreement for free trade, negotiated during Trump’s first term, should exclude it from his plan to impose 10% duties on goods from around the world if he’s elected to another term in November. Chinese imports would face a 60% tariff.

“It’s not a one-way street — other countries, if that policy is enacted, will respond,” said Hillman, who helped negotiate the USMCA. “That could potentially raises costs for everybody.”

A second Trump White House should expect trade partners to respond with reciprocal tariffs, as they did for duties on steel and aluminum that Trump imposed in his first term, Hillman said. Canada, the US and Mexico negotiated the USMCA at Trump’s insistence to replace the two-decade-old North American Free Trade Agreement, which he blamed for the loss of US manufacturing jobs.

Although Trump threatened at one point to end free trade in the region altogether, the nations fashioned a deal that won broad bipartisan support in the US Congress. They’ve since focused on deepening integration, especially in critical industries like semiconductors, after the disruption of the Covid-19 pandemic. 

Hillman, who previously worked as a trade lawyer and negotiator, said she doesn’t see the world breaking down into rival trade blocs even though she agreed that returning some supply chains to the region for critical inputs like food and energy makes sense. 

Hillman downplayed concerns about a USMCA review scheduled for 2026, calling it an opportunity to improve the deal rather than renegotiate it.

With the US election looming, Hillman said Canada continues to use its network of consulates to establish relationships nationwide with both Republican and Democratic lawmakers and aides.

Hillman added that she’s been in touch with some Trump advisers since he left office.

“Obviously, that’s deeply important, in order to get as much information as we can from every region to inform ourselves as to what’s happening under both potential outcomes after the next election,” she said.

--With assistance from Josh Wingrove.

©2024 Bloomberg L.P.

 

Trudeau unveils $2.4 billion package for Canada’s AI sector

Mathieu Dion, Bloomberg News

Canada is launching a fund to boost its artificial intelligence sector and creating a new AI safety institute as Prime Minister Justin Trudeau continues to roll out spending announcements in advance of a new budget. 

The government unveiled a $2.4 billion package of measures related to artificial intelligence on Sunday. The centerpiece is $2 billion for “computing capabilities and technological infrastructure” that can accelerate the work of AI researchers, startups and other firms, according to a statement. 

Other money will be allocated to speed the adoption of AI in sectors such as agriculture and health care, the statement said. The funds “will help harness the full potential of AI so Canadians, and especially young Canadians, can get good-paying jobs while raising our productivity, and growing our economy,” Trudeau said.

Benjamin Bergen, head of the Council of Canadian Innovators, said his group was looking for more clarity on how companies will be able to gain access to the computing power and infrastructure the government plans to make available. “If this gives Canadian companies the resources to compete globally, today’s announcement is a step in the right direction,” he said.

The prime minister made the announcement in Montreal, one of a number of AI hubs that has emerged in Canada. Quebec’s largest city has developed expertise in fundamental research, partly because of the presence of renowned AI researcher Yoshua Bengio. Last year, he joined Elon Musk and Apple Co-Founder Steve Wozniak in signing a letter calling on developers to hit the pause button on training powerful AI models.

Bengio said during the Montreal event that many researchers “are very worried about the trajectory that AI is taking.” He hailed the proposed Canadian AI Safety Institute, which the government announced with a $50 million budget. “Canada places itself on the right side of history with this announcement.”

Canada has yet to adopt a law to regulate AI. The Artificial Intelligence and Data Act was introduced in 2022, but it’s still under consideration by members of parliament.

Over 140,000 people were known to be active AI professionals in Canada, as of last year, according to the government. In 2022, almost 30 per cent of all venture capital activity in Canada, or about $8.6 billion, was related to AI.

Industry Minister Francois-Philippe Champagne told Bloomberg News in March that it will soon be mandatory for the government to be given advance notice when non-Canadian firms plan to invest in key technology sectors such as AI and quantum computing. The notice would give the government time to consider the national security impacts of the investment — a measure that’s seen as aimed at controlling the flow of Chinese money into Canadian entities. 

Finance Minister Chrystia Freeland is due to release her budget plan for fiscal 2024-25 on April 16, but the government has held a series of events to release parts of it. 

 

Latest milestones move Cedar LNG closer to getting a green light

The proposed US$3.4-billion Cedar LNG facility is looking more likely to become a reality in the wake of recent positive statements by the project partners.

RBC Capital Markets said Friday it expects Pembina Pipeline Corp. and its partner, the Haisla Nation of B.C., to green light the project with a final investment decision soon.

"We expect a positive final investment decision for the Cedar LNG project will occur assuming there is no deterioration in the project finance market," RBC analyst Robert Kwan wrote in a note to clients.

"Pembina has made progress on a number of key items."

Cedar LNG is a proposed floating liquefied natural gas facility that pipeline company Pembina is planning to build with the Haisla in Kitimat, B.C.

The facility, which would produce LNG for export to Asian markets, would be owned by the Haisla, making it the largest Indigenous-owned infrastructure project in the country.

Pembina announced Thursday that it has signed a long-term natural gas supply agreement for the facility with ARC Resources Ltd., a Calgary-headquartered company that has natural gas drilling operations in the Montney region of northeast B.C. and northwest Alberta.

Under the terms of the agreement, ARC will deliver approximately 200 million cubic feet per day of natural gas for liquefaction to the facility, for a term of 20 years commencing with the start of commercial operations, which are anticipated in the second half of 2028.

Pembina also said Thursday it has issued a formal "notice to proceed" to its contractors for the engineering, procurement and construction of the LNG production unit.

Cedar LNG has already obtained all major regulatory approvals and is advancing an agreement that would connect the floating facility to Coastal GasLink, the TC Energy-owned pipeline that will also carry natural gas to the Shell-led LNG Canada facility.

Construction of LNG Canada near Kitimat nearing completion and it is expected to be the country's first liquefied natural gas export terminal.

Another smaller LNG facility, Woodfibre LNG, has also received regulatory approval for construction near Squamish, B.C.

Pembina said Thursday it expects to make its final investment decision on Cedar LNG by the middle of this year.

The company had previously said a decision could be made before the end of the first quarter, with onshore construction work starting as soon as the second quarter of this year. But it later deferred its decision, saying ongoing negotiations for natural gas supply, as well as the obtaining of certain third-party agreements and project financing, must first be resolved.

Proponents of a Canadian LNG industry say liquefied natural gas from Canada could help reduce global greenhouse gas emissions by replacing coal in countries that still rely on the dirtier fuel.

But environmentalists argue that LNG creates its own emissions through the liquefaction and transportation process, as well as through the drilling and flaring of natural gas in Western Canada.

They argue that building massive LNG terminals that require huge upfront capital investments "locks in" future greenhouse gas emissions at a time when the world needs to be planning for a lower-carbon future.

The capital cost of Cedar LNG was originally estimated at US$2.4 billion, but Pembina said Thursday it now estimates capital costs at US$3.4 billion.

This report by The Canadian Press was first published April 5, 2024.