Canada has millions of oil and gas investors.
They just don't know how their dollars are working for them.
They’re passive investors, in a sense.
As a result, they have no real clear line of sight into how their investments are performing in their “life portfolios” — you know, keeping things like health care and tuition payments and roads and culture costs in check. And in Alberta’s case, keeping sales taxes at bay.
Indeed, these investors are actually resource owners too — in that for the most part they “own” the molecules beneath their feet.
Their portfolio manager: “Crown” investments. In other words, various provincial governments which act on taxpayers' behalf to extract payments from the oil and gas companies that are interested in making a profit by making investments in someone else’s (read: our) assets.
Unless you happen to be a freeholder, and own the mineral rights beneath your feet as a result of historical circumstance, you own Canada’s resource wealth along with your fellow citizens. Across the 49th parallel to the south, that’s not the case — and it’s one of the major distinctions between the two resource economies.
So why are Canadians not acting like investors? In part, it’s because they have abdicated that responsibility to governments. That in turn obscures the fact that, for example, Suncor Energy as a corporate entity does not “own” a single petroleum molecule, save for any freeholdings. All it owns is the temporary right to extract wealth from those molecules for the considerations it pays Canadians through government spending. Rent, in effect.
Canadians know, of course, that the quality of life we enjoy comes from a robust resources sector. Most make that connection. Where they may not really connect the dots is between themselves and their direct ownership role. Most people believe that in some way, oil and gas companies own outright those mineral rights and pay their freight via corporate taxes and the like. Go ahead, test this thesis with your friends and family outside the sector. In fact, most of our sector communication at least implicitly reinforces the notion, without effectively teasing out the ownership nuance.
Here’s why it’s now more important than ever for Canadians to understand their ownership accountabilities and responsibilities.
Capital and investment make the world go round. Capital flowing into the oil and gas sector helps those molecules we all own create wealth for us.
Here’s our current conundrum: Canada is struggling to attract capital to its petroleum sector; capital that is critical to the industry’s future. Investors are increasingly wary for a variety of reasons. Significant among those reasons is an increasing sense that Canada as a jurisdiction doesn’t want petroleum investment. This has much to do with the perception that our politicians federally and provincially are anti-oil — that we’re on the edge of an abyss when it comes to petroleum. Anti-petroleum politicians have been reasonably adept at implying Canadians are behind their thinking, so much so that energy companies are increasingly challenged to find investor dollars.
Would you toss your capital into the unknown? That is what Canada has become: a place where no investor can find sufficient certainty to consider investment. Capital is going to other places where it can make a reasonable return without having to run obstacle courses of regulatory uncertainty, political duplicity and public apathy.
But what if global and domestic institutional investors, banks and private equity firms et al had a clear sense that ordinary Canadians, as resource owners and investors, think it is important to keep capital flowing into the sector — that Canadians understand those dollars return yields to both investors and Canadian society more generally.
Talk to your friends and family. Help them brush up on their understanding of who actually “owns” Canada’s resource wealth and why we understand it’s important the dollars necessary to make our collective molecules work for us need to keep flowing.
It’s time millions of investors rose up to send that “certainty signal.”