Dimitry Anastakis is a Professor at the Rotman School and the Department of History and the L.R. Wilson/R.J. Currie Chair in Canadian Business History. [This interview has been edited for conciseness and clarity.]
Timothy M. Egan: In the last few months, I have met with 18 European ambassadors, and the overwhelmingly message has been ‘we need more of your natural gas’. While on one hand we have the demand from many that we control GHG emissions – emissions that will, on Canada’s ledger at least, rise if Canada produces more LNG, on the other hand, we have a unique opportunity to help the world drive down global emissions and help our allies’ energy security. What is your perspective on a sector like ours in the present moment, given your historical perspective on how companies and sectors adapt?
Professor Dimitry Anastakis: For the last 150 years, natural gas has been seen as a solution to a lot of problems. And it has been, for a lot of people, a very good solution. We now know, however, that while natural gas is probably the best performer amongst fossil fuels, there are negative externalities. This is challenging, but as with a lot of other industries and firms, there is a potential here in terms of avoiding some of the outcomes.
There is a path dependency that goes into how an industry or a sector is going to evolve based on the circumstances that they face. We are very dependent on natural gas. However, path dependency makes it difficult to get off the path. An example of a good kind of a shift around path dependency is Thomson Reuters. They have gone from a newsprint business – effectively a newspaper – and a radio to now being a digitized firm. This is a sectoral and a firm shift that shows not only nimbleness, but also a recognition of the long-term underlying path dependency still being met. We need energy, and the natural gas industry provides us with a very strong option. But the industry may need to shift its path dependency – as Thomson did. People still need information, and they still need energy. The particulars around it, however, can change. So, what is the path dependency shift for natural gas? and how do you make it in a way that does not disrupt Canadians, does not disrupt a secure energy source and is the long-term benefits it delivers?
It is going to be a long-term project, in my view, for the sector. It is something that is not going to happen today or tomorrow. Thirty-eight per cent of Canadians energy needs are met by natural gas. It cannot be changed overnight. It is going to be a decades long project. It is going to require visionary leadership. I know there are concerns with a lot of people knocking at the door saying, we must end this. And I am sorry, but that is not realistic given the circumstances that we face.
“Thirty-eight per cent of Canadians energy needs are met by natural gas.”
Timothy M. Egan: There are as you note those who want to toss the sector wholesale. How threatening are they to our path? Should the industry consider this an existential threat?
Professor Dimitry Anastakis: The threats are about growth in the future as I understand it, more than about current operations. So this is about a narrowing of the footprint over time. It is a terrible thing for a business to lose its opportunities for growth and especially being regulated that way. So, it makes for a challenging landscape. It puts the industry in a difficult place. One real difference between what happened for Thomson Reuters and what is happening with natural gas industry is that there wasn’t a regulatory environment in which people started saying you are not going to use newsprint anymore. It was completely within the context of innovation that was technologically driven. The emphasis on technology as being a kind of factor in a lot of these dynamics is centrally important.
The natural gas industry is advancing in terms of a lot of the technological change around lowering emissions, green gas, and the kinds of other things that can be done to address the substantive criticisms about your environmental footprint that seem to be at the root of criticisms here. But it becomes a political issue in the sense that you have to convince governments to allow new growth. You need to convince them that not allowing this growth will have profound broader societal impacts. If you don’t, you are seriously threatened.
Timothy M. Egan: One of the arguments to make is that more and more state-owned enterprises, nationally owned oil and gas companies, probably from nefarious regimes, will gain more market share here as the sector shrinks in Canada. This is happening as we speak. When Canadian companies do not produce oil and gas, which they do to extraordinarily high environmental standards, with incredibly transparent governance requirements because of the open markets we operate in, under the rule of law, with significant community engagement, somebody else will. The demand for energy globally will remain, whether we produce it. So the point becomes, shouldn’t we be getting ours out there, before many others do? . What are your thoughts on this?
Professor Dimitry Anastakis: There are a lot of nefarious regimes out there that are not going to have any problems in continuing to do what they do, whereas Canadians are expected to do better. And that gets us back to that age old question about how you deal with global emissions If China does not do anything, what is the point of us doing anything, right? I disagree with that because somebody has got to start somewhere. But it is the demand side of things at some point that are going to need to be addressed. And I don’t know how that kind of fits within the context of your industry in the sense that you are already meeting a demand. But the state regulatory and public sentiment shift away from that.
Natural gas is seen as relatively cleaner, relatively safer, and relatively more secure. So, even that I am sure is no real consolation as you are still facing a regulatory regime, which seems to be inhospitable. It is a political thing that really does invade the ground realities of delivery, infrastructure, dependability, etc.
It seems decision-makers are attempting to do a paradigm shift. Whether it is going to work or not, the jury is still very much out on that. There has to be a transition there. You may disagree with me entirely on this, but I see natural gas as part of the transition, like a hybrid car where you are trying to move from the impacts of one technology to another. I don’t know how long that transition might be. I don’t know what the consequences are for your industry to be in a mentality of, say, we are a bridge towards a future. Natural gas may very well be part of our energy mix going forward for the next couple of hundred years, especially if the methane issue can be minimized.