Thanks largely to high commodity prices, Alberta is poised to be one of fastest-growing provincial economies in Canada. But for Alberta—and Canada—to reap the full benefits of this price surge, policymakers must make Alberta a more attractive place to invest.

Indeed, in recent years, due to opposition from Ottawa and other governments, the energy sector has struggled to complete projects and reach markets overseas. As a result, capital investment in Alberta’s oil and gas sector plummeted from $58.1 billion (in 2014) to $21.5 billion in 2022. Not surprisingly, according to the Fraser Institute’s latest annual survey of oil and gas executives, Alberta has dimmed in the eyes of investors.

To illustrate this trend, consider the difference between Alberta and Texas, two large jurisdictions with large oil and gas sectors. The survey ranks jurisdictions on policy-related investment barriers; the higher the score, the lower the barriers. In 2022, Texas ranked 2nd with an overall policy score of 91 (out of 100) while Alberta ranked 12th with a score of 51.

Why do investors view Texas as a more favourable place to invest in oil and gas?

According to the survey, Texas’s regulatory environment offers greater certainty and predictability compared to Alberta. Investors are particularly wary of environmental regulations in Alberta with 81 per cent of survey respondents indicating that “stability, consistency and timeliness of environmental regulatory process” scared away investment compared to only 13 per cent in Texas.

In addition, almost three-quarters (73 per cent) of respondents indicated that the cost of regulatory compliance was a deterrent to investment in Alberta compared to just 17 per cent for Texas. And 69 per cent of respondents said uncertainty regarding the enforcement of existing regulations was a deterrent to investment in Alberta compared to 18 per cent for Texas.

All told, Texas was much more attractive to investors than Alberta in 15 of the 16 policy factors including taxation, fiscal terms (licences, lease payments, royalties and other production taxes), trade barriers and more.

To make matters worse, this sentiment goes beyond Alberta. Among all Canadian provinces and U.S. states, no province made the top five most attractive jurisdictions and only one province made the top 10 (Saskatchewan ranked 6th). Clearly, the cost of regulatory compliance and uncertainty around environmental regulations are hurting Canada’s investment attractiveness.

Again, policies have produced the current investment climate. For example, the Trudeau government enacted Bill C-69, which imposes complex, uncertain and onerous review requirements on major energy projects. Similarly, Ottawa’s plan to impose a hard cap on greenhouse emissions from the oil and gas industry has increased uncertainty for investors.

Alberta has the opportunity to once again drive economic growth in Canada. However, the regulatory environment is hampering investment in the energy sector. To turn this around, governments in Edmonton and Ottawa must address glaring policy barriers to investment, for the benefit of Albertans and Canadians from coast to coast.