The Fraser Institute

The Fraser Institute

June 27, 2011 06:32 ET

The Fraser Institute: Quebec Seen as Worst Canadian Province for Investing in Petroleum Exploration and Development

MONTREAL, QUEBEC--(Marketwire - June 27, 2011) - Quebec is viewed as one of the worst locations in Canada for investing in oil and natural gas exploration and development, according to the Global Petroleum Survey 2011, released today by the Fraser Institute, Canada's leading public policy think-tank.

Among Canadian provinces and territories, Quebec was ranked ahead of only the Northwest Territories. Globally, the province ranked 92nd out of 136 jurisdictions, with a score similar to Tanzania, China, Egypt, and some of the Argentine provinces. In the 2010 survey, Quebec ranked 77th out of 133 jurisdictions.

"The controversy over shale-gas development in Quebec is undoubtedly creating a negative impression for the province among global petroleum companies," said Gerry Angevine, Fraser Institute senior economist in the Global Resource Centre and co-author of the Global Petroleum Survey 2011.

"The drop in Quebec's score this year is also reflected in much lower rankings for its regulatory climate where uncertainty and regulatory duplication are seen as problems, and labour regulations, which are viewed as too restrictive."

The survey also found that the industry has concerns about the Quebec government's interpretation of regulations in general, environmental regulations, regulatory compliance, fiscal terms such as royalty payments, and uncertainties about protected areas.

Comments from survey respondents regarding the situation in Quebec refer to "overzealous environmentalists" spreading false and inaccurate information about shale gas development that has stirred up public resentment, with hysteria, half-truths, and sensationalist videos appearing to replace sound environmental science. As a result, the shale gas industry has become a scapegoat for politicians of all stripes.

"Explorers and producers do not mind paying taxes and complying with sensible regulations, but they are alarmed when they face uncertainty. And that's the problem facing shale gas development in Quebec. The industry had no idea what was coming. They have been exploring and making plans for several years with the government's approval, only to now find they are stonewalled," Angevine said.

Saskatchewan was the top Canadian province, ranking 11th overall, followed by Manitoba (12th overall) and Ontario (25th overall). The three highest ranked jurisdictions were Mississippi, Ohio, and Kansas.

The Global Petroleum Survey2011 is designed to help measure and rank the investment climate of oil- and gas-producing regions around the world.

A total of 502 respondents completed the survey questionnaire this year, providing sufficient data to evaluate 136 jurisdictions. The exploration and development budgets of participating companies totaled about $300 billion in 2010, representing more than 60 per cent of global upstream expenditures last year.

The survey questionnaire sought the opinions of senior executives and managers on a range of issues including royalties and other forms of petroleum production tax, taxation in general, the cost of regulatory compliance, trade and labour regulations, legal system fairness and transparency, and political stability.

The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 80 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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