The Canadian energy sector just got yet another vote of confidence from the world’s most famous investor. Last August, Warren Buffett’s Berkshire Hathaway Inc (NYSE: BRK-B) disclosed that it held nearly 17.8 million shares of Canadian energy giant Suncor Energy Inc’s (NYSE: SU, TSX: SU) stock, a position which was then valued at roughly USD500 million.

Berkshire subsequently pared its holdings in Suncor by about 5 million shares during the fourth quarter, as the stock ascended to a two-year high. Buffett still holds 13 million shares of Suncor, worth about USD543.7 million, making it the 47^th largest position in Berkshire’s portfolio of 70 securities.

More recently, in early May, Berkshire announced it would be acquiring Calgary-based electricity transmission company AltaLink for an estimated CAD3.2 billion from the Canadian engineering firm SNC-Lavalin Group Inc (TSX: SNC, OTC: SNCAF). The deal fetched a premium far beyond what most observers had anticipated, and it’s expected to close by the end of the year.

Clearly, Buffett continues to see value in Canada’s energy patch. And that makes sense, since the stocks in the country’s energy sector have lagged their peers in their neighbor to the south.

Although the S&P/TSX Capped Energy Index (SPTSEN) is up 23.1 percent year to date on a price basis and in local currency terms, well ahead of the S&P 500 Energy Index’s (S5ENRS) 9.1 percent gain, the story is quite different over the trailing three-year period. During that time, the S5ENRS nearly quadrupled the performance of the SPTSEN, with a gain of 32.6 percent versus 8.5 percent (both performances are reported in their respective local currencies).

And the decline in the exchange rate has helped make Canadian assets even more of a bargain. The Canadian dollar currently trades near USD0.921, down about 13.2 percent from this cycle’s high in mid-2011.

Berkshire’s aforementioned moves could be just the beginning of its involvement in Canada’s energy sector. Speaking before the Edison Electric Institute’s annual convention earlier this week, Buffett observed that Berkshire had already poured billions of dollars in retained earnings and several billion more in equity into investments in North American energy. According to Bloomberg News, he then declared, “And we’re going to keep doing that as far as the eye can see.”

One of Berkshire’s biggest initiatives is in the realm of renewable energy, enticed in part by US tax incentives for such projects. Berkshire has already committed USD15 billion to such projects and could be poised to invest another USD15 billion. Buffett also plans to make investments in oil and gas reserves and pipelines.

One of the reasons the Canadian energy sector could benefit from Berkshire’s opportunistic deployment of capital is because Buffett believes the US shouldn’t shun friendly trading partners, particularly when energy is ultimately a finite resource and the alternative is dealing with mostly despotic regimes overseas.

Indeed, Buffett supports the approval of TransCanada Corp’s (NYSE: TRP, TSX: TRP) Keystone XL pipeline, which would transport Canadian unconventional crude to Gulf Coast refineries.

“I’m very happy Canada has tremendous reserves,” he said, according to Natural Gas Intelligence. “I’d rather be in our hemisphere than in a hemisphere with an unfriendly government. I’m for the pipeline. I have no problem with that at all.”

However, he  also noted, “We’ve got problems with carbon and we have to address them … The idea that you would take a wonderful, friendly country that one way or another is going to sell the oil it develops and in effect, snub them, I don’t think it makes any sense.”

Of course, Berkshire’s holding in Suncor is dwarfed by its USD4.2 billion position in Exxon Mobil Corp (NYSE: XOM). But that could always change.

And Buffett’s foray into Canada may not occur in the form of equity investments, but rather in outright purchases of whole companies or major operating assets. After all, Berkshire’s sheer size means that the equity investments that helped build the company into what it is today are no longer enough to move the needle.

An Energy Industry First

Late last year, a subscriber asked about an article published by Bloomberg that detailed the massive buildup of tailings ponds resulting from oil sands mining. He was concerned about not just the possibility of an environmental hazard, but also the potential liability tailings could pose to the companies whose operations created them.

After all, this is hardly a small problem: The Alberta Environment and Sustainable Resource Development reports that tailings ponds span more than 176 square kilometers, an area the size of the city of Vancouver.

Fortunately, the industry has already been working toward reducing such waste, as well as addressing other environmental challenges. In early 2012, a dozen oil sands producers came together to form Canada’s Oil Sands Innovation Alliance (COSIA). The group is focused on four Environmental Priority Areas: tailings, water, land and greenhouse gases.

Member companies are working together to accelerate improvement in environmental performance in Canada’s oil sands through innovative technologies and practices. To date, the organization’s 13 members have shared 560 distinct technologies and innovations that cost over CAD900 million to develop.

And oil sands giant Suncor has just reported its latest innovation. In an industry first, the company plans to recycle tailings water to feed nearby operations in Northern Alberta, which will save about 1,500 cubic meters of water per day from being stored in its tailings ponds.

According to the Financial Post, the process, which was originally conceived about five years ago via a precursor to COSIA, entails pumping the sludgy water, treating it and then transporting it via pipeline to its Firebag facility. Building the pumping technology and retrofitting the pipeline will cost the company about CAD5million, with testing raising the bill to CAD8 million.

Part of the cost was shared among COSIA members, since Suncor decided not to obtain a patent in order to allow other oil sands companies to adopt the new practice.

Suncor will also commence operating a wastewater treatment plant this quarter, which is expected to reduce its freshwater usage by 65 percent from 2007 levels. Ultimately, the company plans to maximize reuse and recycling, while treating the water to restore it to safe levels and return it to the watershed.