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Providing coverage of Alaska and northern Canada's oil and gas industry
May 2020

Vol. 25, No.19 Week of May 17, 2020

Canada dangles relief

Unveils bare bones program to provide loans for ailing large companies in O&G

Gary Park

for Petroleum News

It was one of those landmark comments by a politician - in this case Canada’s Finance Minister Bill Morneau - that will be tough to shake off.

On March 25 he told reporters that help for the oil and gas industry, which accounts for 10% of Canadian gross domestic product and is the largest source of export revenues, before it was crippled by the fallout from COVID-19, was only “hours, possibly days” away.

On May 11 - 47 days later - Morneau and Prime Minister Justin Trudeau rolled out a financial assistance plan for Canada’s big corporations, including the surviving oil and natural gas companies that, despite the time taken to cobble it together, is mostly a skeleton plan.

As with all of his pandemic-driven rescue plans, Trudeau admits it will take “days” to assemble the details for what government officials insist is a backstop, not a bailout.

Large Employer Emergency Financing Facility

Called the Large Employer Emergency Financing Facility, LEEFF, the program will provide short-term financing to Canada’s largest employers - most of them in the energy, airline and tourism sectors - who are unable to secure loans from banks or other private lenders. To qualify, companies will have to show annual revenues of at least C$300 million and demonstrate a need for financing of at least C$60 million.

Trudeau said the federal money, which will come from the government’s practically unlimited ability to borrow at low rates, will go only to those who place limits on shareholder dividends, share buybacks and executive pay, as well as demonstrating they are setting zero limits on greenhouse gas emissions by 2050.

Trudeau said the financing will be off limits to any company that has been convicted of tax evasion, while the government will review corporate records for any signs of “tax avoidance.”

Response mixed

The Canadian Association of Petroleum Producers and the Alberta government welcomed the sign of support from the government but said it would have been more helpful if the assistance has been available a month ago.

A spokeswoman for Cenovus Energy, one of the largest oil sands producers, said her company wants more specifics before it can determine the benefits of LEEFF.

She also said that if low crude prices extend over a long period it will be important for the Trudeau administration to continue offering liquidity support for companies that employ tens of thousands of Canadians.

Kevin Krausert, president of Calgary-based Beaver Drilling, which is a key player in exploring the prospect of thermal energy development, said the next step in federal aid “needs to be stimulus funds for energy diversification ... where’s the capital for us to kick-start that program.”

Divisions within cabinet

Sources within government indicated the delay in rolling out LEEFF stemmed mostly from sharp divisions within cabinet, with one faction adamantly ruled out to any efforts to protect big players in the fossil-fuel industry.

The level of that opposition outside of government circles was apparent on May 6 when Green Party leader Elizabeth May and Bloc Quebecois, BQ, leader Yves-Francois Blanchet declared the oil industry to be “dead” and insisted help should only be offered to help Alberta petroleum industry workers to “transition” to renewable sources of energy.

Blanchet, ignoring the fact that his own province of Quebec imports 160,000 barrels per day of crude, said the oil sands have been “condemned ... oil is never coming back. Putting money into that business is a very bad idea.”

His BQ has an overriding objective to advance Quebec nationalism and promote Quebec separation from the Canadian confederation.

The BQ and/or the Greens have sufficient votes in the House of Commons to keep the Trudeau Liberals in power.

May said the COVID-19 pandemic “in a very real way, as horrific as this is at many, many levels, gives us an opportunity to stop and think about how we get this economy back on its feet.”

Trudeau only mildly disagreed with the “oil is dead” claim, but Alberta Premier Jason Kenney said Blanchet is “obsessed with attacking the people of Alberta” for generating tens of billions of dollars in equalization payments from federal taxes that have helped Quebec pay for education, health care and social services.






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