Providing coverage of Alaska and northern Canada's oil and gas industry
June 2019

Vol. 24, No.26 Week of June 30, 2019

Attacking Canada’s unity

Trudeau government passes bills seen by critics as slamming door on investment

Gary Park

for Petroleum News

Anger has spilled across the Canadian Prairies and through the corridors of the country’s petroleum industry since the Liberal government of Prime Minister Justin Trudeau wrapped up a parliamentary session on June 21 by passing two pieces of legislation described by many as undermining the national fabric.

Bill C-48, which bars oil tankers from loading diluted bitumen and conventional crude at northern British Columbia ports, and Bill C-48, dubbed the “No More Pipelines Bill” by Alberta Premier Jason Kenney, cleared their final legislative hurdles in the Senate, despite claims by the governments of Alberta and Saskatchewan that they will repel investors from the oil and gas sector and slam the door on any new pipelines.

They have been welcomed by federal Finance Minister Catherine McKenna as the tools to achieve her goal of ultimately shutting down the Alberta oil sands and condemning the energy industry as it now exists to extinction within 12 years.

They have also generated a growing swell of demands for referendums to test the mood in Alberta and Saskatchewan for the separation of those two provinces from the rest of Canada.

Bill C-88

Amid all the sound and fury of the Senate debate the Trudeau government also quietly slipped through a third bill that bolstered a ban on offshore oil drilling in the Canadian Arctic, shelving any thoughts of future oil and gas development in the region.

The virtually ignored Bill C-88 includes changes to the Canadian Petroleum Resources Act to enshrine in legislation a moratorium on exploration in northern waters.

Since late 2016 the Trudeau administration has enforced a moratorium on offshore drilling across all Arctic waters through regulation by rejecting any new bids for licenses or exploration permits.

Indigenous Relations Minister Carolyn Bennett said Trudeau implemented the ban as part of a broader belief that the risk of a spill in the sensitive waters was too great.

Some global majors such as ExxonMobil (in partnership with its subsidiary Imperial Oil) and Shell have pondered drilling programs in the Canadian Arctic but have held back because of past regulatory delays.

Independence favored

Mark Scholz, chief executive officer of the Canadian Association of Oilwell Drilling Contractors, said recent surveys show about 60% of people in Alberta and Saskatchewan feel they would be better off as independent states because of the new measures.

He noted that Trudeau insists his government “knows best,” regardless of a warning from six of 10 provincial premiers alerting the prime minister to a “looming national unity crisis.”

“I hope he will reconsider and listen to what Canadians are trying to tell him; the very future of our country depends on it.”

Bill C-48 narrowly escaped defeat by Senate vote of 49-46, partly because the government accepted a Senate amendment that requires a mandatory review of the tanker ban in five years.

But the Senate refused to consider a proposal by the Canadian Association of Petroleum Products to create of a maritime “corridor” that would have allowed some tankers to dock in designated areas.

ANS shipments not affected

Although it designates a wide swath of ocean from the northern tip of Vancouver Island to Alaska, Bill C-48 will not interfere with the tanker shipment of about 37 million metric tons of crude a year from Alaska to the Lower 48. Those deliveries will be free to continue on their existing routes under international law.

The refusal by senators to vote down the legislation in its entirety prompted Conservative members to accuse Independent senators who make up a majority of the upper house of being Liberals in disguise.

Conservative Sen. Michael MacDonald made a last-minute plea to sway the vote, saying Bill C-48 “will be devastating for the landlocked oil and gas resources of Alberta and Saskatchewan.”

Liberal Sen. Donna Dasko reflected the sentiment in her ranks by arguing the legislation “is quite a good bill.”

Scientific study lacking

A University of Calgary economist Jack Mintz said Bill C-48 was passed “without a scientific study supporting the ban. So much for ‘evidence-based policy.’ The senators supporting the bill should be ashamed of themselves.”

He said the adoption of Bills C-48 and C-69 is an indication that the petroleum industry is “being throttled.”

Mintz said that even if the Trans Mountain Expansion is built it would take only one nail out of the coffin, “but Bill C-69 adds a row of them - lost jobs and Gross Domestic Product.”

Doug Black, a Conservative Senator from Alberta, said Bill C-48 takes “direct aim” at the heart of his province’s oil sands sector, noting: “There are no other bans like this in Canada. I’m not even sure there are any other tanker bans for oil in the world.”

Resource Works Society, a non-partisan research group that is funded partly by the Business Council of British Columbia and individual donations, said that by refusing to allow oil to be loaded or transported from the British Columbia exclusion zone means the Trudeau government is “significantly limiting the possible routes for the export of Alberta hydrocarbons to new markets.”

It said the bill also “appears to limit future liquid fuel export potential from sources such as shale and LNG.”

The organization said that if the government “agrees that tankers can safely move through the Burrard Inlet, Vancouver harbor, the Salish Sea, the Jan de Fuca Strait and past the southern half of Vancouver Island (whose 750,000 residents depend for their oil supplies from barges sailing overnight from the British Columbia mainland) - about 100 miles of narrow water and archipelagos - then surely the same ships could manage the 10 miles out of Prince Rupert harbor to open waters.”

Regulatory overhaul

Bill C-69, which will overhaul regulatory reviews of major resource projects, was defended by McKenna as the basis for demonstrating “that Canada is the best place in the world to invest,” contrary to industry leaders who say the bill will scuttle any new pipeline or oil sands development applications. She said many amendments from the Senate were essentially written by oil industry lobbyists.

Trudeau has insisted the bill will protect the environment and the rights of Indigenous communities while limiting the number of interveners at regulatory hearings and setting the stage for a predictable review process.

The Senate passed that legislation in a 57-37 vote, after the government accepted 99 of more than 200 amendments submitted by Liberal and Independent senators, rejecting the bulk of changes endorsed by the Alberta government and the petroleum industry.

On Bill C-69, McKenna said she was “extremely proud” of the legislation, which “is going to be great for investor confidence in our country to know we have a system that works.”

“If you do not respect the rights of Indigenous peoples, if you do not protect the environment, if you do not listen to concerns, good projects simply will not go ahead,” she said.

She has attracted backing for Bill C-69 from the Mining Association of Canada and the Canadian Electricity Association, both of whom saw the changes as an improvement over the status quo.

In addition, an analysis by the independent research organization Canada West Foundation said most of the changes have established a clear and manageable process, increasing clarity, reducing political discretion, firming up timelines and relying on technical expertise.

At the other end of the spectrum, CAPP said the new regulations will likely “make an already complex system more complicated while ultimately raising uncertainty and the potential for litigation.”

The Canadian Energy Pipeline Association said prospects for major new pipelines are now “bleak.”

CEPA President Chris Bloomer said a “wide cross-section of other industries, Indigenous groups, elected officials and other Canadians shares our concerns. The government’s amendments (to the bill) do not go far enough to make it workable.”

Anger within Alberta

Anger within Alberta runs deep, especially involving equalization payments which redistribute federal taxes from economically strong provinces to those with weaker economies - a program that started in 1957.

Since 1964 Alberta has collected only 0.02% of those payments, while contributing almost C$140 billion over the six years from 2012 to 2017. The formula is supposed to be revisited every five years, but there is no indication that the Canadian government will follow that practice when a review is due in 2020.

Kenney said the passage of the two bills “not only undermines Canada’s economy, but also the Canadian federation. They have brought us closer to moving forward with a referendum on a constitutional amendment to eliminate equalization from the Canadian Constitution. If Albertans cannot develop our resources within the federation, then we should not be expected to pay the bill in the federation.”

Kenney said Alberta will file constitutional challenges in its Court of Appeal to the bills.

He said that if the Trudeau government banned tankers delivering crude to Atlantic Canada and Quebec it would shut down the Quebec economy.

“So why is Bill C-48 a ban on just Alberta exports?” Kenney asked.

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