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Thanks … and no thanks
Mixed response to Canadian government’s ‘relief’ package for struggling industry
Gary Park for Petroleum News
Amid its stalling and waffling on the chances of increasing crude pipeline capacity out of Alberta, the Canadian government has angered as many as it has pleased by offering C$1.6 billion in “potential” funding to a struggling oil industry.
Natural Resources Minister Amarjeet Sohi and International Trade Diversification Minister Jim Carr said companies will be eligible for C$1.5 billion in commercial financing, C$100 million from a strategic innovation fund and C$50 million from a federal clean-growth program.
Sohi said the loans will help companies improve their cash flow and weather the current market uncertainty while the National Energy Board conducts a fresh review of plans to triple capacity of the existing 300,000 barrels per day Trans Mountain pipeline system, which the government of Prime Minister Justin Trudeau purchased for C$4.5 billion earlier this year.
“We understand that for the long-term success and growth of the oil sector, nothing is more important than building pipeline capacity,” he said.
Tristan Goodman, president of the Explorers and Producers Association of Canada, whose member companies produce up to 10,000 bpd, said he was “very pleased that the federal government is at least paying attention (to the industry’s plight) in some substantive way.”
Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors, shared that view, saying the available money will go “a long way towards indicating the federal government does understand the importance of our industry.”
Both said it is possible the funding may even prevent some layoffs, heading into the prime winter drilling season.
No moves to amend bill But the Trudeau government made no moves to amend Bill C-69, which the industry has warned will cripple the regulatory process, making it so onerous that no new pipeline will ever get built in Canada.
Goodman said the legislation is “actually starting to tug at the key threads” of Canadian unity, referring to demonstrations across Alberta and the most serious campaigning in 40 years for Alberta to quit the Canadian federation.
Sohi acknowledged the “opposition and concerns” to C-69, which he promised will be dealt with.
“But first we need to fix a broken (regulatory) system we have now so that we can make sure we are able to build pipeline capacity.”
Alberta Premier Rachel Notley rejected the aid package as woefully inadequate and warned the proposed overhaul of environmental approvals in Bill C-69 would be a serious blow to new pipelines.
She said her government has been “engaging with the federal government for well over a year now, in great detail, about what needs to be changed.”
Notley said companies have no reason to take up the federal funding offer and add to their debt burdens.
Bribery attempt? Many industry leaders and analysts have rated the federal strategy as an attempt to bribe Albertans with their own money, noting that in 2017 Alberta paid C$50.3 billion in federal taxes and received C$28.5 billion back in federal spending.
That left C$21.8 billion of Alberta tax revenues to be allocated among other provinces, of which Quebec (with a current budget surplus of C$3 billion, compared to Alberta’s deficit of almost C$10 billion) collected C$13 billion, while its Premier Francois Legault scorned Alberta oil sands crude as “dirty” oil.
Notley was also infuriated that the Trudeau administration again sidestepped Alberta’s plea for federal help in buying new locomotives and tanker cars to increase crude shipments out of the province by 120,000 bpd.
She said any future pipelines will likely depend on federal financing because the uncertainty has probably put an end to private sector investment.
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