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Canada’s whipping boys
Alberta, Saskatchewan, major drivers of national economy, get nothing from Trudeau government’s plans to fund social programs
Gary Park for Petroleum News
Canada’s petroleum industry provided 830,000 direct and related jobs in 2019 and contributed C$68 billion to the national trade balance compared with a C$22 billion loss for the once-powerful auto sector.
David Dodge, a former governor of the Bank of Canada (the equivalent of the U.S. Federal Reserve), said that without the net trading surplus “we would lack the revenue necessary (to eliminate carbon emissions from) energy production and develop replacement exports.”
He noted that Canada’s brand has become tarnished over recent years. “In the face of regulatory uncertainties, we are no longer seen as a great place to invest,” he said.
“Even Canadian businesses are increasingly looking beyond their own borders. By the end of 2019, Canadian direct investment assets abroad outweighed foreign direct investment into Canada by C$804 billion, almost all of that built up since 2012.”
Massive industry job losses Against such a backdrop - accompanied by the loss of an estimated 23,000 energy jobs in the second quarter alone, adding to the 160,000 Alberta has accumulated since 2014 - industry leaders were hoping the Canadian government might acknowledge the damage done to the oil and gas core in Alberta and Saskatchewan and attempt to at least slow the decline.
Prime Minister Justin Trudeau’s chance to display a change of heart occurred when his administration laid out its priorities for the coming year and its plan for softening the projected deficit of C$343 billion for the 2020-21 fiscal year.
Instead, in a 17-page speech laying out the federal priorities the word “energy” surfaced only seven times, while “oil, natural gas, oil sands and pipelines” received no mention.
The industry was left feeling it has only one use for the Trudeau government ... a means for action on climate change and transition to “cleaner” energy.
“Canada cannot reach net zero (carbon emissions) without the know-how of the energy sector and the innovative ideas of all Canadians, including people in places like British Columbia, Alberta, Saskatchewan and Newfoundland,” the speech said.
“The government will support manufacturing, natural resource and energy sectors as they work to transform to meet a net-zero future (no later than 2050),” the government said.
Kenney lashes out Alberta Premier Jason Kenney, after a long quiet period, lashed out at Trudeau for “doubling down on policies that will kill jobs, make Canada poorer and weaken national unity. Not one word recognized the crisis facing Canada’s largest industry (the energy sector).”
Kenney said the Trudeau administration, without the once massive flow of energy money, has no hope of meeting its spending promises on a wide range of programs, including federally funded national pharmacy care he estimated will cost “hundreds of billions of dollars,” and a plan to create one million (undefined) jobs.
Saskatchewan Premier Scott Moe said he could only conclude that Trudeau is planning to pull out of oil and gas at a time when the industry is “one of the most sustainable in the world,” while ignoring commitments by leading producers such as Cenovus Energy, MEG Energy and Canadian Natural Resources to achieve net-zero carbon emissions.
About 10% of GDP Production of Canada’s energy resources accounts for about 10% of the national gross domestic product at a time when employment is shrinking.
Statistics Canada, a federal agency, reported in late September that the natural resources sector had its largest employment decline on record of 7.3% in the second quarter, while the industry’s contribution to GDP fell by 9.5%.
A recent report by Calgary-based ARC Energy Institute estimated that reinvestment in oil and gas will slump to C$9.5 billion this year from C$25.3 billion in 2019.
The Canadian Association of Petroleum Producers has urged the federal government to offer accelerated depreciation of capital facilities to the sector, including the introduction of 100% immediate deductibility for oil and natural gas capital investments.
Provinces not aligned In the House of Commons, neither Alberta (with 34 Opposition Members of Parliament), nor Saskatchewan (with 14 Opposition MPs), is seen as aligned with Trudeau’s Liberals. Of its seven MPs, Newfoundland has six Liberals.
It is not seen as a coincidence that Alberta and Saskatchewan received no reassurances, let alone financial aid, from Trudeau, but Newfoundland landed C$320 million, with no strings attached, for its struggling offshore industry.
Natural Resources Minister Seamus O’Regan, who is an MP for a Newfoundland constituency, said the money will “support jobs and ensure the sustainable, long-term, lower-carbon emitting future of our offshore.”
He expects it will be allocated to safety improvements, maintenance and upgrades of existing offshore infrastructure, environmental services and clean technology.
That could fall short of lobbying efforts by offshore players and industry associations for the federal government to acquire equity stakes in major projects and offer tax credits and investment incentives.
Newfoundland Premier Andrew Furey has named a task force to decide how his province’s federal windfall should be distributed.
He also announced a new incentive for offshore exploration that will give oil companies the chance of collecting a rebate for exploration costs that would normally go into provincial coffers.
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