The federal government’s efforts to placate the oil and gas sector and Alberta Premier Rachel Notley aren’t working. In fact, the divide between Albertans and the rest of the country may be growing, given the uproar caused by the lack of pipelines and now Bill C-69.
“We understand that when Alberta hurts, so does Canada,” said Natural Resources Minister Amarjeet Sohi at a press conference in Edmonton for announcing the $1.6 billion support package on Dec. 18.
The bailout, consisting mostly of non-forgivable loans at commercial rates, is effectively a mere stopgap measure for a sector reeling from an inability to get product to markets other than the United States.
Notley was not aware that the support package from the feds was coming, but was hoping for a lot more.
She called it “a bit of a cut and paste from previous support announcements” and assumed the $1.6 billion was the first step of many more to come.
“There had better be many steps,” she said at a news conference a couple of hours after the federal announcement.
Notley also criticized the bailout’s purpose, stressing that the issue is not expanding into new markets but simply getting the product to market—what she calls a “15-year slow-motion car crash.” She was also not in favour of going into debt as a long-term solution.
While the lack of pipelines is the elephant in the room, another big problem is onerous regulation and Bill C-69, which would make Alberta even less attractive to investment.
Bill C-69, which would radically change the process of environmental assessment for big infrastructure projects like pipelines, is now undergoing a second reading in the Senate.
A rally of over 1,500 pro-pipeline protestors in Grande Prairie, Alta., on Dec. 16 denounced the bill to revamp the National Energy Board (NEB), saying it would make it impossible to build new pipelines. A similar rally was held in Calgary on Dec. 17.
Martha Hall Findlay, president and CEO of the Canada West Foundation (CWF), said it would create even less trust from the investment community.
The former Liberal MP said Bill C-69 emphasizes social and environmental concerns much more than economic growth and competitiveness, in a podcast with the ARC Energy Research Institute on Dec. 14.
Additionally, regulatory bodies are supposed to be apolitical, but the proposed bill would ultimately make it the minister’s job to decide on project approvals, she said.
“An inordinate amount of discretion is left with the minister of the environment,” she added. “The irony is this is far more laden with political discretion than what we had before.”
Findlay doesn’t think the NEB process is broken and believes that introducing more uncertainty with a whole new process under new legislation would throw a wet blanket on new capital spending.
Bill C-69 would replace environmental legislation and give new agencies broader scope for review. A new “watered-down” Canadian Energy Regulator would replace the NEB, Findlay argues.
“Don’t kick the industry when it’s down,” she said.
Proponents of Bill C-69 want more Indigenous consultation and stronger environmental protections. CWF agrees the bill has some merit with larger impact assessments and that the NEB can be improved.
Sohi reaffirmed his support for Bill C-69, calling it “so fundamentally important.”
But the pendulum has tilted too far. In a Dec. 2 editorial in The Globe and Mail, Findlay noted that in the 392-page Bill C-69 proposed legislation, “competitiveness” appears twice and “economy” and “economic growth” don’t even appear.
The bill and support package are turning into polarizing issues.
Aaron Wudrick, federal director of the Canadian Taxpayers Federation, wants to scrap Bill C-69 and criticized the government’s support package, saying families don’t want to depend on corporate welfare.
“Tying one hand behind the energy sector’s back while sprinkling corporate welfare into the other hand is not a real plan,” he said in a statement.
All sides concur that the Canadian economy needs Alberta’s oil and gas industry to do well and credit the province’s ingenuity in developing the oilsands and being profitable when given the opportunity.
Ottawa’s $1.6 billion bailout will likely be most helpful to the smaller firms facing cash crunches. The funding would help an industry get through a rough spot.
The support, however, is only a small fraction of the total amount of the larger companies’ capital spending budgets. For example, Canadian Natural Resources’ 2019 base capital budget is about $3.7 billion.
Randy Ollenberger, managing director of oil & gas research at BMO, told BNN Bloomberg that the new financing from the feds won’t actually lead to longer-term economic improvement like the hiring of workers.
And despite one of the immediate symptoms of the challenge—the differential between Western Canada Select (WCS) and the U.S. benchmark West Texas Intermediate (WTI)—having returned to normal thanks to Alberta’s decision to cut production in 2019, Alberta can’t seem to catch a break, as WTI hit a 15-month low on Dec. 18 even after OPEC’s Dec. 7 announced production cuts.
Follow Rahul on Twitter @RV_ETBiz