Oilpatch wants Alberta to ease up on rules

The same week Malaysia-based Petronas and its partners killed the Pacific NorthWest liquefied natural gas project in British Columbia—blaming a depressed oil and gas market—the president of Canada's leading oil and gas industry group says federal and provincial governments need to make Canada more appealing to investors.

“I’m not going to speak specifically to Petronas, that’s for them to talk about their company, but we can see today that there’s natural gas being used globally at higher rates than ever before," said Tim McMillan, the president and CEO of the Canadian Association of Petroleum Producers.

"We’re seeing projects moving forward in the U.S., some are under construction, some are already shipping. We see Australia continuing to be a growing player, we see the Middle East attracting capital investments and moving projects forward. It’s Canada that’s struggling to step into this market.”

McMillan made the comments in an interview with National Observer following up on a wide-ranging competitiveness report released by the association in July. It recommends that the Alberta government simplify its rules for developing oil and gas. The CAPP president said "each individual project has a different mix of all of the elements that come together," to limit or strengthen the chances of seeing a project through.

These include international energy prices, he said, but also "regulatory efficiencies and costs."

McMillan's analysis about Canada "struggling" didn't line up with the explanation from Pacific NorthWest LNG board chairman Anuar Taib. The LNG executive said the Petronas decision was entirely based on an "extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry."

Energy sector at heart of political struggles

CAPP's latest efforts to get governments to rethink how they regulate the industry arrive at a particularly fraught time politically: in British Columbia, the recently evicted Liberals were quick to point a finger at Premier John Horgan's incoming NDP government as at fault for the Petronas decision while, in Alberta, opposition Conservatives blame Premier Rachel Notley's NDP government for slowing the province's oil- and gas-driven economy with, for example, a new carbon tax and higher minimum wage.

In a series of tweets posted over the past week, environmental economist Andrew Leach, a professor at the University of Alberta, highlighted the mathematics of the liquefied natural gas project, explaining that it would have been "next-to-impossible" for any government policy to make the project profitable.

"If you're spending 8-10 bucks to chase 5 bucks in value, I've got some bikes I'd like to sell you," Leach wrote on Thursday.

While McMillan acknowledged governments can't change oil and gas prices, he maintained governments can make investment-inviting changes.

“Globally, we have seen capital pulled back ... because prices dropped and production surged. We have seen in late 2016 coming into 2017, the global investment is coming back into the oil and gas market. What we articulated here is (investment is) coming back in different proportions in different parts of the world, and that’s really the root of the challenge we’re trying to shine a light on," McMillan said.

"U.S. production is getting far more capital coming into it than Canada. Canada’s got a far slower recovery, it looks like it’s going to be problematic for a period of time unless we take active measures. Those two things are totally different, and no one’s going to argue that we control the world prices of oil or gas, but what we clearly want people to understand is that there’s differences on where the capital is going, now that it’s coming back.”

Report warns that oil demand and prices about to plummet

CAPP's pleas for help to boost the sagging oil-producing economy with more support for fossil fuels also run counter to advice from experts who say the age of oil is coming to an end.

In a recent visit to Vancouver, Adnan Amin, the director general of the International Renewable Energy Agency, an intergovernmental panel that promotes growth in the green economy, warned that there would be consequences for countries that continue to push fossil fuels.

"Any decision maker who’s making a decision today on fossil fuel infrastructure which is going to be amortized over two or three decades, needs to think very carefully about whether that’s going to end up as a stranded asset," Amin told National Observer in May.

A recent report by San Francisco think tank RethinkX has also predicted that the emergence of electric cars will cause a major disruption to the oil industry over the next decade.

That report by Stanford University economist Tony Seba and investor James Arbib predicted that economics would drive a dramatic shift to self-driving electric vehicles. This, in turn, would have "enormous implications across the transportation and oil industries, decimating entire portions of their value chains, causing oil demand and prices to plummet, and destroying trillions of dollars in investor value — but also creating trillions of dollars in new business opportunities, consumer surplus and GDP growth."

Has CAPP handed a playbook to the Alberta NDP's opponents?

CAPP's recent analysis, amplified by conservative voices in Alberta, is singing a different tune.

When CAPP’s competitiveness report was first released, then-Alberta Progressive Conservative leader (and former Stephen Harper cabinet minister) Jason Kenney tweeted some of its findings and suggested the findings proved current governments were to blame for "fleeing" energy investments.

He also retweeted his party caucus members’ take on the report, which blamed Notley's and Prime Minister Justin Trudeau's policies for having, "severely damaged Alberta's economy."

Kenney’s take-away from the report aligned with his evaluation of the NDP’s time in office, which he described in a recent Facebook video.

Kenney's Facebook videos were part of a campaign to unite the province's Wildrose and Progressive Conservative parties under the umbrella of a United Conservative Party. The unite-the-right campaign, which turned on the question of preventing a second NDP term, proved successful in mid-July. Kenney, former Wildrose leader Brian Jean, and others are now competing to lead the new party.

In the days leading up to membership votes on merging the parties, one University of Alberta political scientist suggested CAPP's leading proposal—to create a joint provincial government-industry oversight committee to streamline the laws and regulations that govern oil and gas development—may not have been aimed so much at Alberta's NDP as at the United Conservative Party.

Perhaps, Laurie Adkin said, “the proposal is really directed to the United Conservative leaders,” as a message that, the Canadian Association of Petroleum Producers is “on standby to make policy as soon as the game changes.”

The CAPP report, Adkin said, could give the opposition conservatives something to work with: “They could pick it up to say how many issues our leading industry has with this government. (This allows them to say,) ‘If we come in, we’ll simplify it and we’ll streamline it,’” she said. “They could certainly use this to bolster their own neoliberal view of the state.”

Former deputy premier Thomas Lukaszuk, in an interview with the National Observer before the parties merged, did not dismiss the notion the CAPP report was something of a policy paper for a new United Conservative Party, either.

“There’s a group of deep-pocketed, shall we say, industry leaders in Calgary, many of them coming from the large (oil) industry, who have always been very supportive of the Reform party, of the Wildrose party, and now of this unification," Lukaszuk said.

Lukaszuk said he was no longer a member of the Progressive Conservative Association of Alberta.

But CAPP president McMillan said the association's proposal, and its report on competitiveness, was not targeted at any specific political party.

While invited by the current provincial government to offer recommendations, he said, "I hope that this is an information document that’s used by all parties."

At the same time, he said, "It’s not targeted at political parties in general at all. It’s actually meant for broad consumption, for Canadians to understand where we are in the world. And if it’s widely read, I think that that’s a good thing.”

Adkin, who recently edited a collection called, First World Petro-Politics: The Political Ecology and Governance of Alberta, likened CAPP’s ask to the oil industry wanting to “sit down and act like a cabinet.”

The proposal shows “nerve to not only propose something like this to the government but to do so publicly,” says Adkin.

“What’s so politically astonishing to me is there’s no recognition that the regulation of these issues also affect the rest of civil society.”

Prime Minister Justin Trudeau's Liberal government is now in the midst of a review of Canada's major environmental laws. Many of them were dramatically changed by the former Harper government to reduce federal oversight of industry, following intensive lobbying by CAPP and its members in the oil and gas industry.

The Liberals campaigned to reverse these changes in the 2015 election, arguing that they had damaged the public's trust and made the population skeptical about the government's capacity to oversee industry.

Alberta can be more competitive, says CAPP

In its July report, “A competitive policy and regulatory framework for Alberta’s upstream oil and natural gas industry,” CAPP offered a vision for the Alberta government and members of industry to work together to streamline provincial government regulations that govern oil and gas development, and to lobby the Canadian government.

CAPP identified a number of government organizations, projects, and regulations that it says stands in the way of industry’s certainty and competitiveness, including the Aboriginal Consultation Office, the Climate Leadership Plan, the Caribou Recovery Strategy, the Alberta Wetland Policy, and the province’s Land Use Framework.

A spokesman for Alberta Energy Minister Marg McCuaig-Boyd said such a committee "would displace the important work and thorough consultations" already being done by the province.

"While CAPP is an important stakeholder in the energy industry, they are not the only stakeholder," Mike McKinnon wrote in an email to National Observer. "In order to help our businesses grow and access new markets, we need to hear from all those who have a vested interest, including municipalities, Indigenous communities and environmental groups."​

Although streamlining how quickly producers can navigate rules that fall under laws like the Water Act and the Environmental Protection and Enhancement Act ranks high on CAPP's to-do list, a spokesman for Alberta Environment Minister Shannon Phillips declined to answer questions about the report.

CAPP pitched a government-industry committee as a solution for a system that it says has been slowed down by inefficiencies, duplications, and costs.

McMillan said the provincial government had asked for CAPP's thoughts on competitiveness, and CAPP proposed "a government-wide approach."

Alberta wants more details

Alberta Energy spokesperson McKinnon said the province had asked CAPP to, "provide detailed data such as comparative times for approvals," to help Alberta Energy and the Alberta Energy Regulator "develop more efficient regulatory processes going forward."

"Since that information was not included in CAPP's report, we are following up with individual companies to gather this information," McKinnon said via e-mail.

Asked whether the province also sees a need to streamline regulations, McKinnon said, "It's just [about] listening to what your stakeholders have to say."

In response to e-mailed questions from the National Observer, Alexandre Deslongchamps, a spokesman for federal Natural Resources Minister Jim Carr said, "We will continue to work with stakeholders to ensure that the regulatory framework for oil and gas remains competitive, including modernizing the National Energy Board. We will also work with industry to help it embrace clean technology and innovation, and make itself more sustainable than ever."

The federal government currently has nine different oil and gas pipelines approved, excluding the Pacific NorthWest project, which had been approved in September.

At a press conference in Calgary on July 6, Alberta Premier Rachel Notley said she'd had a "quick chance to review" the CAPP report, and invited the industry group to come back with more specifics.

"We don't necessarily agree with everything that's in that report, but we do agree with the fact that we need to continue to find successes working together," Notley said.

"We know that there's a lot of successes that we've had, and when it comes to issues of regulatory review, we've certainly invited CAPP to come to us with a more specific report than what we've seen so far, in terms of the particular examples and anecdotes of where we can work collaboratively with them on regulatory improvement."

She added, "I think there's some room for us to partner, there's also some places where we may have to agree to disagree, but I know we've already had successes working together, and I'm sure we'll have many more."

​In its analysis of how Alberta's oil and gas industry could be more competitive, the industry association also highlights U.S. President Donald Trump's two-for-one executive order, wherein the introduction of every new government regulation must be accompanied by two others being thrown out.

The report qualifies that "Alberta does not need to simply echo the U.S. approach to competitiveness," but argues the province must seize the opportunity to create a "made-in-Alberta competitiveness plan that allows our oil and natural gas industry to compete in a changing world dynamic while maintaining world-class environmental and regulatory standards."

— With files from the Canadian Press