This week, industry champions Peter Tertzakian and Jackie Forrest took on the daunting task of inviting meaningful discussion with the Honorable Seamus O’Regan, Minister of Natural Resources and Member of Parliament in the same Federal Government that has so doggedly obstructed, opposed, and over-regulated the Western Canadian Oil and Gas Industry for the last five years. It was a breath-taking exercise in restraint and civility in an attempt to truly communicate the urgency of the need for immediate and effective action for the Canadian Oil and Gas Industry.
To his credit, Peter Tertzakian started the conversation about the Western Canadian Oil and Gas Industry by addressing what he called “the moose in the room” and stated that the people in the Industry would say they haven’t been feeling a lot of love from the Federal Government or the rest of the country in terms of thoughts and feelings about the Oil and Gas Industry and its future. On the other hand, he said, they feel other Canadians are saying “Stop complaining, get on with the future and the new world.”
“I don’t understand how we as a country – who are so privileged, with so many natural resources have allowed ourselves to get into this polarized situation. How did we get here and how can we get out of this polarized situation?” Tertzakian asked.
Minister O’Regan answered “Canada is the fourth-largest producer of oil and gas in the world-… It’s no surprise to me that we are the energy superpower that we are. Half a million people, 8% of the GDP, $122 Billion in exports- it’s important that more Canadians embrace that, and we understand the challenges that are before us. And when we say we are going to get to Net Zero, we understand what we are going to do. Net Zero is a moon-shot … a very defined goal… The important thing is that psychologically, we set that goal.”
O’Regan stated he believes the transition to Net Zero is inevitable, but that regions and people should not be left behind. Peter Tertzkian interjected that in travelling globally, he finds that universally people regard Canada and its energy industry with admiration. Yet in this country, we seem to be ripping ourselves apart. He posed a defining question: “How can we get to that moonshot of Net Zero without ripping the social fabric of the country apart?” The answer was polite and a bit vague. Panellist Jackie Forrest then spoke about the effects of challenges to Industry dating back to 2015- the recent oil price crash and COVID-19. With rigs operating in Canada at all-time lows, she asked what has O’Regan’s government been discussing as they come up with recent policy?
O’Regan stated that during regular conversations with CAPP (ever since he took office in fact), he heard liquidity was the most important issue for the Industry. No mention of access to tidewater and global markets or regulatory delay, or project cancellation and resultant flight of capital as key issues. He believes the wage subsidy has been a huge help for companies during COVID-19 and that the Government is focusing on holding on to workers which was the reason for their orphan well program. He stated they still have some ways to go.
Peter Tertzakian made a great point: “We’ve been working and talking with so many people during this pandemic…one of the things we’re noticing with the debt-oriented programs for the Oil and Gas industry is there is just not a lot of uptake.” O’Regan’s reply indicated that he was under the impression that there was an “overwhelming uptake “on programs that ran counter to Tertzakian’s findings.
Tertzakian clarified that basically, the uptake is very weak in the mid-cap program – the program that targets the large number of companies in the mid-cap junior and intermediate space. The lack of uptake leads to a cynicism that the Federal Government designed these programs to fail. O’Regan’s response was “ Mid-cap is just rolling out -it’s still early days. Our assessment is that some companies are still doing number crunching, they’re looking into the terms and conditions of various programs and seeing what’s required. Some of them are doing analysis to see if they need bridge financing and if they do, then they’ll apply. With LEEF, LEEF itself was intended to be a lender of last resort. So companies may still be working with their financial institutions to see if they can come up with alternative arrangements. I can’t stress enough that the Federal govt is absolutely committed to supporting Canadian workers. This is the biggest industry in the country. This is our biggest export. I wouldn’t allow politics to skew smart financial economics.”
O’Regan did acknowledge that the Canadian economy would not recover unless the Oil and Gas sector recovers. In response to a question about developing oil and gas to continue the employment of Indigenous people, O’Regan asserted reconciliation will lead to stability and certainty for development. When asked what his take was on the Norwegian Fund’s bashing of Canadian companies based on old data while the Fund still kept countries with very meagre ESG, O’Regan stated he sees Norway as aggressive competitors that are direct competitors to Canadian Offshore Oil. On the topic of Offshore Oil and Gas in Newfoundland and Labrador, the Minster sees very clearly. He stated that the $6 Billion in development that has been put on hold is dire for the Eastern provinces and the solutions for Alberta and Saskatchewan just won’t work for them. O’Regan is very concerned with energy security and the fact that Canada is one of only two OECD countries that does not have a strategic reserve. He sees Newfoundland as a viable contributor to Canada’s energy security.
In terms of transition to a lower-carbon energy economy going forward into the future, O’Regan feels economic recovery must be considered and Canada must re-assess the pace of transition to ensure we get the energy needed to restart the economy. He’s working on relationships within Canada and internationally for low carbon initiatives. Typically, there was no time for the questions that were submitted for the panel to discuss. After the webinar, I found myself rethinking the Minister’s comment- “I wouldn’t allow politics to skew smart financial economics.”
What remains to be seen is what the current Federal Government definitions are. What is the definition of “financial economics” for a government that is withholding detailed financial information and refusing to deliver more than a “snapshot” of Federal finances on July 8th? Just last week they gave parliament only four hours to review over ninety pages outlining $87 Billion in new spending. Is that indicative of what they define as “smart” financial approaches? Is that also indicative of how they define “politics”? With COVID-19 limitations on parliamentary sittings, are we even talking about a democratic process anymore? Minister O’Regan seemed unguarded and sincere. He seems heartfelt in his convictions of the value of Canadian Oil and Gas. One only hopes he will be able to steer other members of parliament according to his moral compass.
Maureen McCall is an energy professional who writes on issues affecting the Energy Industry.