Canada will make available $1.6 billion in financial support to help Alberta's oil and gas sector expand into new markets, Natural Resources Minister Amarjeet Sohi announced Tuesday.
Sohi made the announcement alongside International Trade Diversification Minister Jim Carr at the Northern Alberta Institute of Technology in Edmonton. Carr described how the money will be used to help the oilpatch in part with liquidity concerns.
"Alberta's energy sector is not just the historic backbone of our economy, but a key part of our country's future," said Carr. "The workers in this sector are valued parts of our national economy."
Export Development Canada (EDC), the Crown corporation that is already managing the loans related to the government's purchase of the Trans Mountain pipeline, will make another $1 billion available to "exporters of all sizes" to help companies invest in new technology, "address working capital needs or explore new markets," Sohi said.
Another Crown corporation, the Business Development Bank of Canada (BDC), will be creating another $500 million "energy diversification" financing program for "higher risk" oil and gas companies dealing with market uncertainty.
Sohi pointed out there is also $50 million available through Natural Resources Canada’s Clean Growth Program and another $100 million available through Innovation, Science and Economic Development Canada’s Strategic Innovation Fund.
Capital to help firms 'augment' relationship with banks
Some oil companies have complained they are hurting from record-low oil prices. Western Canadian Select, a benchmark heavy crude oil stream comprised largely of oilsands bitumen, hit $11 USD last month, although it has climbed since. Pipelines are at capacity and some refineries are down for maintenance, according to the Canadian Press.
Carr explained that the money announced Tuesday is being made available during a "tough time" for the industry. The extra financing is “significant at a time when companies will need it," he said.
"This capital can be used to augment their relationship with their commercial banks, which is very important, but it’s more access for them than they would have without it...it adds to their liquidity.”
Alberta Premier Rachel Notley announced earlier this month she was imposing a production cut that would take effect in January 2019, and will cut initially 325,000 barrels per day, in order to drain out excess oil being stored in the province as the bottleneck restricts shipments. She has also floated a plan to buy more rail cars to help ship more oil-by-rail.
Reacting Tuesday to the federal government’s announcement, Notley called it “a start” and a “first step,” but added it didn’t particularly align with what her government had been asking for.
Offering businesses “the opportunity to go further in debt” was not a viable long-term strategy, the premier argued. While some small producers will be helped by the effort, she said, the justification for the loans — that they were supporting “developing export markets” — made little sense to her.
“I hate to break it to you, but the whole world wants our product. The issue is not finding a market for our product. The issue is getting our product to that market,” Notley said.
"We don't need help finding more markets, we need help moving our product. I don't know that we could have been much more clear about that."
She added the federal offering appeared to contain little new money, instead mostly representing loans.
In a selfie video, Alberta United Conservative Party Leader Jason Kenney similarly dismissed the loan offerings as unhelpful.
“I’ve spoken to thousands of people in our energy sector, from roughnecks and blue-collar folks on the front lines, to the CEOs of the largest companies. None of them — none of them — are asking for handouts,” he said.
Sohi argues financing isn't fossil fuel subsidy
Sohi said the financing being provided through EDC and BDC is "not a subsidy for fossil fuels."
"These are commercial loans, made available on commercial terms. We have committed to phasing out inefficient fossil fuel subsidies by 2025, and we stand by that commitment," he said.
Environmental Defence didn't see it that way, in a statement released shortly after Sohi's announcement.
"Today, Canada announced another massive backslide on its longstanding commitment to eliminate fossil fuel subsidies," said Patrick DeRochie, Environmental Defence's climate and energy program manager.
Today's announcement, he said, "caps off a year of irresponsible government handouts to support an industry whose growth is incompatible with Canada’s climate targets."
A recent study by the International Institute for Sustainable Development showed that, per unit of GDP, Canada is the largest provider of fossil fuel subsidies in the G7. The G7 pledged in 2016 to eliminate “inefficient fossil fuel subsidies” by 2025.
This month, 415 investors, with $32 trillion in assets-under-management, called on governments to “set a clear timeline by 2020 for the phase-out of all fossil fuel subsidies.”
EDC pulled into more oil and gas financing
The world is using more fossil fuels, leading to a record high in 2017 of carbon pollution related to energy. Energy production and use already accounts for two-thirds of pollution, and energy demand grew last year, with fossil fuels satisfying 70 per cent of that extra demand, according to the International Energy Agency.
The latest report by the UN Intergovernmental Panel on Climate Change (IPCC) — which took almost three years and involved hundreds of globally-renowned experts contributing tens of thousands of review comments over multiple rounds of revisions — says massive cuts to carbon pollution are necessary to avoid dangerous and destructive climate change.
The IPCC report said the world must cut pollution to roughly half of 2010 levels by 2030 to avoid damage to ecosystems and irreversible changes to the climate.
Canada has committed to cutting its carbon pollution 30 per cent from 2005 levels by 2030, and the Trudeau government has moved to implement a price on pollution nationwide, alongside other measures such as investments in green infrastructure.
But Canada's Paris climate agreement target won’t achieve the emission cuts the IPCC report said is necessary. In addition, the UN environment agency said without stricter measures, Canada will fall short of its current target.
Nevertheless, Environment and Climate Change Minister Catherine McKenna said this month she expects Canada to adopt even higher carbon pollution targets in 2020.
Annie Bérubé, Director of Governmental Relations at Équiterre, said investments in Alberta's energy sector should be in renewable energy, and not fossil fuels.
"The federal government’s support for oil and gas workers must be an investment in a just and equitable transition towards renewable energy," she said.
After this month's international climate talks, COP24, where Canada promoted more ambitious targets to cut carbon pollution, "it is incomprehensible that the federal government is still investing in increasing the amount of dirty energy that we export," added Bérubé.
The decision by Sohi to make more financing available to the oilpatch is the latest move by the Trudeau Liberals supporting the industry.
Finance Minister Bill Morneau’s Nov. 21 fiscal update allowed Canada's oil and gas industry to benefit from a new program that allows businesses to write off a larger share of assets in the year an investment was made.
Canada paid $4.5 billion to buy the Trans Mountain pipeline and expansion project, using loans managed by EDC, that are ultimately backed by the federal consolidated revenue fund.
The government is on track to book more in interest expenses over the year as a result of the loans than it is scheduled to take in with poll charges. Finance Canada has said it does not consider this a loss to taxpayers.
Scheer says financial help 'desperate,' a 'trick'
Conservative Party Leader Andrew Scheer characterized the $1.6-billion package as "throwing money at a political problem," and dismissed the move as "nothing more than a desperate, election-year attempt to trick Western Canadians" into thinking Prime Minister Justin Trudeau "cares" about them.
"He (Trudeau) wants to see the industry fail. This has been his plan all along," Scheer said.
The Conservative leader would scrap several pieces of federal legislation the Trudeau government has introduced, such as Bill C-69, the government's planned overhaul of the Harper-era federal environmental assessment regime, that had been criticized as politicizing the approval process for resource projects.
He would also repeal Bill C-48, which would ban tankers carrying crude oil along the northern British Columbia coast, activity that is seen as posing unacceptable risks of an oil spill to communities and fragile ecosystems there.
Finally, he would scrap Trudeau's proposed price on carbon pollution, embedded within the government’s budget implementation Bill C-74. Economists say a carbon price is the best way to reduce pollution while maintaining a thriving economy, and the Trudeau government has said it would offset losses with tax rebates.
Editor's note: This story was updated at 1:45 p.m. ET on Dec. 18, 2018 to include additional quotes and reaction. It was updated again at 3:20 p.m. ET the same day to include quotes from Scheer and Notley.
Comments
Freaking insane. This government deserves to be a one term wonder and I don't even care that this probably means PM Scheer because there won't be much difference at all.
Trudeau's Neo-Liberals and Notley's faux-conservative NDP aren't doing themselves any favours. Notley has been throwing billions of dollars at the fossil fuel industry. Lot of good it will do her next election. Come next May, she will be leading a much diminished opposition party.
The AB NDP was a force for good in opposition. Now we have zero oil industry critics in the AB Legislature. And there won't be any after 2019.
Banished to the opposition benches for the next generation, the NDP will be able to say nothing about oilsands expansion, oil & gas pollution, and climate inaction — because they sided with Big Oil when in office.
When "progressives" stand on the wrong side of science and history, then we are in real trouble.
Right-wingers give Trudeau and Notley no credit for anything that goes right and blame them for everything that goes wrong. Scheer's and Kenney's supporters wouldn't vote for Trudeau and Notley even if they built a billion pipelines. They have only managed to alienate their own.
Those on the left may ask: "If voting for Trudeau and Notley gives us neoliberal policies that fail to address the issue of our time, why bother?"
Correction: faux-progressive NDP, not faux-conservative NDP.
Perhaps The Observer could install an EDIT button.
You hit the nail in the head.
It's as clear as ever that Alberta has become a petrostate. In Notley's mind there is no distance whatsoever between the government, the economy, and the oil industry. The awful irony is that this is as close as the NDP has ever come to socialism -- by turning the party into socialism's evil twin.
The only answer is to elect more Green Party representatives. Real opposition is the one way we can provide an alternative to the present suicidal policies.
1.6 billion to help the oil patch with "liquidity concerns". I guess that's fair--they're trying to sell solid tar as liquid "oil", that must be a major "liquidity concern".
Everything in this article represents the predictable, knee jerk reactions of both sides of the Oil/Gas debate. Notley's "Not what we asked for" (more of the same old, same old pipelines, better prices, ad nauseum) and Patrick DeRoche's "massive backslide...in its committment to eliminate fossil fuel subsidies...." While Jason Kenny insists that no one in the oil patch from roughnecks to CEO's is asking for handouts - more like blackmail demands perhaps.
Ministers Sohi and Carr, seem to be doing nothing more than trying to placate Big Oil with a scattering of crumbs.
If all these players/comentators, critics were as smart as they try to seem, they might be better off taking a closer look at the announcement. As always the devil is in the details which are not spelled out. But look at the agencies charged with distributing the announced funds: EDC - 1 billion to exporters to help invest in new technology; BDC - 500 million. for energy diversification; Clean Growth Program - 50 million; Innovation, Science & Economic Developement Canada's Strategic Innovation Fund - 100 million.
It is subtle, but there is a possible different interpretation - if you care to consider it.
Back in the 70's during the Arabian oil cartel's induced petro crisis, a scientific pundit whose name I can't recall, opined, in view of the then belief we were running out of oil, that Petroleum should be reserved for its highest and best purpose(s). Among those he named lubrication as essential. Since then many more "higher/best" uses have blossomed in the petro/chemical sector - some, perhaps not so "best" but many more that have not even been developed are possible. People forget that the essential atom - carbon - one of nature's building blocks has vast potential, far more important than mere combustion. Petroleum seems to be the most accessible source of carbon. That may change - but for the purposes of this argument we should consider what the wording of this announcement might mean.
Might this be a gentle (feeble?) nudge to the petro oligarchs that they should, indeed, be looking for new markets. Just not the old fuel markets? Maybe innovation in expanding the uses and benefits of this valuable carbon resource? Making this "transformation of all systems (energy, agriculture, land, economy)...required in pathways limiting global warming..." as noted by Thelma Krugg IPCC vice chair, is an urgent demand.
It will require abandoning the "same old" source of wealth and re-investing in new areas of wealth creation. These investments of which many speak passionately are not, in general, being made by governments OR the dying fuel industries. Almost all of the petro sector alredy has substantial investments in the chemical side - but they have not,obviously explored or invested in the real potential of the raw material at their disposal - instead lazily relying on the easy profits from combustion.
If I were an optimist I would hope that this government is indeed, without coming out and boldly saying so, trying to shove the petro resource sector into new thought pathways, ones that may be financially painful for a while but offer the only likely source of salvation for their product.
In human beings, inertia is a recipe for decline. Our global systems, including population growth, demand, will collapse without, human innovation.
If the previous Alberta governments had followed Peter Lougheed objectives when he created the Alberta Heritage Savings Trust Fund (HSTF) in 1976, Alberta would be able to deal with its actual downward economic problems without asking money from anybody, or blaming the rest of the world for its problems.
The Fund was created to help the province when things go bad. It was created to alleviate the up and down of an economy based mostly on one source of revenue, the oil and gas industry ( the actual downward price of the barrel of oil is mostly due to a surplus of production here in Canada and around the world, not to a lack of pipelines).
Initially, the fund received 30% of Alberta's non-renewable resource (NRR) royalties. Over time, successive Conservative governments propped up dubious ventures in domestic ventures ranging from forestry to aviation, food processing, and projects like the Kananaskis Country Golf Course.
Investment into the fund was halted in 1987. Between 1980 and 2014, although non-renewable resource revenues in Alberta generated almost $190 billion, the value of the Heritage Fund in 2014 was only $17.3 billion (as of September 30, 2018, the Fund's assets were worth $17.5 billion).
In 2013, a Fraser Institute report compared the the Alberta HSTF to Norway's Sovereign Wealth Fund (evaluated in 2018 at more than $1 trillion) and Alaska's Permanent Fund (worth $65.3 billion as of May 2018) and argued that Alberta's was significantly "smaller than others because of its relative under-funding and chronic withdrawals of most income from the fund." Alaska for example continued to deposit 25% of its NRR from 1982-2011 and Norway contributed 100%. If Alberta had followed the Alaskan formula, by 2011 the Alberta HSTF would have had $42.4 billion instead of $9.1 billion. By the Norway rules, it would have had $121.9 billion by 2011. That kind of money would have been very helpful.
(source: Alberta Heritage Savings Trust Fund, from Wikipedia, Sept 11, 2018)
To know more about why Peter Lougheed decided to create the Alberta HSTF, go to CBC.ca, a People's History, about "Boom and Bust in Alberta." It shows how we can learn (or not) from history).
Canada gives billion to support oil based companies. What the hell does he mean Canada? It is taxpayers ofCanada, many of whom, think capitalist companies should live or die by their motto ‘Survival of the fittest ‘. They don’t believe the poor, homeless, refugees should be given extra help so why should they be bailed out. Especially since they are direct contributors to climate change. Trudeau is just like his father, say one thing (free trade) then do the exact opposite. How many Hail Mary’s does he have to say to keep his conscience clean. Or Our Fathers and Glory bes?
Hmmm, seems like an awful lot of government money for this particular struggling Canadian industry. Why just Alberta? I certainly don’t recall such extreme efforts at protecting the cod fishery in the Maritimes, manufacturing in Ontario or the steel workers in Hamilton ( Ontario). “Hmm, why not”, I wonder. Could it be that Big Corporations and Federal Governments turned a blind eye to the destruction of the fisheries, benefitted from the export of jobs to Asia and moving steel production out of Canada? Yet these latter industries provided jobs and exports and contributed to the economy.
The Oil and Gas Industry is in trouble for many reasons: low prices for bitumen, not because of lack of pipelines but because it is extremely poor quality and is more expensive to extract and refine while the green tech revolution is producing cheaper and less polluting energy.
Not only that, but the science is absolutely clear that the fossil fuel industry must be phased out for the survival of civilization as we are in, or entering, the stage of climate breakdown.
So I ask again “ Why the commitment of billions more in direct and indirect subsidies to this failing industry? If you don’t already know, you might appreciate Kevin Taft’s book, “Oil’s Deep State: How the petroleum industry undermines democracy and stops action on global warming in Alberta and in Ottawa” and/or Donald Gutstein’s recent book, “The Big Stall :How Big Oil and Think Tanks are blocking action on Climate Change in Canada”.
Why don't the feds give them money to clean up the dead wells. And there was a group of oil workers a couple of years ago which wanted to be trained to convert oil wells to geothermal energy production units. Why wasn't this done. And then there is the clean up of the oil sands themselves. The damage they have done to the Peace Athabasca Delta and Wood Buffalo National Park is unacceptable. but we learn to accept the unacceptable where the oil industry is concerned, don't we? It's unacceptable that they would wreck the BC coast too. But they think they should be able to do it.