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."
Thread (1/13): Canada’s energy sector, including Alberta’s oil and gas industry, is a source of well-paying middle class jobs for Canadians from coast-to-coast-to-coast. Every community and every province has benefited from this prosperity, and we need that to continue. #cdnpoli— Amarjeet Sohi (@SohiAmarjeet) December 18, 2018
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.
#MEDIA: Today’s announcement of $1.6 billion in federal support for oil & gas companies caps off a year of irresponsible public handouts to support an industry whose growth is incompatible with Canada’s #climate targets. Full statement: https://t.co/fTagEjv3At #cdnpoli— EnvironmentalDefence (@envirodefence) December 18, 2018
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.
"Large-scale transformations of all systems (energy, agriculture, land, economy) are required in pathways limiting global warming to 1.5°C", Thelma Krug, #IPCC Vice-Chair, key note speech to the Pre-2020 Stocktake: technical part, 5 December #SR15 #IPCCatCOP2 pic.twitter.com/23kfOVEgAl— IPCC (@IPCC_CH) December 5, 2018
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.
Nothing more than a desperate, election-year attempt to trick western Canadians into thinking he cares. Energy workers don’t need a hand out. They need jobs! Scrap no more pipelines Bill C-69. End the shipping ban. Build the pipe! https://t.co/Lqg2rWqx5R— Andrew Scheer (@AndrewScheer) December 18, 2018
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.