PSAC faces mul­ti­tude of chal­lenges head-on

Prairie Post (West Edition) - - Prairies - BY JAMIE RIEGER SOUTH­ERN AL­BERTA NEWS­PA­PERS

As the pe­tro­leum in­dus­try con­tin­ues to face chal­lenges on mul­ti­ple fronts, the or­ga­ni­za­tion that rep­re­sents hun­dreds of up­stream oil and gas com­pa­nies in Canada is con­tin­u­ing to be the voice for its mem­bers and as the chal­lenges get more com­plex, their voice gets louder, par­tic­u­larly in lob­by­ing the govern­ment at the provin­cial and fed­eral lev­els.

Tom Whalen, out­go­ing in­terim pres­i­dent and CEO for Pe­tro­leum Ser­vices As­so­ci­a­tion of Canada (PSAC) pointed to lengthy reg­u­la­tory waits in get­ting projects ap­proved, po­lar­iza­tion of the in­dus­try in the pub­lic, and the cur­rent en­vi­ron­ment in the United States as just a few of the is­sues fac­ing the in­dus­try to­day.

"We've been that voice for the in­dus­try for the past 25 years. Ob­vi­ously, we are non-par­ti­san and have to be able to work with govern­ment, but we are so­lu­tion-based,” ex­plained Whalen.

"I see a lot of po­lar­iza­tion. Peo­ple are ei­ther pro or against the oil and gas in­dus­try. But, we aren't go­ing to get to a so­lu­tion if peo­ple don't sit down and talk."

PSAC has been sit­ting down and talk­ing with govern­ment en­ti­ties, such as the Al­berta En­ergy Reg­u­la­tor in speed­ing up the process in get­ting all the nec­es­sary ap­provals for projects.

"I think one of the big is­sues is the reg­u­la­tion stack­ing. It's easy to add reg­u­la­tion to reg­u­la­tion and I know the AER is try­ing to stop all of that red tape," said Whalen, ad­ding that south of the border, the process is much more stream­lined. "In the U.S., they are get­ting things (ap­provals) through in 60 days. Here, it's tak­ing months or years. Look at Kinder Mor­gan and Trans Moun­tain. It's been years and we still don't have a pipe­line."

The U.S also has lower cor­po­rate tax lev­els that are more at­trac­tive to com­pa­nies.

"We've got all th­ese bar­ri­ers like the U.S. tax re­form, which is great for the Amer­i­cans, but it makes us less com­pet­i­tive be­cause they can't make money here," he said. "The com­pa­nies want to be deal­ing in more busi­ness­friendly en­vi­ron­ments."

While some progress is be­ing made in their talks with govern­ment, the process has been slow go­ing and com­pa­nies look­ing to in­vest are go­ing else­where.

"Quite frankly, I'm not re­ally sure things are get­ting any bet­ter ei­ther," he said. "And, we are dy­ing by our own sword. We're send­ing our men and equip­ment to the U.S. We are feed­ing our com­pe­ti­tion with our own re­sources and our ser­vice in­dus­try can't com­pete with­out hav­ing the ca­pac­ity to get our prod­uct to the re­finer­ies. We have a ceil­ing; we're capped."

More prod­uct is mov­ing by rail and Whalen said that is great news, but with the cur­rent sit­u­a­tion, Al­berta is los­ing close to $15 bil­lion a year in rev­enue.

"Look­ing at where we are now, the oil and gas in­dus­try is flat and its go­ing to stay that way," he added.

In ad­di­tion, Bills C-69 and C-48 could hin­der any pos­si­ble progress for the pe­tro­leum in­dus­try.

"The big thing on the hori­zon right now are Bill C-69 and C-48. Those two are a huge con­cern and Bill C-69 will im­pact more than one in­dus­try. Short of telling them to scrap it, I will say they need to re-write the whole thing," said Whalen.

Bill C-69 would re­place the Na­tional En­ergy Board with the Cana­dian En­ergy Reg­u­la­tor and de­velop a new Im­pact As­sess­ment Agency. Op­po­nents to the Bill are con­cerned it would make the Cana­dian pe­tro­leum in­dus­try even less com­pet­i­tive than it is now, cre­ate more un­cer­tainty which would lead to less in­vest­ment, and that it gives too much de­ci­sion-mak­ing power to one per­son, the fed­eral en­vi­ron­ment min­is­ter, rather than to an in­de­pen­dent body.

Bill C-48, the Oil Tanker Mora­to­rium Act, re­stricts some oil tanker move­ment on the west coast. The ban would in­clude tankers car­ry­ing more than 12,500 met­ric tonnes ev­ery­thing from di­luted bi­tu­men to gas con­den­sates, but tankers car­ry­ing liq­uid nat­u­ral gas from the LNG plant at Kiti­mat will be ex­empt.

Whalen also said paid Amer­i­can pro­test­ers who have come to Canada to protest the in­dus­try here are send­ing mis­guided mes­sages while ig­nor­ing what is hap­pen­ing in their own coun­try.

"We need to look at the whole west coast. In Cal­i­for­nia, 90 per­cent of their oil comes from out­side North Amer­ica and there are al­ways Rus­sian tankers com­ing into Wash­ing­ton," said Whalen.

He also said that the Que­bec ban on hy­draulic frac­tur­ing and the on­go­ing pipe­line op­po­si­tions have had a huge im­pact on the in­dus­try.

"Trans Moun­tain and En­ergy East have raised the con­ver­sa­tion, but not pro­duc­tive con­ver­sa­tion. Key­stone is still an is­sue. Obama put the nail in the cof­fin, then Trump ap­proved it, but it got re-routed, so all of that is still on­go­ing,” he said.

The lack of sup­port from Pre­mier John Hor­gan and the B.C. Govern­ment on the Trans Moun­tain Ex­pan­sion project while ap­prov­ing a pipe­line for in­com­ing jet fuel for the Van­cou­ver air­port and the $40 bil­lion LNG fa­cil­ity at Kiti­mat has Whalen con­cerned about Hor­gan's next move.

“The hypocrisy from the B.C. Govern­ment is a big con­cern. The worry I have is he'll dou­ble down," said Whalen.

Once a leader in the liq­uid nat­u­ral gas in­dus­try, Al­berta is now lag­ging be­hind when it comes to global LNG com­pe­ti­tion.

"The U.S. only had one LNG fa­cil­ity in Alaska - and now are ready to crank on their fifth. We had 27 and now have one," said Whalen.

A huge mis­con­cep­tion in the pub­lic is with the rev­enues of the big oil com­pa­nies. Typ­i­cally, the only fig­ures be­ing re­ported are the rev­enues and Whalen said it is the Re­turn on In­vest­ment that should be an­nounced, as it would show a more ac­cu­rate ac­count, in­clud­ing re­search and de­vel­op­ment con­tri­bu­tions, and roy­al­ties.

"You have to go back and look at the re­turn on in­vest­ment (ROI), but the num­ber that gets flashed around is the big num­ber and that is all they look at. ROI is the part that gets missed," said Whalen. "Peo­ple don't un­der­stand they have own­er­ship in that oil. The oil com­pa­nies, how many peo­ple do they em­ploy? And, that's not to men­tion the roy­al­ties. Ev­ery Cana­dian ben­e­fits from those roy­al­ties."

While the in­dus­try in the U.S is thriv­ing, it con­tin­ues to strug­gle in Al­berta and across western Canada. Part of the prob­lem has been with the in­dus­try it­self in not ed­u­cat­ing the pub­lic all along with things such as im­proved tech­nolo­gies that min­i­mize the im­pact on the en­vi­ron­ment.

"We've been a lit­tle guilty of be­ing too quiet for too long. We've got to sent some sig­nals, not just to Cana­di­ans, but to Cana­dian in­vestors. One ini­tia­tive we now have is the Sus­tain­able En­vi­ron­men­tal En­ergy In­vest­ment fund for smaller oil and gas com­pa­nies. We raised just un­der $1 bil­lion that is to be re-in­vested, with half for recla­ma­tion and half for wells," he said of one ini­tia­tive in the works. The oil and gas in­dus­try has faced chal­lenges in the past and PSAC has been there to ad­vo­cate for the in­dus­try and its mem­bers since the days of the Na­tional En­ergy pro­gram.

"PSAC got started with the na­tional en­ergy pro­gram in the early 1980s. That was the premise that got it go­ing," said Whalen.

"For op­er­a­tions, it was pretty dire back then and then there were the high in­ter­est rates. To­day, there are a num­ber of peo­ple find­ing them­selves in that same sit­u­a­tion. The in­dus­try was a frac­tion of the size that it is to­day. It's im­pact­ing a lot more peo­ple to­day," he added.

It was in 1980, just as the Na­tional En­ergy Pro­gram was rear­ing its ugly head that Whalen him­self started work­ing in the in­dus­try.

"I started in the fall of 1980, work­ing in the seis­mic sec­tor, then work­ing rigs," he said.

In 1981, he started work­ing at Wain­wright, work­ing for Juras­sic Drilling. It was here that he got his start work­ing on ser­vice rigs as a rough­neck. He worked his way up the ranks un­til 1990 for the last five years, man­aged a fleet of rigs that pro­vided down­hole ser­vices as­so­ci­ated with well com­ple­tion, stim­u­la­tion, and work-overs.

In 1990, he joined Baker Hughes as an ac­count man­ager for the oil­field chem­i­cals di­vi­sion. Baker Hughes pur­chased a U.S. chem­i­cal com­pany and Whalen spent the next 26 years with that or­ga­ni­za­tion. Dur­ing his ten­ure with Baker Hughes, he held po­si­tions in­clud­ing, field man­ager, dis­trict man­ager, busi­ness unit man­ager, coun­try man­ager, Vice Pres­i­dent of Mar­ket­ing for Canada and the en­ter­prise Vice Pres­i­dent of Wa­ter Man­age­ment. While at Baker Hughes, Whalen sat on the PSAC board.

Mr. Whalen also sits on the boards of four Cal­gary based or­ga­ni­za­tions; the Women in Need So­ci­ety, Lit­tle Rock Re­sources Ltd., Drill­form Tech­ni­cal Ser­vices and Panop­tic Au­to­ma­tion So­lu­tions.

He's leav­ing the or­ga­ni­za­tion on Nov. 2 and will an­nounce in the com­ing days where he will be go­ing.

PSAC was formed in 1981 when the Na­tional En­ergy Pro­gram came into play. The role of PSAC, which re­placed the Cana­dian As­so­ci­a­tion of Oil­well Drilling Con­trac­tors (CAODC), was to pro­vide a stronger voice with the provin­cial and fed­eral govern­ments in con­cerns im­pact­ing the ser­vice and sup­ply sec­tor of the oil and gas in­dus­try.

At the time, tax mea­sures as­so­ci­ated with the NEP were forc­ing drilling and ser­vice rigs to head south to the U.S. where busi­ness was more re­cep­tive. Within a year, ap­prox­i­mately $1 bil­lion and 8,000 western Cana­dian jobs were lost.

PSAC rep­re­sents those in the pe­tro­leum ser­vice, sup­ply, and man­u­fac­tur­ing sec­tor, in­clud­ing ce­ment­ing, drilling, drilling flu­ids, en­vi­ron­men­tal ser­vices, equip­ment rentals, in­dus­try sup­plies, man­u­fac­tur­ing, per­fo­rat­ing, pipe­lines, pro­duc­tion test­ing, safety equip­ment and ser­vices, snub­bing, truck­ing, well

File photo

Foster­ton Sask. the site of the first oil well.

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