AFL supports pipelines
Transformation an opportunity for province
Alberta Federation of Labour president Gil McGowan was in Lethbridge last week, but he wasn’t here to talk provincial labour relations this time. McGowan was here to talk pipelines, Alberta energy diversification and about the future of Alberta oil and gas development in his role as cochair of the Energy Diversification Advisory Committee (EDAC).
“Based on our research and conversations with energy stakeholders, including many of the biggest oil companies in the province, we concluded that global energy economy is at the front end of a dramatic transformation,” McGowan told The Herald in an exclusive interview.
“It is not a question of if the energy economy is going to transform, but when. So our main conclusion is we have to prepare for it.
“This transformation presents threats for Alberta, but also opportunities.
“Seeing those opportunities and seizing them is key to mitigating the threats.
“The diversification within our province’s existing oil and gas economy should be an integral part of our efforts to meet this global energy transformation.”
McGowan said the committee members felt Alberta could be doing more to help pave the way for new investment in the downstream oil and gas industry, including the construction of upgrading facilities and petrochemical plants to maximize the advantage Alberta gets from its reserves.
“Time is of the essence, and we are losing the race,” stated McGowan.
“Other oil and gas producing nations have figured out that reorienting their energy sectors toward downstream industries makes sense, and they are moving aggressively to make it happen. We think Alberta should be doing the same.
“And from our conversations with them, oil and gas companies are chomping at the bit to do it (in Alberta), but there are some obstacles blocking their path. We need the government to help address some of those obstacles. Over the last 15 years or so, we have been in the race to have these types of projects built, but we haven’t been winning it for one reason and one reason alone: And that is our up front capital costs tend to be about 10-15 per cent higher than other competing jurisdictions.”
McGowan said a government subsidization policy to offset startup costs could be the answer, with perhaps something equivalent to a Loughheed-era prosperity fund underwriting these subsidies. EDAC also recommended the government find ways to speed up the approvals process for downstream oil and gas projects.
“When you build upgraders and petrochemical plants, you are not just creating jobs in up front construction and day-to-day operations, you are also creating ongoing work in maintenance and generating huge spin-offs for businesses,” McGowan added.
McGowan said EDAC and the Alberta Federation of Labour were 100 per cent behind projects which would create greater efficiency and volume for Alberta bitumen getting out to new markets, but would also like to see this outward push move in lockstep with an investment policy in upgrading on this end of the pipeline to create a higher value product for export in the first place.
“We’re supportive of the TransMountain pipeline,” he stated. “Our report is consistent with the government’s position on the need to find new markets for our oil and gas products. But our position is by investing in new technology like upgrading or partial upgrading, we would find new ways to find new markets. You can find new markets by building pipelines to tidewater, and sending our bitumen over to places like Asia; or you can find new markets by developing new products in Alberta and selling to a wider range of refineries.
“The products that interested us the most were not only the ones which reduced the need for diluent (in pipelines), but also those which transformed the product we are transporting from diluted bitumen into a medium grade crude. This reason that is important is because only a handful of refineries around the world which can use diluted bitumen as a feed stock; whereas every refinery in the world has the ability to use medium grade crude as feed stock.”
McGowan said the Alberta government has accepted all of EDAC’s recommendations in principle, and is, according to conversations he has had with ministers, likely poised to announce new investments in partial upgrading in this spring’s budget. McGowan said he is also working closely with his B.C. labour counterparts to put pressure on that province’s government to get out of the way of pipeline expansion.
“Our biggest considerations when it came to writing this report was to find new ways to adapt Alberta’s oil and gas economy in the face of global changes in energy markets, but also to create more family and community sustaining jobs ,” he concluded. “And not just jobs for the short term, but jobs for the long term ... We have had conversations with our (labour) counterparts in British Columbia, and they agree with us that the Trans-Mountain pipeline should be built, and that working people in both provinces would benefit.” Follow @TimKalHerald on Twitter