Natural gas plant sale raises issues on opposing/governing sides
The New Democratic Party Opposition asked pointed questions last month over the sale of two natural gas processing plants by Crown-owned SaskEnergy. The deal to a private Alberta company sold a plant in Coleville and a half-interest in one at Kisbey to Steel Reef Infrastructure Corp. of Calgary.
The deal, according to the NDP, possibly broke the Saskatchewan Party’s promise to not sell crown corporations without a referendum. Or it was a case of privatization by a thousand cuts.
The governing Saskatchewan Party, via a SaskEnergy spokesman, claimed the sale was assets that are non-core to the natural gas utility.
The Coleville plant was built when few natural gas processing plants existed in Saskatchewan.
The two plants pulled in $7 million last year compared to the $910 million SaskEnergy revenues during that period. They aren’t large money- earning operations.
Natural gas from production at the well site to the furnace takes several steps — initial processing to remove impurities and adding the smell, to shipping and delivering the fuel to customers. Given the abundance of processors and the relatively low returns the sale seems reasonable.
However, Bronwyn Eyre, minister responsible for SaskEnergy, muddied the discussion by stating that many natural gas companies are selling off their natural gas processing plants because they are no longer core assets.
Yes she is correct. They are selling. But the main reason why industry giants like Enbridge and AltaGas are selling natural gas processing plants is a need to reduce high debts. In the natural gas industry, processing plants are built after the size of a natural gas pool is determined. They are operated as a piece of infrastructure, gradually gaining value with time.
Natural gas producers regularly need access to cash for development of new fields or other investments. When that cash need arises and there is no desire to sell more shares or increase debt, sale of so-called non-core gas processing assets comes in handy.
Sale of the cash cow processing plants allows development of new fields and new cash cows by this industry-wide piggy-bank practice.
The NDP used this sale to make a point that it doesn’t believe the Saskatchewan Party’s promises on Crown corporations. That is a point frequently made by the NDP to scare its base support of 35 per cent, but does little to bring in new supporters.
If the NDP is to become more successful in provincial Opposition, the party needs to offer more robust criticism of issues – issues like if times are so good why are small businesses and big ones across the province hurting? Why are we losing people again?
Why are we over-building bypasses with cost over-runs around Regina when Moose Jaw can’t even get a traffic light at the Trans-Canada Highway?
If the NDP did that, the party would be rewarded with more credibility. Heaven knows this province needs a strong Opposition to counter the feeling of infallibility and stupidity that power by three-term governments often develops.
Ron Walter can be reached at ronjoy@ sasktel.net