PSAC faces multitude of challenges head-on
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 solutionbased,” 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 are dying by our own sword. We are 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 the capacity to get our products to the refineries.” Tom Whalen, CEO, PSAC
"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 servicing, and wireline.