A lot of work to be done by Al­berta govern­ment to re­gain its com­pet­i­tive edge, ac­cord­ing to CAPP re­port

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

If Al­berta wants to once again be a leader as a global en­ergy sup­plier, it must do what it takes to close the com­pet­i­tive­ness gap and that in­cludes stream­lin­ing its cum­ber­some reg­u­la­tory ap­proval process, im­ple­ment­ing cli­mate poli­cies that are ef­fec­tive, ef­fi­cient, and en­cour­age in­no­va­tion.

That is ac­cord­ing to Cana­dian As­so­ci­a­tion of Pe­tro­leum Pro­duc­ers (CAPP) in its Up­date: A Com­pet­i­tive Pol­icy and Reg­u­la­tory Frame­work for Al­berta's Up­stream Oil and Nat­u­ral Gas In­dus­try, a re­port that was re­leased on Sept. 26.

In 2017, CAPP pre­sented the ini­tial re­port that iden­ti­fied chal­lenges fac­ing the up­stream nat­u­ral gas and oil in­dus­try and pro­posed solutions on work­ing with the Al­berta govern­ment in im­prov­ing the in­vest­ment cli­mate which has de­te­ri­o­rated in re­cent years. The up­dated re­port in­cludes the cur­rent sta­tus of that in­vest­ment cli­mate, in the in­dus­try and its com­pet­i­tive­ness. The re­port in­cludes ar­eas need­ing im­prove­ment and op­por­tu­ni­ties for pri­or­i­ti­za­tion.

"Mar­ket ac­cess is a key fac­tor driv­ing in­dus­try com­pet­i­tive­ness, but it is only one part of the equa­tion. We need govern­ment to ad­dress the pol­icy and reg­u­la­tory chal­lenges that make Al­berta less com­pet­i­tive com­pared to other ju­ris­dic­tions," said Tim McMil­lan, pres­i­dent and CEO of CAPP. "In or­der to im­prove com­pet­i­tive­ness we need to stream­line the reg­u­la­tory process by re­duc­ing time­lines, mod­ern­iz­ing our cur­rent reg­u­la­tions and im­prov­ing ef­fi­ciency."

While the Al­berta En­ergy Reg­u­la­tor (AER) is work­ing with in­dus­try on short­en­ing the length of the ap­proval process, the re­port in­di­cates that CAPP would like to see all min­istries of govern­ment take an ac­tive role in work­ing with in­dus­try on the process.

Cur­rently, ac­cord­ing to the re­port, the pro­por­tion of well and fa­cil­ity ap­pli­ca­tions which are non-rou­tine due to par­tic­i­pant en­gage­ment have dou­bled since 2014. This non-rou­tine par­tic­i­pant in­volve­ment well li­censes can take 10 times as long as rou­tine well li­cense ap­pli­ca­tions. As well, fa­cil­ity li­cense ap­pli­ca­tions that are non-rou­tine can take as long as 130 days to ap­prove.

This slow pace has con­trib­uted to the ero­sion of in­vestor con­fi­dence in the oil and nat­u­ral gas in­dus­try in the prov­ince. The re­port states that more ef­fi­cient, pre­dictable reg­u­la­tory pro­cesses that main­tain en­vi­ron­men­tal and reg­u­la­tory out­comes, are what is needed.

"The cur­rent reg­u­la­tory en­vi­ron­ment has con­trib­uted to the ero­sion of in­vestor con­fi­dence in the oil and nat­u­ral gas in­dus­try. Al­berta's reg­u­la­tory frame­work is chal­lenged by process in­ef­fi­cien­cies, lengthy ap­proval time­lines, and es­ca­lat­ing reg­u­la­tory costs that, com­bined, in­crease costs and gen­er­ate in­vestor un­cer­tainty in Al­berta's reg­u­la­tory sys­tem."

CAPP says in a press re­lease that at a time when en­ergy de­mand and cap­i­tal spend­ing are in­creas­ing glob­ally, to­tal in­vest­ment in Canada's oil and nat­u­ral gas sec­tor is ex­pected to fall to $42 bil­lion in 2018 down from $81 bil­lion four years ago. To­tal an­nual spend­ing in the oil sands has dropped for the fourth con­sec­u­tive year.

Fed­eral Bill C-69 and Bill C-48 are ex­pected to have far-reach­ing neg­a­tive ram­i­fi­ca­tions on the in­dus­try and CAPP en­cour­ages the Al­berta govern­ment to sup­port the in­dus­try "in its call for the pause and re­view of fed­eral Bills C-69 (Cana­dian En­vi­ron­men­tal Assess­ment Agency and Na­tional En­ergy Board re­view) and the elim­i­na­tion of C-48 (West Coast Tanker Mo­ra­to­rium) in light of the Fed­eral Court of Ap­peals de­ci­sion on TMEP. There is an op­por­tu­nity for the Al­berta govern­ment and in­dus­try to send a strong and firm mes­sage to the Govern­ment of Canada and stand up for Al­berta."

Tom Whalen, pres­i­dent and CEO of Pe­tro­leum Ser­vices As­so­ci­a­tion of Canada, a non-par­ti­san or­ga­ni­za­tion that pro­vides a voice for its mem­bers said both Bills are huge con­cerns.

"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.

As well as push­ing the fed­eral govern­ment on these Bills, CAPP also says Al­berta's high cor­po­rate tax rate is scar­ing away in­vestors.

"The U.S. is mak­ing tax re­forms while the com­bined fed­eral and provin­cial cor­po­rate taxes in Al­berta have in­creased to 27 per­cent, putting us at a sig­nif­i­cant dis­ad­van­tage to our com­peti­tors and spurring for­eign in­vest­ment," said McMil­lan.

In sum­mary, the re­port rec­om­mends the fol­low­ing ac­tions:

-Ar­tic­u­late a vi­sion for fu­ture de­vel­op­ment, com­plete with spe­cific goals and per­for­mance met­rics such as in­vest­ment, pro­duc­tion, and project ap­proval-re­lated tar­gets;

-Re­quire all min­istries work­ing with the oil and nat­u­ral gas sec­tor adopt a man­date to im­prove com­pet­i­tive­ness as a key con­sid­er­a­tion in their de­ci­sion­mak­ing pro­cesses;

-The Al­berta En­ergy Reg­u­la­tor (AER) con­tin­ues to work with in­dus­try to sub­stan­tially stream­line the reg­u­la­tory ap­proval process;

-Ef­fec­tively im­ple­ment cli­mate poli­cies with pro­tec­tion mech­a­nisms for en­er­gy­in­ten­sive, trade-ex­posed (EITE) sec­tors, and re-in­vest any car­bon-re­lated rev­enue to EITE in­dus­tries through re­cy­cling and in­no­va­tion fund­ing; and

-Strengthen its sup­port for liq­ue­fied nat­u­ral gas (LNG) de­vel­op­ment on Canada's west coast, with the same level of com­mit­ment on its ef­forts on the Trans Moun­tain Ex­pan­sion project (TMEP).

"Canada is a global leader with a sys­tem of strong en­vi­ron­men­tal stan­dards and reg­u­la­tions. We have a high-qual­ity prod­uct and should be the sup­plier of choice to meet in­creas­ing fu­ture en­ergy de­mand," said McMil­lan. Sup­port­ing in­for­ma­tion:

-As global en­ergy de­mand in­creases by 2040, oil and nat­u­ral gas will be the largest sources of en­ergy with de­mand ac­count­ing for 27 per­cent and nat­u­ral gas ac­count­ing for 25 per­cent by 2040.

-Cap­i­tal in­vest­ment is fore­cast at $42 bil­lion in 2018, down from $81 bil­lion in 2014. This is in­dica­tive on de­creased con­fi­dence from in­vestors in Canada's oil and gas in­dus­try and the Cana­dian govern­ment in their abil­ity to get projects com­pleted.

Cur­rently, the oil and gas in­dus­try con­trib­utes:

-$109 bil­lion in di­rect GDP in 2017 (6.25 per­cent of Canada's to­tal);

-$12 bil­lion in av­er­age an­nual rev­enue to gov­ern­ments be­tween 2014 and 2016;

-533,000 di­rect and in­di­rect jobs in 2017 (in­cludes the range of 200,000 in the ser­vice sec­tor).

CAPP rep­re­sents small and large com­pa­nies that ex­plore for, de­velop, and pro­duce nat­u­ral gas and oil through­out Canada. CAPP's mem­ber com­pa­nies pro­duce about 80 per­cent of Canada's nat­u­ral gas and oil. As­so­ciate mem­bers pro­vide a wide range of ser­vices that sup­port the up­stream oil and nat­u­ral gas in­dus­try. To­gether, CAPP's mem­bers and as­so­ciate mem­bers are an im­por­tant part of a na­tional in­dus­try with rev­enues from oil and nat­u­ral gas pro­duc­tion of about $110 bil­lion a year. CAPP's mis­sion, on be­half of the Cana­dian up­stream oil and nat­u­ral gas in­dus­try, is to ad­vo­cate for and en­able eco­nomic com­pet­i­tive­ness and safe, en­vi­ron­men­tally and so­cially re­spon­si­ble per­for­mance.

File Photo

Rail is cur­rently a ma­jor method of mov­ing pe­tro­leum.

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