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I was recently forwarded a link by a kind reader to a story about how “cleaning up Alberta’s oil patch could cost $260 billion.” Like many who do not have $260 billion, the article caught my eye. Trouble started almost immediately; the story was attributed to a Mike De Souza. This gentleman writes for a publication called the National Observer, and I will not post a link because it is the sort of site that advertises pure, unbiased information and provides anything but. Suffice it to say that Mike De Souza would swim through a shark tank with bacon stuffed in his ears if he knew it would harm Canada’s petroleum industry somehow.
The startling number, as many of you now know, comes from a presentation made by an Alberta Energy Regulator executive last February to a “private audience.” It appears to have been some sort of rogue presentation, because the number exceeds the AER’s estimate by $200 billion.
That is, surprisingly enough, neither here nor there; there is no documentation to support the bigger number and it remains speculation (two experts I spoke with offered quite different opinions, one corroborating $60 billion and one thinking the true number higher). What is of interest, lamentably, is how this story illuminates the sad state of affairs that Canada’s petroleum industry seems incapable of doing anything about.
First off, the news report itself. De Souza et al obtained the presentation through, per the article, requests under the Freedom of Information Act. Good digging on their part, but what on earth is going on with the regulator’s disclosure?
Back in the days when I was involved in corporate public disclosure, any material presented externally, or even internally to employees, was considered public material. There is no way to control where that information will go. It is mind-boggling that the AER would sanction and/or not control something as crucial as those estimates, because we all know what happens next – that is the new “real number” in the eyes of the world. De Souza et al are very good at what they do. Try Googling a simple “Alberta $260 billion” and you will get over 140,000 results. Job well done, Mike. The AER posted a hasty explanation, standing by its lower estimate, but Google does not care and never will.
Then, as if that disclosure issue were not bad enough, the AER on the very next day put out the news that the organization’s president is resigning. It was planned for months, the AER says, and had nothing to do with the bombshell of the day before.
It is a miracle that the petroleum industry is still alive with that kind of help. Ellis is resigning in 3 months; was it absolutely necessary to announce it the following day? Do you not understand what war you’re in?
The AER is making positive strides, such as the area based closure program, which will significantly reduce the cost of abandonments through geographical cooperation among companies. Such programs are critical information for the citizens of Alberta and anyone else paying attention to the issue. But no one knows, and so no one cares. $260 billon, and the president resigned. That’s what the world now knows.
The AER is but the tip of the iceberg in this insanely unfocused “attempt” to speak wisely for the industry. The quotation marks are necessary because there doesn’t appear to be any attempt at all. There are countless examples of missed communication opportunities, self-inflicted wounds, and inward thinking.
Sometimes the industry doesn’t even help itself. Canadian Natural Resources, probably the smartest and shrewdest operator in the business, expressed frustration this past week at how crude oil logistics situations – the inability to move oil out of the province with maximum efficiency – were being gamed by some players to make windfall profits. In a sheer coincidence, BP reported in its third quarter results conference call just how lucrative the massive Canadian oil price discount can be. Don’t call me, lawyers, I’m just sayin’. Because that’s what you said. And Q4 will likely blow Q3 out of the water in that regard. Natural gas is no better; we have the lowest prices in decades in the province, and the situation is being made worse as more BC gas is being brought into a severely glutted market because TransCanada feels like doing it. All these actions decimate Alberta royalties and Canadian tax revenues, and no one notices because no one says anything.
It goes on and on. I received an excellent report from another reader, with a bunch of charts showing how uncompetitive Canada is. One chart compared the number of days required to get a construction permit in 35 countries, and Canada was second last, far behind even Italy. Great stuff, but I can’t show that to you, because it originated from an investment bank’s circulation to its valued (i.e., fee-friendly) clientele, of which I am not one. Excellent messages the world needs to hear, but they won’t because, well, I don’t know, ask them.
And that’s just industry. If you want to see true Keystone Cops, we can of course look no further than government. I try very hard not to single out politicians, it is not a game I like to play because I don’t know what it’s like to be an elected official. Stupid decisions are stupid from some chairs but not others. But this is business, our business, and some performances are inexcusable. If you care to watch, I defy you not to cringe as the Deputy Minister at Alberta Energy and an assistant deputy minister are unable to answer the most basic questions about Alberta’s oil production. The way they describe the oil price differential is equally painful. And these are the industry’s representatives?
This business is hard enough with all the attacks coming from outside. Can we not maybe take that extra step and show real leadership, rather than relying solely on people’s energy dependence?
We are taking mortar fire from all sides. We have industry associations that seem to resonate only with the industry. We have a wealthy capital-markets elite that circulates great information that might help the cause, but only to those with the right credentials, and only if it helps their cause first. We have a regulator that blows its own toes off, and an energy ministry that doesn’t understand the most basic facts about Alberta energy. We have federal… don’t even get me started on that. Suffice it to say that Canada’s petroleum industry appears to be an embarrassment to Ottawa, who grudgingly absorbs those piles of petroleum cash but wants it known that the whole business is rather unseemly.
Maybe we should replace a lot of vice presidents and directors and associate deputy directors with a bunch of 15 year olds who can show us how social media works. And maybe we should marry those with a select few from the industry who really know what they’re doing, who actually do things, and who understand what progress looks like.
Maybe we should learn from another recent Global News story. A Calgary geologist named Julia McElgunn found herself on a training course with a native anti-pipeline BC resident, and she took the opportunity to strike up a dialogue and advance the discussion. The two of them probably did more to advance the energy debate with BC indigenous peoples than would a year’s worth of consultations. All on their own initiative. That is what true leadership looks like. Maybe Ms. McElgunn should be our deputy minister at Alberta Energy. I bet she would know every vital statistic before she even started the job.
Several hundred thousand of us with boots on the ground have a few questions. First, why do we make it so easy for those who are trying to choke our business to death? And the other is, can we have some help please? I’m just a yappy little dog, and people like Julia and the many hard-working energy people I talk to do what we can, but where is everyone else? Where are the big hounds? And this time bring your ‘A’ game, please.
Read more insightful analysis from Terry Etam here. To reach Terry, click here
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