Varcoe: Oilpatch ‘boiling over’ as energy CEOs tackle pipeline impasse with premier

It was near the end of an hour-long meeting Thursday on the 21st floor of a downtown Calgary office tower when junior oil producer Doug Bartole finally had a chance to speak to Alberta’s premier.

Around the boardroom of the Canadian Association of Petroleum Producers sat Rachel Notley, her chief of staff and deputy minister, along with executives from some of the country’s biggest energy companies: Canadian Natural Resources, Suncor Energy, TransCanada and Enbridge.

The mood in the room, Notley said later, was “tense and concerned” as they gathered for the first time since a court ruling last week pushed the Trans Mountain pipeline expansion into limbo.

As the head of the smallest firm at the table, Bartole was there to talk about the fallout for his company, and hear what the premier intends to do to get construction back on track.

Many of the larger companies spoke about the ruling’s chilling impact on the broader investment climate, and the inability of Canada to get major infrastructure built.

Bartole spoke from the heart about the challenges facing his company, InPlay Oil Corp., and the implications for dozens of communities across the province that rely on the oilpatch.

He pointed out the number of public junior oil and gas producers in Canada has shrunk from about 80 a decade ago to roughly 20 today. (National Bank data shows 45 per cent of junior producers have disappeared since 2012.)

Problems facing the sector, including discounted heavy oil prices and lagging stock values, have many struggling to raise money, hire staff, increase capital spending or grow.

“I was pretty much the last one to speak and … I was pretty emotional,” the 52-year-old native of Bonnyville recounted Friday.

“I related us to a lot of the small companies throughout the province and in the small towns. We put our own money into this to get it going,” he said.

“Trans Mountain affects us like everyone else … but the entrepreneurship that we bring to the table — these small service firms and ma-and-pa companies and the jobs they add — have been hurt significantly. And I don’t think anyone has spoken out for that.”

After the meeting wrapped up, executives solemnly exited the elevators at First Canadian Centre and headed off into the streets.

Several in the room said Bartole’s comment were particularly powerful because they reflected the growing anxiety and anger roiling through the sector and province today.

Much of it is fuelled by the uncertainty about a pipeline project designed to triple the amount of Alberta oil shipped to the west coast and, so far, Ottawa’s undefined roadmap to restart construction of the $7.4-billion development.

The expansion was put on hold after the Federal Court of Appeal ruling quashed the project’s approval because of the federal government’s inadequate consultation with Indigenous communities and the regulator’s improper consideration of the pipeline’s impact on oil tanker traffic off the Pacific coast.

There are no obvious solutions to quickly resolve the problems identified by the court, although the premier spoke Thursday about legislative options.

“There is a sense of urgency. We must find a solution to this problem quickly,” she told reporters.

Companies getting ready this fall to build their 2019 spending programs are worried the project’s delay will impair future investment.

“It’s bad for Canada. I don’t think the Canadian public actually realizes, it’s not just about the pipeline,” Steve Laut, executive vice-chairman of Canadian Natural Resources, said moments after the meeting broke up.

“It’s about LNG, it’s about any project in Canada, anything that needs to be built, maybe it will not get built now.”

Without a resolution to Canada’s pipeline problems, the ability to attract investment back into the energy sector remains hamstrung — and executives warn that could impact other big-ticket projects across the country.

“There’s no predictability, there’s no certainty, there’s no timeliness. So it’s just pure uncertainty. That’s where we are at,” Laut added.

What is certain is companies are deeply worried about the impact of the ruling as Canadian oil production increases and existing pipeline systems are full.

Western Canadian heavy oil is likely to continue to face a steep discount to light crude until new pipelines are built.

In the short-term, the ruling is also squeezing share prices for many oil producers. Since the court decision, the S&P/TSX Capped Energy Index has dropped about six per cent.

Tamarack Valley Energy CEO Brian Schmidt, who attended Thursday’s meeting, said he told the premier his company would likely be trading at almost two-times higher if the junior producer was located south of the border, based on the valuation of similar-sized American operators.

“You’re just watching people leave the basin. No one is able to raise money here right now,” said Schmidt, whose company’s share price is down almost 10 per cent since the ruling.

“This pipeline is now a barometer for major project investment in Canada.”

CAPP president Tim McMillan said there was some discussion in the room about federal legislative solutions to clarify parliament’s authority over pipelines.

The ball remains firmly in Ottawa’s court. The prime minister said this week that options are still being explored.

“It’s getting towards things being pretty desperate,” Chris Bloomer of the Canadian Energy Pipeline Association said after the meeting.

Notley told reporters Thursday she’s pushing for the Trudeau government to make its plans clear within weeks on how it will revive the stalled project.

But the issues are complex and will take time — several months or possibly years — to resolve.

Company executives wonder what will happen next, but are preparing for the worst.

“We’re certainly not cutting staff, but we’re certainly reducing our capital expenditures,” said Chris Slubicki, CEO of Modern Resources, a Calgary-based junior petroleum producer.

For Bartole, whose company employs about 75 people and operates in central Alberta, the meeting was a chance to talk to others in the industry and the premier about the latest setback for the pipeline.

A solution needs to be found shortly, not in several months or years, he stressed.

“I’m talking for the smaller guys here,” Bartole added. “As an Albertan, and all of us in this industry behind the scenes, we’re extremely frustrated, boiling over.”

Chris Varcoe is a Calgary Herald columnist.

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