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Notley to announce plan to address oil price differential

Last Updated Dec 2, 2018 at 1:04 pm MST

EDMONTON – Premier Rachel Notley says a decision on whether or not to curtail oil production will be announced Sunday and if her op-ed in the Edmonton Journal is any indication, production could be put on pause.

Notley wrote in the op-ed the “natural inheritance of every person in this province is being sold for next to nothing”. Her piece goes on to say while the long-term answer is building new pipelines–which she says the province plans to keep fighting for–there needs to be more done in the short-term.

One of those short-term options is “to intervene and temporarily restrict oil production, with a cut in production, industry-wide.” She said the restriction would be lifted when “stockpiles draw down, the price gap closes and the bleeding stops.”

Notley also wrote her government needs to be smart about this decision as it is a major decision with major implications and that is why a team has spent the last few weeks pouring over the issue. While there’s been a consensus on a solution among government leaders–both from the NDP and Notley’s counterparts in the UCP and Alberta Party–there hasn’t been an industry consensus and one isn’t expected, either.

Notley is calling this one of the toughest decisions that will be made as a province, but that hard-working people’s jobs, kids, and futures remain their absolute focus. She ends her statement by saying, “No matter what, I won’t stop fighting for you.”

Her official announcement is slated for 6 p.m. Sunday. CityNews will be taking it live in the 6 p.m. broadcast.

Entire Alberta energy industry hurting, says analyst

Meantime, the Canadian Association of Petroleum Producers (CAPP) says it isn’t ready to comment just yet. It will be waiting for the news that comes out of the provincial capital Sunday night. However, CAPP President Nick Shultz did tell 660 NEWS in an emailed statement that a lack of competitiveness and market access and unprecedented price discounts, continue to be among some of the most significant challenges in the Canadian energy industry.

“This dire situation further reinforces the need for Canada to export its oil and natural gas to new global markets–ensuring fair market value for our natural resources, helping to meet growing global demand, and expanding our customer base beyond the U.S.,” he said.

Analyst Peter Tertzakian said while he doesn’t know what the government action will exactly be ahead of tomorrow’s announcement, he did say Alberta is in a tough situation and something has to be done. He also said limiting production is a legitimate way of intervening in the market and it’s one of the more “obvious” options in bringing prices back into line with American prices.

“We already know [low prices are] affecting Alberta’s situations–the royalties, taxes, and the broader, multiplier effects of losing employment as a consequence of these low prices,” he told CityNews. “The premier will be acting in the interest of the Alberta people and after all the Alberta people are the resource owners.”

He said there are lots of companies, both in and out of the “oil sands fray”, that are suffering as a result of the current broad-based oil and gas issue. He also expects the people to be most hurt by restricting oil production would be people working in the oilfields.

“We’re entering into the winter drilling season right now. And as expenses for drilling get cut you’ll see an increase in potential unemployment in the province,” said Tertzakian. He also called Notley’s announcement last week regarding moving oil by rail a “midterm” solution with an impact that won’t be felt for months to come.

READ MORE: Alberta buying its own rail cars to move oil without feds, Notley says

He said there always consequences from any sort of intervention, but he thinks mass layoffs are unlikely. “It depends on how the cuts are done…They will likely be very short-term to try and alleviate the current situation. As we head into the midterm several months out, hopefully, the railroad additional capacity will be able to clear the glut and then beyond that other solutions include the potential start-up of some pipelines toward the end of next year.”

Tertzakian said government intervention is very rare–the last time it happened in Alberta’s energy industry was during the Peter Lougheed era.

Is history repeating itself?

An energy war between Alberta and Ottawa in the 70s and 80s pit Lougheed against then-Prime Minister Pierre Trudeau. The spat garnered international attention with even the New York Times picking up the story with a headline reading “Alberta to Cut Oil Output in Dispute Over Prices”.

Maclean’s Jason Markusoff said the battle over oil in the 80s was a political issue, not so much an economic one like we’re seeing today.

“It’s hard to compare this issue to the 70s and 80s,” he said. Decades ago the Trudeau government imposed the National Energy Program designed to ease up energy prices around the country. At the time this was going to impact Albertaimmenselyy. Markusoff said Lougheed sent a bold message to the feds by turning off the taps.

“This was going to raise prices for gas stations and home heating for the east,” he said.

A political move.

“[This was to get] Ontario and the federal government’s attention. In this case, it’s very much an economic move. It’s about moving prices not politicians…This isn’t about settling scores, it’s about settling down the economy and limiting layoffs and major production cuts.”

‘It was the oilfield’ that cost one Edmonton-area man his job a month before Christmas

“It’s a month before Christmas and I’m laid off. Sorry, kids. Santa isn’t coming this year, I guess.”

Welder Joe Hrachy was laid off from his job in Nisku. He said he and his coworkers were told they would have work until next January (2020) after a big contract came in. And then they were laid off.

“We were a production shop…The majority of our work is all oilfield. With the pipeline getting squashed and everything else happening, yeah, it was because of the oilfield,” he said, adding the current price oil is being sold at is a kick in the face.

“We’ve got more oil [in Alberta] than we know what to do with but we’re still buying Saudi oil, buying American oil. We’ve got the product here.”

He isn’t thrilled with the idea of “turning off the taps” because it will cost more and more Albertans their jobs. “We’ve seen it everywhere. The first rollback three or four years ago wages got pulled back when they said, ‘okay, we’ll just slow production down’. So everyone got their wages cut,” he said.

“If Jason Kenney and Rachel Notley want to pull production back in the oilfields, that’s not going to do it, man. When production gets rolled back–that’s exactly why I’m laid off!” He said cutting jobs is not the way to promote an economic recovery in Alberta or Canada.

Joe Hrachy was laid off a month before Christmas. He says it’s a direct result of turbulence in the energy industry. (PHOTO: Carly Robinson, CityNews Edmonton)

 

 

He also said tradespeople are in a bit of a tough spot when they look at rolled back wages, some sitting around the $17 an hour mark, with the risk of layoffs. He said with minimum wage at $15 with less of a risk working a minimum wage job more people might move away from Alberta’s biggest industry. He offered up a solution the government could redirect labourers and put them to work building greener energy projects like windmills.

“We’re all trying to go green–get all the welders in Canada building wind farms. Maybe throw some wind turbines up along the road. It’d be something to do and we’d be pushing for greener energy, too,” he said. “We could go solar, we could go geothermal.”

He said what Albertans need from the federal government is help.

“A GM plant got shut down in Oshawa and I might be wrong in my numbers but what did they lay off, 2,500 employees? Welcome to Alberta, man! There’s probably been 250,000 people in Alberta without a job since 2015. Sure they can say the unemployment rates are better, but I’m a prime example,” he said.

“How long am I supposed to tell the bill collectors, ‘sorry’? Got to make payment arrangements because I can’t afford to pay a full bill,” he said. “There’s a lot of guys in my situation. They rode the train when it crashed and a lot of us were just trying to scrape out of the bottom of the hole. And it’s like as soon as you see a little bit of daylight it’s like your ladder is kicked out from under you and you’re back at the bottom again. It’s rough out here. It’s scary.”

He said Alberta is no longer the ‘Texas of Canada’ and the glory days are gone.

-With files from CityNews and 660 NEWS.