Column: It’s been a perfect storm, but the province is working on life preservers for oil industry

I spoke to Minister of Energy and Resources Bronwyn Eyre on April 14 about the province’s announcement of a number of measures to help out the oilpatch in this time of crisis.

I asked her about the thinking behind extending expiries for oil leases. Eyre responded there’s very little cost to the government on this, and since the current price of oil is so low, they’re not going to lose much in terms of land sales, and there’s so little drilling expected.

article continues below

But Saskatchewan has not followed Alberta’s lead in stopping land sales for now. The usual April Saskatchewan sale went ahead April 7, bringing in a paltry $1.7 million. The ministry hasn’t cancelled or postponed the next one, scheduled for June 2, as of yet.

“We decided to go with the routine, because it’s so hard to know,” Eyre said. “We did decide to go ahead. We’ll see what we do, going forward. We did have some interest, but of course not a massive amount. That’s to be expected. It was just about trying to stick to the schedule, perhaps for force of habit or predictability.”

In recent years, the province has been charging an administration levy on oil producers, basically having the industry paying for its own regulation, to the tune of 90 per cent. In an effort to help out the industry, Eyre announced on April 14 the province would be knocking that back to 50 per cent for the time being.

When I asked her about drilling prospects for this year, Eyre said, “I’m very concerned.

“I don’t think it would be correct to say that things are looking particularly up. It’s a great concern, to me. The capital investment cuts announced by companies in the province, will sadly impact jobs and drilling, and more broadly seeing, production. We’re already seeing the impacts of this. It’s been a perfect storm, and such a rapid one.”

One of the sticking points between the federal and provincial governments has been on methane regulation. For a while there, it looked like there could be a Saskatchewan set of rules, and a federal set. The feds have now accepted the province’s rules as being sufficient.

“The methane agreement is significant,” Eyre said, adding, “This was something the sector wanted, to be clear there were not going to be two sets of frameworks imposed, with two sets of regs. But in fact, the Saskatchewan rules, which make more common sense, are way less prescriptive, based on individual pieces of equipment, that kind of thing. And we now have the jurisdiction to act in that space.”

It’s been a long time coming, she said.

In a way, this was similar to the province asking the feds “will you accept our plan, our approach” when it came to implementation of carbon dioxide strategies.

It took months of work to get to this point. She said Saskatchewan appreciates the acceptance of the plan, “because we think it’s a good plan.”

“It still strives to reduce 4.5 million tonnes from venting and flaring by 2025. We know that gas is wasted, 20 per cent to venting and flaring, so it makes common sense to do something.”

Eyre says Saskatchewan’s is a much more common sense, field-tested approach.

To this end, I would say reducing the release of methane to the atmosphere is probably one of Saskatchewan’s best strategies for reducing greenhouse gas emissions. Surely there will be groans from the industry, especially with regards to where its uneconomical to capture this gas. But perhaps this will drive innovation for small-scale power generation using this gas. Maybe it’s easier to feed power into the grid, already supplying that wellsite or battery, than it is to collect gas from it?

Even if you’re not wholly sold on the whole greenhouse gas thing, this is essentially an argument for energy conservations and increased efficiency.

Eyre said, “The work involving the CAODC that builds on what was agreed upon between Premiers Kenney and Moe last year to harmonize rules and regs and cut red tape between provinces, and in this case, to move between job sites over the border without getting bogged down over two sets of rules was something in the works, yes, but it’s now official, and I think it will be helpful on the ground.”

Eyre has told her federal counterpart that now would not be the time to throw any more regulatory hurdles at the provinces. She pointed out we’re still importing Saudi oil into Eastern Canada, but can’t export oil from northern British Columbia due to Bill C-48, which is now law.

“The optics around that are a bit unfortunate, in light of the Saudi Arabian component to the problem we’re in, in the first place. Wouldn’t it be night if Canadian energy were mandated at a time like this? It would be instant unity,” she said.

Just a couple days before, OPEC+ announced production cuts of 10 million barrels per day, although President Donald Trump indicated it was likely going to be a lot more.

I asked Eyre, should Saskatchewan be part of some sort of cartel to control production?

She responded, “It’s good news, for now, for Saskatchewan, that we haven’t been asked to mandate cuts. That really is a provincial jurisdiction, anyway, but Canada, Newfoundland, Saskatchewan, Alberta, haven’t been asked to do that. We don’t need anything mandated right now, of course, because we’re seeing the voluntary, market-driven curtailment of production anyways. It would be rather painful, if anything were formally mandated on top of that.

“For now, I was quite heartened that decision was reached, that they addressed it on the level they did.”

These mid-April measures are not the end. The province is looking to do more for the industry.

“In terms of what is to come, and what form it is to take, that is unknown, in terms of what’s wanted,” she said.

 

Brian Zinchuk can be reached at brian.zinchuk@sasktel.net.

 

 

© Copyright Pipeline News

Comments

NOTE: To post a comment you must have an account with at least one of the following services: Disqus, Facebook, Twitter, Google+ You may then login using your account credentials for that service. If you do not already have an account you may register a new profile with Disqus by first clicking the "Post as" button and then the link: "Don't have one? Register a new profile".

The Pipeline News welcomes your opinions and comments. We do not allow personal attacks, offensive language or unsubstantiated allegations. We reserve the right to edit comments for length, style, legality and taste and reproduce them in print, electronic or otherwise. For further information, please contact the editor or publisher, or see our Terms and Conditions.

comments powered by Disqus