Trudeau government must produce plan to help one of Canada’s most important sectors
It’s no secret that the Trudeau government has been influenced by the international environmental movement, which has spent millions in an attempt to shutdown Canada’s fossil fuel industry. Indeed, in 2017 when referring to Alberta’s oil industry, the prime minister said we need to “phase them out.” In addition, in 2012 when he was with the World Wildlife Fund, Gerald Butts, former principal secretary to Prime Minister Trudeau, said “we don’t think there ought to be a carbon-based energy industry by the middle of this century.”
But with Canada’s oil and gas sector struggling with two concurrent shocks—a major reduction in demand caused by the COVID-19 crisis and an aggressive battle for market share between Saudi Arabia and Russia—the federal government, perhaps reluctantly, is apparently working on an aid package to provide much-needed immediate relief for the battered industry.
When that package will come is anyone’s guess. On March 25, federal Finance Minister Bill Morneau said a package was coming in just a few hours or days. "I don't have the final answer on the exact hour that that will be delivered,” he said, “but I'm not talking about weeks. I'm talking about hours, potentially days.”
Yet here we are two weeks later, with the Easter long weekend upon us and the Department of Finance indicating that there’s still no timeline for its release.
Could it be that the government is waiting for the proverbial “Friday news dump” where in theory, releasing bad news on a Friday afternoon (or a Thursday before a long weekend) avoids media scrutiny?
There’s no question that Canada’s battered energy sector is growing impatient. Alberta Energy Minister Sonya Savage recently expressed frustration on behalf of the industry and criticized Ottawa for taking “too long” to respond to the sector’s concerns.
It’s easy for people outside of Alberta, Saskatchewan and Newfoundland and Labrador to dismiss the dire straits of Canada’s energy industry, but the crisis impacts us all including Ontario and Quebec, which have refineries that depend in part on western Canadian oil. By requiring intermediate goods and services, the Canadian energy industry’s supply chain also stretches from coast to coast, creating jobs, growth and economic opportunity across Canada.
According to Natural Resource Canada, the energy sector generated to more than $220 billion in economic activity and nearly 11 per cent of our country’s economy. Perhaps most importantly, Canada’s energy sector employed (directly and indirectly) and supported more than 830,000 jobs.
The energy sector also contributes nearly $17 billion to government coffers through corporate income taxes, sales and payroll taxes, royalties and land sales. Someone might want to mention that to the 265 academics who wrote a letter to Prime Minister Trudeau stating that “public investment in oil and gas at this time is… unwise given the urgent need for strategic investments in economic recovery.”
While it may be too much to hope for a permanent shift in the Trudeau government’s attitude and policies towards Canada’s oil and gas sector, the prime minister would be wise to ignore these academics and immediately provide a needed short-term aid package.
In particular, Ottawa should provide liquidity measures to avoid another Bonavista Energy situation. The oil and natural gas producer headquartered in Calgary recently revealed that its banking syndicate rejected a request to draw $175 million from its $500 million line of credit despite the company’s view that all conditions were met. In these uncertain times, companies must be able to access the credit they already have in place.
The package should also contain funding to help deal with Alberta’s serious orphaned (abandoned) oil and gas well problem. While a longer-term solution is needed, funding today will help maintain jobs and help clean up abandoned wells.
The COVID crisis will end, and global demand for oil and gas will return. What’s needed now, more than ever, is a robust plan to help one of the country’s largest and most important sectors and the Canadians who rely on it for their paycheques.
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