April 20th, 2020
Support plan for oil and gas sector
I was encouraged by the government's support plan for the oil and gas sector that was finally announced on Friday. In short, I had asked the Minister of Natural Resources to support workers and not throw money at large corporations. Here's my column on all that.
On Friday, the federal government rolled out its long-awaited initiative to support the oil and gas sector, a sector hit hard by the COVID-19 pandemic and the world-wide lockdowns that have ensued. Oil prices, already low at $50 per barrel, plunged as demand dropped. Within weeks, a barrel of Western Canada Select was cheaper than a Starbucks latte.
In mid-March, the federal government hinted at a $15 billion package for the oil industry. On March 20th I wrote to Seamus O’Regan, the Minister of Natural Resources, asking that the government focus any support package on oil patch workers, not big companies. I didn’t want to see a repeat of previous government bailouts that threw money at failing corporations (think Bombardier or GM), only to see those funds disappear into shareholder dividends and executive bonuses without any long-term job security for workers.
In that letter, and in a subsequent phone call to Minister O’Regan, I suggested that the government provide support for the industry by investing significantly in the clean-up of oil and gas wells abandoned by bankrupt companies. There are over such 3400 orphaned wells scattered across Alberta, and hundreds more in BC and Saskatchewan. They are not only environmentally hazardous but are a real problem for the landowners who no longer receive income from the wells yet still can’t farm the land around them.
A recent study estimated the cost to clean up these and other inactive wells (those still owned by viable companies) as up to $70 billion. Clearly this is a problem that needs to be tackled, and that effort would provide work for thousands of oil sector workers that have lost their jobs in the recent downturn. It’s an issue I’ve been pressing the government on for several years.
Other groups offered their suggestions to the federal government for a support package. The Alberta UCP government asked the federal government to buy shares in distressed oil companies. A group of 15 oil company CEOs asked the federal government to buy their accounts receivable. A group of 254 academics—many of them from Alberta—countered by saying the government “should pursue the retraining of fossil fuel workers, and public ownership of Canada’s renewable energy sector, where government coordination and large scale investment are needed in the short term and where investments will be repaid. Funding is also urgently needed to support energy and water conservation, public transportation, regenerative agriculture and other areas of mitigation and adaptation to global warming.”
Friday’s announcement stated that the government will put $1.7 billion into cleaning up orphaned wells, providing jobs for 5200 oil workers. A separate fund will provide $175 million to help companies reduce emissions, focussed on methane pollution. Methane is one of the most potent of greenhouse gases—80 times more damaging than carbon dioxide—and most of the world’s methane emissions come from the oil and gas industry.
The emissions reduction fund is an important step. A few years ago, the Liberals came up with a plan to require industry to reduce methane emissions but quickly backed down after pressure from the private sector. This new initiative will revive those measures, ensuring that companies comply with the reductions while providing funds to make sure the work gets done.
I am encouraged by this economic support package for the oil and gas industry. It provides immediate relief for thousands of workers and is a step in the right direction to address two of the major environmental impacts of the sector. I hope the government continues in this direction, diversifying our economy through stimulus funding for renewable energy, energy efficiency retrofits and other initiatives that will help us out of this crisis and into a cleaner, more resilient economy.