An update on Alberta’s energy sector isn’t a very cheery thing to listen to these days, but Ponoka County council was able to take away a few interesting items from a presentation at their June 18 meeting.
Kelly McTaggart, community engagement advisor for the Canadian Association of Petroleum Producers (CAPP), came by to provide an industry update.
CAPP, an advocacy and lobby group for oil and gas member companies, represents about 80 per cent of all crude oil and natural gas in Canada.
McTaggart explained not a lot has changed in the over the last 12 months, as capacity and access to new markets remain the biggest hurdle for both industries while also awaiting policy and other announcements from provincial and federal governments.
Despite the second approval for the Trans Mountain (TMX) expansion just being announced, there is a need for one or both of the other pipeline projects to be approved.
“There are some positives with Enbridge’s Line 3 getting U.S. federal approval, but there are still a number of permits from some states that leaves it still up in the air and Keystone XL faces several challenges with environmental reviews,” she said.
“The TMX approval still has some hurdles ahead, but Canada needs at least two of these pipelines though TMX is the most important as it is the only one that will provide supply to new markets.”
She added that industry is still waiting to see what the new Alberta government will do on rail capacity, as it had previously stated it would kill the deal to lease tanker cars made by the NDP.
Natural gas was also big topic with McTaggart noting it is in slightly better shape than the oil side.
“There remains pipeline room for gas, especially in B.C. and the investor climate is better because there is a lot of conventional drilling ability still in Alberta. It is somewhat good news,” she said.
“The markets in China and India are key for Canadian natural gas. China alone is looking to import 41 billion cubic metres per day, so there are huge opportunities available.”
However, that’s were the positivity ends as there will soon be some U.S. natural gas pipelines running into Ontario plus new capacity connecting the lucrative U.S. northeast to gas supplies in the U.S. midwest.
“Due to that, there is a need for new pipelines to the east and a need to push Canadian natural gas in order to keep the industry strong,” she added.
“The U.S. is our biggest customer, but also now our biggest competition as they have increased production 35 per cent in the last decade. That is why we need to look elsewhere, such as Asia.”
While an International Energy Agency (IEA) supply forecast shows a 400 per cent increase in renewable energy production by 2040, McTaggart explained the broader story demonstrates alternative energy won’t soon be taking on too much of the actual load.
“While renewables are and will be an important part of the global energy story, it will by no means outpace oil or natural gas. However, the story does show that natural gas will dramatically increase over that same time frame,” she said.
One other subject that has been in the news and that CAPP is attempting to help with is the growing trend of companies going under and abandoning oil and gas assets.
“The substantial inventory of suspended and orphan wells continues to grow as the downturn rolls on. We are looking at a six per cent increase this year and there is incentive for industry to fix this,” said McTaggart, who added the biggest indicator of a company collapsing is non-payment of property taxes.
“There is a need to have policy and triggers in place to find out why these companies keep going under. Not paying taxes is a signal to us that there are issues, but ideally the issue would somehow be identified earlier so the province and orphan well association can step in.”
She added that CAPP is advocating for the UCP to continue the review on the subject started by the NDP.
This particular issue has relevance to Ponoka County as the municipality is among the top 10 in energy activity in Alberta. Reeve Paul McLauchlin referenced the recent bankruptcy of Tridon Energy, who received approval to acquire hundreds of wells from a defunct company then cut deals to lower their tax burden only to go belly up within weeks.
“They transferred hundreds of wells then literally pulled the plug. The reality is this system is seriously broken. It’s ridiculous to the point where a northern municipality has a company still in operation, yet refusing to pay its taxes to the tune of about $8 million,” he said.
“This county is energy positive, but we are as apprehensive as anyone else, but my biggest question is what can you share with us to make us more aware of things?”
McTaggart stated that CAPP is working on a couple of things that may help lobby government and that she would see what information can be handed to the county in order to help both parties stay up-to-date.