Nix ‘Social Licence,’ Says Wall At Sask. Conference

REGINA — ‘Social licence’ is a term that should cease to be used, according to Saskatchewan’s former premier. Quite simply: The term seems to carry unsavoury implications, chief among them that industry does not already have the social licence to operate and that it must apply for it from an entity whose identity is unclear.

“We really don’t know who is the issuer of the social licence,” Brad Wall told the Williston Basin Petroleum Conference on Tuesday. He said it became especially unclear who issues social licence following the inability of Alberta’s carbon tax to garner really any environmental/political support for a pipeline project.

Unfortunately, noted Wall, governments in Canada have been “very flatfooted and not at all effective” in helping Canadians understand why this nation’s energy sector already has earned whatever is implied by the ‘social licence.’ Fortunately, he added, Canadians slowly are figuring it out anyway.

“Social licence has long been paid for by this industry. It’s paid for in the taxes this industry has provided to all of Canada. It’s paid for in the direct support to transfer payments that quite literally have ensured the survival and viability of social programs. It’s paid for in the jobs that are created for Canadians.”

However, noted Martha Hall Findlay, president and chief executive officer of the Canada West Foundation, investors increasingly want to know environmental impacts: How companies do things, and not just what they do.

“We’re certainly seeing that with global investment,” she said during a panel discussion on necessary policy decisions to drive and retain investment in Saskatchewan’s energy sector. “There are global investment groups, and their shareholders are asking for ‘green.’ They’re asking for the carbon footprint. They’re asking those questions.”

Even though he rejects the notion of winning social licence to operate, Wall still believes industry must continue to address environmental issues and communicate its efforts and success in this regard. Pro-industry demonstrations carry value in telling this story, he said, citing the mass of trucks that passed through Regina in early April to protest carbon taxes, Bill C-48 and Bill C-69, as well as to support building pipelines.

“I think that it shocked many of our fellow Canadians to see the trucks on highways in the convoys. It puts a face to the industry.”

Not surprisingly, Wall added, he opposes a federally-imposed carbon tax. Taxing Canadian emissions, which comprise around 1.7 per cent of global emissions, has been almost the entirety of the current federal government’s environmental plan over the last three years. He believes a better focus is for governments and industry to develop technological solutions to global emissions, as was the case with the Boundary Dam Carbon Capture Project.

“If Canada wanted to have an impact on the global issue, then in my view we would have this big vision supported by resource dollars, [both] private and public sector, to do something about that.”

For Findlay, who also avoids using the term ‘social licence,’ when it comes to attracting investment into Canada’s energy sector, certainty is very important, and certainty is put into question when governments in Canada “flip-flop” and totally change directions every time different parties are elected to form those governments.

“When the current federal government came into office, one of the first things that they did was reverse a decision approving the Northern Gateway pipeline,” she said, adding that move was “shocking” for investors. Likewise, when a province is engaged in carbon polices and a newly-elected government in that province reverses that engagement, it too makes uncertain that matter of certainty for many investors, she noted.

“Investors look at the increased polarization, increased rhetoric and the increased flipping of decision-making when people do get elected. This is just a caution to governments: Don’t just rush into flipping everything, because there are long-term, deeper consequences.”

Craig Lothian, president of Lex Capital Management, suggested some of his U.S. investors are dissatisfied with Canada’s current federal political regime, citing what they consider poor environmental policies in this country. He told Findlay those investors would hope for changes after the next federal election.

“You’ve talked about the risks of flip-flopping. But in this particular case the flip can’t be any worse than the flop.”

Smaller Saskatchewan producers best stick to their ‘day jobs’ to win investment: panel

Balancing portfolios with more renewable energy in order to attract more future investment is an easier task for super majors than it is for smaller Saskatchewan producers, Jason Moser, partner and director of investment, PFM Capital Inc., told a conference panel discussion on oil and gas investment strategies.

“I think they probably have an easier time, because they have the in-house expertise,” he said, adding a smaller producer is challenged to have those same skill sets in-house. He noted, though, that co-generation is something of a cottage industry for producers in Alberta where there is a surplus of cheap gas. “There definitely are opportunities.”

According to Scott Southward, president and CEO of Steel Reef, in the wake of volatile commodity prices in the past few years, capital markets increasingly want to invest in companies that simply do what they do best, which in the case of Williston Basin energy producers likely does not include renewables.

“If the story is too complicated, then [investors] don’t want to invest, because they don’t know what the platform actually is,” he said. However, capturing associated gas currently is more important for the basin than it was, say, five years ago, which creates opportunity for Steel Reef as producers increasingly focus on pursuing their target resource.

“There has been a real push from the regulator to start covering this, and that actually creates a niche business for us to go in and get some gas plants and infrastructure in to help producers out with that.”

Funds flow challenges for oil and gas producers has actually benefitted Southward’s company a bit, he added, as producers have precious capital to spend, and so they want to put what they have in the drill bit.

“They don’t have a lot of extra cushion to do what I can do. It’s helped in terms of the opportunity set, but I wouldn’t say capital is easy to come for anyone in the Canadian oil and gas industry right now.”