How Industry Is Reacting To The TMX Decision
Reporters for the DOB contacted the chief executives of several industry associations on Tuesday for their reaction to the decision of the federal government to approve the Trans Mountain expansion:
Petroleum Services Association of Canada (PSAC)
Despite Tuesday’s “right decision” to approve the Trans Mountain expansion, it remains to be seen whether the feds actually have the conviction to see this project through to its completion, said Gary Mar, president and chief executive officer at the Petroleum Services Association of Canada (PSAC).
“We know there are opponents who will use every means necessary to delay this project further,” he said. Pipeline opponents will use different tools, ranging from litigation to civil disobedience, and the federal government must still demonstrate whether it will ultimately follow through despite this opposition, said Mar.
“I will not express optimism until such time that the project commences its construction and is completed,” he said, suggesting the timing of this week’s Trans Mountain decision — days before a government decision on bills C-48 and C-69 — relates to an overall issue as to how the government will deal with the oil and gas business in the future.
While it has approved Trans Mountain, Mar suspects the federal government will appease pipeline opponents by enacting legislation that makes it impossible to complete any pipeline to the northwestern coast of British Columbia, extinguishing projects such as the Eagle Spirit Pipeline, as well as making it difficult, if not impossible, for any future pipeline project to receive approvals in Canada.
“And so, while Trans Mountain is welcome, because it would add roughly 600,000 bbls/d in takeaway capacity and would help us to move oil to marketplaces other than just the United States, it is only a fraction of the type of takeaway capacity that is needed for the production we could have in Canada.”
Mar said there are no immediate benefits for the oil and gas sector until the project is actually complete. Once completed, though, production increases would help put those in the service, supply and manufacturing sectors back to work. Unfortunately, he added, many energy sector workers may have already left the Canadian industry by that time, heading to other marketplaces.
“Even if we had all the terrible legislation like bills C-48 and Bill C-69 extinguished and rewritten into a palatable format, and if we had the Trans Mountain expansion completed, the question is: Will there still be people to be working in this area to be producing the energy that can be exported? That’s a legitimate question.
“There are fewer people entering into this work environment, and the people who are trained and highly skilled are taking their skills and training to other parts of the world where it is easier to get projects done.”
The head of the Canadian Energy Pipeline Association (CEPA) was appreciative of federal government approval of the Trans Mountain expansion project, but somewhat guarded in his initial views of the Trudeau government’s official announcement.
While Chris Bloomer called the announcement “welcomed” by industry, he hesitated to call it a win until construction actually begins on the long-delayed project.
“The decision is certainly welcome. If it wasn’t for a positive decision it would have been catastrophic. So, we welcome the decision but … what are the next steps to get through to getting this project up and running in the next few years or so?” he said in an interview.
“And, how are we going to deal with what I think will be still some strong waters? There’s some speculation where people have said they’re going to file court injunctions and they’re going to do this, or they’re going to do that,” he added.
“The question mark that hangs over this whole thing at this moment is, really, how is the federal government going to manage that? Certainly, in an election cycle, if it gets really messy, how are they [the governing Liberal Party] going to stand by the decision and say, ‘We did the right thing and we were rigorous and met all the hurdles necessary to access new markets?’”
Bloomer said that despite the Liberal Party’s thumbs-up concerning Trans Mountain, how the ruling federal party’s reacts to the fall-out, sure to come from anti-pipeline advocates, remains key.
“There’s two big questions hanging in the air: How are they going to deal with the opposition going forward on Trans Mountain to make sure it happens and, secondly, how are they going to articulate the vision for this industry going forward and its need for additional infrastructure.”
Bloomer succinctly summed up his thoughts on the federal announcement: “Guarded, cautious; I mean, this industry is deeply in trouble and has been deeply in trouble for a long time. This [Trans Mountain] is a necessary project to go ahead. It’s withstood incredible scrutiny from all angles and it should go ahead,” he said.
That said, and especially in the current election cycle leading up to the October federal election, Bloomer admits there’s uncertainty.
“There’s concern about how the [current] government is going to deal with opposition to get this done; there’s concern of the government’s view of the role of this industry going forward,” Bloomer said.
“The whole announcement was basically a project announcement wrapped into a campaign speech. So you kind of look at that and go, ‘OK, I guess that’s what it is.’ We’ve got to change that narrative. We’ve get to get the [federal] government to be behind the industry and behind getting this project built,” he added.
“Buying it is one thing; approving it is another. Getting it built is the other thing. So, we’re maybe, let’s say, two-thirds of the way.”
Tristan Goodman, president of the Explorers and Producers Association of Canada (EPAC), is optimistic that the federal government’s announcement is a harbinger for better times ahead for a beaten-down western Canadian oil and gas sector.
“First, I’m very supportive [of the federal government’s decision] and it’s good news for Canada and the prosperity of our country. And I think, also, it’s positive from the perspective of showing that we can get pipe built and have protection of the environment, along with proper consultation of Indigenous nations,” he said.
Goodman’s said he’s “optimistic” that shovels will be in the ground soon and that construction of the Trans Mountain expansion project will begin in relative short order.
“I recognize that there’s still continued frustration. But, yes, I think we are going to see shovels in the ground and I would encourage the federal government, as owner now of this significant Canadian asset, to move quickly forward on this decision and demonstrate that approval means oil will flow.”
According to Goodman, the “odds are significantly in favour” of the Trans Mountain project actually moving forward. Especially considering the federal government's $4.6-billion purchase of the asset.
“I think the federal government is serious about this. I think we’re always questioning if they spent this money to not build a pipeline. And I, genuinely, don’t think that’s what they’re thinking. I think they need to respond to all Canadian concerns and, as much as we need the pipeline built, there are others that are still in opposition. It’s a tricky thing to manage,” he said.
That said, Goodman prefers a glass-half-full analogy.
“From my perspective, I’m not going to use the term ‘cautiously optimistic.’ I’m a realist and I am an optimist and I believe the line is going to be built.”
Canadian Association of Oilwell Drilling Contractors
Mark Scholz, president and CEO of the Canadian Association of Oilwell Drilling Contractors, said while he is pleased the expansion was renewed, he was disappointed with Prime Minister Justin Trudeau’s delivery of the decision.
Calling the delivery “disingenuous,” Scholz said Trudeau failed to mention how good Canada is at producing energy in a responsible way, nor did he mention the fact Canada has the best people, equipment and regulatory systems in the energy industry.
“It just seemed like the industry was almost a nuisance that we have to put up with until this [energy] transition takes place,” said Scholz. “And that, to me, is quite disingenuous, particularly when I think Canada’s oil and gas industry actually has a huge role to play in dealing with and addressing climate change. And the fact that he didn’t mention anything of that sort, it was … quite disappointing.”
Some industry associations said they won’t be convinced the project will proceed unless there are shovels in the ground. Scholz took it a step further saying he won’t be convinced until the first barrel of oil is shipped.
“I really think that this government does not have a particularly good history of meeting the needs of our industry. And so I think a lot of people are saying, ‘Yeah, okay, this is great. It’s been approved.’ So when is it going to be completed and the first barrel shipped?”
Scholz said the approval was anticipated by the industry and it has been priced into the market. He doesn’t expect to see any immediate huge rally in the oilfield services sector.
“We are sitting on incredibly harmful legislation that’s currently in the Senate right now [bills C-69 and C-48],” he said. “And if those two pieces of legislation go through, particularly C-69, I think … that it is going to make it very, very difficult to attract capital in Canada.”
Scholz said it is challenging to be positive in these negative times when he’s been on the phone with association members that have been getting re-evaluated for lines of credit.
“There’s just so much negativity and noise that’s going on in the background,” said Scholz. “And so I really do believe that we’re in unchartered waters right now. This is worse than the 1980s by tenfold. And it’s quite unprecedented what we’re dealing with. We’ve seen a 40 per cent reduction in the rig fleet since 2014. So we used to have 900 drilling rigs in Canada; today we have 550. And I think we have about 200 more to go [leaving the fleet] before we’re done.”
Canadian Association of Petroleum Producers
Tim McMillan, president and CEO, said the approval means Canada will finally gain more access to growing overseas markets. He said the expansion is a step in the right direction toward offering a long-term solution in improving investors’ confidence in Canada.
“This project is crucially important because just a few years ago we had three major pipelines projects to Canadian ports for Canadian oil,” said McMillan. “Today we have just one. We have to continue to push for greater market access and major projects to come back to Canada.”
McMillan said the prime minister’s commitment to construction starting this summer is crucial and something they will be following closely. McMillan said ultimately every day the project is not concluded Canadians are missing out on millions of dollars of revenues to government. The benefits will be immediate on the construction side and the benefits to the general economy won’t take affect until oil is flowing, said McMillan.
“We’ve proved to the world we can approve major projects, we now have to prove we can build them,” said McMillan. “I am confident, I think, that the environment in Canada today is far more conscious of the pressures that are trying to stop energy infrastructure — that we’ve seen the awareness of Canadians of these projects rise. We’ve seen the support of Canadians rise in poll after poll. And the foreign activists, I expect, will use every tool in their toolbox. They will use the courts. They’ll use social media. But when it has the broad base support that Canadians are continuing to show, I think that that puts them in good stead.”
Other reaction from around the patch
Delbert Wapass, executive chair and founder of Project Reconciliation, said the federal government made the right decision on the expansion of Trans Mountain.
“We see the possibility to make this a pipeline to reconciliation,” said Wapass. “We are proposing to buy a 51-per cent stake in TMX on behalf of eligible Indigenous communities in Western Canada because we want to move from managing poverty to managing wealth,” he said.
“It’s high time Indigenous Peoples had a seat. This is about us taking the lead on protecting the environment and controlling the revenue that will allow us to move from poverty to prosperity.”
“Minister Bill Morneau has previously indicated the federal government’s interest in Indigenous Peoples having an ownership stake. We look forward to working with the government on the opportunity, and believe it will be a significant step to economic reconciliation.”
Assembly of First Nations
AFN National Chief Perry Bellegarde said implementing and enforcing free, prior and informed consent will ensure that governments, business and First Nations are onboard and onside before any development begins. Implementing this basic international standard should not delay development. It’s a way forward and a way to better ensure economic certainty. Avoiding it actually creates economic instability for the country, he said.
“First Nations are not mere stakeholders. We are the rights and title holders and our rights, title and jurisdiction must be respected,” said Bellegarde. “It’s clear First Nations have different positions on this project but they all stand firm that their rights be respected and their traditional territories be protected. Only First Nations can determine if those conditions are met. The government needs to engage fully with First Nations — to uphold rights and for the basis of good business. This entire situation is an important reminder why the UN Declaration on the Rights of Indigenous Peoples and free, prior and informed consent is the way forward. It’s the way we avoid conflict, lengthy and costly court cases. It's how we create peaceful approaches and economic certainty for everyone.”
Independent Contractors and Business Association (ICBA)
Chris Gardner, ICBA president, said it’s time to build the pipeline and secure the investment, jobs and opportunities that will be an important part of Canada’s long-term prosperity.
“We have been proud to champion this nation-building project from the very beginning and will keep on working to ensure Canada’s energy industry has the workers, infrastructure, support and approvals needed to be successful,” said Gardner. “It is impossible to overestimate how important responsible resource development is to our economy and to Canada’s ability to attract investment and create opportunities for hundreds of thousands of families across our country.”
Progressive Contractors Association of Canada (PCA)
The Progressive Contractors Association of Canada (PCA), whose member companies will be major builders of the Trans Mountain Pipeline expansion project along with Alberta and B.C. construction workers, is urging the federal government to ensure nothing else stands in the way of this critically important project.
“We’ll believe this project is moving forward when the shovels are finally in the ground,” said Paul de Jong, PCA president. “While today’s decision is the right one, it’s far from a ringing endorsement when the government is working so hard to kill major resource projects through legislation and regulations designed to make energy development less likely in the future.”
The PCA believes Bill C-69 will bog down major projects and drive up costs and uncertainty. Bill C-48, it adds, limits Canada’s export capacity by banning oil tankers carrying more than 12,500 metric tonnes of crude oil from stopping at ports along B.C.’s north coast. Both bills are likely to be passed into legislation this week.
“We’re urging the federal Liberals not to use Trans Mountain as a pawn in their re-election bid this fall,” added de Jong. “With thousands of jobs, billions in economic benefits and Canada’s credibility on the line, there’s too much at stake not to get this project built now, not months from now after an election.”
PCA co-sponsored a rally in Vancouver today in support of the project.