AB Today – Daily Report March 11, 2020

Quotation of the day

“Price shocks are a normal part of the commodities business, and historically the Canadian oil and natural gas industry has been strong enough to weather similar fluctuations in the oil price. Today we are not.”

CAPP president and CEO Tim McMillan said infrastructure delays and cancellations have ​ ​ left oil and gas companies in a weak spot.

Today in AB

On the schedule The house is on a constituency break this week; MLAs reconvene on March 16.

On the order paper, the government teased three new bills that could be introduced next week: ● Bill 6, Appropriation Act, which approves spending in the budget; ​ ● Bill 7, Responsible Energy Development Amendment Act, which would overhaul the ​ regulatory approval process for oil and gas development; and ● Bill 8, Protecting Survivors of Human Trafficking Act. ​

Bill 7 comes from Energy Minister Sonya Savage, who has previously said she plans to ​ ​ ​ ​ ​ introduce a “suite of policies which will address the entire lifecycle of wells — from licensing to operations to production to abandonment and reclamation to post-closure and legacy sites.”

Premier watch On Tuesday, Premier Jason Kenney met with members of his executive council, provincial ​ ​ ​ ​ officials and industry leaders to discuss the impact of the oil price downturn.

He also appeared in a video with Ontario MP Erin O’Toole, who he has endorsed to be the next ​ ​ ​ ​ ​ leader of the Conservative Party of .

Cenovus to cut at least $300 million in spending, other companies expected to follow suit After losing more than half its stock value a day earlier, Calgary-based Cenovus announced Tuesday it will cut its 2020 capital spending by 32 per cent.

The company previously estimated it would spend between $1.3 and $1.5 billion this year; now that is down to the $900 million to $1 billion range.

Cenovus will also suspend its crude-by-rail program and defer decisions on major growth projects, as the energy sector in Canada and abroad grapples with a massive decline in crude oil prices.

Cenovus signed a deal with the province to offload government-held crude-by-rail contracts signed by the NDP in exchange for a special production allowance. But, with average oilsands production now expected to fall by six per cent to 350,000 and 400,000 barrels per day, the company says it will no longer require the allowance.

“We have top-tier assets, one of the lowest cost structures in our industry and we’ve made significant progress in deleveraging over the past few years,” Cenovus president and CEO Alex ​ Pourbaix said in a news release. “Consistent with our commitment to balance sheet strength, ​ we’re exercising our flexibility to reduce discretionary capital while maintaining our base business and delivering safe and reliable operations.”

The company also had plans to expand its Christina Lake and Foster Creek projects, but they have now been put on hold. Planned capital spending at Cenovus’s Deep Basin and Marten Hills operations were also suspended.

Reg Curren, spokesperson for Cenovus, told AB Today that Cenovus’s community investment ​ ​ ​ projects, including a recently announced Indigenous housing initiative, will continue.

Canadian energy companies especially vulnerable to market turmoil, says industry group Canadian Association of Producers (CAPP) president and CEO Tim McMillan said ​ ​ Tuesday that Canadian oil and gas companies are not in a strong position to absorb the market shock of the massive drop in crude prices caused by a dispute between Russia and OPEC.

“A series of infrastructure delays and cancelations such as Energy East and Northern Gateway has limited Canada’s ability to access world markets and therefore, better prices for our resources,” McMillan said in a statement. “Being price takers has made us uniquely vulnerable

to dramatic shifts in the oil price and what we’re seeing today will have immediate negative impacts on Canada’s economy.”

He also zeroed in on the federal government’s law banning tanker traffic off the coast of British Columbia as a weakness factor.

Analysts fear project cancellations, more belt-tightening In an investor note, CIBC analyst Robert Catellier said the last time Saudia Arabia waged a ​ ​ price war in 2014, West Texas Crude fell from US$80 to $US28 by 2016, halting as many as nine oilsands projects.

Analysts at Houston-based investment bank Tudor, Pickering, Holt & Co. also wrote about the potential for projects to close up shop in the province, pointing to the period between late 2015 and summer 2016 when oil production in fell by 140,000 barrels per day.

“Investor interest has perked up on the potential for Canada to be among the first to shut-in or decline given the rapid decline in crude prices," they wrote.

Premier Jason Kenney has dismissed a request by the NDP to rewrite the budget in light of ​ ​ plunging oil prices, instead establishing an emergency economic panel, headed by Imperial Oil board member and economist Jack Mintz, and convening closed-door meetings with cabinet ​ ​ and industry.

Today’s events March 11 at 9:10 a.m. — Calgary ​ ​ Premier Jason Kenney will speak at the Calgary International Airport about his upcoming trip to ​ ​ Ottawa to attend the First Ministers’ Meeting.

March 11 at 10 a.m. — Edmonton ​ ​ The Alberta Federation of Labour will be at the legislature to demand paid sick leave for employees.

March 11 at 2 p.m. — Edmonton ​ ​ Calgary—Fish Creek UCP MLA Richard Gotfried will speak at the South East Edmonton ​ ​ Seniors Association’s annual meeting.

Upcoming events

March 16 at 7:30 a.m. — Edmonton ​ ​ Finance Minister Travis Toews will speak at the Edmonton Chamber of Commerce and CPA ​ ​ Alberta budget breakfast at the Sutton Place Hotel. Toews was previously scheduled to speak on Wednesday, but the event was postponed.

Topics of conversation

● A new report from the Parkland Institute says job numbers in the oilsands will not return ​ ​ to the highs of the 2010s — despite production being at an all-time high. ○ Even though Canada’s Big Five oil producers have ramped up production, employment is down, in part due to automation and more efficient technologies. ○ The Big Five companies — , CNRL, Cenovus, Imperial Oil and Husky Energy — have shed 53,000 jobs since 2014. The report suggests the majority of those will never return, despite added takeaway capacity expected in the next few years. ○ “The massive capital spending of the growth phase of the industry is over,” said the report’s lead author Ian Hussey. “That and recent trends in ​ ​ extractive technologies and facility design cast further doubt on oil sands employment increasing significantly in the future.” ○ Instead, Canadian oil companies have increasingly been transferring gains to shareholders, including profits related to the UCP’s corporate tax cut, which the government billed as a job-creation measure. ○ Productivity per employee in the Canadian oilsands industry has grown by 72 per cent since 2014, while overall productivity is up 47 per cent.

● Before oil prices tanked this week, oil production and active drilling rigs were showing positive signs. ○ In February 2020 there were 166 active drilling rigs, up 15.3 per cent year over year. The number of inactive rigs decreased by 22.9 per cent during the same period. ○ Oil production was up 5.7 per cent year over year in January 2020, as the government’s curtailment eased.

● Speaker Nathan Cooper released an explainer video on the process of budget ​ ​ ​ ​ estimates.

● Treaty 6, 7, and 8 chiefs who attended a special assembly of treaty chiefs last week issued a statement calling for Treaty 7 territory children and family laws to be respected. ○ The chiefs met to discuss Canada’s Bill C-92, An Act Respecting First Nations ​ ​ Youth and Families, which recognizes First Nations jurisdiction over child and family services. The bill was granted royal assent last year. ○ Children’s Services Minister Rebecca Schulz stated the province spends ​ ​ approximately $800 million to fund her ministry, where roughly 62 per cent of the children in care are Indigenous.

○ The nations are asking for a minimum of $500 million from the province in order to exercise their jurisdiction over children’s services. Any lower amount would continue to fail First Nations children, according to their statement.

News briefs

NDP says workers must be protected during coronavirus outbreak ● NDP Labour critic Christina Gray called on the UCP government to introduce support ​ ​ and labour protections for workers amidst the outbreak of coronavirus. ○ In a letter to Finance Minister Travis Toews, Gray asked the government to table ​ ​ legislation that would temporarily ban employers from requiring sick notes, create a job-protected leave for those who contract COVID-19 and give financial support to affected Albertans. ○ Such legislation would have precedent. In Ontario during the 2003 SARS outbreak, the legislature passed SARS-specific job protection. ○ “We know the financial burden of not working will be extremely difficult for many Albertans, so we are also asking the UCP to consider a range of measures to help ensure people who are ill and suspected of having coronavirus are not financially pressured to return to work and endanger the health of others,” Gray said. ○ Brittany Baltimore, press secretary to Labour and Immigration Minister Jason ​ ​ Copping, said the minister’s office is consulting with the federal government on ​ potential changes to the EI program and is requesting employers waive requirements for doctor’s notes for sick leave. ○ Dr. Deena Hinshaw, Alberta’s chief medical officer of health, said AHS is ​ ​ currently providing sick notes to patients with confirmed cases of COVID-19 without requiring those patients to see a doctor. So far, there are 14 confirmed cases in Alberta. ○ In 2018, the former Alberta NDP government updated labour legislation to allow for five days of protected leave if an employee or someone an employee is caring for is sick. Long-term disability and illness leave is also available for up to 16 weeks. ○ According to Statistics Canada data from 2019, Albertans incur the lowest number of sick days. While the Canadian average for sick days is 8.5 days per year, Albertans averaged just 6.7 days. ○ Meanwhile, Prime Minister is expected to make an ​ ​ announcement this morning about support for people and businesses impacted economically by COVID-19.

Funding announcements

Alberta Transportation

● Transportation Minister Ric McIver announced $50 million over four years for ​ ​ improvements to Highway 881 near Fort McMurray, including passing lanes, a new rest area, intersection improvements and roadside turnouts between Lac La Biche and Anzac. ○ The funds will begin flowing in 2022.