Government of Alberta

11/14/2019 | Press release | Distributed by Public on 11/14/2019 17:29

Premier Kenney speech at the Canadian Association of Oilwell Drilling Contractors - November 13, 2019

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Thank you so much Mark. I can just sit down because you just delivered my speech. Thank you.

Thank you Mark for that inspiring message, that note of optimism and for your deep dedication to the future of this wealth-creating industry that fuels our economy.

And thank you to CAODC, your board and your staff and most importantly your members for creating jobs, taking risks even in trying times, for swimming upstream, for showing the spirit of resilience that has always characterized Alberta and our energy sector. So let's give a round of applause to CAODC for being a very important and powerful voice.

Now, Mark has underscored how these are very challenging times. And I know that is felt more in the service sector amongst drillers and contractors than perhaps any other part of Canada's energy industry.

You know that the rig fleet is at its lowest level since 1977, or second-lowest level, and operating days for rigs are at their third-lowest level since 1990. And the workforce in your industry is one-third the size of 2014. We understand the human consequences of all of that.

We know about the small mom-and-pop-owned hotels in those towns throughout rural Alberta that used to be fully occupied and are now consistently vacant. We know about those small businesses up and down the province that are struggling, because your member companies are struggling.

But today I'm here to offer a message of, I think, well-founded optimism that together we will get through these trying times. With our spirit of resilience, of innovation, our work ethic, we'll get through it.

But we'll also get through it, because we are on the right side of history. You are businesses and innovators, entrepreneurs, engineers, rig hands and workers who have helped to literally fuel the modern Canadian economy. We could too easily take for granted enjoying one of the highest standards of living in the world, but it doesn't happen by accident. It happens because, in part in this country, of the great endowment of our natural resources and our willingness to apply innovation to develop them in a responsible way.

And I want you to understand, as Mark just said, that at least here in Alberta, you have a government that has your back - that will fight without relent for the future of the women and men who work in Alberta's oil and gas sector.

And I also want you to understand that we are not isolated. We are not alone. We have this significant majority of the provinces and territories in Canada who agree with us on the urgent need for responsible resource development and a future for our wealth-creating energy industry.

How are we expressing this support as a government? Well, first let me run through some of the things that we have done in our first six months in office.

First of all, we repealed the carbon tax. And we've brought in, after extensive consultations with industry, the Technology Innovation and Emissions Reduction Fund that will show an intelligent path to incentivizing emission reductions without making Alberta uncompetitive.

We implemented the Job Creation Tax Cut to move Alberta from one of the highest levels of business taxes in North America to the lowest in Canada, and one of the lowest levels in North America. Once fully implemented the Job Creation Tax Cut means that, by 2021, Alberta will have a combined federal-provincial business tax rate that is lower…that is, in fact, the next highest province, Ontario, will be 45 per cent higher.

And our combined rate will be lower than the effective business tax rate in 44 of the 60 states and provinces across North America, once again making us a magnet for job-creating investment.

We passed the Open for Business Act that, amongst other things, brought balance back to our labour legislation. And I'd like to thank Minister Copping for his good work on that.

As well as our skills for jobs agenda being led by our Advanced Education Minister Nicolaides. Because as I was before lunch chatting with some of your member companies, they said that even now because of the downturn, so many people left the drilling industry that many of your member companies are now facing the paradox of labour shortages.

And so we want to plan well for the future. That is why we are re-engineering the training and education system in Alberta to significantly increase apprenticeship learning and trades training opportunities in our high schools and in the postsecondary system, to ensure that the next generation has the skills for the jobs of the future.

We're also retooling Alberta's immigration policy under Minister Copping's leadership and consultations to develop an Alberta Advantage Immigration Strategy, to ensure that the newcomers who we invite to Alberta have the skills that we need to get to work at their skill
level and that includes in the energy sector.

So this is not just about short-term stimulus policy. This is about long-term planning for the future.

We passed the Royalty Guarantee Act, which has given certainty to investors that Alberta will not destabilize our royalty regime in the future, like we did in 2008 and 2015. And now investors know, with certainty, what the royalty schedule will be on the wells that they drill, on the projects that they lead.

We passed legislation allowing municipalities to offer generous and long-term tax incentives to attract new capital investment to their jurisdictions.

We reduced linear taxes for shallow gas producers in this province, who have been coping often with negative prices barely even able to keep their head above water. And that was an important lifeline.

And we are, further to that, are doing a comprehensive review of the assessment principles around linear taxation for gas producers as part of our effort to implement the recommendations of the Kvisle Panel (Hal Kvisle) to ensure that there is a bright future for our natural gas industry.

Speaking of which, our Associate Minister for Natural Gas was appointed precisely because, too often, the gas producers have been forgotten about in all the clamour in the spotlight on oil and on bitumen in particular.

We now have a designated minister for natural gas and an associate minister supported by a section of the Energy Department fighting for the gas industry every day.

And Associate Minister Nally (Dale Nally) spent months hammering out a voluntary consensus amongst the up, mid and downstream players in the natural gas markets to revert to rules that will prevent negative prices for Alberta natural gas during periods of maintenance in the summer, and which have increased the future prices on Alberta natural gas. It's another important sign of hope for the future.

We also restored the energy-only power production market, after the previous government blew two billion tax dollars on a scandal they never really paid a price for.

I don't know why. The media never thought it was worth seriously getting into it - a $2 billion fiasco on power production.

But we will not allow Alberta consumers and businesses to be punished for the irresponsible hyper-centralization of power production, which is why we restored an energy-only market that will allow for increased production of energy and increased use of natural gas and co-generation.

This has helped unleash several major new capital projects, like Suncor's $1.5 billion conversion to a natural gas co-generation facility up north.

All of which will help to not only ensure the future of affordable power prices in Alberta, which is important for economic diversification, but also to provide a growing market here in our province for stranded natural gas.

And of course we've launched and made major progress on our red tape reduction action plan - the goal of which is to reduce by at least one-third over four years the number of regulatory requirements imposed by the Alberta government.

We're doing this because while we Albertans have always imagined ourselves to be the entrepreneurial spirit of the Canadian economy, the truth is that during the good
years we allowed, especially in government, a constant accretion of regulatory
complexity into our economy, such that the Canadian Federation of Independent Business says Alberta is the only province to get an F on its red tape report card.

And you know that this has been expressed in terms of slow and seemingly endless approvals processes by Alberta regulators.

This is not acceptable and that is why we passed the Red Tape Reduction Act.

We've appointed a minister to lead the red tape reduction process.

We've established an industry panel on which I think CAO-DC has a seat, to get specific input from the industry on how we can eliminate deadweight, pointless regulations; move from a process-obsessed system to a smart, common-sense, outcome-based approach to regulation, while maintaining amongst the world's highest workplace, consumer and environmental standards, but applying them in an intelligent way, focusing on businesses that have a bad compliance record, rather than hounding those that have a perfect compliance record.

And simultaneously accelerating the approvals process at the Alberta Energy Regulator and other regulatory bodies.

That's why we are now engaged in a comprehensive governance review of the Alberta Energy Regulator.

There is a parallel process to harmonize regulations within the AER and accelerate the approvals process and significant personnel changes as you know, because as Ronald Reagan used to say: 'Personnel is policy.'

Our goal in all of this will be to have world-class regulation that operates independent of the elected government, but which moves at the speed of business.

And our ultimate goal is to become the freest and fastest-moving economy in North America.

In addition to that, we've taken important measures recently to help stimulate new drilling activity in your industry.

Last week, as you know, we announced an exemption from the curtailment production limits for oil production in the conventional basin that produces new energy.

And we hope this is an important incentive that will create, hopefully, hundreds of new drilling projects in the winter drilling season to come and throughout 2020.

Now, we know that there have been submissions from many of you about how we could clarify the rules about what constitutes conventional for the sake of this exemption, and we're listening to you.

To be clear, our goal is to do everything we can to incent new exploration and production, while ensuring that we avoid the kind of catastrophic differentials from which this province was suffering a year ago.

And on that front I think there are grounds for optimism, as Mark said. With pipeline optimization on Line 3 and other projects, we are well on our way to seeing an additional 200,000 barrels per day of egress from existing systems.

In addition, our government announced special production allowances to exempt incremental crude shipped by rail from the curtailment caps.

We estimate that this will allow the industry to ship something in the range of 250,000 additional barrels of Alberta crude over the months to come.

We'll be facilitating that by finalizing the sale, on acceptable terms, of the crude-by-rail contracts signed by the previous government, which will immediately allow some producers to take advantage of the special production allowances with the logistics that have been lined up, to move an additional 125,000 barrels per day.

And then of course, we are optimistic about the completion of Enbridge's Line 3 replacement that adds another 380,000 barrels per day.

And so, all combined, we can see in the next year to 16 months something in the range of 800,000 barrels per day of egress, which means that we should have a market that is producing and shipping more Alberta energy than ever, while keeping markets in balance.

More storage has been built since the disaster of last November, and so we have that backup capacity.

So here's a message that I sent to markets on Wall Street a few weeks ago when I met with institutional investors representing over $9 trillion of assets: That there is a very strong short and medium-term future of additional shipment capacity.

And while we will maintain the curtailment tool to protect the value of the resource that belongs to Alberta -we must do that, we must make it very clear to markets that we are not going to recklessly allow Alberta to be driven back into giving away our energy- we believe that the path is clear over the next year to gradually reduce and eventually eliminate the need to use curtailment.

And then of course, we move forward on the larger pipeline projects. And I'll say a word about that in the future.

Now to come back to red tape reduction, the CAODC has had some specific and long-standing recommendations in this regard.

And our government wants to do everything we can to work with the drilling industry to remove unnecessary and pointless deadweight regulations. Because this industry is a vital part of Alberta's oil and gas sector and has been restricted by certain rules that limited movement between worksites and across provincial borders.

We know that service rigs spend 95 per cent of their time working on oil wells in the field, not on the roads. Because of this it makes sense to remove some of the requirements that are intended for commercial transport vehicles that spend the majority of their time on Alberta's highways.

In June, we made regulatory changes, as per our platform commitment, to remove red tape for the service rig industry by replacing the annual Commercial Vehicle Inspection program, the inspection of service rigs, with an inspection every five years and exempting service rigs from the Safety Fitness Certificate requirements.

We will shortly be updating the MOU that we have with your association and the Government of Alberta to implement new requirements by January 1st of 2020 that will extend the same exemptions we recently provided to service rigs to other equipment which is essential to service rigs, including 5-ton equipment trucks, pump and tank trucks, as well as the doghouse trailer or crew trailer.

As part of updating that MOU, we will ensure the definition of convoy includes the rig manager's vehicle to better facilitate the operations of the support vehicles.

We understand that the support vehicles are essential to the operation of the service rig and they too spend 95 per cent of their time working on wells in the field and not traveling on the roads.

We also signed an MOU with the Government of Saskatchewan in the summer to harmonize our regulations. And we are working to seek a joint exemption from federal regulations in these areas.

So, we look forward to finalizing this technical work to further reduce red tape on this industry to help get Albertans back to work.

Now, we're also listening to the industry about what more we can do to stimulate job-creating activity.

CAODC and others have recommended, for example, a potential royalty holiday on new drilling activity and such concepts are under active consideration.

As well, we will be approaching the federal government on supporting flow-through shares to accelerate well reclamation, to create new jobs that generate economic growth while also helping our environment.

And we will also be focusing in the next few weeks on doing everything we possibly can to mitigate any of the unintended consequences of the Redwater decision, which has done so much to restrict access to both capital and credit, equity and credit, for this industry. And if you have ideas on how we can do so, please be in touch with our Minister of Energy, Sonya Savage, or my office. We are doing everything we can to find solutions to these challenging technical problems.

But ultimately folks, I really believe that we have grounds for optimism as I said, in the next year or two as we find growing export opportunities for our energy while keeping our market in
balance.

But then we have to deal with the big strategic challenges and let me say a word about that.

First of all, we know that one of the biggest constraints on the ability of your companies to create good jobs in Alberta is through what I would say is a misapplication of this investment concept of environmental, social and governance principles.

Outrageously, Alberta in general and our oil sands in particular have been targeted based on inaccurate, dated and distorted metrics when it comes to ESG.

That is why our government has established an industry working group to get current, comprehensive and compelling data about how our industry is increasingly outperforming the world when it comes to responsible energy production.

About how we've reduced by some 29 per cent since the year 2000, the carbon intensity of a barrel of bitumen and are on track to do that by another 20 per cent in the decade to come.

About how we are on the cusp of an entire new generation of technology in bitumen extraction, moving from steam to solvents with gas co-generation, with other technologies including the scalable application of carbon capture utilization and storage, plus new opportunities for offsets and so many other things.

We have major producers in the oil sands that are now talking credibly about net-zero carbon production of our heavy oil.

Now most of you are engaged in the conventional basin, so why am I focusing so much on the heavy oil and the bitumen?

Because the constraints on our ability to export our conventional energy come from the green left's focus on trying to landlock the oil sands. So we are all in this together. And that is why it is important for us to tell the story.

It is also why we are fighting back. We're fighting back on the ESG front.

It's why I've had members of my staff meeting with global companies in London, in Europe and elsewhere to tell the truth about Alberta's responsible energy production.

I was on Wall Street telling this story. And I'll be visiting London, England in December to meet with major global investors there and on the continent of Europe, because many of these financial institutions have never actually heard our side of the story, and it's time that
they get a balanced and objective view.

It's also why we launched the Canadian Energy Center with a $30 million budget to respond in real time to the lies and myths told about our energy sector.

It's why we launched the Allan Commission under the Inquiries Act to get to the bottom of the foreign-funded campaign to landlock Canadian energy.

It's why we've launched the Indigenous Opportunities Corporation, backed up by $1 billion of the faith and credit of Alberta's Crown to facilitate aboriginal co-ownership of and financial participation in major resource projects - which I believe can be a game-changer on TMX and other projects to demonstrate concretely, not just rhetorically, that the vast majority of Western Canadian First Nations want to be partners in our energy industry, to help move their people from poverty to prosperity.

And we will not leave them behind. They must be included in the future of this industry.

It's also why we've launched the Indigenous Defense Fund that will provide funds to help get pro-development First Nations into court to assert their right to economic development. To demand that not just the anti-development minority, but the pro-resource majority of our Indigenous people have an equal voice before the courts, rather than just giving all the political and legal voice share to a small minority of foreign-funded organizations.

But it is equally important, that we stand up with strength and determination to the government in Ottawa. And where possible to see common ground, but where not possible, to assert our vital economic interests because, after all, they are the interests of Canada.

I spoke to this at length on Saturday and you may have read about a number of the strategic issues and ideas that we are considering to assert Alberta's role in the Federation.

What you may not have read about is the shortlist of urgent economic imperatives that I will be raising with Prime Minister Trudeau when we meet in the weeks to come.

First of all, we will be demanding firm, actionable guarantees on the construction and completion of the Trans Mountain pipeline, including a clear willingness to ensure that the rule of law is respected and applied.

All of Alberta's leverage -short, medium long-term, all of the big changes that we are thinking about- all of that is in part designed to apply pressure and leverage to ensure the completion of that critical project.

Secondly, we will seek the approval of flow-through shares, as I've mentioned, or other tax instruments to increase job-creating investment in environmental technology such as carbon capture utilization and storage that will accelerate the reduction of GHG emissions from Canada's oil and gas sector, making our companies more attractive for international investment. Thirdly, we will seek support to fund the creation of green jobs by accelerating reclamation of abandoned wells, which should be helpful to the service sector.

Next, we will seek got clear support for future liquefied natural gas projects that will significantly reduce global GHG emissions by accelerating coal-to-gas conversion in the developing world.

And we will not relent in pointing out to the federal government that this is the single biggest thing that we could do to reduce global greenhouse gas emissions.

Apparently, there are some voices of the federal cabinet table who believe that after LNG Canada, there should be no more approvals.

Because apparently there are some people who think when it comes to the climate challenges that Canada lives under some kind of a sealed bio-dome and that the Paris Accord only applies somehow to Canada, regardless of how we operate with the rest of the world.

But we managed to get all 10 provinces and three territories to sign off at the Council of the Federation to federal use of Article 6 of the Paris Treaty, which allows for credit for countries who assist with reduction in emissions around the world.

And we can do that through LNG. This is something about which we will be relentless.

We will demand a repeal of the Bill C-48 tanker ban and the Bill C-69 no-more-pipelines law, or at the very least significant amendments to mitigate their negative impact.

And I will ask Prime Minister Trudeau if he is serious about listening to Western voters, to Saskatchewan and Alberta in particular.

Then please listen to the people he appointed to the Senate of Canada, who adopted every amendment proposed by the Government of Alberta and the Canadian Association of Petroleum Producers in the spring.

We will seek accelerated federal approval of outstanding job-creating projects like the Teck Resources Frontier Mine, TransAlta natural gas pipelines to convert their plants from coal to gas and so many others.

If you have projects where you are waiting for federal approval let us know, and we will put that on the list of how Ottawa can help to create jobs and reverse the jobs crisis in this province.

Finally on our urgent list we will be seeking an equalization rebate, because we got shortchanged through something called the fiscal stabilization program. It's supposed to be an offset for have provinces that have a sudden precipitous decline in their revenues.

We should have received $1.75 billion instead we received $220 million because it was capped.

And the message to Ottawa is: Yes, we are going to talk to you about equalization reform. And we are prepared to put Section 36 of the Constitution to a referendum vote.

But one thing that Ottawa can do today without affecting another province negatively, to demonstrate some good faith that the people of the West are being heard, is to retroactively lift that cap on the equalization rebate.

And I will tell Prime Minister Trudeau if he does so, we will put that money to good work - putting Albertans back to work in this and other industries.

So I will close. I'm sorry, Mark. I know I've blown out your schedule here. It's not as bad as Saturday where I spoke for Fidel Castro length - 110 minutes.

But let me just close because as I was walking in, I was given a report of a meeting that happened this morning with the leader of the Bloc Quebecois Monsieur Blanchet and Prime Minister Trudeau, after which Mr. Blanchet who now controls, I think 32 seats in the House of Commons, said the following.

He was asked if he would show any support for the West that feels increasingly alienated. And he said, 'If they were attempting to create a green state in Western Canada, I might be tempted to help them. But if they are trying to create an oil state they cannot expect any help from us. And through national or international channels we will keep fighting this idea to obsessively want to extract oil from the ground.'

This, on the same day that his provincial cousins, the Parti Quebecois, tabled a motion in the Quebec National Assembly demanding that Quebec exercise a veto over any prospective future changes to the equalization formula.

And these statements are being made a week after Quebec tabled a budget with a $4 billion surplus thanks to a $13 billion equalization payment from Ottawa, which came from the workers that many of you have had to lay off.

So let me just say this to Mr. Blanchet, to the Parti Quebecois: If you are so opposed to the energy that we produced in Alberta, then why are you so keen on taking the money generated by the oilfield workers in this province and across Western Canada?

You cannot have your cake and eat it too. Pick a lane.

Either you can say as Quebec that you're no longer going to take the energy and equalization resources that come from Western Canada's oil and gas industry. And then you can become even more dependent, by the way, on OPEC dictator oil imports.

Or you can do what we do as Canadians - coming together to support each other, especially in times of adversity.

Albertans have contributed over $600 billion net to the rest of the Federation since 1960 - an average of $23 billion a year in each of the past five years, and yet we are going through an economic crisis.

All we ask is a little bit of fairness. We're not asking for a special deal, we're asking for a fair deal. And we will fight for that fair deal.

Let me say in French to Mr. Blanchet, the Bloc Quebecois and the Parti Quebecois: If you want to take oil money from Alberta, you have to let us develop that oil. Why do you oppose the industry that sent $13 billion to the Government of Quebec? Quebec issued a balanced budget with a $4 billion surplus last week, because Quebec received $13 billion in equalization payments which came in part from Alberta's energy industry. You can't have both butter and money from the butter. You have to make a choice.

That's a Quebec saying, you can't have both your butter and the money from the butter. So you gotta make a choice, don't you think folks? We need to send a message to all of our Canadians.

Thank you very much. Merci beaucoup.