Alberta’s carbon tax plan ‘one more reason why the Western Canadian oilfield is going to slowly die
Any hope that Jon Schroter, owner of a small well-service rig business, had of returning to work in Alberta was pushed out of reach by Premier Rachel Notley’s climate change plan.
The plan, which effectively puts the province’s fossil fuel industry on a leash by introducing a carbon tax that increases costs across the board, caps oilsands emissions, and forces an aggressive transition to renewable energy for power generation, is Canada’s sacrifice to the UN’s climate summit. Representatives of nearly 200 countries are meeting in Paris over the next two weeks to negotiate a global agreement to reduce carbon emissions with the aim of keeping global warming temperature increases below 2 C.
But none of that policy work helps Schroter or his 15 employees.
“It’s one more reason why the Western Canadian oilfield is going to slowly die,” said Schroter.
Desperate to keep his two well-servicing rigs running, with competitors going bust all around him, the president of Edmonton-based Victory Well Servicing Ltd. moved his staff and equipment to West Texas this year, where activity in oil and gas shale is steady and the 15 per cent higher day rates and strong U.S. dollar ease the hurt of being far away. He’s moved Stateside before: during the days of Pierre Trudeau’s National Energy Program, when he was a young rig hand and left Alberta to work in U.S. oilfields for almost three years.
With Alberta’s climate change plan raising costs in Western Canada’s already deeply depressed basin, Schroter believes drilling activity will collapse even more than anticipated. Thanks to cheap commodity prices, only 4,728 oil and gas wells are expected to be drilled next year, down from 11,226 in 2014, according to the most recent industry estimates, making it the toughest environment since the aftermath of the NEP in the early 1980s.
“I know for a fact, talking to the exploration and production companies, that anything that will make it more difficult to get the oil out of the ground, another tax burden, (means) they just won’t do the project,” Schroter said.
In Edmonton last Sunday, Notley was joined by oilsands leaders — from Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy Inc., and Shell Canada — as she unveiled her “climate leadership plan.” The oil players’ gesture was interpreted as a peace offering to the left-leaning provincial government, showing a willingness to work together to decarbonize the economy — if that means it wins them the so-called social licence to finally get oil-export pipelines like Energy East and Keystone XL approved.
They were rewarded with a deal that gives the oilsands some room to grow and keeps their carbon taxes to levels that the government had already signalled in advance.
Notley justified the plan by saying Alberta had to “turn the page on the mistaken policies of the past” and “do our part to address one of the world’s greatest problems.” But some say that Notley is now on notice: she had better deliver pipeline approvals — fast.
“Let’s see if this works,” said Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors (CAODC), which estimated this month that the oil price downturn that began in late 2014 has already cost member companies 28,485 oilfield jobs. “If it doesn’t, if we don’t get a single pipeline built, then this whole ordeal has been a failure.”
But Gary Leach, president of the Explorers and Producers Association of Canada (EPAC), is not convinced that opposition to pipelines will go away.
Alberta’s carbon tax plan ‘one more reason why the Western Canadian oilfield is going to slowly die’
Any hope that Jon Schroter, owner of a small well-service rig business, had of returning to work in Alberta was pushed out of reach by Premier Rachel Notley’s climate change plan.
The plan, which effectively puts the province’s fossil fuel industry on a leash by introducing a carbon tax that increases costs across the board, caps oilsands emissions, and forces an aggressive transition to renewable energy for power generation, is Canada’s sacrifice to the UN’s climate summit. Representatives of nearly 200 countries are meeting in Paris over the next two weeks to negotiate a global agreement to reduce carbon emissions with the aim of keeping global warming temperature increases below 2 C.
But none of that policy work helps Schroter or his 15 employees.
“It’s one more reason why the Western Canadian oilfield is going to slowly die,” said Schroter.
Desperate to keep his two well-servicing rigs running, with competitors going bust all around him, the president of Edmonton-based Victory Well Servicing Ltd. moved his staff and equipment to West Texas this year, where activity in oil and gas shale is steady and the 15 per cent higher day rates and strong U.S. dollar ease the hurt of being far away. He’s moved Stateside before: during the days of Pierre Trudeau’s National Energy Program, when he was a young rig hand and left Alberta to work in U.S. oilfields for almost three years.
With Alberta’s climate change plan raising costs in Western Canada’s already deeply depressed basin, Schroter believes drilling activity will collapse even more than anticipated. Thanks to cheap commodity prices, only 4,728 oil and gas wells are expected to be drilled next year, down from 11,226 in 2014, according to the most recent industry estimates, making it the toughest environment since the aftermath of the NEP in the early 1980s.
“I know for a fact, talking to the exploration and production companies, that anything that will make it more difficult to get the oil out of the ground, another tax burden, (means) they just won’t do the project,” Schroter said.
In Edmonton last Sunday, Notley was joined by oilsands leaders — from Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy Inc., and Shell Canada — as she unveiled her “climate leadership plan.” The oil players’ gesture was interpreted as a peace offering to the left-leaning provincial government, showing a willingness to work together to decarbonize the economy — if that means it wins them the so-called social licence to finally get oil-export pipelines like Energy East and Keystone XL approved.
They were rewarded with a deal that gives the oilsands some room to grow and keeps their carbon taxes to levels that the government had already signalled in advance.
Notley justified the plan by saying Alberta had to “turn the page on the mistaken policies of the past” and “do our part to address one of the world’s greatest problems.” But some say that Notley is now on notice: she had better deliver pipeline approvals — fast.
“Let’s see if this works,” said Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors (CAODC), which estimated this month that the oil price downturn that began in late 2014 has already cost member companies 28,485 oilfield jobs. “If it doesn’t, if we don’t get a single pipeline built, then this whole ordeal has been a failure.”
But Gary Leach, president of the Explorers and Producers Association of Canada (EPAC), is not convinced that opposition to pipelines will go away.
Alberta’s carbon tax plan ‘one more reason why the Western Canadian oilfield is going to slowly die’
