Please Sir, Can I Have Some More?
Please Sir, Can I Have Some More?
What another tumultuous month in Alberta! Our hearts and prayers go out to all of the Fort McMurray evacuees as you await the green light to head back to your home town. Fortunately Fort Mac was spared for the most part, thanks to the heroic efforts and dedication of those that stayed behind to save what they humanly could. Unfortunately, there are still those who have lost it all and are starting over once again. To all those that have given so graciously to help out in whatever way you possibly could, a tip of the hat to each and every one of you. A new definition for ‘The Alberta Advantage’!
In the face of this turmoil, and further upheaval in the industry, I would like to take a moment to personally thank you for picking up our May edition of Oilfield PULSE. Our theme this month is ‘The Cost of Doing Nothing’. Clearly this is a new challenge for the oil and gas industry from a cost perspective but as recent weeks would attest, it’s really not in our blood to do nothing, under any circumstances.
Equalization Payments vs. Provincial Welfare
From my own personal perspective, something has been nagging at me since the whole Energy East filibuster took place from local politicians in Quebec. In turn, many people, and a small number in the press, west of Quebec swung back with a vocal refrain calling for the reduction or outright elimination of equalization payments to Quebec, and dare I say to all other ‘have not’ provinces. Their justification? Alberta, and other ‘have’ provinces have paid billions of dollars to these provinces for many, many years. Now it’s our turn for a little love in return! Let’s get some of this cash back in our time of need. Problem is, there is no cash to give back, as this money has been long since spent as both federal and provincial debt and borrowing across the Canada continues to spiral out of control.
As oil prices continue to struggle to maintain the $45 USD level with any sustainability, the industry continues to shrink all around us. Severely reduced or non-existent capital budgets for 2016 are still having a devastating effect on activity across Western Canada. With the prolonged downturn in prices the negative trickle-down effect on the rest of the economy is now being felt across the entire country from displaced workers in the Maritimes, to Canadian manufacturers in Quebec and Ontario who no longer are being considered nor sourced for their products and services.
Not only is the cash unavailable, but apparently so is the love. Billion dollar private sector mega projects are being needlessly delayed by this political grandstanding and under the table whispers to further grease the palms of politicians looking, once again, to get more free money for nothing in return. It’s already hard enough for these pipeline companies, and the industry in general, to constantly battle the climate change warriors and other environmental activists let alone all of the backroom politics and public flogging of the industry. Oliver Twist asked ….. “Please sir, I want some more”. Mayor Denis Coderre and his political brethren have changed this to ……. “I want and deserve more!”
The net result; there is a ton of people, equipment, and hardware that is now sitting idle. From drilling rigs down to personal PCs, they are all gathering dust in yards across Western Canada and in empty offices well beyond just the City of Calgary. But at what cost? Every company is cutting back, skinning down on every aspect of their operations leaving all kinds of physical assets and human resources on the sidelines. This month in the PULSE we are examining ‘The Cost of Doing Nothing’. What’s going to be the toll on the future viability and prosperity of the oil & gas industry to re-kick-start operations, and what can still be done today or in the slow months still ahead of us to prepare for this eventual outcome?
Check out the articles from our regular contributors as they share with us their views and opinions on how the industry, even in these uncertain times, can take advantage of this period of low activity to survive until the turnaround arrives. And better yet, what could possibly be done today to come out on the other side with a lower cost base structure, and heightened market presence for when projects are flowing once again!
This brings me to my final point on equalization payments, or should I say provincial welfare. Shouldn’t it be the responsibility of all provincial governments to be fiscally responsible, or in other words, to have a solid game plan to wean themselves off of equalization payments, or at least to be accountable for the equalization dollars they are spending? How marvellous would the Canadian standard of living be if all ‘have not’ provinces changed their budgetary, spending and borrowing ways to become ‘have’ provinces? Provinces that no longer have to rely on equalization payments to make ends meet! Seeing as this tax revenue comes with no strings attached there is absolutely no incentive to become more fiscally responsible, and to me, that sounds more like provincial welfare than equalization payments.
Companies all over Canada are going out of business due to the current economic crisis in the oil and gas industry. Once vibrant employers are no longer in existence in many cases through no fault of their own. This is happening, while Alberta’s credit rating continues to spiral downward, and in the words of the rating agencies due to uncontrolled spending and borrowing, not just because of the price of oil and gas! It seems we have entered into an era where government spending and borrowing is considered a good and easy thing to do, while making money and controlling spending is now always somebody else’s problem. So what’s the cost of doing nothing as it relates to equalization payments? More hypocritical and self-entitled levels of government willing to stand at the trough and demand more, even in times when there is nothing more to give!
Deep down, I truly believe that’s not what the majority of average Canadian’s want nor expect out of their elected officials! Let’s make sure they all truly know how we feel.