Creating upgrading jobs in Alberta has never been more viable
CALGARY – The so-called "bitumen bubble" is actually an opportunity for the province to add value and create jobs, says the Alberta Federation of Labour. R
In a new report, the AFL shows that the difference in price between bitumen and crude makes it economically viable to invest in the infrastructure needed to upgrade Alberta’s oil resources here.
“The price of bitumen is low right now because we’re flooding the market with bitumen,” Alberta Federation of Labour president Gil McGowan said. “And the solution they’re proposing is building more pipelines to flood the market even further. That’s just not how markets work. We need to refine the bitumen here, so that we’re selling what the international markets want: synthetic crude.”
Using the government’s own estimates, the report shows that Alberta can build on the Lougheed legacy and create more than 12,000 long-term stable jobs through upgrading.
“The Conservatives have promised to make sure that 65 per cent of Alberta’s bitumen is upgraded here, but have repeatedly broken that promise because they say that the price of bitumen is too high,” McGowan said. “The price isn’t high anymore, but they’re still not listening to the markets. The differential should be seen as an opportunity, not a threat."
In light of Alberta’s projected $3-billion deficit, getting a fair value for the province’s natural resources is of paramount importance. According to the report, if Alberta were selling synthetic crude oil instead of raw bitumen, producers would be earning $38 more per barrel.
“By not requiring upgrading in Alberta, we’re pumping out more of the wrong thing,” McGowan said. “We’re shipping good oil sands jobs elsewhere, when the economics of upgrading make a lot more sense.”
AFL report: Bitumen glut has silver lining
Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email email@example.com.
CALGARY - Public sector unions are bracing to fight impending provincial cutbacks driven by a multi-billion dollar cash crunch.
And a prominent economist said Premier Alison Redford's TV address to Albertans Thursday fails to come to grips with a looming budget shortfall larger than the province is letting on.
Even before Redford's speech, the Alberta Federation of Labour was readying a public relations offensive to offer alternatives to slashing spending on crucial programs, said president Gil McGowan.
"The public sector unions have been meeting the past couple of weeks to discuss the implications of the budget and, like a lot of Albertans, we're prepared for the worst," McGowan said Friday.
Alberta's fiscal chickens are coming home to roost after years of tax-slashing for wealthier Albertans and a resource revenue giveaway to a wildly profitable energy industry, he said.
"Our provincial GDP is literally 75% higher than the rest of the country, yet we can no longer afford even to have run-of-the-mill services," said McGowan. "I call it the great Alberta disconnect."
After meeting with Finance Minister Doug Horner last Tuesday, McGowan said it's clear areas like education and health care won't be spared drastic action in the budget expected in March.
"Everything we've heard is suggesting the budget won't be as bad as what we saw in the (Ralph) Klein years, but worse than anything we've seen since," he said.
University of Calgary economist Dr. Jack Mintz said Redford's TV address muddied the fiscal waters, and unmentioned obligations like financing requirements could see a shortfall of $8-$10 billion.
"This government has considerable credibility problems as far as their budget plan," he said.
Even with budget cuts averaging 5% over all departments - or a $2-billion slim-down - an ocean of red ink will remain because the discount on Alberta bitumen will also persist for years, added Mintz.
"If they don't make major cuts this years, the sustainability fund will be depleted and they'll be borrowing because they don't want to take it from the heritage fund," he said.
Educators watched Redford with considerable interest, hoping the province's commitment made to them last year in a three-year funding pact will hold in March, said Calgary public school board vice-chairman Lynn Ferguson.
"We are certainly aware of the economic challenges facing the province," said Ferguson.
"I would hope since education is a consistent priority for Albertans, that value would be reflected even in a difficult budget year."
SunNews, Friday, Jan. 25, 2013
Byline: Bill Kaufman, QMI Agency
Real problems caused by low taxes, royalty giveaways and lack of upgrading strategy
Alison Redford's claims that Alberta's financial woes are caused by a 'bitumen bubble' are a distraction.
The 'bitumen bubble' Redford refers to is the difference between the price we get for our bitumen – known as Western Canada Select (WCS) – and the price of internationally traded oil – West Texas Intermediate (WTI).
"There has always been a difference in price between Alberta's bitumen and the West Texas Intermediate blend," AFL president Gil McGowan said, adding that the real causes of the budget deficit are royalty giveaways, tax cuts for the wealthy and the lack of a provincial upgrading strategy. "The budget crisis was not created by this. The real problem is the broken system for revenue generation in Alberta."
Although the difference in price between Alberta's bitumen and WTI crude has been around for a while, this is the first time an Alberta finance minister has raised it as a drag on the economy. In 2005 and 2006, the difference in price was larger than it is now, yet Alberta was enjoying massive surpluses.
"The difference might be greater than it has been for the last couple of years, but they're disingenuous to blame all their budget woes on this differential," McGowan said. "The government has always created budgets that take this difference in price into account. Last year, they delivered a budget that was exceedingly optimistic. Now they're acting shocked. It's a misleading distraction."
According to the government's own studies, Alberta could collect $11-billion more in taxes and still remain the lowest-taxed jurisdiction in Canada. If Alberta were to collect enough in taxes to cover its current projected deficit, we would still be the lowest-taxed province by about $8 billion.
"There have been successive years of massive tax breaks to Albertans who earn more than $250,000, there have been giveaways to mega corporations, and the royalty rates that Alberta charges for our resources are actually lower than they were under Ralph Klein," McGowan said. "If the government is going to tackle the deficit, they need to be honest about the causes, rather than hiding behind distractions."
Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email firstname.lastname@example.org.
ST. ALBERT - A Canadian subsidiary of Chinese state-owned oil giant Sinopec has been ordered to pay $1.5 million in penalties for failing to ensure the safety of two Chinese workers killed in a 2007 tank collapse at a work site in northern Alberta.
Sinopec Shanghai Engineering Company Canada Ltd. pleaded guilty to three charges under the Occupational Health and Safety Act in September. It was given the maximum $500,000 fine for each charge in a St. Albert courtroom Thursday.
The total penalty is the biggest workplace safety fine in Alberta's history and one of the biggest in Canada.
Two charges were related to the deaths of the two temporary foreign workers and the third was connected to two workers who were seriously injured.
As part of a creative sentencing agreement between Crown prosecutors and SSEC lawyers, $1.3 million of the fine will be used to educate temporary foreign workers on their legal rights.
Workers Ge Genbao, 28, and Lui Hongliang, 33, were killed on April 24, 2007 when the roof structure of a multi-storey metal holding tank collapsed at a work site 70 kilometres north of Fort McMurray. The site was part of the Canadian Natural Resources Ltd. $10.8-billion Horizon project.
Court has heard that SSEC Canada did not get the tank construction plan certified by an engineer. The wires securing the tank were not strong enough to hold up in even moderate winds, according to an agreed statement of facts.
"The accident almost had a sense of inevitability to it," said provincial court Judge John Maher. The judge said he was struck by the extent of the failure to comply by safety standards.
"This is a particularly egregious case," Maher said. "The size of the penalty is directionally proportional to the consequences of the act. It's hard to imagine in this case why it would not be a maximum penalty."
Crown prosecutor Marshall Hopkins said he was confident such a massive penalty would be an effective deterrent for other companies.
Kevin Flaherty, executive director of the Alberta Workers' Health Centre, said the money enables his group to "do some good work with a bad situation."
The $1.3 million will be used in a three-year program to train 45 people to educate temporary foreign workers about their rights and Alberta's workplace health laws. Flaherty said such workers are particularly vulnerable because they fear loss of their work visas if they speak up.
"They can't just walk across the street and get another job," Flaherty said. "We need to be a much better job of treating these workers as people when they arrive."
Flaherty expects the education program will reach 5,500 workers and spread further by word of mouth.
The Alberta Federation of Labour was not impressed by the court decision and called the fine "a slap on the wrist" that will not be a deterrent.
"One-and-a half-million dollars doesn't even amount to a rounding error in the annual budget of a monstrous global corporation like Sinopec," AFL president Gil McGowan said in a prepared statement. "This fine does nothing to dissuade them from playing fast and loose with the safety of their workforce."
SSEC was the direct employer of the workers and contracted by CNRL. SSEC recruited 132 Mandarin-speaking Chinese workers for the tank project.
The original plan was to build the tank walls first, then use them to support the roof while it was under construction. That plan changed when the project fell behind schedule.
CNRL approved the construction change, but SSEC did not prepare any formal written procedures that should have been certified by a professional engineer.
The construction of 13 tanks began on April 2, 2007. The collapse occurred three weeks later.
Hongliang, an electrician, was struck by a steel girder while standing on the partially completed wall. He died at the scene. His son, in China, was only a year old at the time. Genbao, a scaffolder, was on the floor of the tank and was crushed by falling steel. He died on the way to hospital. He is survived by four older sisters in China.
On Thursday afternoon, SSEC Canada issued a statement that expressed regret for the deaths and said it accepted Maher's ruling.
Sinopec had tried to appeal to the Supreme Court of Canada on the grounds that it had no official presence in Canada and was not under the jurisdiction of a provincial justice system. The nation's top court refused to hear that appeal.
The Edmonton Journal, Thursday, Jan. 24, 2013
Byline: Ryan Cormier
Edmonton - A $1.5-million fine to oil giant Sinopec will do nothing to deter them from practices that endanger workers, according to the Alberta Federation of Labour (AFL).
At a St. Albert court room on Thursday, Jan. 24, the Canadian subsidiary of Chinese oil corporation Sinopec was fined $1.5 million for an incident that cost two of their employees their lives. According to the Alberta Federation of Labour, the fines are too small to make a difference to the massive corporation.
“One and a half million dollars doesn’t even amount to a rounding error in the annual budget of a monstrous global corporation like Sinopec,” McGowan said. “This fine does nothing to dissuade them from playing fast and loose with the safety of their workforce.”
Sinopec and two other companies were charged after a 2007 container collapse killed two temporary foreign workers at an oilsands project near Fort McKay, Alberta. A total of 53 charges were laid against the companies, of which Sinopec pled guilty to three charges of failing to ensure the health and safety of workers.
“Sinopec didn’t just import workers from the third world, they also imported third-world health and safety standards,” AFL President Gil McGowan said. “Alberta missed its chance to send a message that Chinese companies working in the oil sands need to play by Canadian rules.”
McGowan says it might be the largest safety fine in Alberta history, but that only shows that Alberta has a long track record of not aggressively enforcing its own workplace safety rules.
The two victims, 28-year-old Ge Genbao and 33-year-old Lui Hongliang, were just two of the more than 130 Cantonese-speaking workers who had been brought over from China for the Sinopec oilsands project.
“We shouldn’t forget the circumstances that led to the deaths of Genbao and Hongliang,” McGowan added. “The company did not get the construction plans certified by an engineer. The wires weren’t strong enough to hold up against the wind. It was a complete abdication of responsibility on the part of the employer.”
Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email email@example.com.
It has been, for Alberta, a dismal new year. With pipelines out of the province effectively full, Canadian crude has become a discount brand, and once-expected money is evaporating. The future looks little better. Alberta's Finance Minister has taken to dramatic language to describe the financial duress striking his province.
"This is not an ordinary storm," Doug Horner said this week. The dipping price of Canadian oil will strip some $27-billion from the Canadian economy this year, he said in a speech to the Calgary Chamber of Commerce that was designed to soften the ground for what is certain to be a grim provincial budget on March 7.
Mr. Horner's argument hinges largely on "differentials." It's an industry term that describes, in the current context, price discounts. So for example, Canadian heavy oil – which is often traded as a blend called Western Canadian Select – has seen a differential of as much as $42 (U.S.) a barrel below the headline oil price numbers. In North America, the headline number is typically the "benchmark" West Texas intermediate (WTI) blend. A big dip away from West Texas intermediate means that Canadian oil is selling on the cheap – and cheap oil for buyers mean low prices for sellers, the reason Alberta is facing such dire straits.
Not everyone is buying it, though. Gil McGowan, president of the Alberta Federation of Labour, for example, says "the differential has been around for years, it's just now being used as a scapegoat to draw attention away from the government's failed revenue policies."
And it's true that differentials are nothing new. Canadian heavy oil takes more energy – and therefore more cost – to process into fuels like gasoline or diesel, so it's always sold for cheaper. According to Patricia Mohr, the Bank of Nova Scotia economist, that discount averaged $18.19 between 2005 and 2009. (Alberta budgets on a $15.97 differential.)
So a $40 discount for Canadian heavy oil is big – but nearly half that discount is perfectly normal. And over the past 12 months, the differential has averaged just over $25, which means it hasn't been much bigger than average.
Still, the current differential is obviously much bigger – and there are ways to sort out what it could be if there was plenty of space on pipelines. Take, for example, the differential between Louisiana light sweet oil (LLS) and Maya oil. Those two blends of crude traded on the U.S. Gulf Coast are roughly comparable to Canadian light oil and Western Canadian Select, respectively. In recent trading, the gap between LLS and Maya has been roughly $13. Some argue that in a logical world, the Canadian heavy oil discount would look more like that – a possibility that emphasizes how much is being lost today.
But the many different ways of calculating things have led to widely varying estimates of the missed revenues for energy companies today. The Canadian Association of Petroleum Producers did a back-of-the-envelope sketch and came to roughly $15-billion, based on current pricing. Martin King, a commodities analyst with FirstEnergy Capital Corp., pegs it at $18-billion.
The numbers are necessarily guesses, since they are based on estimates of what oil prices could be if pipelines weren't effectively full and product went to market unobstructed.
That said, the numbers can also be crunched to show much larger losses. If Canadian crude could make it to tidewater, it would access the kind of international prices that drive LLS and Maya. Compared to that, far more revenue is being forfeited – Mr. King puts it at nearly $30-billion, in the vicinity of the Alberta estimates. Still, that's far more hypothetical, since it's less certain that Canadian oil will achieve international prices, given the troubles industry has encountered building pipelines to the West Coast.
And at least part of the story is that the Alberta government didn't just underestimate differentials. It also overestimated the headline oil prices, expecting a WTI price of $99.25 when it's actually been about $93 over the past 12 months.
Either way, Mr. King said, current differentials are adding up to missed government tax and royalty revenues of about $4-billion to $6-billion. Most of that pain accrues to Alberta.
"You take the mid range of that; $5-billion that's wiped out just because we're taking a hit on spreads," he said.
The Globe and Mail, Tuesday, Jan. 22, 2013
Byline: Nathan Vanderklippe
VANCOUVER - The nationwide Idle No More movement merged with ongoing protests against oil pipeline projects proposed for British Columbia, to bring more than a thousand protesters out to greet the federal review panel conducting hearings in Vancouver.
The community hearings by the federal panel on the Northern Gateway project are scheduled to resume this morning, after a noisy start on Monday night.
First Nations from as far as the Haisla Nation on the North Coast, near the would-be tanker port of Kitimat, B.C., and from the Interior took part in a march to the downtown hotel where the hearings are being held.
"The Harper government has one of the most aggressive, high-carbon strategies in the world," Eddie Gardner, of the Sto:lo Nation, told the crowd as they mobilized ahead of the march.
He blasted the federal Conservatives for changes they've made to environmental laws that will affect oversight of the Northern Gateway proposed by Enbridge (TSX:ENB) and other projects.
"He implemented that legislation, it has become law, and he did it with crass and ruthless disregard for the environment," Gardner told the protesters.
"Stephen Harper is hell bent to expand the tar sands.
"Canada is coming alive to Harper's real agenda ... he is one of the biggest enemies of the environment."
Protesters were met by Vancouver police, who kept them from entering the building. They remained outside the Sheraton Wall Centre for a short time, drumming and chanting "No Pipelines" before moving on.
Kiera Corrigan, 25, said she is originally from Bella Coola, a small community on the central coast.
"I think it's really important that we don't put in this pipeline. My home town is right south of Kitimat, so it hits really close to home if we ever have an oil spill, which there will be," she said.
Protesters also took aim at a proposed expansion of the existing TransMountain pipeline operated by Kinder Morgan.
The pipeline moves oil from the oil sands to port in Vancouver, and a proposed $4.3-billion expansion would more than double the capacity of the 1,100-kilometre line.
The joint review panel, which is weighing the Northern Gateway, has scheduled eight days of hearings in Vancouver.
They're hearing public comment on the controversial plan to deliver oil from the Alberta oil sands to a tanker port on the North Coast of B.C.
Community hearings were held previously in Victoria, and a one-day hearing is scheduled in Kelowna later this month.
The panel limited access to the hearings room to participants.
"Given the large urban nature of Victoria and Vancouver and previous protests held in both locations regarding the proposed Enbridge Northern Gateway project (the project), the panel has decided that it will limit access to the hearing room," stated the directive.
Members of the public are able to listen to submissions in another location. The hearings are also being streamed live on the panel website.
Access to the hearings remained closed off after the protesters dispersed.
Inside, the three-person panel heard from a range of interested members of the public, from First Nations and environmentalists, to a scientist who lamented telling her children and grandchildren about what she did about climate change.
"What will you tell your grandchildren?" the woman asked the panel.
Eric Doherty, a former Canadian Coast Guard marine engineer turned environmental planner, chided the panel for failing to consider emissions from the Alberta oil sands in its assessment.
"It's no longer controversial that global warming is killing people," he said. "It's no longer controversial that global warming is THE threat to our society."
The pipeline project has been incredibly divisive in British Columbia and as the end of the long regulatory process nears, both sides are trying their utmost to rally support.
The United Association of Plumbers and Pipefitters decided to weigh in Monday, with a statement from Canadian director John Telford stating that the project "will provide jobs to members in Eastern Canada as well as the West."
"The regulation of the oil and gas industry as a whole ensures that the impact to the environment and native peoples will be minimal and the benefits should far exceed any possible drawbacks," the union said in the statement.
And Enbridge has been on a charm offensive in the province for months, with full-page newspaper ads and radio ads extolling the benefits of the project and assuring B.C. residents they will employ world-leading safety measures.
The panel held final hearings earlier in Edmonton, Prince George and Prince Rupert, where company experts and interveners answered questions under oath.
Those hearings will resume in Prince Rupert next month, and the panel must submit its recommendations to the Environment Minister by the end of this year.
Huffpost BC, Tuesday, Jan. 15, 2013
Byline: Dene Moore, The Canadian Press
During the last month of 2012, Christian Paradis, Canada's minister of industry, announced on behalf of the Canadian government the approval of the $15.1 billion acquisition of Nexen Inc. by China state-owned enterprise (SOE) China National Offshore Oil Company (CNOOC).
The CNOOC deal was heralded as the largest acquisition by a Chinese SOE, and the media suggested that with this transaction the Chinese communist regime indicates its intention to reduce its investment in U.S. bonds.
CNOOC pledged to abide by free market standards, including "transparency and disclosure; commercial orientation, including an adherence to Canadian laws and practices ... and employment and capital investments, which demonstrate a long-term commitment to the development of the Canadian economy," as stated in a Dec. 7, 2012, Government of Canada announcement.
It is not known if a national security review, often required under the Investment Canada Act, has been completed in the CNOOC-Nexen purchase, especially as Canadian secrecy rules prohibit anyone from discovering that such a review took place.
The CNOOC deal is not cast in stone yet, as Nexen has assets in the United States, the United Kingdom (U.K.), and the European Union (EU), and thus still needs approval from the U.S. Committee on Foreign Investment in the United States (CFIUS), Canadian regulatory agencies, and respective U.K. and EU government agencies.
"The U.S. approach is more specific, transparent, and integrated than the Investment Canada scheme. The U.S. CFIUS model also requires nine agencies to work together to carry out reviews," said Debra Steger, law professor at the University of Ottawa, in a Dec. 7, 2012, interview published by Maclean's.
Secrecy and Lack of Transparency
According to media reports, the Canadian government has not prevented the acquisition of a Canadian oil and gas company by any foreign SOE, because it could always find a net benefit for Canada. However, as of date, the government has not been transparent as to what it considers a net benefit and how it tests for the net benefit.
"There is no formal, transparent, judicial or quasi-judicial process. Rather, the process is an internal investigation conducted by Industry Canada officials in the case of a 'net benefit' review," Steger said in the interview.
There are actually two types of reviews: One is the net benefit review, and the other is the national security review. The latter could be ordered when the foreign buyer is an SOE. However, this type of review is shrouded in greater secrecy, and it is impossible to determine if such a review has taken place.
"In the case of a 'national security' review, the process is even less transparent ... and no written reasons are published. ... The national security process is shrouded in secrecy, there is no appeal, and ... no one knows what happened in a particular case or even if a national security review was conducted," Steger said.
Acquisition of Canadian Assets
The Nexen purchase isn't CNOOC's or other Chinese SOEs' first purchase of Canadian assets.
"In 2011, CNOOC made a major move into the oil sands by purchasing 100 per cent of OPTI Canada for $2.1 billion. Sinopec acquired Daylight Energy in 2011, and made a $4.65 billion investment in Syncrude in April 2010.
"China Investment Corporation (CIC), a sovereign wealth fund with an office in Toronto, made an investment of $817 million in a new oil sands joint venture with Penn West Energy Trust in May 2010; it also made a $1.5 billion investment in Canadian mining company, Teck Resources, in 2009. Petro China invested $1.9 billion in Athabasca Oil Sands Corp. in late 2009," according to Steger.
Concerning some of the above investments, Steger suggests that some of them were minority investments, and thus didn't fall under the Investment Canada Act requirement, even though some of the investments were for a large amount of money.
Chinese SOEs and the Trust Issue
The question remains, can the agreement between CNOOC and the Canadian Ministry of Industry be taken seriously?
"About two-thirds of the public (68%) say the U.S. cannot trust China too much or at all," according to a Pew Research Center Sept. 18, 2012, report.
"Unfortunately, as long as China is ruled by the communists, ... [their] words cannot be trusted," according to a commentary on the Eye Dr. DeLengocky website, a website by a Vietnamese doctor who immigrated to the United States in 1990
Quoting former president of South Vietnam Nguyen Van Thieu, Dr. Tayson DeLengocky said, "Do not listen to what the communists say, just look at their actions."
Public Relations Ploy
Concerning the takeover of Canadian assets by foreign SOEs, Stephen Harper, Canada's prime minister, announced that going forward, Canada would put in force tougher conditions, which would nix acquisitions like the CNOOC-Nexen deal.
"Prime Minister Harper's supposedly 'tough new conditions' for foreign takeovers are nothing more than a public relations ploy aimed at masking the fact that he has just allowed a foreign government to seize unprecedented control over Canada's energy resources," a Dec. 7, 2012, article on the Alberta Federation of Labour (AFL) website suggests.
The AFL doubts any sweeping overhaul is in the making, especially since the process will be outside the public eye, and the industry minister will still be in charge of the proceedings.
"CNOOC is not your typical oil company. It doesn't operate on market principles, and it isn't beholden to investors. If they [Canadian officials] had been serious about defending the interest of Canadians, they would have nixed the deal outright," according to AFL President Gil McGowan in the Dec. 7, 2012, article.
Trying to Nix the CNOOC-Nexen Deal
"The Harper Government approved the sale of Nexen to a Chinese government-owned oil company Friday in part because critics of the deal couldn't make a good case against it," a Dec. 9, 2012, article on the Calgary Beacon website suggests.
Arguments that China is a communist country are a political weapon, but not a sound argument to scuttle the CNOOC-Nexen acquisition.
The communist allegation cannot be seen as a valid reason for nixing the CNOOC-Nexen deal, as proponents will ask, "Then why does Canada do business with China?" For example, why does Canada continue to do business with the Chinese state? In 2011, Canada's trade deficit with the Chinese state was CA$32 billion and CA$24 billion from January 2012 to September 2012, according to the Asia Pacific Foundation of Canada.
Concerning the argument that Canada is handing over its natural resources to China, the Calgary Beacon article disagrees.
"Under Section 92A of the Canadian constitution, the provinces own the country's natural resources and are given the responsibility for managing them," according to the article.
Many of the opponents to the CNOOC-Nexen deal point to the flagrant industrial espionage the Chinese state has been committing for years. No one doubts that the Chinese state has been known for years as a violator of intellectual property rights and has been linked to online spying.
"The counter argument is that CNOCC is state-invested, not state-managed, ... [and] has plenty of Canadian shareholders. ... CNOOC has also pledged to keep on the existing Nexen management team, which suggests that using the Canadian entity to commit espionage may be tougher than it looks," according to the Calgary Beacon article.
Epoch Times, Friday, Jan. 11, 2013
Byline: Heide B. Malhotra
CALGARY — The boom in U.S. shale oil and natural gas production threatens to cut off a key supply of skilled temporary foreign workers for Alberta companies, as more tradespeople opt to work on large infrastructure projects in the United States despite the lure of dramatically higher wages in Western Canada.
"There's going to be a battle between what goes up north versus what comes down south," said Mike Bergen, executive vice-president of Sugar Land, Tex.-based market research firm Industrial Info Resources.
Advances in drilling technology have unlocked new supplies of crude oil and natural gas from hard-to-reach reservoirs across much of the U.S. By 2025, shale gas alone could add more than one million workers to the U.S. manufacturing industry, according to a fall report published by PricewaterhouseCoopers, reducing costs for raw materials and energy by as much as US$11.6-billion annually.
"You get a big [liquefied natural gas] project that takes place and then you get several of these big refinery projects and then here comes a new ethylene plant," Mr. Bergen said. "That's going to draw a lot of labour."
Alberta's perennially tight labour market means average wages for electricians, boilermakers, plumbers and pipefitters, carpenters and structural steelworkers are anywhere from 70% to 136% higher than median U.S. wages, depending on the trade, according to a five-year outlook published Monday by Industrial Info.
The high wages contribute to an operating environment already seen as one of the most expensive regions in the world from which to extract oil, at a time Alberta's heavy blend of crude, Western Canada Select, is subject to steep price discounts in the U.S.
Larry Matychuk, business manager for the Edmonton-based Local 488 branch of the United Association of Plumbers and Pipefitters, said the base wage rate for members is $43.77 per hour plus benefits.
He said the union regularly turns to its U.S. affiliates for additional tradespeople during "shut down season," a four-month annual stretch when refineries and bitumen upgrading plants shut down for maintenance, exacerbating worker shortages.
"We've had 200 to 300 of them up here at a time," he said of the U.S. tradespeople. "We expect that that's going to increase. We offer jobs to Canadians first. However, there is work picking up across Canada now. There's work in Saskatchewan; there's work in Newfoundland. Work is starting to pick up in Ontario and B.C. We don't have access to as many of the Canadians as we used to have."
ExxonMobil Corp. said last week it was moving ahead with its US$14-billion Hebron development offshore Newfoundland and Labrador.
The project, designed to recover more than 700 million barrels of oil from the Jeanne d'Arc basin roughly 350 kilometres southeast of St. John's, will employ up to 3,500 people during construction, the Irving, Tex.-based energy giant said.
That could spell trouble for Alberta oil producers. The latest figures compiled by the Petroleum Human Resources Council of Canada suggest at least 9,500 jobs could go unfilled in the country's oil and gas industry by 2015.
Oil sands production is poised to increase 44% by then from today's levels, to 2.48 million barrels per day, according to the Canadian Association of Petroleum Producers.
An influx of U.S. tradespeople could help with facility expansions needed to boost production, Mr. Matychuk said, "if the Americans are available at the time when we need them."
Gil McGowan, president of the Alberta Federation of Labour, expressed concern about Americans filling Canadian jobs in the oil sands.
"We're not talking about sharing a cup of sugar with them," he said in an interview. "We're talking about jobs that pay in excess of $100,000 a year. We should not be allowing these jobs to go to people outside of Canada without first doing everything we can to provide opportunities to Canadians."
The point may be moot, as workers in the U.S. help rejig facilities to meet new sulphur specifications in gasoline plus accommodate soaring production of U.S. shale oil fields.
Refiners are "engaging in some pretty big projects" on the Texas Gulf Coast, Mr. Bergen at Industrial Info noted. "We're anticipating some pretty decent expansion work on distillate and crude conversions for taking the shale crude," he said.
Financial Post, Monday, Jan. 7, 2013
Byline: Jeff Lewis
The Alberta Federation of Labour (AFL) has added its voice to those worried about the ramifications of Canada's role in China's energy plans.
Following Prime Minister Stephen Harper's approval of state-run China National Offshore Oil Corporation's (CNOOC) takeover of Nexen, the AFL released China's Gas Tank, a report outlining how it believes China is moving to control all stages of its Alberta oil operations.
The report says three state-owned Chinese oil companies, CNOOC, PetroChina and Sinopec, have major investments in the oilsands. It points out these companies' U.S. tax filings admit the three companies are affiliated and sell oil to one another. Chinese state and private investment in the oilsands is unclear, but significant. For example, Chinese-owned Sunshine Oilsands "holds seven per cent of the total oilsands leases in the Athabasca region, or 1.15 million acres of oilsands leases," according to the report.
The report also points to the proposed Northern Gateway pipeline that would run from Alberta to the British Columbia coastline and is ostensibly intended to ease shipment of oil and natural gas to Asian markets. Sinopec is one of the 11 companies investing in that pipeline. Four remain unidentified.
Finally, the AFL asserts the Canadian federal government did a poor job negotiating the Foreign Investment Protection Agreement (FIPA) with China, and should renegotiate before it is officially passed.
"From our perspective the big problem is that the Chinese have interests that run counter to the interests of the Canadian public," says AFL president Gil McGowan. "It's clear that the Chinese are assembling the pieces necessary for what we would describe as a low price strategy for Canadian bitumen.
"What I've been told by people in government and in industry is that we can't be picky about what we send to those markets... we basically have to give them whatever they want.... Frankly I don't buy that argument because they need us more than we need them. But it's not challenged," he says.
Gordon Holden, director of the University of Alberta's China Institute, echoes McGowan's observations. He says China is not happy buying oil from Iran, Saudi Arabia and Sudan, and is looking for more stable sources.
"Alberta is rock solid in terms of the manner of doing business — relatively transparent, but also just without the complications," says Holden.
McGowan says the AFL, which represents 27 labour unions in Alberta, is not alone in its alarm over Canada's hasty business dealings with China. Even internationally, the public is asking Canada to slow down. U.K.-based Avaaz.org is an online campaign network with 17 million members that develops petitions and protest campaigns on social and environmental issues it believes are important to its members.
Avaaz is currently campaigning against the present form of the Canada-China FIPA. Nearly 38,000 people have pledged support to the campaign.
"As the owners of the resource, I think Albertans deserve to know what's going on and what's being lost, but they don't," says McGowan.
Fast Forward Weekly, Thursday, Dec. 27, 2012
Byline: Susy Thompson for News