Regina鈥� On Feb. 8, Premier Brad Wall announced a new proposal in which it would like to see the federal government provide $156 million to assist the energy industry clean up and abandon wells. He spoke to Pipeline News later that day about this as of yet unfunded proposal, low oil prices, pipelines and carbon dioxide initiatives. (See related story Page 5)
Pipeline News: How is oil dipping into the $20s affecting Saskatchewan?
Brad Wall:There鈥檚 two main answers to the question. One, the economy, which is most important, because, of course, that鈥檚 people鈥檚 jobs and livelihoods that are at stake; and there鈥檚 the budget, which is also important, but not as crucial as jobs.
With respect to the jobs side, we saw the numbers come out on Friday from Stats Canada. I was surprised. Even with the 1,900 jobs we鈥檝e lost on the resource side, even with those included, we created net new jobs of 5,200 year-over-year. That speaks to some resilience and diversity in the economy. We also have the lowest unemployment rate in the country. Today we had amazing agriculture/agrifood export numbers come out. We鈥檝e already exceeded our goal. We set a goal in our growth plan that we would be at $15 billion in agrifood exports by 2020. Well, we exceeded it this year. The big star was lentils, but we鈥檙e limited in that. It鈥檚 the second year we鈥檝e been the number one agrifood exporter in the country out of Ontario.
All of that says the economy has been certainly affected and seeing job losses and slowdowns and some companies shutting down completely as a result of low oil. We take that very seriously. That鈥檚 why we鈥檝e made the proposals for using some federal level support for abandoned well cleanup, to keep folks working. But there is comparative strength in the economy, in other sectors.
The other piece of the budget, much different story there; a very, very difficult budget. Oil is the reason, for the most part, although forest fires this year are part of it. But oil is reason for the most part we鈥檙e going to have a deficit this year, the current year, and, should we get elected in April, we鈥檙e going to have to have a modest deficit before we get back to balance in 2017-18.
P.N.: I鈥檝e talked to several companies in recent weeks who have laid off half their staff over the past year. Is there anything the provincial government can or should do to help struggling oilfield businesses, or the federal government? That goes into your proposal today. Is that the only thing up your sleeve, or are there other things you may be working on?
Wall:In the budget, we knew we would be facing these challenges. The price of oil was sliding in all of 2014, so we implemented some new growth tax incentives in other sectors. We鈥檙e going to continue with our infrastructure investments. If we鈥檙e elected, you鈥檒l see some around that piece, as well as expanding it. That creates jobs and opportunities in other areas, to be sure, but the announcement today focused on the 1,900 to 2,100 that have lost their job directly in the energy sector in our province. They鈥檙e uniquely best qualified to help with well cleanup. We think this proposal to the federal government, (is)better than expanding Employment Insurance, which is fine, we know the prime minister has talked about that. (This) will keep people working in the oil sector. A lot of independent contractors, who are technically still on the job, are working a lot less. So expanding employment insurance has a limited impact for those folks, whereas putting them back to work on oil well cleanup has, we think, a more positive impact.
P.N.: Is there a worry here that the orphan well program and the liabilities associated with if may not be enough to cover the fallout from what鈥檚 happened, and potential insolvencies?
Wall: That is a concern. As you know, as we lose more companies, the pressure on the remaining ones will get stronger in terms of assessment for the orphan well fund, never mind what you鈥檙e pointing to 鈥� the impact on their balance sheets. The small companies, especially, are trying to survive, with respect to their financers, who are looking at their new values and liabilities such as completed, or abandoned wells. It would have some help to offer companies that are facing those challenges, as well as putting people to work.
P.N.: Would there be any provincial money going into this?
Wall:No. We would say to the federal government that right now, Saskatchewan taxpayers are going to put in $500 million, half a billion, into the federal equalization program. That鈥檚 our per-capita share, in terms of our taxpayers. We would say, 鈥淭ake it out of that.鈥�
To have that much going into equalization and nothing coming back, when oil鈥檚 been in the ditch for quite a while, without a prospect of improving, I think it leads to a conclusion the feds could take on a program like this, or augment it, even, out of those dollars. Alberta will be putting in about $2 billion.
P.N.: The Trudeau government is now going to ban tankers off the northern coast of B.C., effectively killing Northern Gateway. What are your thoughts on that?
Wall:Obviously, we鈥檙e all concerned about the coastline of the country. We鈥檙e concerned about environmental issues. We know there are technological ways to mitigate against oil spills from a pipeline and tankers. I just have a concern that eliminating the option, in terms of moving our oil to tidewater. If the federal government believes the coastal protections are simply not there, (that) the technological protections are not there to guard against some catastrophe on the coast, then that makes Energy East even more important. We鈥檝e got to move some oil, somewhere. We鈥檝e got to get away from having just one customer. That鈥檚 what I鈥檝e been saying. It just makes good common sense the prime minister would be a champion for the Energy East pipeline.
P.N.: The British Columbia government has rejected the Trans Mountain Expansion application to the National Energy Board. If it is killed, along with Northern Gateway, what do you think about losing the option to ship oil to the Pacific?
Wall:We鈥檙e mostly talking about Alberta. The impact would be on Alberta. Both the Kinder Morgan and Northern Gateway are Alberta bitumen, while Energy East (would have) Saskatchewan oil in it. However, it does hurt everybody that has oil in their jurisdictions, because if we can鈥檛 get oil to tidewater, we can鈥檛 get the Brent price. The differential is much smaller now, but it鈥檚 there, and it will grow. We鈥檒l never get that full value for our resource. That deprives not just industry, but the government. People own the resource in the first place.
The world鈥檚 greatest oil reserves are here in Canada, but we sure don鈥檛 act like it, because we don鈥檛 want to move it across our own country. The movement of other durable goods, chemicals, products, across Canada happens regularly and without harassment, it seems, compared to the energy sector. If the energy sector is feeling a little bit put upon, I understand why.
P.N.: You criticized Montreal-area mayors for opposing Energy East, which might be our last hope for export pipelines. What do we do now?
Wall:I don鈥檛 think it is. I guess cities can make presentations to NEB processes, but they鈥檙e not going to necessarily win the day for their own side. There鈥檚 every chance Energy East can succeed.
It鈥檚 really frustrating. The province of Quebec is a benefactor of equalization payments to the tune of $10 billion. Fifty-six per cent of the whole federal program goes to Canada鈥檚 second-most populous province that has a 400-year old economy. At least in part, the money鈥檚 been supported by strong energy sector that helps provide employment opportunities for all Canadians from coast to coast to coast. It also helps support transfers by paying a lot of taxes. Transfers, in the case of equalization, go predominantly to Quebec. It鈥檚 very frustrating for Western Canadians so see mayors basically want to shut down a pipeline that represents an industry that has supported their city and province vitally over the last decade.
P.N.: Now that you鈥檝e had some time to reflect on Paris COP21, what is the impact on Saskatchewan?
Wall:We鈥檒l know more in March when we meet with the prime minister and have a discussion about what鈥檚 next for the federal government鈥檚 plan on carbon. As for us, we鈥檙e not going to be moving towards a carbon tax. In fact, I said at SUMA I don鈥檛 want to increase any taxes. That even means the carbon levy our greenhouse gas legislation allows for. Now is not the time. That will be my counsel in March. We can have discussions about the long-term, but Saskatchewan will be strongly opposed to any new tax, any new barriers to investment in our economy. The timing of that is simply very, very wrong right now, given the price of oil.
P.N.: Will Saskatchewan end up being the last man standing when it comes to coal-fired power generation? Is that realistic?
Wall:It is, if we continue to clean it up. January was the best month to date for Boundary Dam 3. We had about an 86 per cent capture and it ran the entire month. We鈥檙e on track to capture 800,000 tonnes, which is very close to what the objective was of a million tonnes per year, and cleaned it up to be much cleaner than natural gas. We鈥檝e even had initial discussions with the federal government to do another project, whether it be Boundary Dam 4 or something else carbon capture. There鈥� seems to be an interest talking about it.
I think we better not give up on coal because, you know, in the last three years, in 2014, 2015 and this year, China will add 133,000 megawatts of coal in those three years. That鈥檚 just what they will have added. That鈥檚 our entire Canadian production 鈥� they鈥檝e added it in just three years. Yes, they鈥檙e doing more renewables, and burning coal. So we think we have to find a solution around coal, or everything we do in this country, be it cap-and-trade or carbon tax, will be negated by the fact so many places in the world are going to continue to burn coal and build coal.
