Oil CEOs meet to plot new strategy as fissures within industry grow

At a private meeting at the Calgary Petroleum Club last Friday, 150 or so oil and gas CEOs and other business leaders met to discuss the future of Canadian energy. Most of the companies represented were small players. The Canadian Association of Petroleum Producers, the large industry association that is seen as being dominated by the largest companies, was not invited.

The general discussion was about frustration that Canadians are being played for fools by their own governments about the real potential and cost of renewable energy, leading to rushed decisions to transition away from hydrocarbons and meet greenhouse gas reduction targets, without a fulsome and honest assessment of the consequences.

“Why are we only looking at the impacts of oil and gas, compared to the benefits of renewables?” asked Michael Binnion, the president and CEO of Calgary-based Questerre Energy Corp., who convened the meeting.

“We can talk about the benefits of renewables, but let’s also talk about the impacts,” he said in an interview. “Then we can have an adult conversation about our energy diet and how we can have more of the right energy in the right place.

“But get out of this polarized debate (that) renewables only have benefits and are good and clean energy, and (that) hydrocarbons only have impacts and are bad and are evil energy.”

Binnion said the approach worked in Quebec, which this week introduced a new hydrocarbon law that “is cautiously pro oil and gas development” despite years of opposition from the green lobby. He served as chairman of the Quebec Oil and Gas Association and worked hard to inform the debate.

It can work elsewhere, where many decisions are being made that will impact Canadians for decades, such as regulatory approvals of pipelines and liquefied natural gas projects, and where there is a desperate need for a balanced discussion “before we throw the baby out with the bathwater,” he said.

The group is in the early stages of coming up with a strategy and building a network of like-minded people across Canada that could include banks, law firms, academia. Details are sketchy because participants agreed to keep the discussions at the meeting confidential for now.

But many also worry about “intimidation” from government should the list of participants become public, said one CEO familiar with the initiative.

In Calgary, there are only two kinds of companies… Those going broke fast or those going broke slow.

The effort is also a sign of the growing fissure between companies that are supporting governments achieve their climate change aspirations and those that do not and are worried about the consequences of environmental policy.

Four large oilsands companies — Suncor Energy Inc., Cenovus Energy Inc., Canadian Natural Resources Ltd., and Royal Dutch Shell PLC — cut a deal late last year with Alberta’s NDP government that led to a cap on oilsands emissions for the whole sector. The NDP has bragged their support is proof that its policies are embraced by the oilpatch.

In reality many see the policies as suicidal. The angst is deepest among smaller oil and gas companies and service providers struggling to stay alive after 18 months of devastatingly low oil prices and higher taxes, the latter about to get even higher thanks to a carbon tax law enthusiastically passed by Premier Rachel Notley this week.

“In Calgary, there are only two kinds of companies,” Binnion said. “Those going broke fast or those going broke slow. People are worried and afraid. If you are in the upstream business … you have to be worried about the fact that Western Canada, Alberta … might not be competitive world wide as we used to be.”

Saskatchewan Premier Brad Wall continues to demonstrate deeper understanding of the industry’s mood than the Alberta government. In Calgary this week, Wall said the oil and gas sector faces an “existential threat.” He also poured cold water on Ottawa introducing a national carbon tax, saying the timing is wrong during a downturn.

Many efforts to “change the conversation” were made in the past. They led to an even stronger pushback from the environmental movement, which in turn influenced governments. The only result so far from years of discussion by provinces on a national energy strategy is a pile of environmental policy.

CAPP led many initiatives to highlight the contribution of the energy sector. Given its large and diverse membership, the powerful lobby group is seen as having too many constraints to speak effectively, said another CEO who supports the new effort but asked not to be named.

“The industry not only responded too slowly, but responded in a non-constructive way,” the CEO said. “Its engagement is not what it needed to be.”

The push has the feel of a last gasp before Canada’s energy economy is damaged for good. The cracks are widening. Despite the rise in oil prices above US$50 a barrel this week, investment is expected to flow to the United States and elsewhere with lower political risk.

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