Thursday, April 22, 2021
VOLUME 3 I ISSUE 43
MERIDIANSOURCE.CA
CAPP updates Chamber ally on recovery GEOFF LEE
WRITER
.................................. The Canadian Association of Petroleum Producers (CAPP) says high rural municipal taxes are discouraging investment growth in Saskatchewan’s oil and gas industry. T h a t ’s o ne of t h e m an y hurdles to economic recovery CAPP seeks to resolve in collaboration with the Lloydminster Chamber of Commerce and its political action committee. “On the economic side, we need to start working very smartly, collaboratively,” said CAPP president and CEO, Tim McMillan, in a Zoom presentation hosted by the Chamber on April 14. “A part of that is our role to engage with Chambers and governments to get some of the policies that can drive that recovery.” McMillan says in Saskatchewan, one of the biggest hurdles the industry needs to overcome is municipal property taxes. “That’s what we’ve been engaging the political action group on,” he said. “The other is SaskPower. The structural cost at SaskPower has driven costs in a way we don’t see in other jurisdictions and are becom-
ing a barrier to investment.” CAPP calculates every hour of work in the oil and gas industry in the province creates more than $2,000 of GDP compared to $225 of GDP for every hour of work in mining and metals. “Enabling more investments in oil and gas and more oil and gas jobs has huge effects,” said McMillan. Capital investment in oil and gas is expected to grow by 14 per cent in 2021 from $24 billion to $27B nationally this year. CAPP projects the pace of capital investments to be slower in Saskatchewan than British Columbia and Alberta due to hurdles like municipal property taxes. McMillan notes the province has seen a decline in investment of 45 per cent the past few years, along with a 20 per cent loss of jobs while property taxes have climbed by 20 per cent. “There are some areas that have seen dramatic increases in their property taxes at a time when we’re losing investment, and that is counterproductive” said McMillan. He notes there are signs of a turnaround ahead, with some of the oil and gas targets noted in Saskatchewan’s
Growth Plan to 2030. “It’s a bit of a ‘north star’ for us and we would hope for municipalities as well,” said McMillan. The government wants to see oil and gas investment grow and production to grow up to 600,000 barrels a day by the end of this decade. “That’s achievable, but it’s going to take us all working together,” said McMillan. The Province also wants to position Saskatchewan as the best place in North America to test, commercialize and scale new oil and gas technologies. “This is going to be a big piece of work for us to bring the municipalities into that common cause with the province, but I think all Saskatchewan will be better off when we do that,” said McMillan. Alberta is attracting a higher percentage of the $27B capital investment pie than the rest of Western Canada. McMillan says opportunities for investment lie in making changes to royalty calculations for bitumen that have stalled the development of partial upgrading in Alberta. “About $18 billion in upgrading was invested in
File Photo the U.S. by Canadian companies due to this policy since 2009,” said McMillan. CAPP has proposed changes to the non-marketbased calculation of the Bitumen Valuation Methodology. “Today, there is a disproportionate royalty on arm’slength transactions that is at the root of this and that needs to be corrected,” said McMillan. CAPP also sees opportunities provincially, nationally and globally for natural gas, with the International Energy Agency predicting dramatic growth for oil and gas to 2040. “It has natural gas growing the fastest and it’s going to overtake coal to become
the world’s second-largest source of energy,” said McMillan, noting oil is number one. He says COVID-19 has also benefited Canada with higher prices for liquified natural gas and an unprecedented demand for petrochemicals used to make N-95 masks. “Every single component from the strap to the filter is made up of petroleum products, except the staples to hold the strap and the nose clip,” said McMillan. He also noted domestic oil and gas producers have nearly returned to producing 100 million bbls/day before COVID-109 cut production to a low of 85 MB/d in Canada.