Black Gold, Special Oil & Gas Show Edition, June, 2019

Southeast Saskatchewan Oil Industry update

June 2019

Oil Show chairman giving a tour Del Mondor, chair of the Saskatchewan Oil and Gas Show and CEO of Aldon Oils, gave a tour on the top of a drilling rig’s mud tank at the Oil Show in 2017 to Tim Harder and Ryan Smith, both from Calgary. The tank was manufactured by Stewart Steel for Panther Drilling, and the tank was shipped off to a rig site right after the Review File Photo 8982 — Greg Nikkel show was done where it was needed at a well site.

Oil Show to feature two commentators

T

he Saskatchewan Oil and Gas Show is gearing up for a two-day exhibition at the Weyburn fair grounds on Wednesday and Thursday, June 5 and 6, featuring two high-profile keynote speakers, Vivian Krause and Rex Murphy.

There has been a lot of planning over the past two years to get the Oil Show ready to roll, said chairman Del Mondor, who paid tribute to the Oil Show board of directors for the work they’ve done on their various committees.

“I think all 30 board members have done exceptional jobs to make sure their area is ready to go at show time.

We’ve only got two days to get it right,” said Mondor, noting the show is the culmination of two full years of planning by each of the committees. “We want people to come and have a good time,” he added, saying the show is a reflection of the southeast oil industry.

Setup for the Oil Show will finish off on June 4, and many exhibitors will be on hand to take part in the Oil Show golf tournament. There will be a shotgun start at 7:30 a.m. for the morning flight, and after an exhibitors brunch, the afternoon flight will have a shotgun start at 1 p.m.

The meet-and-greet kickoff supper for the Oil Show will be held at the Weyburn Curling Rink in the evening, with a steak-and-lobster dinner and entertainment provided by Focal Point, a music group from Forget.

Vivian Krause

Rex Murphy

The Oil Show itself kicks off on Wednesday with the chain-cutting ceremonies at 9:45 a.m., with Mayor Marcel Roy, and exhibits will open at 10 a.m.

Premier Scott Moe and the entire provincial cabinet will be in Weyburn for a cabinet meeting, and the premier will then speak to the Oil Show just prior to the presentation of the Saskatchewan Oil and Gas Recognition Awards at the luncheon.

The Saskatchewan Oilpatch Hall of Fame inductees will be honoured, including Ray Frehlick, president and general manager of Prairie Mud Service; Dean Potter,

president and CEO of DPX Inc., and Eldon McIntyre, CEO of Jarrod Oils.

The Southeast Saskatchewan Legends will also be honoured, and they include Jerry Mainil, Caprice Resources/Jerry Mainil Ltd.; Dean Pylypuk, Estevan manager for the ministry of Energy and Resources; and Glen Grimes, president and CEO of Petro Care Electric, Gold West Wire-Line, and Grimes Energy Ltd. Researcher and blogger Vivian Krause will speak at 2 p.m. She is well-known for her research into the organized efforts by various groups to keep pipelines from being built and keeping the oil industry in Alberta and Saskatchewan landlocked.

In the evening, there will be a prime rib dinner at 7 p.m., followed by a ceremony to recognize the Saskatchewan Oilman of the Year, Lane McKay of Steel Reef Infrastructure Corp., and the Southeast Oilman of the Year, Dennis Day, president of Fast Trucking. These awards will be presented by the Oil Show Board.

The main feature on Thursday will be the industry luncheon at noon at the Curling Rink, and the guest speaker, commentator Rex Murphy.

He is well known for his commentary on The National on CBC-TV, and for his columns in The National Post, as well as being in high demand as a speaker.

Inside this edition of Black Gold:

Oil Show has a great story to share

Mainil family supports oil industry

Kmita brothers cautiously optimistic

W

2 - BLACK GOLD - June 2019

The opportunity city

elcome to Weyburn

Enjoy the Saskatchewan Oil & Gas Show

Saskatchewan Oil Show to make big splash this year

E

very two years, the movers and shakers of the oil industry converge on Weyburn for the Saskatchewan Oil and Gas Show, and this year’s show promises to be as big and exciting as ever. “We’ve stepped up our game to bring in a different crowd,” said Del Mondor, chairman of the Oil Show board, adding the organizing committee made the effort to spend more money to bring in some big names as speakers.

The Oil Show will feature researcher and blogger Vivian Krause and commentator and broadcaster Rex Murphy as the two keynote speakers, with Krause to speak after the awards ceremonies on Wednesday, June 5, and Murphy to take to the podium on Thursday after the industry luncheon.

At the Saskatchewan Oil and Gas Recognition Awards on Wednesday, Premier Scott Moe will be speaking, and in another first for the Oil Show, the provincial cabinet will hold their cabinet meeting that morning with many of the ministers staying to tour the Oil Show. “We’re ready to go, we’re completely organized,” he said. “It will give Weyburn some much-needed positive publicity.”

Mondor noted they have featured broadcaster John Gormley as a keynote speaker in the last two oil shows, which has been good for the oil and its exhibitors. “He’s such a cheerleader for Saskatchewan,” said Mondor, adding of this year’s first speaker, “Vivian has a very targeted message.”

As for Murphy, the TV commentator has indicated he is going to come to Weyburn prior to the day he’s speaking because he wants to tour of the local oil industry and talk to local operators. “He’ll be here to find out what’s happening in the oil business,” said Mondor.

This is Mondor’s third and last Oil Show, and he has been grooming local oilman Dan Cugnet in the vice-president’s position to take over after this show is done. He will continue to be on the Oil Show board, and has been involved in the show for the past 15 years.

“Each one of the shows was after a price drop, so I’ve had a little different challenge for the last two shows. I’m right in the middle of this business, and I understand where people are coming from. I get it … so a lot of what we’ve done is cognizant of that,” said Mondor.

Asked what his thoughts were on the current state of the oil industry in southeast Saskatchewan and western Canada generally, Mondor said he knows things have been tough in the last few years, but added, “I’m always an optimist. We’re just pumped about the oil business and the Oil Show.”

He noted that for his own oil company, Aldon Oils, they are keeping busy and are making plans for drilling new wells. He said there are indications of a slow recovery in the area, such as a local oil service company, John Kmita Ltd., buying a new service rig this year.

There are properties and facilities up for sale in the southeast and elsewhere in the province, and it may be an opportune time for businesses to take a look at what moves they might be able to make, he added, noting he is involved with his brother on the western side of the province, such as in the Kindersley area.

Mondor gives all credit for the success of each Oil Show to the 30-member board, with members busy on their committees taking care of each aspect of the show’s activities.

Welcome to the 2019 Saskatchewan Oil & Gas Show

By Greg Nikkel “We want people to come and have a good time,” he added, saying the show is a reflection of the southeast oil industry, with signs of life and activity in the region starting to appear. “As long as the oil price stays above $60 (per barrel) and the U.S. dollar exchange rate stays at around 74-75 cents, I think it’s going to get busier,” said Mondor.

What he and a lot of operators are looking for right is some consistency in the price of oil, then this will allow them to make their business plans and get the wheels in motion for such activities as drilling oil wells. It takes manpower and machinery to get a well drilled, and it easily costs $1 million or more to drill a well, “so you have to have some certainty in the price.”

Asked if the carbon tax has had an impact on the oil industry as it has on other sectors of the economy, Mondor said, “Overall it takes away from the positivity of the industry. In Saskatchewan, we’re hit twice, as Saskatchewan has their own carbon plan, and the feds have piled on with their carbon tax, so it’s a bit of a downer.”

He added that this tax will only get higher as time goes on. “I’m all in for doing something about emissions, but the carbon tax is not the place for that,” said Mondor, noting there are other ways to be addressing the issue of greenhouse gas emissions without a punitive tax.

Meantime, he is looking forward to the networking opportunities there will be at the Oil Show, noting that the oil business “is a small industry”, and with many owners and operators converging in the city for the three days of the show, a lot of business will get done along with the visiting.

Chairman ready for his last Oil Show Del Mondor, chairman of the Weyburn Oil Show board, is ready for the Saskatchewan Oil and Gas Show to be rolled out and to host the exhibitors and visitors from June 4 to 6 at the Weyburn exhibition grounds. He said the 30-member Oil Show board have been busy over the past two years getting the show ready, and it is now ready to go, with keynote guest speakers Vivian Krause and Rex Murphy to headline the event. This will be Mondor’s third and last Oil Show as the chair, but he will remain on the Oil Show board.

Review Photo 3846 — Greg Nikkel

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BLACK GOLD - June 2019 - 3

18 Biennial th

June 5 & 6, 2019

Weyburn Review Photo Greg Nikkel

ViVian Krause June 5th 2:00 p.m.

Exhibition Grounds • WEyburn, sK

Join us for an informational address from our keynote speakers.

reX MurPHY June 6th 12:30 p.m.

SCHEDULE OF EVENTS TuESDAy, JunE 4 6:30 a.m.

7:30 a.m.

EXHIBITOR GOLF TOURNAMENT Morning golf registration & breakfast (exhibitors)

Sponsored by: Badger Daylighting Location: Weyburn Golf Club

Shot Gun Start - Morning Flight Courtesy rides sponsored by: Baker Hughes

12:00 p.m. Exhibitors Brunch & Registration Sponsored by: NOV Completions Tools

1:00 p.m.

Shot Gun Start - Afternoon Flight

Courtesy rides sponsored by: Baker Hughes

2019 MEET & GREET KICK-OFF SUPPER 7:00 p.m. Steak & Lobster Dinner Sponsored by: Gilliss Casing Services Location: Weyburn Curling Rink Entertainment: Forget Focal Point Music

11:00 p.m. GRounDS CLoSE

WEDnESDAy, JunE 5 9:45 a.m.

opening ceremonies/chain cutting with City of Weyburn Mayor Marcel Roy

Location: Crescent Point Place

10:00 a.m. SHOW OPENS - Weyburn Curling Rink 12:00 p.m. Luncheon Sponsored by: Crescent Point

12:15 p.m. Premier Scott Moe 12:30 p.m. 2019 SASKATCHEWAN OIL & GAS RECOGNITION AWARDS

Presented by: The Weyburn Oil Show Board

2:00 p.m.

7:00 p.m.

8:30 p.m.

Guest Speaker: VIVIAN KRAUSE

Sponsored by: Carson Group & Alchem Energy Services

Prime Rib Dinner

Sponsored by: Finning Canada

Awards Ceremony: SASK & SE OILMAN OF THE YEAR

Presented by: The Weyburn Oil Show Board

11:00 p.m. GRounDS CLoSE

THuRSDAy, JunE 6 9:00 a.m. SHOW OPENS - Weyburn Curling Rink 12:00 p.m. Industry Luncheon 12:30 p.m. Guest Speaker: REX MURPHY

Sponsored by: Valleyview Petroleum & Panther Drilling

3:30 p.m.

GRounDS CLoSE

Sponsored by…

Weyburn Oil ShOW bOard

P.O. Box 1450, Weyburn, SK S4H 3J9 Tel: (306) 842.3232 Fax: (306) 842.3265 Email sk.oilshow@sasktel.net Web Site: www.oilshow.ca

TICKETS AVAILABLE ON OUR WEBSITE

www.oilshow.ca

» Editorial & Opinions

4 - BLACK GOLD - June 2019

Written By: Greg Nikkel editor@weyburnreview.com

A threat to the oil industry is a threat to all sectors

T

he future of the oil and gas industry in Western Canada is at stake, and by extension, the future health and wellbeing of the economy of Saskatchewan, Alberta and in reality, the entire country of Canada.

The industry has suffered under what might be termed the “perfect storm” of factors, all converging to push down and depress the price of oil and the ability of the industry to properly ship their crude petroleum to markets other than the United States.

There has been a concerted effort by environmental groups and the federal government to prevent the oil industry to be able to achieve their most basic goal: build and expand pipelines to ensure the safe transport of crude petroleum to tidewater and to other markets overseas.

The Trudeau government made a pretence of addressing the issue by spending a huge amount of taxpayers money to buy the TransMountain Pipeline — but they have done nothing with it, and in spite of repeated statements by the prime minister that an expanded pipeline will get built, nothing is happening.

On top of this, other pipeline projects like Keystone XL and Energy East have hit brick walls and not gone anywhere, and are not likely to.

In the meantime, millions of barrels of oil from Saudi Arabia (and other sources) are arriving on Canada’s East Coast by tanker ship to provide for the oil needs of the eastern part of the country, while domestically-produced oil from the West is being prevented from supplying those needs.

Never mind the hypocrisy of allowing these tanker ships to come in with oil across the Atlantic while preventing tanker ships from coming to port in northern B.C. on the West Coast, take a quick look at the differences in the sources of this oil.

For starters, Saudi oil is produced in a country that has major challenges in labour standards and human rights, and their environmental standards are far less stringent than many countries.

Oil produced in Western Canada is produced under some of the most stringent environmental standards in the world, not to mention high standards of workplace safety and of labour standards that are second to none in the world.

Are the dollars spent to bring in foreign-produced oil going to benefit anyone in Canada? Are any families going to be supported, or service industry businesses?

No, they are not. Meantime, there are oil companies and service companies in the West that are hurting because of the challenges to the industry that include the inability to properly move their oil to market.

The landlocked oil industry in Saskatchewan and Alberta are forced to sell the oil, at a highly discounted level, to the United States, because they have no other choice of accessing any other customers. Thus, the industry here is subject to the price differential, meaning the price in U.S. dollars that American oil producers sell it at is not the price that producers here are getting.

The businesses involved in oil production, both direct and spinoff, support jobs, and the companies also support their communities and pay taxes. The economy benefits from their investment in infrastructure and production, and in the royalties paid to the provinces, which in turn benefits the entire population with government services like health and education.

Everything is inter-connected, and what impacts one sector of the economy in turn impacts other sectors — and conversely, what benefits one sector spreads and benefits other sectors in the economy. Thus it is not a stretch to say that a threat to one major driver of the economy is a threat to everyone — and this needs to be changed.

You wouldn’t trust just anyone with your health. So why trust just anyone for your news?

Viewpoint:

Why Ministerial Discretion Does Not Belong in Bill C-69

by Gary G. Mar, Q.C., President and CEO Petroleum Services Association of Canada

O

n March 22, 2019, my Board Chairman and I represented the Petroleum Services Association of Canada (PSAC) before the Standing Senate Committee on Energy, the Environment and Natural Resources. We were testifying on behalf of PSAC Member companies, offering their views and perspectives on Bill C-69, which would enact the Impact Assessment Act and the Canadian Energy Regulator Act, as well as amend the Navigation Protection Act and a number of other acts.

In short, Bill C-69 is the federal government’s attempt to impose new “environmental assessment” measures on Canada’s resource sector. It has been widely criticized as likely to further delay and discourage investment in Canadian pipelines, mines and other resource infrastructure. Its “green agenda” threatens to trump economic considerations while adding new layers of bureaucracy, higher costs, longer delays and more uncertainty on Canada’s resource sector.

In preparing to appear before the Committee, we struggled with what we could present that hadn’t already been said many times before by other parties as deeply distressed as we are with the disastrous consequences this bill portends. Nevertheless, we felt it necessary to reiterate the issues of deep concern that had also come to the fore in our own assessment of the bill’s likely impact.

We pointed out that what began in 2014 as a downturn due to low commodity prices, a situation outside of the control of a federal or provincial government, has escalated into a dramatic flight of capital from Canada in response to factors that are within the control of governments.

These include competitiveness, regulatory uncertainty, the tanker moratorium, the clean fuel standard, methane emissions reduction regulations, carbon taxes and, finally, Bill C-69.

At a time when investors are looking for regulatory certainty and firm timelines, Bill C-69 in its current form threatens the opposite. Canada will continue to sacrifice billions of dollars of economic prosperity and growth even as jobs continue their flight to other countries.

One of the biggest problems with Bill C-69 is that it would give the federal Environment Minister added discretionary power on deciding whether a project

goes ahead or not. This politicization of the process has been roundly criticized by numerous thoughtful commentators, including the four Atlantic Premiers (including three Liberals) who told the Prime Minister that Bill C-69 in its current form “will not meet the dual objectives of environmental protection and economic growth”. They went on to say that a particular concern is that the bill “places final decision-making power in the hands of the Minister or Governor in Council and provides the opportunity to veto the results of thorough scientific assessment and review of evidence”.

Telling the Committee that PSAC shares this concern added nothing new to the debate. What is new is a key lesson coming out of the ongoing SNC-Lavalin saga. In that regard, we reminded the Committee that one of the purposes of administrative law is to take political decisions out of the hands of politicians and place it in the hands of subject experts.

That’s what we seek: subject experts able to move the process forward in an objective manner. Legislators have the key responsibility of establishing the parameters within which such quasi-judicial administrative bodies exercise their authority. They then need to stand out of the way and let their handiwork prove itself.

The problem with politicizing the process by adding a ministerial override is that you will invariably have other ministers, MPs, and others with agendas lobbying the minister in question to exercise his or her discretion in a certain way.

The clear danger is that issues of national interest may be forced to take a back seat to those of political interest. Our advice to the Committee? If you don’t want the PMO, or ministers, or others exercising undue pressure upon an individual minister, then take away that possibility. The process must not be politicized.

Let’s take to heart what the PM himself said about the SNC-Lavalin affair: “We will stand up and defend and create jobs, and we will always defend our institutions and rule of law.”

By all means, create new and better institutions and laws as they deal with resource development, but then stand out of the way and let them work with certainty, objectivity and timeliness to restore investor confidence and bring back those jobs for Canadians.

63% of Canadians can't spot fake news.

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BLACK GOLD - June 2019 - 5

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6 - BLACK GOLD - June 2019

PSAC lowers well-drilling forecast for 2019

T

he Petroleum Services Association of Canada (PSAC) in its midyear update to the 2019 Canadian Oilfield Services Activity Forecast lowered, for a second time, its forecast for the number of wells drilled (rig released) in 2019 across Canada to 5,300 wells, a drop of 1,300 or twenty per cent from the original Forecast of 6,600 in November 2018.

PSAC has based its updated forecast on an average natural gas price of C$1.65/mcf (AECO), crude oil price of US$57/barrel (WTI), and a U.S.-Canada exchange rate averaging $0.75.

“It is unconscionable that we continue to thwart our own prosperity, driving capital investment that creates good middle-class jobs and economic benefits for all Canadians to other countries while we make no dent whatsoever in global GHG emissions for our

Sunset in the oilpatch

Review Photo 5239 — Greg Nikkel

The sun was low on the horizon behind these three pumpjacks just south of Weyburn recently.

loss,” said PSAC President and CEO Gary Mar. Duncan Au, PSAC Chair and President & CEO of CWC Energy Services noted, “Clearly, cash flow for our E&P customers has improved with higher WTI prices and narrower WCS differentials, but that has not translated to re-investment in new crude oil production. Instead, E&P companies are reducing debt, paying dividends, buying back their own shares and investing elsewhere rather than re-investing in this country. As a result, we have seen oilfield service companies laying off employees this past winter season in what traditionally is the busiest time of year.”

On a provincial basis for 2019, the revised forecast for Saskatchewan now sits at 1,960 wells compared to 2,422 wells in the original Forecast, and Manitoba is forecasted to see 260 wells or a jump of five in well count for 2019.

PSAC now estimates 2,685 wells to be drilled in Alberta, down from 3,532 wells in the original forecast. British Columbia’s expected well count has been nominally lowered, from 382 wells to 375 wells. Eastern Canada’s well count has been raised from 9 to 20 between forecast versions – one bright spot for increased activity in the country.

This year, PSAC is also forecasting activity beyond drilling to include maintenance and repair work and site closure activity to cover a broader spectrum of activity that is undertaken by the sector.

Mar reflects, “On a positive note, closure activity, such as decommissioning, remediation and reclamation activity, has intensified. With increased funding to the Orphan Well Association and the new Area Based Closure program introduced by the Alberta Energy Regulator, more well sites are being decommissioned providing additional work for services companies when they sorely need it.

“Delays of critical pipeline infrastructure for oil – Line 3, Trans Mountain Expansion, and for natural gas – Coastal GasLink for LNG, and regulatory uncertainty with the impending passage of federal government Bills C-69 and C-48 however, continue to dampen hopes of increased capital investment and a robust oil and gas industry this year.

Opportunity is at our door. We must find ways to communicate our responsible energy development to all Canadians to foster support for this vital industry that provides jobs and economic benefits to Canadians from coast to coast.”

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BLACK GOLD - June 2019 - 7

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8 - BLACK GOLD - June 2019

Major challenges ahead for oil industry

T

here is optimism for the future of the oil industry in Canada, but there are some major challenges that need to be dealt with first, said Weyburn oilman Dan Cugnet in an interview.

The president of Valleyview Petroleums and vice-chair of the Weyburn Oil Show board also expressed his ongoing support for the industry in southeast Saskatchewan, and the part that the Oil Show plays in Weyburn and in promoting Western Canada’s oil industry.

“I think the Saskatchewan Oil Show in Weyburn has always been the premier energy industry event in the province and that will continue moving forward. I think this year and in future years, we will see increased advocacy and the Show becoming more of a platform for education and for the energy industry to have a voice and promote itself. We have a great story and we need to start telling it,” he said, noting the two keynote guest speakers will be playing a role in this regard.

Researcher and blogger Vivian Krause will be the speak-

Dan Cugnet

er on Wednesday, June 5, and journalist and commentator Rex Murphy will be the featured speaker on Thursday, June 6, at the industry luncheon.

“People in this country and province don’t understand where their energy comes from, where the food comes from and how it’s grown, and there are some misconceptions out there and false rhetoric from outside sources that want to hurt our markets, and build theirs up,” he said.

Asked how important or significant the Oil Show has been for the community, and for the SE oil industry, Cugnet replied, “I think it has been incredibly significant in showcasing the talent, expertise and innovation Saskatchewan and Canadian individuals and companies possess. Ag and oil are absolutely the foundation of the western economy and diversification is great and all business is good business, but these last few years have really highlighted that energy is the economic engine that not only drives our economy, but the Canadian and global economy.”

He pointed out that the Oil Show provides an opportunity for people to get up close to a service rig, or learn about fracing, and also to recognize what environmental leaders this industry is compared to the rest of the world.

“This show breaks down those walls and lets everyone peek inside. And it’s a great chance to visit with friends, competitors and share that knowledge as well,” he added.

Cugnet shared some thoughts about where things are at currently in the oil industry, expressing both optimism and some critical views of the government in power in Ottawa.

“Currently the price of oil is good for industry, government, manufacturing etc. It’s at a point that isn’t too low or too high, where it’s good and steady,” he said, adding, “I think the industry is slowly being crushed under the weight of current federal domestic policy. Investment is right out of the sector. The funds and pensions and foreign investment is all but gone until the Liberals are out of power, plain and simple.”

Cugnet thinks the changes politically in Alberta bode well for the industry as a whole, but Saskatchewan needs to do a better job of supporting local companies and industry.

“We really missed an opportunity to attract and siphon investment away from Alberta into Saskatchewan under the previous government there. Government is by nature slow to react and there was a missed opportunity for us.

“I think our government is doing a good job, but we need to do much better, especially in the climate we’ve

By Greg Nikkel

been faced with the last five years. Premier Kenney is going to be very aggressive in attracting investment and Saskatchewan needs to get more aggressive as well, or risk getting left behind,” he said.

Asked if he is seeing signs of a return to some level of activity here, he said, “No. There is some, but the Americans raising sanctions on Iran last fall really stalled things out the last three quarters. We may start to see some things picking up in the next couple months, but until it’s happening, it ain’t happening.”

On the question of whether the oil price sustainable, or if the differential still a factor, Cugnet said, “Oil is at a great price point right now. It’s sustainable. Government is what is failing the industry currently. The differential had really tightened up under the cuts of the previous Notley government. People may have a different opinion than me on this, but I think what Premier Notley did was the right thing on the cuts and I will give her credit there. I have been critical of most of what she did regarding energy, but I do think that was the right decision.”

He added that the differentials are starting to widen out in the forward curve for heavy oil and is already back over $20 per barrel for the fourth quarter of 2019.

“So this story isn’t going away really for the foreseeable future and I would say the next decade. There will be ups and downs based on what happens globally, such as with Iran, Venezuela, Libya and with consumption levels.

“Many are predicting that the diff is going to swing the other way with large capital projects being abandoned and the need for heavy feedstock being at a premium to all the lighter shale coming online. Others think that refineries are going to start to adjust and add capacity for lighter crude. The jury’s definitely out and I wouldn’t want to guess who’s right,” said Cugnet.

He added that time will tell about whether the shale revolution is over or is just getting started here in Canada.

Asked if he is optimistic, or cautiously optimistic, about the industry’s future in the coming months and years, he replied, “In the coming months, not as much. The only thing people need to know is that last year global consumption increased by 1.6 million barrels a day and this year looks to increase by 1.3 million barrels a day. So each year the world needs another North Dakota and Saskatchewan worth of oil on top of what it currently uses, or a hundred million barrels a day and climbing. Do the math. Am I optimistic? Absolutely.”

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Province to appeal carbon tax ruling

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askatchewan’s provincial government lost their court battle against the federally-imposed carbon tax with a 3-2 split decision by the court of Appeals, and the premier is vowing to continue the fight by taking it to the Supreme Court of Canada.

“Though I am disappointed by today’s ruling, our fight will continue on behalf of Saskatchewan people — who oppose the ineffective, job-killing Trudeau carbon tax,” said Premier Scott Moe on Twitter on the day of the ruling on May 3. “It was a 3-2 split decision and we look to appeal to the Supreme Court of Canada.”

The federal government’s carbon price starts at a minimum of $20 a tonne and will rise by $10 each year until 2022.

Environment minister and Weyburn-Big Muddy MLA Dustin Duncan noted there are other court cases pending against the carbon tax, and the province will wait their outcomes before filing to the Supreme Court. Manitoba filed in Federal Court recently, and Ontario is also taking the matter to court.

Alberta’s new premier Jason Kenney recently said the carbon tax that was set by former premier Rachel Notley will be ended by May 30, and vowed to fight the tax in court if the federal government moves to impose it on that province.

“We feel pretty good about the fact it was a 3-2 split decision,” said Duncan, noting they took heart from the comments of the two dissenting justices in the Court of Appeals decision, and their arguments were longer than the opinions provided by the three other justices.

In the dissenting opinions, the carbon tax was not a valid use of the constitution by the federal government, while the three other justices ruled that the federal government has the jurisdiction to institute such a tax.

Duncan also pointed out that in making their ruling, the majority opinion used the arguments put forward by the B.C. government lawyers rather than the federal one, “so it was interesting to see that.”

His ministry developed a climate change initiative to address the whole issue of greenhouse gas emissions, and did so without the imposition of a carbon tax.

Part of the challenge for the government is how to quantify the good things that agriculture and oil sector producers are doing to reduce greenhouse gas emissions and make these count in the overall picture.

“Our plan is doing a better job of accounting for that than the carbon tax is,” added Duncan.

The issue will likely come up in discussions and in speeches at the Saskatchewan Oil and Gas Show, which will be held in Weyburn on Wednesday and Thursday, June 5 and 6.

Duncan noted that for the first time in the Oil Show’s history, the entire provincial cabinet will be in attendance, and will hold a cabinet meeting at the Oil Show on Wednesday morning with Premier Scott Moe scheduled to speak just before the noon Oil and Gas Recognition Awards.

He added they plan on taking in the show and touring the grounds as well while they’re here for the meeting.

BLACK GOLD - June 2019 - 9

By Greg Nikkel

MLA Dustin Duncan

Poll shows public supports gov’t fight of carbon tax A new poll shows about two-thirds of Saskatchewan residents support the provincial government’s legal action against the federal carbon tax.

In the poll released by Insightrix Research on Thursday, residents were asked if they support or oppose the province fighting the carbon tax, and 51 per cent strongly support the province while 16 per cent somewhat support it.

CARBON TAX

A majority of residents in all age ranges support the provincial government, although the level of that support rises with age.

When asked why they support the provincial government, most respondents (78 per cent) feel the tax will result in price increases which will be passed on to the consumer, and 76 per cent believe the carbon tax will have minimal benefits to reducing pollution. About 71

per cent of respondents feel the province’s economy will be hurt by the tax.

On the statement that the federal government has no right or jurisdiction to impose this kind of tax, 47 per cent supported that position.

Among the 22 per cent who oppose the provincial government’s stance, 69 per cent feel this tax will limit the environmental impact caused by industry, 54 per cent believe it will limit the environ-

mental impact caused by consumers, and 49 per cent believe the federal government has the right to impose this tax.

In addition, 49 per cent of this group feels the carbon tax will be beneficial to the Saskatchewan economy.

The poll was taken of 801 randomly-selected panel members, with a range of age, gender and region to match the population of the province.

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10 - BLACK GOLD - June 2019

Kmita brothers ‘cautiously optimistic’ of oil industry

The newest service rig for John Kmita Ltd.

By Greg Nikkel

Review Photo 5019 — Greg Nikkel

Tyler and Jonathan Kmita stood with their newest service rig, bought over the winter from the manufacturer in Leduc, Alta., after they touched up the paint on it in their service shop. The service rig worked for a couple of months before road bans, and was ready to head back out to the oil patch.

T

he owner-operators of an established service rig company, Jonathan and Tyler Kmita, are “cautiously optimistic” about the future of the oil industry in the southeast — but only if there’s a change in government in October.

The brothers are carrying on the business of John Kmita Ltd., located on Highway 13 just east of Weyburn, with a fleet of service rigs that includes a brand new rig they bought over the winter from their supplier in Leduc, Alta., after retiring their rigs No. 1 and 2.

“When we decided to build a new rig, we were done paying for Rig No. 5. Rig No. 4 was built in 2009-10, which we got in the last part of the downturn at the time so we could save a little money,” explained Jonathan. “So with the new rig, we thought it was a good time to upgrade our equipment, and the original rigs, No. 1 and 2 got retired.”

Their late father, John, bought those two rigs in 1966 and 1969 respectively to start the company off, and as Jonathan pointed out, they have essentially the same equipment as the new rig, such as the draw works, but with not as many bells and whistles.

He admitted it was “a bit of a gamble” when they spent the money to buy a new rig, but noted part of the success of their operation is to maintain a low debt load that helps make such a purchase possible.

“It’s kind of steady right now, but not too busy. I guess we’re fortunate enough with the clients we have, that we’ve stayed working,” said Jonathan.

“In the southeast, we’re somewhat isolated from Alberta, almost like we’re on our own island. We seem to roll along better than other locations.”

While the Kmita rigs have been working, the offsetting factor is that with the downturn going on over four years now, the prices paid by oil companies has dropped by 30 to 35 per cent from what they paid during the boom time.

“No matter what industry you’re in, it’s hard to manage a 30 to 35 per cent cut,” he said, adding of the cyclical nature of the oil industry, “It’s the nature of the beast. We rode a pretty good wave for a while.”

Part of the cause of the ongoing downturn is “the political climate federally” which has been hurting the oil and gas industry, particularly with the inability to get any pipelines built.

The opposition of many groups to the pipelines is misplaced, and many people are misinformed about what is involved with the industry, said Jonathan.

“They don’t realize how dependent we are on fossil fuels,” he said, pointing out the demand for fuel and products made from petroleum is not declining but increasing.

He also noted that projects like the Energy East pipeline was stopped by opposition in the East, and yet they bring in millions of barrels of oil from Saudi Arabia, where

the labour and environmental standards are at a far lower level than the standards set for the oil produced in Canada.

Jonathan added that this region, which includes the Bakken formation, has the third largest reserve in the world, so it’s difficult not seeing as much work going on as there should be.

With the price of oil in the range from $62 up to about $70, “it’s been brutal, no matter who you’re talking to with the downturn going this long.

It’s been four and a half years already. Nobody thought it would last this long,” said Jona-

than, noting some companies like Weatherford have gone into bankruptcy as a result.

“You try to learn to plan in the good times, and you try to keep the debt load down,” he said, adding they also try and keep their service rigs maintained and in good repair, because when a job comes around, “you can’t work when you’re broken down.”

The other key to longevity is diversifying one’s business so you can keep working.

“It’s a tough balancing act,” said Jonathan.

“We take care of the guys

at work, and them time in the shop,” added Tyler. “If you don’t have a good crew, it’s kind of tough to go to a job.

Dad always insisted that we treat our guys right.”

“It takes a good men to run a good crew,” said Jonathan, who laughed and passed on another saying that their dad always said, “Good service doesn’t cost, it pays.”

Tyler noted that treating their workers right pays off in the long run, and said next year they have two employees who will have been with the company for 25 years.

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BLACK GOLD - June 2019 - 11

Carbon tax will be onerous burden on trucking industry

The carbon tax was applied as of April 1, and the Saskatchewan Trucking Association opposed its implementation.

Because Saskatchewan is a listed province (a backstop jurisdiction the federal government forced the tax on), Saskatchewan companies are required to track the location of purchase of diesel fuel and the where this fuel is consumed.

This requirement and the carbon tax overall are placing an administrative burden on companies in Saskatchewan. This burden creates an uneven playing field that may make small local companies less competitive as they try to keep up with extra costs.

The carbon tax requirements are a big change for companies. The STA asserts that companies were not properly notified of the requirement to register with CRA in regards to the federal carbon charge. Due to this lack of communication, there are companies that have failed to register.

Those who fail to register will be charged $2,000, which the STA sees as an unreasonable fine that was avoidable. Additionally, there has been a lack of clarity from the federal government on how companies are to report their fuel purchasing and consumption, when trucking companies will be charged for the tax, and when they will be refunded.

“The Saskatchewan Trucking Association has opposed this taxation since it was announced. Even if the end cost is ultimately passed on, the burden this places on trucking companies is excessive. Companies who cannot comply in time will be fined – that is yet another burden this tax brings. This has left many companies scrambling, and we are only at the registration phase,” said STA Executive Director Susan Ewart.

The trucking industry is supportive of emission reduction, but the federal carbon tax is not the best solution. Many members of the Saskatchewan Trucking Association spend significant time and money investing in greener fleets. The carbon tax system will take time and money away from fleets that could and should invest in new equipment and technology to help Saskatchewan, and by extension Canada, meet emission reduction requirements.

Working on a pumpjack wellsite

Photo 6974 — Andy Williams

A work crew from Jerry Mainil Ltd. did service maintenance at a wellsite, with worker Regan Arnoud up on the crossbeam of this pumpjack as they worked on the machinery for the site. A picker truck and crane was in place to lift the beam back on as the crews serviced the pumpjack.

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12 - BLACK GOLD - June 2019

Mainil family business will continue fighting for oil industry

T

he owners and employees of Jerry Mainil Ltd. have been fighting for the oil and gas industry in southeast Saskatchewan, and will be continuing that fight as they carry on with the business started 58 years ago by Jerry Mainil.

His sons, Dale and Dennis, and son-in-law Calvin Tracey, are the current ownership group of the oil service company, and they have been heavily involved in every effort to support the industry during the ongoing downturn.

They were involved in the organizing of the convoy to Ottawa to protest the carbon tax and to support the building of more pipelines, and more recently, were also in-

volved in the huge convoy to Regina to the Rally Against the Carbon Tax. “Would we do it again?

Sure we would,” said Dale, who then agreed with Calvin that they were very disappointed that the national media was very clearly biased against the oil industry in both of these events, with very little coverage at all of the convoy to Regina, said to be one of the biggest ever in the world.

Not only does the oil industry here operate under high standards and strict environmental laws, the oil companies in western Canada have been very innovative.

“In innovation and technology, we’re industry leaders in Canada,” said Dennis,

pointing to the carbon capture technology developed here in Saskatchewan as a primary example of something that has a great benefit to the environment and the industry itself.

“We want to be good stewards of the land, which we are. We already lead the world in environmental regulations and standards,” added Dale, pointing out that this whole debate over the environment is causing a division in Canada that is hurting a lot of people.

“Until we see a change in government, it’s going to be very tough for our industry to get anything,” he said.

The result is, with the inability to get pipelines built here, is “companies are leaving Canada and taking

their investment dollars with them,” said Calvin.

“We’ve been through this before, with Justin’s father and the National Energy Program,” said Dale, adding that his father started their business up and stayed positive through all of the downturns and challenges. “We’re all in this together.”

“That’s why we participated in the convoy. There are a lot of people employed here. We’re taking care of the people we employ,” added Calvin.

Dennis agreed, saying, “We look after Weyburn, Estevan and southeast Saskatchewan. We’ve met a lot of people you wouldn’t hook up with otherwise, so there’s a lot of people who care and want to keep it going.”

Owners of Jerry Mainil Ltd. vow to keep fighting

Review Photo 4429 — Greg Nikkel

The ownership group of Jerry Mainil Ltd. gathered in front of their newest Caterpiller bulldozer, a D8T, in their yard in Weyburn. From left are Dale Mainil, Calvin Tracey and Dennis Mainil. They have owned and operated the company since 1992, after taking over from their father who began the company in 1961.

Jerry is being honoured at the Sask. Oil Show this year as a “Legend” of the Saskatchewan oil industry. He was honoured as the very first Southeast Oilman of the Year when the Oil Show began.

Asked if the current price of oil is helpful to keeping activity going in the industry, Dale replied, “If we had a friendly federal government, $60 (a barrel) is a good incentive for some activity.”

Eastern Canada needs to be educated about the importance of the oil industry, added Dennis, such as how the oil-producing provinces have contributed greatly in equalization payments to the eastern provinces to help sustain them.

Dale commented there is “a lack of leadership” in Ottawa which has resulted in Canada bringing in 800,000 barrels a day of Saudi oil to the East Coast rather than allowing Western Canadian oil to supply their needs safely.

He pointed out that the environmental and labour standards in Saudi Arabia are far less stringent and tough than Canada’s, yet they are being supported by buying their oil, along with some 37 per cent of domestic use oil being brought in from the U.S. “It’s frustrating when you let politics interfere. They use the environment as an excuse,” said Dale.

“Our goal is to continue doing what we have been doing for 58 years. We’re staying the course,” he added.

Calvin said a lot of their staff have been with them for a long time, even through the downturn, and they have

By Greg Nikkel been able to keep many of those staff on. “It’s what we do, it’s what we know,” he said.

Dale noted that his father started their business in 1961 and they are now in their 58th year, so they have come through many circumstances, and ups and downs over the years. He, Dennis and Calvin took over the ownership of the company in 1992.

Jerry Mainil will be honoured this year as one of the “Legends” of the southeast oil industry at this year’s Saskatchewan Oil and Gas Show.

Dale noted that his father was the very first Southeast Oilman of the Year at the Oil Show, and had also been inducted to the industry Hall of Fame.

“He believes in Saskatchewan, and he knows one thing: work,” said Dale, adding that one key lesson he’s learned from his dad is that it takes a total team effort for a business to succeed in this industry.

“We still have to make our voices heard and be consistent. I’m not going to be negative about it. Our goals are right and noble,” said Dale.

“We’re proud of Weyburn, and we’re proud of our industry. It’s events like the Oil Show that give us a chance to promote it.”

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BLACK GOLD - June 2019 - 13

Subsurface mineral crown offering held

The Government of Saskatchewan’s Subsurface Mineral Crown Disposition Public Offering held on April 23, the first offering of the 2019-20 fiscal year, raised $10,000 in revenue for the province based on interest in resource exploration in the Estevan area.

A single subsurface mineral permit block totalling 1,553.820 hectares was posted and received a bonus bid of $10,000.

Deep Earth Production Corp. was the successful bidder.

The permit block is located along the Saskatchewan-North Dakota border, approximately 30 kilometres southwest of Estevan, an area that is prospective for brine minerals such as lithium.

“The public offering process helps facilitate exploration activity by Saskatchewan’s mining industry for this specific class of minerals in an orderly, transparent way,” Energy and Resources Minister Bronwyn Eyre said.

“Enabling global access to our diverse resource potential will help sustain Saskatchewan mining in the long term.”

Introduced in 2018, subsurface mineral public offerings use an open and competitive bidding system similar to the existing process for issuing periodic oil and gas dispositions in Saskatchewan. The system covers all natural mineral salts and their compounds found more than 60 metres below the land surface. These include boron, calcium, lithium, magnesium, potassium (of which potash is a compound), sodium, bromine, chlorine, fluorine, iodine, nitrogen, phosphorus and sulfur.

The next scheduled date for a subsurface mineral public offering in Saskatchewan is December 17, 2019.

Mainil crew at work at a site T.J. DeWit operated a backhoe as Mark Adcock held a rope on a section of pipe and a valve as it was lowered into a trench, at a worksite for Jerry Mainil Ltd. south of Weyburn in the Weyburn Oil Field. The crew was working on a pipeline Photo 6966 — Andy Williams section near a wellsite.

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14 - BLACK GOLD - June 2019

Networking at the Sask. Oil and Gas Show

Review File Photo 8731 — Greg Nikkel

Visitors to the Saskatchewan Oil and Gas Show visit and do networking while checking out the indoor booths in Crescent Point Place in 2017. All booth spaces were filled for the indoor and outdoor areas, and organizers expect the 2019 Oil Show will be the same, with setup to finish up on June 4, and the Oil Show will

Young Fellows serve up prime rib Volunteer Duane Walkeden of the Weyburn Young Fellows Club served up freshly-cooked prime rib beef to attendees of the Wednesday night supper at the Saskatchewan Oil and Gas Show in 2017 at the Curling Rink.

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Review File Photo 8848 — Greg Nikkel

A fun race at the Oil Show St. Michael students Macy Cugnet, at left, and Reid Glennie at right finished a race against each other to get dressed in fire fighting gear, while visiting the Firemaster booth at the Saskatchewan Oil and Gas Show in 2017. Macy won the race between the two, and then they both tried on breathing apparatus to see Review File Photo 8965 — Greg Nikkel how heavy the equipment is for a fire fighter.

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BLACK GOLD - June 2019 - 15

Oil Show booths fill Weyburn exhibition grounds

Review File Photo 8921 — Greg Nikkel

The Weyburn fair grounds were filled with outdoor exhibitors for the 2017 Saskatchewan Oil and Gas Show, and visitors and exhibitors are shown walking through the area after a supper at the Weyburn Curling Rink. Organizers are gearing up for another full Oil Show, with setup to be completed on Tuesday, June 4, with the exhibitor golf tournament and the meet-and-greet steak and lobster supper in the evening, and the full two days of the Oil Show itself on June 5 and 6.

Opening the 2017 Oil Show

An environmental demo at the Oil Show

Mayor Marcel Roy used large bolt cutters to cut the chain held by MLA and then-Energy and Resources Minister Dustin Duncan, left, and Del Mondor, chair of the Saskatchewan Oil and Gas Show, to officially open the 2017 Oil Show.

The evening program featured the Oilman of the Year Awards.

A Grade 5 class from St. Michael School listened to an explanation from Clint Fladeland, right, of Matrix Solutions, about how to reclaim soil that has been contaminated by oil, while the class toured the Saskatchewan Oil and Gas Show in 2017.

Review File Photo 8856 — Greg Nikkel

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16 - BLACK GOLD - June 2019

Oil-gas land sale raises $1.5 million

The April offering of Crown petroleum and natural gas rights was held on April 9, and raised a total of $1.5 million for the province.

The public offering saw 38 leases purchased, totaling 5,595,875 hectares. The Swift Current area received the most attention with 14 leases sold for $914,349.

The Weyburn-Estevan area was second with 11 leases sold, covering 754.588 ha for a total of $245,288, an average of $324 per hectare.

The top bidder for the southeast area was Highrock Resources Ltd., who spent $113,929 to acquire a 128ha lease. This was the top price paid for a lease in the southeast, and is situated in the Viewfield Bakken Oil Pool, and partially within the Morrisview FrobisherAlida Oil Pool, 13 km southwest of Kisbey.

The highest dollar per hectare in the southeast was from Audax Investments Ltd., who paid $1,057.82 per hectare for a 31.787-ha parcel located within the Huntoon Midale, Huntoon Frobisher and Viewfield Bakken Oil Pools, 20 km northeast of Midale.

While the numbers were down for this sale, Saskatchewan still posted the highest average-per-hectare revenues among the western provinces.

“Industry sources frequently identify Saskatchewan as having a very attractive operating environment and fiscal regime,” said Energy and Resources minister Bronwyn Eyre.

“We are also home to some of the best and most cost-effective conventional oil and gas development opportunities you will find anywhere. It’s not surprising that when we talk to audiences around the world about the investment opportunities in Saskatchewan, we are often talking about oil and gas,” she said.

The next public offering of oil and gas rights will be held on Tuesday, June 4.

Welding stainless steel in the shop

Photo — Andy Williams

Dexter Jarvis welded some stainless steel components in the shop at Jerry Mainil Ltd., as part of a work project the company was working on. The company ensured that their employees were able to be busy throughout the year, even when activity in the oilpatch had slowed down.

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BLACK GOLD - June 2019 - 17

PTRC carries on oil-gas research to help industry

T

he Petroleum Technology Research Centre (PTRC) has been doing research into oil and gas projects for 20 years, and plans to continue to provide research as the industry evolves in coming years, members of the Weyburn Chamber of Commerce heard at a business breakfast meeting at the Legion Hall.

CEO Dan MacLean gave the presentation, noting that the PTRC largely began as research into the CO2 miscible flood project that PanCanadian and Shell established in the Weyburn and Midale fields respectively, and they followed the evolution as PanCanadian became EnCana and Cenovus before they sold the Weyburn operations to the current owner, Whitecap Resources. In Midale, Shell sold their operations to Apache, which is still the operator of that field.

The study on the injection of carbon dioxide into the Weyburn and Midale fields went for 15 years, from 2000 to 2016, at a cost of $80 mil-

lion as they determined if the injected CO2 stayed in the ground or if it escaped back up to the surface.

In this time period, it’s estimated that prior to CO2 injection, there was some 370 million barrels extracted from the Weyburn field and 154 million barrels from the Midale field, and with the CO2, the Weyburn field produced another 155 million barrels, and Midale saw 67 million barrels produced.

The carbon dioxide increased recovery by 26 to 38 per cent in the Weyburn field, and 30 to 43 per cent in the Midale field. The research carried out led to over 300 peer-reviewed articles by researchers from around the world, and these results continue to inform other CO2 storage projects world-wide, with 21 research partners and six government funds involved.

With the former Cenovus facilities now owned by Whitecap Resources, the PTRC are back in discussions with them about reengaging with research into

the continued use of CO2 for enhanced oil recovery, said MacLean.

These experiences and the research data led to the establishment of Aquistore CO2 monitoring and storage research site that includes injection and observation wells drilled to a depth of 3,400 metres, rigged with extensive monitoring equipment, such as a 650-geophone permanent seismic array. MacLean said there is worldwide interest in Aquistore, as they share knowledge with interests in other countries, including three in the U.S., two in the United Kingdom, four in Australia and two in South Africa.

“We were in Melbourne, and had a whole day to present what we’re doing with Aquistore,” he added. “A lot of people are talking about CO2 capture and storage.”

MacLean noted there are only two such projects in Canada, theirs and one owned by Shell in Alberta.

In addition there are 26 research partners in nine countries, and $20 million of

in-kind contributions over the past six years from companies, and over 100 papers published on the project so far.

In more recent years, the PTRC has expanded their oil industry research to heavy oil production, with their Heavy Oil Research Network (HORNET), and the Joint Implementation of Vapour Extraction or JIVE, a four-year $40 million demonstration project near Lloydminster involving Husky, CNRL and Nexen.

With the development of the Bakken zone, the PTRC also has a tight oil program that studies CO2 enhanced oil recovery trials in the Bakken, to examine how hydraulically-fractured wells respond to CO2 use.

Looking at the Saskatchewan oil industry, MacLean

noted that in 2010, Saskatchewan as a whole produced 400,000 barrels a day of crude petroleum, and currently production is around 480,000 barrels a day, which is about 12 per cent of Canada’s total oil production.

The number one oil producer is Crescent Point Energy, followed by Husky Oil and Whitecap Resources.

MacLean noted that 20 companies produce 90 per cent of the oil in Saskatchewan, and the list of companies is changing with buy-outs and amalgamations. He gave as one example how Cardinal has picked up Apache’s Midale operations.

Looking at a list of the top oil producers in all of Canada, 10 of the top 25 companies operate in Saskatchewan, and on the list of

By Greg Nikkel high-netback companies, 11 of the top 25 are operating in Saskatchewan.

“What a great story, this is a great place to invest,” said MacLean, adding there are a number of challenges facing the industry heading into 2019, including piling on of regulations, the pending carbon tax from Ottawa, the lack of any ability to get a pipeline built in Canada, and the movement of capital out of Canada in the oil industry.

“The world needs Canadian oil,” said MacLean.

“We are the most heavily regulated industry in Canada, if not the world. Our oil and gas regulations are the benchmark, we are the standard around the world. We are the most environmentallyfriendly produced oil in the world.”

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Sandblasting crew busy in the oil field Daniel Waterfall, an employee of Jerry Mainil Ltd., prepares the equipment for some sandblasting at a well site south of Weyburn recently. The oilfield service company has been able to keep their personnel busy with maintenance and odd jobs in the Photo 7029 — Andy Williams oilpatch, even with a downturn in activity in the region.

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18 - BLACK GOLD - June 2019

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