PIPELINE The Pipeline News North
NEWS NORTH
Serving the Oil and Gas Industry in Nor thern B.C. and Alber ta
June 2022
VOL. 14 • ISSUE 06
FREE
B.C. scraps contentious deep well credits for oil and gas Deep well credits, long a source of criticism from anti-fossil fuel activists and the Green Party as a fossil fuel subsidy that robs B.C. of its fair share of profits from natural gas extraction, are being eliminated. The B.C. government today announced an overhaul of the way it taxes the oil and gas sector. It is moving to a system that will tax oil and gas producers in B.C. at roughly the same rates as Alberta. The government estimates the new royalty model will generate an average of $200 million a year in additional royalty revenue to the province – about $1 billion over five years. “For too long, the system of royalties for oil and gas has set us up to a situation whereby, rather than British Columbians benefiting completely from these resources, we’ve seen extremely large profits for oil and gas companies, while British Columbians have had to pay more for heating costs as a result,”
said Premier John Horgan.
Energy, Mines and Low Carbon Innovation.
As of September 1, the deep well credit program in B.C. will be gone, replaced by a new royalty and tax model that will tax natural gas producers at higher rates. Other credits for marginal and low-value wells will also be eliminated.
“The new system will ensure the public a return of half the profits over the life of any oil and natural gas well.”
The new rates are a 5% royalty for the first 12 months for new wells – a 2% increase over the current 3% rate. Companies will then pay royalties rates based on profits – i.e. revenue minus costs – with “price sensitive” rates of 5% to 40%, once drilling costs are recovered. In other words, the royalties collected by the government will reflect natural gas prices, which have more than doubled since a year ago in Canada, and nearly tripled in the U.S. “Establishing a rate that is price-sensitive will better reflect the value of the resource and provide a greater return to British Columbians,” said Bruce Ralston, minister of
Deep well credits on pre-existing wells will expire in four years. Until then, companies can still use them to reduce the royalties they pay, unless they decide to voluntarily transfer the credits to a credit bank for emissions reductions and “land healings” – i.e. land reclamation – over and above what is already required by regulation. In response to criticisms that B.C.’s deep well credits had resulted in the B.C. government forgoing about $3 billion in oil and gas royalties and taxes, the John Horgan government commissioned Nancy Olewiler, a public policy professor at Simon Fraser University, and Jennifer Winter, associate professor of economics and scientific director of the energy and environmental policy research at the University of Calgary, to review B.C.’s oil and gas royalties and credits.
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CAPP: the next era for Canada’s oil and natural gas industry
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CAPP president and CEO Lisa Baiton gave the keynote speech today at Alberta Relaunch 2022 presented by New West Public Affairs. Baiton discussed the path forward for Canada’s oil and natural gas industry, with a focus on how CAPP members can contribute to and help solve some of the biggest challenges facing the world today, including climate change, energy security and affordability. See the full speech below: Remarks by Lisa A. Baiton, President & CEO Canadian Association of Petroleum Producers The next era for Canada’s oil and natural gas industry Good morning and thank you for that introduction. As Monte said, I’m Lisa Baiton, President & CEO of the Canadian Association of Petroleum Producers. I’m pleased to join all of you today in this, my first public speaking engagement on behalf of CAPP. I am also pleased to be speaking particularly at this “relaunch” event – because we are in a unique moment in time when people – at home and abroad — are willing to take another look at Canada’s oil and natural gas industry, and are willing and open to listen to our evolving story. I have been in my role for just two months now, And while I have been diligently working to meet with all of my industry, stakeholder and government colleagues, there is only one of me – and a LOT of you – so I am still working my way through those important introductions. In the meantime, I thought I might start by telling you a little
bit about myself. First, I grew up in Swift Current, Saskatchewan. My parents owned and operated a small oilfield servicing company. I tell you this because growing up in that environment I learned — in a very personal way — what the oil and gas industry means to communities, to workers and to the families that depend on our industry for their prosperity and in many ways, their survival. And my move back west also feels like I am coming full circle. Second, I have had a 30 plus year career: I worked for three federal and provincial governments within Canada, I have worked in business advisory and advocacy, and most recently, I spent over a decade on the global leadership team of the Canada Pension Plan Investment Board — one of the top 10 retirement funds in the world — that leaned into the energy transition over a decade ago, while still very much supporting the oil and gas industry – both as a generator of prosperity for the 20 million Canadians who contribute to the CPP – but also as a critical piece of a transformation to a balanced energy mix. So I hope to bring those collective experiences to bear on behalf of CAPP members in terms of their need for regulatory certainty, market access, and access to capital. Third, while it may not be overtly obvious from looking at my biography, the golden thread in my career has always been choosing roles that somehow contributed to the greater good. As a proud Canadian, I am invested in the success and progress of our oil and natural gas industry, so it is a great honour
for me to come back to western Canada and take on the role – and the responsibility – of representing our innovative industry that spans natural gas to light oils to bitumen – across our resource rich provinces. Particularly at a time when the world is grappling with the unprecedented challenges of ensuring the difficult task of simultaneously providing energy security, affordability, reliability AND achieving GHG emission targets in the face of consumer demand. So now that you know a little bit about who I am, let me tell you a bit about my vision for CAPP’s “relaunch”. In my meetings over the past couple of months, this is perhaps the question I get the most — which is: “what is your vision for CAPP?” Broadly speaking, the vision for CAPP is to be a constructive and solution-oriented partner – working with all governments and all parties — both here in Canada, but also with key governments globally, to continue to engage our energy citizens, but as part of this moment when people are open to taking another look at our industry, to engage in a dialogue with a broader set of stakeholders, to “relaunch” the conversation about the next phase of over a century of industry innovation in exploration and development — and the value it can bring to the table — to address the collective, global challenges of energy and the environment, and in that spirit of collaboration, avoid policy discord, and foster a better understanding of providing cheap, clean and secure energy.
Pipeline News North, June 16 2022
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Canada imposes sanctions on Russian oil, gas and chemical industries Canada is imposing new sanctions under the Special Economic Measures (Russia) Regulations in response to Russian President Vladimir Putin’s ongoing egregious and unjustifiable invasion of Ukraine. These new measures impose a ban on the export of 28 services vital for the operation of the oil, gas and chemical industries, including technical, management, accounting and advertising services. The banning of the exportation of oil, gas and chemical services targets an industry that accounts for about 50% of Russia’s federal budget revenues. The measures announced today apply further pressure on President Putin to immediately withdraw his forces from Ukrainian soil. Canada is unwavering in the belief that Ukrainians deserve to live in peace, and it implores Russian leadership to stop its senseless war.
These measures will reduce Russia’s ability to wage war and will send a clear message to the Russian regime: Canada will not back down in holding those responsible for the devastation in Ukraine to account. Canada will continue to work with its likeminded partners in the international community to coordinate further measures. “The Russian invasion of Ukraine has now lasted over 100 days. In that time, Vladimir Putin and his regime have caused untold pain and suffering in Ukraine and across the world. We will continue to relentlessly pursue accountability for Vladimir Putin’s senseless war. Canada will do everything in its power to prevent Putin’s ability to fuel and finance his war machine,” said Mélanie Joly, Minister of Foreign Affairs. Quick facts
Since Russia’s illegal occupation and attempted annexation of Crimea in 2014, Canada has imposed sanctions on more than 1,500 individuals and entities. Many of these sanctions have been undertaken in coordination with Canada’s allies and partners. Since Russia’s further invasion of Ukraine on February 24, 2022, Canada has imposed sanctions on more than 1,070 individuals and entities from and in Russia, Ukraine and Belarus. In March 2022, Canada referred the situation in Ukraine to the International Criminal Court (ICC), in concert with other ICC member states, in light of the numerous allegations of serious international crimes committed by Russian forces in Ukraine, including war crimes and crimes against humanity.
Standards allow companies to get both tax credits and sell carbon credits Canada’s new emissions standards for gasoline and diesel will allow oil companies that get a federal tax break for installing carbon capture and storage systems to generate credits based on those systems, which they can then sell to refineries and fuel importers. Cabinet approved the final regulations for the Clean Fuel Standard last week and The Canadian Press obtained them
Monday ahead of their intended publication July 6. Gasoline and diesel suppliers can meet the new emissions standards for the two fuels in multiple ways, including buying credits from other companies that produce renewable fuels, build electric vehicle infrastructure or reduce emissions when fuels are extracted. Oil companies that get a
Canada’s weekly rig count is up Canada’s weekly rig count up 15 to 175 June 24, 20224:45 PM CAOEC Canada averaged 175 active drilling rigs this week according to data from the Canadian Association of Energy Contractors. Of those rigs, 29% are drilling for natural gas, 52% are drilling for oil, 2% for other (helium, hydrogen, geothermal, or potash), and 17% are moving. Drilling activity by province is 70% in Alberta, 19% in Saskatchewan, 3% in BC, and 8% elsewhere.29dk2902l Precision Drilling holds the majority of the Canadian market share with 26%, Ensign Drilling with 23%, Savanna Drilling with 11%, Akita Drilling with 5%, Bonanza Drilling with 5%, Horizon Drilling with 5% and Stampede Drilling with 5%.
new federal tax credit of up to 60 per cent of the cost of installing carbon capture and storage systems can also generate and sell credits for use within the clean fuel standard credit system.29dk2902l The Canadian Fuels Association says it has
long supported the Clean Fuel Standard because it helps companies plan and invest in low-carbon technologies, but wouldn’t comment on the final version of the regulations until the government officially releases them. Greenpeace
Canada’s
senior energy strategist Keith Stewart says the clean fuel standard isn’t going to generate any new emissions cuts and will instead create new revenue sources for big oil producers. - Canadian Press
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Pipeline News North,, June 16 2022
BMO Capital Markets and The Canadian Association of Petroleum Producers to host annual Energy Symposium BMO Capital Markets (BMO) and The Canadian Association of Petroleum Producers (CAPP) are pleased to announce they will cohost the annual Energy Symposium investor conference beginning in 2023. Through this long-term sponsorship, BMO brings to the annual event broad and deep sector knowledge, a differentiated ability to connect the industry with investors, and the expertise of an Energy Transition Group focused on helping clients achieve their climate goals and net zero ambitions. “BMO Capital Markets has worked with the Canadian energy sector for more than a century and is
proud to co-host the annual Energy Symposium investment conference,” said Dan Barclay, CEO, BMO Capital Markets. “Energy has been a backbone of the Canadian economy for a very long time and access to energy will continue to be critical even as the world transitions to net zero. Our Climate Ambition is to be our clients’ lead partner in the transition to a net zero world and central to that work is convening and facilitating the conversations that take place at the annual investment conference.” “Continued investment in Canada’s oil and natural gas remains critical as increased investment in both production, environmental and emissions-reduction projects help
What are the Oil Sands?
Canada produce the cleanest energy possible while contributing to reaching global climate goals,” said Lisa Baiton, CAPP President & CEO. “The BMO Capital Markets CAPP Energy Symposium is our flagship event that provides an important platform for our members to tell their story to investors from around the world and we are excited to work with BMO, who has proven to be a steady and reliable partner to Canada’s energy industry.” Ongoing investment in Canada’s industry creates and protects jobs while delivering much needed revenues to federal and provincial governments. For Canada, energy security and climate change issues are not mutually exclusive, and
Canada can be a critical player in both spaces. Now is the time to position Canada as the global leader in safe, secure, ESG-leading sourced energy. This ambition requires investment and this conference will help inform the industry on leading approaches to achieve these goals. The conference will be held in Toronto April 4 and 5, 2023 and provides an opportunity for investment, dialogue and discussion that explores corporate strategies, industry performance and trends among conference delegates, including buy-side institutional portfolio and fund managers and CEOs from Canada’s leading upstream, midstream and pipeline industry.
From the Pipeline archives
Canada’s oil sands are the largest deposit of crude oil on the planet. The oil sands (or tar sands as they are sometimes inaccurately referred to), are a mixture of sand, water, clay and a type of oil called bitumen. Thanks to innovation and technology we can recover oil from the oil sands, providing energy security for the future. Oil sands are made up of water, sand and bitumen. Oil sands are a mixture of sand, water and bitumen (oil that is too heavy or thick to flow on its own). Bitumen is so thick that at room temperature it acts much like cold molasses. For that reason, this resource is sometimes called “tar sands,” but that term is incorrect because bitumen and tar (asphalt) are different compounds. “Oil sands” correctly identifies the end product derived from bitumen: crude oil. Alberta Oil Sands Oil sands deposits are found around the world, including Venezuela, the United States and Russia, but the Athabasca deposit in Alberta is the largest, most developed and uses the most technologically advanced production processes. Commercial-scale production from Alberta’s oil sands started in 1967 when the Great Canadian Oil Sands (now Suncor Energy) started operation.
East of South Kootenay Pass. This well, drilled by William Lineham of Okotoks, produced light oil which was refined in a small still on the site.. GLENBOW ARCHIVES