Brian Zinchuk is editor and owner of Pipeline Online
Saskatchewan Energy and Resources Minister Bronwyn Eyre, at the small modular reactor announcement in Regina on March 28. Photo by Brian Zinchuk
REGINA – Saskatchewan Energy Minister Bronwyn Eyre was sitting front and centre on March 28 at the Hotel Saskatchewan for the announcement that Saskatchewan, Ontario, New Brunswick and Alberta were moving forward on the next step of advancing small modular reactors for electrical power generation. But something else was on the minister’s mind – Prime Minister Justin Trudeau’s recent announcement that Canada would add 300,000 barrels of oil per day to our production totals, in response to the war in Ukraine.
For the Saskatchewan minister, it was a lot of talk from a federal government that has done everything it can to stymie oil production in this country. It’s a battle she’s been fighting daily with the feds since 2018, when she was appointed Minister of Energy and Resources. And the frustration was palpable.
Pipeline Online spoke to Eyre after the press conference.
Asked about how we can respond to the federal call for more oil production, Eyre replied, “The reality is that companies can only do so much. We don’t have nationalized oil or a command economy in Canada.”
A command economy is one where the government tells businesses what to do, and they do it. Think the Soviet Union, or Communist China. In Canada, governments regulate, but they don’t dictate.
Eyre said of the end of the oil downturn, “It’s different this rebound round, because of the headwinds we’ve faced since the last one. So, we have many more regulatory constraints on us. We have a looming federal Fuel Standard. We have Bill C-69 in place. And it’s had a real impact – the Saguenay facility, for example. Yes, it was Quebec, but there was also a Bill C-69 factor that killed it. And that would have been one of the great solutions. We could have used Saguenay LNG to send overseas.”
Energie Saguenay was a liquified natural gas project that was killed last summer by the Quebec government, followed up by the federal government doing the same this last Feb. 7, 17 days before the Ukraine War started.
Eyre continued, “And so, we’ve got to turn on a dime. Even taking the Ukraine thing out of it, and the tragedy of all that, and all it represents, even so, it was difficult coming out of COVID and the perfect storm of 2020, with the OPEC+ price war and everything else. You’ve got companies which are still in quite a lot of debt, they’re paying down debt. They there’s the labour problem. No wonder there’s a skittishness among once-energy workers to come back, on-pause energy workers (thinking), ‘Is this for real this time?’”
She said part of it is a good problem. The Accelerated Site Closure Program was meant to get the service sector back to work, which it did in large part, and that sector is now, with oil rebounding, somewhat overstretched.
Share buybacks instead of drilling
In recent months, nearly every oil company’s earnings calls have stressed their focus on dividends and share buybacks, but that has meant less money for capital development, and thus, less drilling. On that, Eyre said, “You’ve got the dividend and the share buyback issue, which, a few months ago, before all the geopolitical upheaval and the price explosion, was much more of an issue.
“But you also have a lot of capital allocation on hold, because of the perfect storm we’ve seen these last few years. Now, we’re going into this situation, and there’s pressure to increase output. But, whatever’s been proposed by the federal government, kind of eking out 200,000 to 300,000 more barrels per day – it really should be two million, and could have been, but for all we’ve come to be facing over these last years. No egress. Keystone, dead. Energy East, dead. Northern Gateway, dead. TMX, to be determined? All of it.
“And we can’t do it by dictum, certainly provincially. And then you have the interprovincial issue. We can’t just tell companies what to do.”
She continued, “It’s interesting that, when the federal government weighs in, after just a few months ago talking about capping production, now they’re talking about increasing production. And all they can basically come up with is about 200 to 300,000 more, because that’s really all that we can get out, right now.”
And, true to form, the very next day after this interview, Trudeau, Environment and Climate Change Minister Steven Guilbeault and Natural Resources Minister Jonathan Wilkinson announced massive greenhouse gas emissions cuts for the oil and gas sector, and dramatic increases in the requirement for zero-emissions vehicles sales in the next four and eight years. The announcement came just days after a call to increase oil production by 300,000 barrels per day.
Eyre noted the threat to democracy caused by the Ukraine War, as well as “the issue of supply, the issue of demand, the issue of energy independence decisions that European countries have made.”
She said she feels companies are feeling the pressure and are aware of the issue, and that they’ve been approached to work with such requests.
“(For) companies, it is finally an issue of capital decisions and their shareholders. They have to deal with this emerging reality as private companies and, you know, TC energy does not want to restart Energy East. Kinder Morgan walked away from TMX. Why? We know why, because finally, you can only go so many rounds, it becomes incredibly expensive to their bottom lines.”
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Eyre said if peace talks are not successful and the war escalates, “It seems to me the federal government could only directly intervene in our economy under some form of emergency measures, under peace, order and good government. Saskatchewan can’t act alone in this. We can have conversations, and we do, with companies about how this could look. Some companies have been approached, which led to the announcement last week by Wilkinson. But otherwise, we don’t really have a lot more egress possibilities. We’re already going at full throttle, here.”
By 2014, Saskatchewan had enough crude-by-rail facilities built to theoretically ship nearly every barrel we produce by rail, which would give use some capacity to send oil to the east. Most of those facilities have gone stagnant over the last seven years. But they do exist. To that end, Eyre said “It would have to be federally mandated through some emergency measures structure. We can’t command CN or CP to do anything right now.”
And this is where Eyre’s frustration was apparent, noting that the province has been at odds with the federal government on many of these policies long before the Ukraine War started. “We have been so, so hampered by these policies.
“Imagine we’re talking about an increase in the carbon tax and the impact on real people and businesses carbon tax, increasing April 1. Do you see the Feds saying they’re going to pause the federal Fuel Standard? I don’t. And on and on and on it goes. Bill C-69. Pipelines. So, it’s easy to say as the federal government, let’s get things rolling. But there’s only so much we can do at this point, especially when you go ahead and kill LNG at Saguenay. I mean, they should start right there, get that thing going again.”
Eyre noted some of the ironies of the situation. She noted that Germany, for example, had a “uniquely windless year last year. Now, Germany is ramping up coal, Canada is exporting coal, China’s funding coal, and we’re mandated to transition away from coal.
“Also, this dependency now that they have on Russia, in some of these European countries, it’s a dire situation. Everything’s got to change.”
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