CAODC President Mark Scholz’ speech at a packed Associate Member Breakfast.
By Mark Scholz
It’s no secret that the past four years in our industry have been particularly challenging. To have such a great gathering and so many sponsors for this event, especially right now, goes a long way toward helping us do the work we do for our members, so thank you, we genuinely appreciate it.
You know as I read through the list of sponsors I’m sure I know personally at least one or two of the people behind most, if not all of those organizations.
Yes, you seethe logos up on the screen, but what makes up all these organizations are dedicated individuals from this outstanding industry.
It’s hardworking women and men who are the faces behind these logos and these folks are standing up and supporting their industry association during difficult times.
In 2018, our drilling members had a total of just over 69,000 operating days, down slightly from 2017. Over the past four years, CAODC members have averaged only 61,000 operating days. When you compare that to our last “good” year, which was awhile ago now, in 2014, we are down over 50 percent.
In 2014, we drilled approximately 13,000 wells. This year we are forecasting 7,000. Four straight years of depressed activity levels have left many of our members on life support.
The Canadian rig fleet is expected to continue to decrease at a steady pace, with newer,high-spec rigs and associated senior personnel and many skilled managers being transferred to the United States where costs are lower and day rates are higher.
In 2018, CAODC drilling rig contractors delisted 26 rigs with 11 of those or 42 per cent relocated to the United States.
I was visiting members up in Fort St. John in October of this year and most of them told me they were focused on paying the next interest payment to the bank and struggling to keep their most senior people employed.
It’s hard for these small business owners to see everything they have worked so hard for crumble before them. To have to exit tenured people who have been with the company for decades and not have enough resources to maintain equipment. In fact, I would estimate the majority of the organizations represented in this room have had negative earnings for the past several years. That is the depressing reality of our industry today.
Other industries in this same situation would be holding out their hands for a government bailout. But instead, our industry is only asking for government permission and support to get our ethical products to market. The lack of action and attention to this pressing issue is deafening as the most important industry in the entire country is facing an existential crisis. And today,Canadians are the owners of a pipeline for which there is still uncertainty as to when or if it will ever be built.
The price of WTI and Brent has recovered substantially from the lows of 2016. Global oil consumption is nearing 100 million barrels per day, and it seems that a recovery is in sight for nearly every producing jurisdiction in the world with the exception of Canada.
I was in Houston a few weeks ago speaking with members about their operations in the United States, and the difference between the two jurisdictions is, quite frankly, discouraging.
As most in this room are very well aware, the two most prevalent challenges to a recovery in Canada are market access and the cumulative costs of doing business.If you are at all interested in energy, or politics, you are aware that we have arrived at this place due to several factors, not the least of which was an orchestrated attempt to place Canada’s oil and gas, and our oil sands in particular, under the microscope as a proxy for the world’s climate change challenges.
As our friend Vivian Krause has documented so well, the efforts of groups like the Tides Foundation, LeadNow, Open, and 360.org have been hugely successful in taking advantage of the natural good-hearted tendencies of Canadians and creating a misinformed backlash against our oil and gas sector.
The result of their efforts is twofold: one, it has created a vocal minority of industry opponents who punch above their weight in shaping the conversation about Canadian oil and gas; and two: it has created perhaps well-intended, but cumulative and ultimately debilitating public policy that has resulted in major project cancellations and delays, and a flight of capital from our country.
Radical environmentalists have worked tirelessly to paint the Canadian oil and gas sector as a faceless corporate enemy, but for everyone here, this characterization is laughable. We know the pride we take in doing our jobs well.
We know the amount of time, effort, and money spent on making our industry safe; we know the many, many, and in some cases too many regulations we have in place;we know precisely what is involved with remediating a well site or consulting with First Nation communities.
We work closely with regulators and landowners. We take care in training and mentoring new workers and observing all the necessary inspections. We integrate our equipment with the latest technologies. And more than that—most importantly, in fact—we know the families of our friends and colleagues.
We’ve driven their kids to the hockey rink. We’ve been to their homes for a summer BBQ. We’ve watched them donate to local charities and volunteer for community projects; coach soccer teams, organize and sponsor ball tournaments. We’ve worked with them to collect food and presents for Christmas hampers.
So when I hear our opponents characterize us as faceless, greedy corporations looking to destroy the planet, it doesn’t sit too well. And as folks in this room know the truth about not only what our industry does in terms of jobs, economics, tax revenues, transfer payments, AND the environment, there is no wonder why we get frustrated.
But when industry opponents undervalue or ignore altogether, the character of the people who work in this industry and what they do to help build and sustain the communities where they live and work, we all need to take a stand. Friends, in Canada we respect each other’s differences and opinions, but our opponents are not entitled to their own facts.
I’m not sure there is an industry that has given more Canadian workers an opportunity to build careers and lift themselves and their families into the ‘middle class’like the drilling and well-servicing industry.
But rather than turn to Canadians in the industry to ask questions from those who know the answers, too often political leaders and policymakers accept the uninformed arguments that oil and gas is a sunset industry, and building pipeline infrastructure in Canada would prevent the world from meeting its GHG emission targets.
When viewed from this perspective, the lack of activity over the past four years is not hard to understand. The Canadian oil and gas industry is simply too dysfunctional to anticipate any kind of quick recovery.
We have spent years hearing our political leaders start all conversations about oil and gas in this country from the perspective that we have something to be ashamed of, and a gradual phase out is the solution.
Until this year, in fact, it seemed the plan was that we were to be ‘transitioned away from’ or ‘phased out’ while our economy diversified and got off of fossil fuels.
And then we bought a pipeline, and the story changed. And we’re happy that the storytellers started to look past the rhetoric and into the facts, because the facts are that this industry built our province and is the economic backbone of our country. And the facts are that this industry can and should be part of the global emission reduction solution, replacing production from countries like Saudi Arabia, Iran and Nigeria.
Replacing coal fired electricity with natural gas. Replacing outdated technology around the world by exporting Canadian technology. This creates jobs, helps the environment, and stimulates the technology that will keep Canada relevant and prosperous for the next 100 years.
How many people in this room can say their kids and grand kids have a better standard of living than they did because of a career built on hard work and ingenuity? How many people in this room can say their communities and small towns have hockey rinks, or local clinics, or youth programs because of a thriving oil and gas industry?
No other industry in Canada levels social and income inequalities like this one. Drilling and well servicing has provided the opportunity for countless hardworking and genuine people to build lives for themselves, their families, and their communities.
As we have been saying for many years now, we need our Canadian political leaders to be proud of the work the women and men of this industry do, because we are the best in the world.
With that in mind, it’s easy to see how tone at the top matters. And Premier Notley has been a vocal advocate for pipeline infrastructure and raising these issues on a national level. And we thank her for that leadership.
Premier Notley is bringing these messages to Ottawa on behalf of Alberta, and I hope it will be echoed by those at the federal level, reminding the country why this industry is so important, and why we need to see it survive and flourish.
The service and drilling rig business has been approaching its own apocalypse. Our Association has been working with the Alberta Government for the past two and a half years on a carbon levy exemption for our service rig members.
Now a carbon levy exemption alone is not sufficient to save our members and their businesses, but it would be a significant measurer of goodwill towards a strained and unprofitable industry; an industry that employs thousands of Alberta families.
In the coming months, our Association will be tabling a range of regulatory reforms with the Alberta Government to help bring back competitiveness to our industry. We need a whole-of-government approach to systematically challenge all regulatory assumptions, ensuring the outcomes are clear and affordable to business.
Now,friends we may not agree with every public policy decision made by the Alberta Government, but what we can agree on is the importance of the oil and gas industry to not only our province but to the entire country. And because of this we will work tirelessly to achieve not only market access but regulatory reform to get our people back to work.