President’s Message: Canada’s Energy Sector, a benefit for all Canadians

by Mark A. Scholz

As the summer approaches, I want to reflect on the last couple months we’ve endured in the energy sector. The year started off on the wrong foot, with ongoing pipeline blockade protests across the country and cancelled infrastructure projects all within the first two months. Little did we know that was the least of our troubles in 2020.

As March began, the global oil price war between Saudi Arabia and Russia began to take a major toll on our industry with an over supply of oil. Once the pandemic began to spread, we all saw how badly the global economy deteriorated when almost everything, other than essential services, was put to a stop. As businesses started to close down indefinitely, we saw the true impact on our sector, which unfortunately left many businesses on life-support. It wasn’t just the pandemic that hurt our industry, but negative oil prices, too much production, and the third economic crash in just over a decade.

The past few months have been a tremendous struggle for all of us, and now it is more important than ever that we come together to show Canada our energy sector can help carry us out of the pandemic with more economic opportunity. A few grandstanding politicians have taken this time to say that “oil is dead” and now is a good time to shut down the industry. However, I would have to disagree. Now is the time to leverage our energy sector to help bring the economy back to where it once was. The Canadian energy sector is a pillar of strength for the economy and is something we should all be proud of. We need to share our message, just like the climate activists do, to show Canadians all the benefits our sector brings them.

The Canadian Energy industry is made up of hard-working Canadians from across the country, and together we’ve contributed on average, $16 billion to the federal government annually since 2013 alone. In 2018, the sector directly employed more than 282,000 people and indirectly supported over 550,500 jobs. Canada’s energy sector is the sixth largest in the world. We adhere to strict environmental reporting that other energy-producing countries do not. Why wouldn’t we want to utilize our resources when our energy demands continue to grow?

On behalf of the oilwell services and drilling industry, I’ve been working hard to ensure our voices are heard at every level of government. We’ve had a few signs of hope including the $1.7 billion from the Federal Government to reclaim orphan wells across Saskatchewan, Alberta, and BC. Pipeline progress is being been made on the Trans Mountain Expansion Project and Coastal Gas Link, and the Government of Alberta has made a significant investment in Keystone XL, to provide North America with a secure supply of crude oil for years to come. However, we all know that we need more support.

To help our sector weather the storm, I have made the following policy recommendations to the Federal Government on behalf of the Canadian Association of Oilwell Drilling Contractors:

  • That they introduce additional liquidity measures through unsecured and subordinate financial instruments.
  • That they purchase income tax losses from drilling and service rig companies, less the government’s cost of capital.
  • That they defer Canadian drilling and service rig companies’ GST and payroll remittance interest-free for six months instead of the current June 30 program. Under this policy, companies would resume regular payments at the end of the six months but would have six months to repay the balance remaining from the deferral period.

I believe that these policies would provide substantive and instant liquidity to companies in this difficult economic environment.

I know it won’t be easy but we’ll get out of this trying time stronger than ever and our natural resources sector will continue to be a source of environmental and economic strength, not a barrier to it as our opponents would have us believe. Let’s continue to speak up and share the great work this industry does. Our industry has never hesitated to lend a helping hand to fellow Canadians and I hope the federal government will do the same for us during our time of need.

Mark A. Scholz is President and CEO of the Canadian Association of Oilwell Drilling Contractors.

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