You Broke it You Fix it

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Cenovus Energy Ltd under its new leader Alex Pourbaix advanced an interesting idea that was not universally accepted.  It should have been.  No one would argue our energy industry is long on oil and gas supply these days, but some might say we are short on ideas about what to do about it.

To solve the problem of oil and gas discounts, currently costing Canada as much as $100 billion per year, Mr. Pourbaix argued for apportionment.  His idea is the Alberta Government should mandate a proportionate cut back in supply to match our existing take away capacity.  Virtually overnight this would get Alberta the market price.  You don’t need to pull out a calculator to figure out that three times the price, makes up for smaller volumes, and would mean more royalties for the Province of Alberta – a lot more.

Our major integrated oil companies immediately argued that we should let the private market deal with this issue.  My small and big c conservative friends have generally felt the same way.

My first instinct is also to be wary of setting the precedent of Government managing oil supply.  After all, it’s not milk we are selling here.

But let’s be clear, the private market didn’t break down here.  Starting years ago, private companies offered to build and finance multiple pipelines and LNG plants to deal with the $100 billion dollar a year problem we face today.

The Conservatives barely kept up with this problem and so for the first time in my career we needed rail to transport crude in spite of the $15 per barrel discount.   Recently it has completely unraveled purely because of ideological policy in Ottawa that ignores the strategic interests of Canada.  The World Wildlife Fund driven ideas behind the fiscal mess in Ontario are now behind pipeline cancelations, tanker bans and bill C-69, the ‘no more pipelines’ law, in Ottawa.

On the principle if Government breaks it; Government fixes it, why would we not be willing to fix in Alberta what Ottawa broke.

In the private sector the rule is if there is too much supply on a common carrier pipeline, then suppliers are apportioned.   Why wouldn’t Alberta as the owner of the resource, do the same thing when there isn’t enough space for Alberta on the pipelines?

Unlike the NDP and UCP both musing about managing supply and cutting off British Columbia, Alex Pourbaix’s idea would deliver the same amount of oil and gas.  We wouldn’t be hurting our end customers who wouldn’t even pay a different price for gasoline.   The difference would be no more record profits for middle men like BP with refineries in the United States.  Instead of the US economy benefiting from wind fall profits and taxes, Alberta would receive revenue and royalties based on the market price.  If Albertans as the owner of the resource want their fair share then apportionment is the way to get it, at least until market access is solved.

If you are still unconvinced about setting a precedent, then I make this final appeal.  What was the point of voting in the NDP if they won’t interfere in the market to get Alberta’s fair share from Trump?