Alberta Premier Rachel Notley appeared before a Senate committee last week in consideration of Bill C-69, which is controversial legislation introduced by the federal government that it claims will improve Canada’s environmental approval process, but which critics say will deter investment in the oil sector.
Prime Minister Justin Trudeau’s Liberal government unveiled the draft of Bill C-69 last year. Supporters say the changes will improve the consultation process with indigenous people, thereby reducing hurdles that have crippled oil pipeline construction in recent years and other major projects. Critics say it will give too much power to government, allowing Ministers to veto projects before a review even begins, and create far more uncertainty for investors. The bill is currently being considered by the Senate committee, which can offer amendments based on testimony by experts and affected individuals. It still faces a number of additional steps before it becomes law.
Alberta is Canada’s primary crude-producing province, but oil prices plummeted at the end of last year because of congestion in export pipelines that prevented barrels from reaching U.S. markets. Landlocked Alberta urgently needs new pipelines to solve transportation bottlenecks, however projects such as the Trans Mountain expansion, which would nearly triple the number of barrels flowing to Canada’s Pacific Coast, have been delayed for years by regulatory hurdles.
Premier Notley warned the Senate Committee on Energy, Environment and Natural Resources that proposed federal legislation for major project reviews, including crude oil pipelines, risks worsening a slump in the country’s energy sector. “We agree that the process for approving infrastructure projects needs to change. But we cannot swap one broken system with another broken system.” She suggested a number of amendments to the bill, such as excluding inter-provincial pipelines, and providing more clarity on exactly what factors will be considered when assessing a new project. The Premier also asked for firm time limits for project assessments and for the federal government to consider the socio-economic impacts of a project in its evaluation process.
Alberta will head into the provincial election with a $6.9B deficit. The election will be held no later than the end of May, and speculation is the election will be called within the next two weeks, before a new budget is introduced. The current budget had originally forecast a deficit of $8.8 billion, but Finance Minister Joe Ceci says a lower dollar and higher than expected bitumen royalties have helped reduce the red ink. Total revenue this year is forecast at $49.6 billion and total expenses at $56.6 billion.
On Thursday, the same day Premier Notley spoke to the Senators, Alberta raised the amount of crude that companies can produce in April to 3.66 million barrels per day, an increase of 100,000 bpd from the limit imposed in January. The province is now raising the limit because the amount of oil in storage is shrinking and prices are stronger, the Premier said in a statement. Pipeline transportation capacity could also increase because less diluent, used to help viscous heavy crude flow, is needed as the weather warms up.
The discount on Canadian crude versus U.S. barrels has narrowed dramatically. On Thursday, the benchmark heavy grade Western Canada Select for March delivery in Hardisty, Alberta, last traded at $12.65 a barrel below U.S. crude, according to brokers Net Energy. Last October the discount was more than $50 a barrel. Production for February and March was set at 3.63 million bpd, adding 75,000 bpd from the January limit. The latest adjustment means producers can increase output by another 25,000 bpd in April. Curtailments do not apply to small companies producing less than 10,000 bpd.