Sask. announces relief for oil industry amid 'extreme' impact from COVID-19, price war
REGINA -- Saskatchewan has announced a variety of supports for the oil and gas industry as COVID-19 continues to take an economic toll.
These supports include:
- Extending a number of deadlines to assist in stabilizing operations. These extensions do not have an environmental impact.
- Extending mineral rights due to expire this year until 2021
- ”Reducing the industry portion of the Oil and Gas Administrative Levy by 50 per cent this fiscal year and delaying the invoicing of the remaining balance until October 1, 2020. “ This measure alone is expected to save the industry $11.4 million.
“The Saskatchewan energy sector is the second largest contributor to provincial GDP and, directly or indirectly, employs more than 34,000 people; so doing all we can to protect jobs is a major priority,” Energy and Resources Minister Bronwyn Eyre said. “These relief measures will address certain immediate liquidity and administrative challenges to help companies focus on retaining as many workers, and as much production, as possible.”
In a teleconference on Tuesday, Eyre told reporters similar supports would be considered for other resource industries in the province, but noted oil and gas is the hardest hit.
“We recognize that this isn’t only an oil and gas sector impact,” Eyre said. “That said, the impact in recent weeks on the oil and gas sector has been extreme and in a class on its own."
Warren Waldegger, the president and CEO of Fire Sky Energy, says the attitude in the sector has changed over the last few months as the industry rides out the effects of an international price war between Saudi Arabia and Russia and the COVID-19 pandemic. Both factors came in addition to an already struggling market.
“We went from being very optimistic about our industry and the things we personally had in front of us to kind of being very pessimistic,” Waldegger said.
According to Waldegger, the biggest short term help will be the mineral rights extension as it allows more time for operators to plan since holding onto those rights typically means drilling a well – which comes with a cost.
With a difficult market, it’s an expense many oil producers need to be more cautious about.
“An extra year on some of those leases to get our feet back under our ground, hopefully that will lead to future drilling activity,” Waldegger said. “Which probably has the greatest spinoff for the government.”
He says the rollback on the administrative levy is an immediate help to oil producers, but notes this move should not be seen as the government subsidizing the sector.
“No other industry actually pays for their own regulation and that’s exactly what the oil and gas administrative levy is,” Waldegger said.
In the future, Waldegger hopes to see more policies that allow for more stability in the industry, but for now is working to see his business ride out the downturn.
The Government of Saskatchewan and Canada have agreed to “methane reductions in the upstream oil and gas industry.”
The province says this agreement is the result of months of consultation, and moves to make the industry regulated by Saskatchewan.
“We are very pleased that the federal government has agreed with the strength of our Methane Action Plan, and that we have regained provincial jurisdiction over our regulations,” Eyre said. “We will now work with our operators in a common sense way to reduce emissions from venting and flaring by 4.5 million tonnes per year by 2025.”
The province says it is taking steps to “reduce red tape” for the industry while continuing to ensure public safety. A Memorandum of Understanding was signed between the province and the Canadian Association of Oilwell Drilling Contractors that “harmonizes regulations With Alberta”.