If Rex Tillerson, the former head of ExxonMobil and Donald Trump’s nominee for Secretary of State, taught a class on pipeline strategy Brian Jean would be stuck at the front of the room wearing a dunce cap and Rachel Notley would be excused because she already knows this stuff.
Ever since Donald Trump was elected Mr Jean has been hammering Ms Notley; demanding to know what she’s going to do about Keystone XL.
Mr Jean says Keystone XL will create “a lot of jobs here in Alberta”, remove the “bottleneck” in the oilsands and help Albertans get back on their feet.
Mr McIver echoes Mr Jean’s comments saying the Trump administration offers “new hope” for Keystone XL.
Both conservative leaders want Ms Notley to pledge her support for Keystone and to lobby hard to get it approved.
Ms Notley eyes them patiently, then gives the following response: her government is happy to work with the energy industry to find ways to enhance trade with the US, but the government will focus “on those things over which we have agency,” namely Canadian pipelines seeking access to tidewater from a Canadian port.
Pipeline strategy class
Mr Tillerson recently gave a speech outlining the lessons he’d learned in his 41 years at ExxonMobil. Ms Soapbox has taken the liberty of condensing these lessons into what she’s calling “Mr Tillerson’s pipeline strategy class”.
Mr Jean and Mr McIver would be well advised to stop horsing around and pay attention. Ms Notley is excused from class because she understands these lessons, probably because they’re simply common sense.
LESSON ONE: Make evidence-based decisions
Mr Tillerson says evidence is important—at one time “experts” believed the world was running out of oil, but now the evidence shows that global market supply exceeds demand by one to two million barrels a day.
Mr Jean’s comment that the approval of Keystone XL will remove the “bottleneck” in the oilsands demonstrates he doesn’t understand the evidence at all.
This “bottleneck” doesn’t exist, at least not according to the US State Department which said Keystone XL is “unlikely to significantly impact the rate of extraction in the oil sands.”**
Mr Jean argues Keystone XL will create lots of well-paying jobs in Alberta.
This is ridiculous.
The Canadian portion of the Keystone system was completed years ago. If Keystone XL (the US portion) is approved, the US State Department says it will create 42,000 temporary construction jobs and 35 permanent jobs—all in the US.
Right…now that Mr Tillerson has their attention, Mr Jean and Mr McIver can focus on four other equally important lessons.
(Ms Notley is free to hang out in the lunch room. She’s been applying these lessons in the Alberta context since the NDs assumed power in 2015.)
LESSON TWO: Create a structure that’s viable at the bottom of the cycle as well as at the top
Mr Tillerson says down cycles are a fact of life in a commodity business.
Ms Notley has implemented policies to buffer Albertans from the down cycle as Alberta ricochets from boom to bust.
She’s incenting diversification with tax credits and grants for non-energy sectors including agricultural, petrochemicals and small businesses involved in everything from creating new technologies to entertainment.
Sadly, Mr Jean doesn’t understand the reality of a boom/bust economy. If he gets elected he intends to rip up every piece of legislation the ND’s have passed. Sigh.
LESSON THREE: Control what you can control
Mr Tillerson says you should focus on what you can control.
Mr Jean doesn’t understand that everything concerning Keystone XL is out of his control.
TCPL, not the government, will decide whether to pursue a fresh application under the Trump administration. The shippers, not the government, will decide whether they’re prepared to commit production to Keystone XL in addition to the commitments they’ve made to Trans Mountain and perhaps Energy East.
Mr Trump, not the government, will decide how much of TCPL’s profits he will extract in return for approving Keystone XL and then TCPL, not the government, will decide whether Keystone XL is worth the bother.
Mr Jean can flail about all he likes but he no influence whatsoever over TCPL, the shippers or Mr Trump.
Ms Notley knows this and that’s why she refuses to focus all her resources on “a pipeline to tidewater in someone else’s country.”
LESSON FOUR: Manage the risks
Mr Tillerson says his business, like most, is fraught with geopolitical, financial, technical, environmental and operational risks.
He says the risks of climate change “are serious and warrant thoughtful action” and that the best way to address these risks is by implementing a revenue-neutral carbon tax rather than a “hodge-podge” of ineffective regulations.
Ms Notley, like Mr Tillerson, understands risk, particularly the political and environmental risks facing pipelines. She chose to mitigate these risks by implementing the Climate Leadership Plan. Her efforts paid off when the prime minister approved two out of three interprovincial pipelines.
Notwithstanding the support the Climate Leadership Plan has received from the energy industry Mr Jean and his conservative friends promise to abolish the carbon tax, thereby destroying the very policy that allowed the prime minister to approve the two pipelines in the first place.
THE MOST IMPORTANT LESSON
While Mr Jean and Mr McIver are badgering Ms Notley to support Keystone XL, she’s focusing on the work that has real impact and will “deliver outcomes for our industry partners.”
She understands the role of government in pipeline strategy, which is why she’s in the lunchroom talking to her friends and Mr Jean and Mr McIver are stuck in Mr Tillerson’s class.
Here’s the most important lesson of all: it’s not enough to say you’re standing up for the energy sector. You actually have to do it—effectively.
*NOTE: Ms Soapbox is invoking Rex Tillerson not because he’s the best choice for Secretary of State but because he might get through to the Wildrose and PCs.
Sources: Alberta Hansard, Nov 10, 2016, p 1864-1865
**TransCanada 2015 Annual Information Form, p 11 http://www.sedar.com/GetFile.do?lang=EN&docClass=1&issuerNo=00019418&issuerType=03&projectNo=02442866&docId=3862285
Excellent, thank you.
You’re very welcome Ed.
It is amazing what cool logic can produce. We have the Koch brothers making a scene out of climate change and wanting to leave Alberta; we have your two dunces whipsawing public opinion and to finish it off, we have Post Media who have forgotten how to report and instead join the whipsaw brigade. I have far more faith in Ms. Notley at the controls (of what she can control and actually focusing on that) rather than the foaming at the mouth Trumpites and dogma driven idiots to the right. I hope Albertans figure this out before the next election. Ms. Notley is the nearest thing to Peter Lougheed and his heroic policies for Albertans (not buddies).
Roy I pulled up the Koch brothers letter in which they advised the Alberta Energy Regulator they wanted to cancel the Muskwa SAGD project. The project was started in 2014 and expected to be completed in 2017. It would have produced 10,000 barrels of oil a day. Analysts like Peter Tertzakian say that given the slowdown in demand, these smaller projects are more likely to succeed than the larger ones, nevertheless the Koch brothers are saying that “from an economic perspective…the costs to maintain the EPEA and OSCA approvals in good standing, [are] excessive when measured against the risk of maintaining the approval and waiting for a change in economic and/or regulatory conditions that would justify project sanctioning and investment. I’m not sure what the “cost to maintain” these approvals are, but I would have thought they’d be small. I hope a reader with experience in these sorts of projects shares their insight with the rest of us. shares Here’s a link to the Koch letter: http://boereport.com/2016/12/16/read-koch-oil-sands-operating-letter-to-aer-requesting-cancellation-of-sagd-project-due-to-regulations-and-carbon-tax/
Pure politics by Koch – economic impact suggested by Koch doesn’t stand up to rational analysis! Economic modelling of the Koch project be Andrew Leach indicates that the economic impact of NDP tax & GHG policies is to reduce free cash flow by $0.19/bbl with today’s prices, or $0.71/bbl with EIA prices.
Asdfghh: Thank you for this. Looks like the Koch decision is more smoke and mirrors. Much appreciated.
The legacy of the Hon. Peter Lougheed’s approach to managing the energy industry was simply, sometimes it’s necessary to stand up TO the energy industry in order to stand up FOR the energy industry; sometimes they can be myopic and their own worst adversary, government leaders worth their salt know this and stand up to energy leaders when they are heading for a fall. It’s important. The interests of the energy industry are not synonymous with the best interests of Alberta. Albertans came to that conclusion on May 5, 2015. It’s time to rally in support of the Notley government so that Alberta’s economic future is founded in solid policies including diversification.
You’re absolutely right Robin. Rachel Notley is indeed following in Peter Lougheed’s footsteps. A good example is the recent announcement of two projects under the Petrochemical Diversification Program. One will create an integrated propylene and polypropylene facility which will employ 2,000 to 2,500 workers on site during construction and result in 150 full-time jobs after completion. The second, a propane dehydrogenation facility, will create about 2000 construction/fabrication jobs and result in 95 full time positions after completion. Both projects are receiving hundreds of millions of dollars in royalty tax credits. A senior executive from Nova Chemicals (where I once used to work) called the projects “a significant step forward in further diversifying our energy sector”. Here’s the link: https://www.alberta.ca/release.cfm?xID=4495520E69E0C-DE88-1617-49C3B3BEDFB06497
Keep at it RACHEL the baying hounds are just that and playing a political agenda of fear and innuendo to further their own thirst for power
I agree Leonard.
hi Susan – I am sitting here visiting with Deb in Victoria and commenting that she should get your fantastic emails too. Please sign her up. Hope all is well with you and Roy. Merry Christmas and Happy New Year to you. Jodi
Thank you Jodi. It’s great to hear from you. I hope to catch up with you and Deb in Victoria some time in 2017. Tell Deb all she needs to do to get my posts by email is to click on the “sign me up” box and they’ll be delivered right into her mailbox. We’re all well at our end. Merry Christmas and a Happy New Year to both of you!
“The interests of the energy industry are not synonymous with the best interests of Alberta.”
If we have the courage, like Peter Lougheed did, to stand up to “Big Oil” and to Easterners, for our own best interests as owners of the resource, we too might get banned from the Petroleum Club, but we will shine and prosper like never before.
Robin Wortman, and almost without saying – Ms. Soapbox, kindly proceed to the head of the class and take your rightful places!
Thank you ABCanuck. I’d forgotten about that banning business. I googled it and learned that Peter Lougheed was banned because he introduced the Natural Resources Revenue Plan (1972) which boosted royalties from 16.7% to a maximum of 23% and did so without breaking contracts. Very smart man. Here’s a link which sets out Peter Lougheed’s accomplishments: http://www.jameshmarsh.com/2011/11/alberta%E2%80%99s-quiet-revolution-the-early-lougheed-years/
I just repeat one more time what I have said too many times already, but I am now an expert on the extreme right wing way – repeat it until you believe it – Bryan Jean does not have a clue about anything at all. God save us from him taking over power in Alberta.
I’m usually wrong about politics – left or right, but suspect the real Alberta threat is Jason Kenny. Once the embarrassing French debates are past, I’m waiting for O’Leary to throw his wisdom (and wallet) into the federal circus and imitate the U.S ‘reality show’. If these ‘Stars’ line up, any pretense about social justice, environment and democracy will succumb to corporate greed. Tell me I’m wrong.
No one can tell you are wrong because that is exactly what is going to happen.
Jason Kenney is definitely the real show but that is what he has always liked to be – the Joker.
Carl and Carlos, I agree with you. Jason Kenney is skilled at whipping up public angst and the media is either incapable or unwilling to correct his misstatements. Yesterday I read an article outlining the reaction of six “typical” Albertans to the carbon tax. There were a number of reactions ranging from “the tax will be so onerous we’re thinking of moving to Mexico” to “the tax is a trick to impose another general revenue tax” to “there is no climate change problem”. What really troubled me was the reaction of the guy who was considering moving to Mexico. When he found out the tax would only be $30/month he was surprised because it wouldn’t be onerous at all and that wasn’t his understanding and he’d listened to everything on the news. Given the lack of truthful coverage about the NDP’s policies it’s no wonder Albertans are sitting ducks for the likes of Jason Kenney. All we can hope for is that these policies will prove to be a pleasant surprise for Albertans and they’ll finally see Kenney and his colleagues for the charlatans that they are.
Try reading some enlightened commentary by Bill Gates in Atlantic Monthly. http://www.theatlantic.com/magazine/archive/2015/11/we-need-an-energy-miracle/407881/
The media is not incapable, it is purposely unwilling to contribute to balanced and informed dialogue. The viral disease of the media empire of Post Media is destroying our understanding and indigenous knowledge. The sooner it collapses under the weight of its vitriol and false news, the better off we will be.
Douglas: Excellent article. Some things I took away from Bill Gates comments were (1) climate change is real “If you’re not bringing math skills to the problem, then representative democracy is a problem”, (2) the free market won’t develop solutions fast enough because there are no fortunes to be made, (3) rich countries need to step up and solve the problem now, not wait for every country to get on board, (4) government funded R&D is a good investment, and (4) environmentalists damage their credibility by being overly certain (climate models are not exact).
A fine example of clear thinking, unlike the baffle gab we get from Trump and the conservatives.
Congratulations, fellow blogger! I nominated you for the Versatile Blogger Award! Enjoy a moment to shine then spread & share the love! Thanks for being a part of my little blogger-sphere. You truly inspire me.
Wow! Thank you Gringa! You are one of the most versatile bloggers I know–everything from NASA to Trump to tales from your childhood. Always an interesting and insightful read!
Ummm … I read your article and have concluded that you have not fully understood that the Keystone XL pipeline will actually deliver Canadian crude to tidewater… the fact that the refineries at tide water are then processing it and shipping refined product abroad seems to be missed in the calculation… it will limit the number of crude by rail cars… and actually allow expansion of production of crude in Alberta…
Dean I am aware that Keystone XL will deliver Canadian crude to tidewater where it will be processed and shipped out. I was simply quoting from TransCanada’s Annual Information Form which is a document all public companies are required to file by Canada’s securities regulators. The AIF includes a quote from the US State Department that says Keystone XLis “unlikely to significantly impact the rate of extraction in the oil sands.” I don’t know how the State Department came to this conclusion but as a lawyer who worked for a public company and filed AIFs for decades I do know that it’s against the law for a public company to lie, misrepresent or omit any material information. If TransCanada included this quote in its AIF and knew it to be false or misleading it would be subject to legal sanction.
…the expansion of production relates to the availability of rail cars now used to haul the product to the destinations the Keystone would take up… rail cars don’t make money unless they are moving and full, and the rail units that haul crude can’t haul anything else… so if they aren’t hauling crude handled by Keystone they will shipping product to other destinations from available sources… there is a lot of ‘shut in’ oil looking for home that could fill this pipe and the rail cars without changing the production rates of the mined oil sands…That ‘shut in oil’ represents a lot of jobs in Alberta.
Thanks Dean. I’m going to check out TCPL’s US filings to get more information. As I said the Canadian leg of Keystone was completed years ago. The US leg from Cushing to the USGC is also finished. I’m not clear on how much difference the approval of US cross border leg will make to Alberta jobs.