Estevan 鈥� For Warren Waldegger, president and CEO of Estevan-based junior oil producer Fire Sky Energy, the provincial government鈥檚 steering the competitiveness issue to the federal government isn鈥檛 the whole truth.
鈥淭hey鈥檙e the regulator,鈥� he said on April 16. 鈥淚f we鈥檙e uncompetitive, it鈥檚 typically on the Saskatchewan government, more than the feds.鈥�
And on that day, several other junior oil producers echoed concerns about how competitive Saskatchewan is now as an oil producing jurisdiction, given the Donald Trump administration鈥檚 large corporate tax breaks and the anticipation of tax breaks in Alberta from the new Jason Kenney United Conservative Party government. It was Alberta鈥檚 election day, and indeed, Kenney won, promising to dramatically reduce red tape and cut business taxes.
Waldegger noted that while Saskatchewan scrambled to move towards its own climate action plan, oil and gas ended up 小蓝视频 the poster child for that plan.
鈥淢ethane reducing changes will have a serious implication on investment and activity in our province, and we really didn鈥檛 solve anything. We鈥檙e still 小蓝视频 subject to the carbon tax, and we have both of these things on our plate,鈥� he said.
Waldegger felt the industry consultation on recent methane emission reduction regulations were pretty weak. 鈥淢ost of our concerns were easily discarded,鈥� he said.
One fundamental issue he is concerned about is the lack of infrastructure to tie into gathering systems, both for oil and for natural gas. He said it鈥檚 very tough to justify connections into oil or gas infrastructure, from an economics point of view.
Part of that has to do with geology. While he noted some people might think of southeast Saskatchewan as broad resource plays like the Bakken, in fact the 鈥渕eat and potatoes鈥� is the Mississippian conventional production made up of small pools. Once five or six wells are drilled in that pool to delineate it, that pool is already in decline for the next half dozen wells which will be drilled over the life of the pool. These small pools have a limited amount of gas, which in turn makes it uneconomic to tie into gas lines.
鈥淭hese are very distinct, small pools with limited amount of gas. Gas is the byproduct. It鈥檚 not the product we鈥檙e after.鈥�
Jon Hromek, who is the president and CEO of Adonai Resources II Corporation, pointed out that Alberta has much better geology than Saskatchewan, but Saskatchewan used to have a better regulatory environment. Waldegger concurs, pointing out that in Alberta, there鈥檚 much better gas gathering infrastructure than in Saskatchewan. It also typically has more targets to produce from.
The new regulations covers basically every source of emissions, from tanks and valves to flares. But in addressing these emissions, Waldegger notes some changes don鈥檛 make a lot of sense.
For instance, by running valves off of field gas, he said, 鈥淭here鈥檚 no more efficient system to do that with. You鈥檝e already got the energy source captured on location, in a remote location, typically. So it makes no sense to try run those off a compressor, when we already have gas that is compressed in our vessels. The things we鈥檙e trying to do, we鈥檙e going backwards. We鈥檙e going to ignore the impacts of the construction of that compressor, and running that compressor off electricity, instead of using the source of energy we already have on location.鈥�
He noted these are very minute emissions sources.
鈥淚f you look at the last decade, it鈥檚 building one thing on top of another, onto the industry,鈥� he said, pointing to Directive S-10, burner regulations, and now these new methane regulations. 鈥淭he only thing they鈥檝e really kept consistent is the royalties, and that was from the previous regime.鈥�
Asked if it鈥檚 death by 1,000 cuts, he replied, 鈥淚t鈥檚 feeling that way.鈥�
鈥淲e鈥檙e also looking at new pipeline licensing, a new regulation. And they鈥檙e telling us, it鈥檚 not cheap. New estimates for building this pipeline module in IRIS is very high, and industry is bearing 90 per cent of that through the levy.鈥�
That levy was introduced by this provincial government, meaning that industry pays for growth in the bureaucracy.
Would it all be solved by $100 oil? Waldegger doesn鈥檛 think so, saying, 鈥淭here鈥檚 been major changes to the financial backbone of our industry, and that goes back to dissolving the royalty trusts, way back then.鈥�
Those royalty trusts, which were dissolved by the federal government, provided a buyer, and an exit strategy, for small producers.
He said in talking to the mergers and acquisition people, there鈥檚 basically 50,000 to 60,000 barrels of oil per day production for sale in southeast Saskatchewan and Manitoba with no apparent buyer. That includes companies going public.
鈥淭here鈥檚 no obvious liquidity market,鈥� he said.
The whole plan for a company like Fire Sky is to provide investors with liquidity.
鈥淚 would say we have serious concerns over the competitiveness of our industry, and the trend. The trend is not good. There鈥檚 a lot of additional costs and manpower to deal with new processes and procedures. We can鈥檛 keep looking at the federal government and saying they鈥檙e the problem, yet we keep creating new processes in our own province,鈥� Waldegger concluded.
