A Calgary oil and gas investment firm’s warning that thousands of Alberta jobs will be lost if royalties are hiked by 20 per cent is an unconvincing “scare tactic,” says the president of the Alberta Federation of Labour (AFL).
“We don’t buy the energy industry’s doomsday scenarios,” says Gil McGowan, whose federation represents almost 125,000 Alberta workers. “Frankly, we think their threats about… job loss are empty threats and should be seen only as a bargaining position.”
First Energy Capital, a Calgary oil and gas investment firm, estimates 19,000 jobs could be lost in Alberta if proposed royalty rate increases are accepted. The firm says low gas prices alone will cost 3,500 conventional oil and gas jobs in 2008, and estimates another 8,100 jobs will be cut if royalties are hiked by 20 per cent. In the oilsands, First Energy says royalty changes would cost 11,000 jobs a year.
“They’re basing their assumptions on the notion that it would be desirable to maintain the current rapid pace of development,” says McGowan. “We would argue that it would be better to develop oilsands projects at a more reasonable pace so that employment… is stretched out over a longer period, instead of having a frantic seven- or eight-year period that needs to be supplemented by thousands of temporary foreign workers.”
In December 2006, there were more than 22,000 temporary foreign workers in Alberta, many of them working in the oilsands and energy-related construction projects. When the federal government announced changes to the temporary foreign worker program in September, it cited the oilsands labour shortage as an example of why the controversial program is necessary. (The program changes make it easier for employers in Alberta and B.C. to bring in foreign workers.)
Canadian Natural Resources Ltd. (CNRL), one of the first energy companies to bring foreign workers to Fort McMurray, is now also warning that the proposed royalty hike could force it to cut 3,900 “direct jobs” and 16,000 “indirect jobs.”
The AFL estimates the number of foreign workers in Alberta may have ballooned to over 60,000 since December, and stories of foreign worker abuse are also growing. “If we do experience a slowdown and those temporary foreign workers are no longer needed… that wouldn’t be such a bad thing,” says McGowan.
Amy Taylor, an economist with the Pembina Institute, agrees an economic slowdown would benefit many. “You have to think about where (corporations’) responsibilities come from,” says Taylor. “Their responsibilities are to their shareholders, and to maximize returns to those shareholders. So obviously they’re going to be trying very hard to protect those extra profits they’re currently making that should be transferred back to Albertans.”
However, Kevin Lo, an analyst with First Energy, says his firm’s job loss forecast isn’t a scare tactic, or even a worst-case scenario. “It could get worse,” he says. “It could get way worse. This is the worst it’s been in 15 years.” The number of active drilling rigs in Alberta has decreased by 220 since 2005, largely due to low gas prices, according to First Energy. During the same period, active rigs decreased by only 19 in Saskatchewan and 16 in B.C. “If those rigs aren’t working, those people aren’t getting paid,” says Lo. “It’s not a scare tactic. It is truth.”
Julie Hrdlicka, the southern Alberta rep for the Parkland Institute, says it’s ironic the industry is warning about job losses at the same time it plans to ship more bitumen to the U.S. for upgrading. (TransCanada’s Keystone pipeline, which was approved by the National Energy Board in September, will create an estimated 18,000 jobs in the U.S.) “We say that, ‘oh, if the royalty rates increase, there’s going to be job losses,’” Hrdlicka says. “Well, we’re already doing that by shipping this bitumen south. We’ve got such a messed up idea of progress in this province.”
Hrdlicka also says it’s unlikely the province will lose investment. (Several companies, including locals like EnCana Corporation and Talisman Energy, have threatened to withdraw investment from Alberta if royalties are hiked.) “We’re in a very strong position in Alberta, and we can’t be intimidated by these corporations,” Hrdlicka says. “If a company decides to leave, I think there will be other companies that will come in. They recognize that Canada is a stable country — unlike so many other places in the world — for investment.”
However, EnCana spokesman Alan Boras says his company wasn’t trying to intimidate, but rather to give a realistic perspective on the economics of the proposed changes. “When we applied the formulas that the panel is recommending, we found that it made our new (unconventional) projects — our emerging projects — uneconomic,” says Boras. “And as a result, they would not attract investment.”
