Friday, 26 June 2015

Resources continue to be the foundation of BC's economy

The resource sector is the foundational stone upon which the BC economy was built, and it is as important today as ever


This article by Resource Works senior research fellow Marlyn Chisholm is adapted from the BC Check Up, a publication the Chartered Professional Accountants of BC joint venture, on behalf of ICABC, the Certified Management Accountants Society of BC, and the Certified General Accountants of BC. A link to that full report (in PDF format) is hereReproduced with permission

Article originally published on June 22, 2015 by Resource Works; can be obtained on their website at this link.

What we've forgotten


BC has witnessed profound changes in its economic structure and trade patterns since the beginning of the 20th century. During this time our province has transformed from a “hewer of wood and drawer of water” primarily reliant on the export of commodity lumber and minerals, to one with a far more diversified economy, dominated by a rapidly proliferating service sector.

But how did this all begin? From its inception, BC has been a resource producer and exporter, starting with the fur trade in the mid-18th century, and timber and gold in the 19th century. Subsequently, coal, energy, other minerals, and agricultural products have also emerged as key BC exports. Over the past 150 years, the provincial economy has grown and built on these “basic” industries either directly, in support industries such as construction, transportation, and wholesale supply, or in a wide range of indirect services such as retail and accommodation.

As BC’s population reached a critical mass, a plethora of new industries also blossomed independently, generating more rounds of direct and indirect jobs and earnings.

With population inflow has come the development of public and private infrastructure and services throughout BC, attracting capital investment and generating further job creation. In short, the traditional resource industries served as a starting point for population and economic growth in BC, spurring on development in both good and services sectors.

It continues to do so today, but for many residents of the Lower Mainland a combination of the knowledge economy, tourism, and a vast array of services seems to dominate the landscape, while our province`s historic role in the resources recedes into the past. This is echoed by an overall assumption of many BC residents that the resource sector is a matter for the interior and northern regions, and in particular for those in the Lower Mainland, they have minimal interests in BC’s resource development.[i]

We have lost sight of the importance of resources in our economy, particularly in the Lower Mainland and major urban centres. However, they still constitute a large part of the economic foundation of this province, not only in resource-dependent communities such as Prince George, Slocan, or Port Alberni, but in Vancouver and across the Lower Mainland.

Let’s look more closely at the ways in which the resource sector generates economic and social benefits in BC, and how it connects to other industries, especially in the service sector.  

A snapshot of the resource industry today


The forest products industry is a major employer on the BC Coast and BC Interior, with dimension lumber accounting for most exports. The forest industry has seen periods of boom and bust throughout the decades as markets and prices varied, with commensurate effects on company revenues, [ii]employment, and earnings. The forest industry’s fortunes began to wane in the late 1980s, when the industry began a phase of rationalization. Forest industry revenues slumped and many mills closed, with thousands of jobs lost permanently throughout the province. The forest product share of the value of BC global exports declined from 57% in 1988 to 32.3% in 2012.

However, this industry’s fortunes have recently changed. In 2013, solid wood product exports from BC rose by 25.5%, stimulated by renewed demand in the US. At the same time, however, pulp and paper exports declined slightly. Employment in wood product manufacturing rose for the second year in a row.



BC’s agriculture and fisheries began with the indigenous people, but accelerated with the arrival of Europeans seeking out other resources. BC’s most productive farmlands lie in the Fraser Valley, the Peace River Valley, and the Okanagan Valley, producing a range of dairy, livestock, grain, fruit, and vegetables for domestic consumption and national and international export. With the massive consolidation of farms, employment in this sector has remained static for the past decade.  In the late 19th and early 20th century, BC’s fisheries grew significantly, particularly for salmon. In the 1990s, factors such as oceanic change, loss of fish habitat, and overfishing led to a collapse of the Pacific salmon catches. Most salmon canneries were closed, and the government reduced the fishing fleet in 2004, exacting an economic toll on dependent communities. Nevertheless, BC still sustains a strong seafood sector, both commercial and aquaculture.Altogether, the value of British Columbia’s agriculture, seafood, and agrifood sector has risen over the past 25 years. In 2013, BC producers exported $2.9 billion worth of products to more than 140 countries.[iii]

Activity in BC’s mining industry spans the province. Metal mining is concentrated in the southern, central, and northern Interior, as well as northwest BC. Coal mining takes place predominantly in southeast BC (east Kootenays) and the Peace River Region in the northeast. In the past few years, several major mining investments have been proposed—including the Blackwater Gold project in the Cariboo (capital cost of $1.5 billion) and the resumption of operations at the dormant Quintette coal mine near Tumbler Ridge (with a capital cost of $500 million).[iv] But a 2013 downturn in both gold and coal prices have in some cases delayed capital investment decisions. Nevertheless, there continues to be many new proposed metallic and coal mines throughout BC.

BC’s energy sector offers some of the largest provincial economic opportunities in a generation. As of early 2014, over one dozen liquid natural gas (LNG) and pipeline projects in Northeast and Northwest BC, all at different stages of environmental approval, were proposed but none have yet been given the go ahead. In 2013, gas prices were low, but a cold winter in the US renewed demand for Canadian natural gas and boosted prices in early 2014, and gas prices are predicted to rise over the next year.[v] In the longer term, with the advent of pipelines to and shipping facilities on the north coast (Kitimat and Prince Rupert), the Asian market holds enormous export potential for BC and Alberta producers. But this is an opportunity with a finite window – BC lags behind its US and Australia competitors in developing its gas reserves. In addition to its natural gas reserves, there are several hydro and wind power projects either proposed or underway in BC, particularly in the northeast. By far the largest project would be the $7.9 billion Site C Clean Energy Project, which is a third dam and hydroelectric generating station on the Peace River.

Finally, we cannot exclude the benefits of the northern Alberta oil sands, which continues to generate a great deal of employment, earnings, and business revenue not only in Alberta, but in BC and throughout Canada. In fall 2012, a survey of oil sand producers demonstrated that there were at least 322 suppliers to the Canadian Oil Sands projects located in BC, with most of these located in the Lower Mainland.[vi]

What benefits does the resource sector generate?


        Local employment, income, and business effects
Major projects undertaken by resource companies draw significant capital investment into communities, generating economic and social benefits that last for several years or even a generation or more. The resource sector attracts huge amounts of capital investment into BC annually from both domestic and foreign sources. In the fourth quarter 2013, for example, there was $29.2 billion worth of projects proposed, started, completed, or on hold in the Northeast Development Region, mostly in mining, oil and gas extraction, and utilities.[vii] This capital is used to purchase materials and equipment, pay for construction, and ultimately project start up. For example, Encana, a North American energy provider with an interest in the Montney gas fields in northern BC, has invested approximately $1 billion annually in BC for the past decade.[viii] In 2013, Encana spent approximately half of their operational and capital expenses on the Montney project in BC, with the rest going to Alberta and elsewhere. 

At the local level, the construction, extraction, processing, and transportation of resources generates jobs and income. These jobs are generally full time, and pay well. Through local hiring and the purchase of local goods and services, resource industry operators contribute directly and indirectly to local community economic activity by supporting businesses, during both the construction and operations phases. Spending by highly-paid resource workers and those who work for their suppliers on consumer goods and services creates induced employment and income effects within the community or nearby communities. This benefits both First Nation and non-aboriginal workers and their families.

Local economic benefits also accrue in the form of worker training. For example, in Fort St. John, the natural gas industry has worked with post-secondary education providers to implement programs that update and boost workers’ skills, thereby increasing their productivity and wage potential. This contributes to a local labour force with a higher educational attainment level. Many employers have a policy of hiring and training First Nation workers, and ensuring that they and their communities realize the benefits of resources.

        Provincial employment and income effects
While the employment and income effects of resource extraction are important at the local community level, they extend far beyond this. Resource companies often have offices in the Lower Mainland, where they generate more direct jobs. These companies may also hire workers from other parts of BC who choose to live temporarily in camps or hotel accommodation while they work for construction and/or operations, and spend their earnings elsewhere in the province.

Generally speaking, resource companies do a lot of outsourcing to other industries, particularly in the service sector, and they do not import a large share of their inputs. Many workers are employed indirectly throughout BC in businesses that serve the resource sector, primarily in finance, insurance and real estate; professional, scientific and technical services; transportation; business services; and accommodation and food.

The distribution of expenditures on material, equipment, and services depends on the industry, the operation, and mode of transportation necessary for shipping supplies and the final products. For example, in 2000 the Kemess gold mine, which is situated 280 km north of Smithers, spent 63% of its payroll in the Bulkley-Nechako and Peace River Regional Districts, while its expenditures on goods and services were distributed across several regions. Approximately 50% of goods and services were obtained from businesses in Prince George, the Okanagan, and Vancouver, while Ontario and Alberta supplied another 27.4%.[ix]

Labour and materials for the construction phase of new pipelines and gas processing plants in northern BC would likely be sourced primarily from BC and Alberta, depending on costs and transportation logistics. New economic opportunities in communities like Prince Rupert (where population has been declining for at least a decade) and Kitimat would attract temporary workers who live in camps as well as new workers and their families, and new businesses, who intend to stay.

Purchasing patterns during both construction and operations phases generate province- and nation-wide indirect and induced effects.

What share of the benefits generated by BC’s resource sector goes to the Lower Mainland? A study undertaken in 2014 demonstrates that 55.5% of all jobs generated by BC’s resource industries—direct, indirect, and induced— are in the BC Lower Mainland.[x] In other words, the part of our province that seems most dominated by the service sector is still very much dependent on resources.

        GDP
It is estimated that the resource industry’s output in BC was $21.4 billion in 2010, or 11.2% of provincial GDP.[xi] The natural resource sector has myriad linkages to other sectors of the domestic economy. Data from the Statistics Canada I/O model shows that if BC’s resource sector boosted its output by 10%, this would expand BC’s GDP by $2.2 billion, and Canada’s GDP by $4.5 billion. Over 40% of the increase in BC’s GDP would be in mining (including natural gas extraction), and 20% in resource-based manufacturing. 

        Government revenue
Resource industry operators also generate municipal, provincial, and federal government revenues in the form of royalties and corporate taxes, property taxes, and personal income taxes paid by their employees.[xii] These government revenues are used to build infrastructure, and support a myriad of social and health care programs, bettering the quality of life of all British Columbians.

The BC government’s most recent budget predicts a small fiscal surplus during the next two years. This will be achieved through a combination of reduced spending and higher taxes (e.g. tobacco and MSP premiums), but it does not take into account the significant future royalties and corporate taxes that would be paid if at least one of the proposed LNG projects goes ahead. The provincial government forecasts that royalties from the new LNG industry could amount to over $100 billion during the next 30 years.[xiii] These new revenues would put the provincial budget well into the black, and help support the growing costs of health care and education. 

        Advances in technology
The resource sector’s effect on BC’s technology industry is not simple to quantify, but it has been profound. Out of necessity, resource operators worldwide have rapidly adapted new technologies to harvest or extract, transport, and add value to their commodities more efficiently and cost effectively. This has spawned a new generation of BC-based technology providers who tailor their products for resource applications. Advanced technology is being used in all stages of operations in agriculture, sawmilling, mining, and oil and gas, and energy production. Here are a few examples:

  • The development of new extraction and processing technologies in the mining industry has had a direct impact on BC’s gold production, which has tripled since 1980.[xiv]
  • Sawmills are achieving better operating and capital investment decisions through the use of software optimization systems.
  • Natural gas producers combine hydraulic fracturing (“fracking”) with horizontal drilling to access unconventional gas deposits in shale. This produces affordable and reliable quantities of natural gas, although there is growing public concern about associated environmental effects on groundwater.
  • Farmers now use computer monitors and GPS locators to make tractors more accurate and less wasteful in the use of seed, fertilizer, and fuel.

By continually investing in new technology and refining the production and transportation chain throughout BC and Canada, operators are able to stay competitive and better process and transport raw materials. In addition to improving competitiveness, resource operators are using new technology to address another key concern— environmental protection and mitigation. In the advent of tighter government regulations pertaining to environmental and social impacts and a corporate trend towards more accountability and transparency, the resource sector is one of the biggest users and implementers of environmental technology. A wide array of cleantech companies has been developed in BC with the goal of helping their clients reduce environmental impact, achieve lower costs, and boost performance.[xv] Clean technology (cleantech) developers’ biggest customers are conventional oil and gas, energy and oil sands production, mining and related services, renewable energy, and utilities companies[xvi].[xvii] Resource producers have partnered in many cleantech initiatives, and implemented the technology in a variety of ways. For example:

  • In New Westminster, Kruger Products (a tissue manufacturer) replaced its natural gas boiler with biomass gasification to produce process steam, with the goal of attaining lower emissions and costs, and reducing its carbon footprint. This technology was developed by Nexterra Systems Corp. of BC.[xviii]
  • Vancouver-based MineSense™ Technologies has developed an ore recovery process that enhances the sustainability and longevity of mining operations.
  • NuWave Research of Burnaby has developed NuGenesis™ a method for continuous vacuum microwave drying that could be done at farms or food processing plants to minimize food waste. This would reduce energy and transportation costs associated with transporting food to drying facilities.

The cleantech industry is expanding in BC, creating challenging and high-paying jobs in the service sector. These producers are also achieving a worldwide reputation for innovation and leadership, and further contributing to BC’s exports of goods and services.

        Conclusions 
Due to more complicated corporate structures, electronic communications, and changing trade patterns, the dependencies between the resource industry and the rest of the economy have strengthened and become more complex. The untold billions of dollars in capital that have flowed into BC’s resource sector over the past century have disseminated jobs, income, and business revenues not only in resource towns but throughout the provincial economy, with the Lower Mainland a major beneficiary.

There is no denying that some resource industries, like forest products, experience cyclical booms and busts by virtue of their dependency on world commodity prices. Nevertheless, these industries have generally sustained many BC communities for several generations, through good times and bad, and they continue to seek ways to reduce their vulnerability to world markets. Moreover, resource operators have become far more attuned and responsive to social and environmental effects, one reason that the cleantech industry has gained traction so quickly in BC.

In a world where most people are employed in the service sector and where high technology is regarded as the beacon of the future, it is easy to lose sight of what really makes our economy tick. The resource sector is the foundational stone upon which the BC economy was built, and it is as important today as ever. 

        About the BC Check-Up
Since 1999, the Institute of Chartered Accountants of BC (ICABC), have benchmarked the province’s economy in the BC Check-Up. This tradition is being continued by the Chartered Professional Accountants of BC joint venture, on behalf of ICABC, the Certified Management Accountants Society of BC, and the Certified General Accountants of BC.

The BC Check-Up uses selected economic and social indicators to evaluate BC as a place to work, invest, and live. In order to provide context, BC’s progress levels are compared with those of Alberta and Ontario, as well as Canada as a whole. The data is obtained from Statistics Canada, and supplemented with information from other credible published sources.

NOTES


[i] Philip, Cross (April 2014), “High Impact: The Importance of Natural Resources to the Economy of British Columbia”.
[iii] BC Stats, BC Origin Exports to All Countries, Selected Commodities. Review April 4, 2014.
[iv] Quintette project deferred April 2014.
[v] TD Bank Economics Observation February 24, 2014), Finally Some Good News for Canadian Natural Gas Producers?
[vi] Source: Canadian Association of Petroleum Producers, Fall 2012, BC Suppliers to Canadian Oil Sands.
[vii] BC Ministry of Jobs, Tourism and Skills Training (December 2013), BC Major Projects Inventory.
[viii] Source: Encana, March 19, 2014.
[ix] McInnes, Donald, Presentation, The Case for Hydropower Development in the Highway 37 Corridor.
[x] Cross, Philip (April 2014), The Impact of the Growth of Natural Resources on the Economy of British Columbia, undertaken for Resource Works Society of BC.
[xi] P. Cross, Op. Cit
[xii] This is not a complete list of taxes paid by companies and employees.
[xiii] BC Government, LNG in BC, http://engage.gov.bc.ca/lnginbc/b-c-s-lng-story/#market-value-for-lng (accessed June 2014)
[xiv] BC Technology Industry Association, Outlook 2020 Initiative, BC’s Advanced Technology Sector – Reaching for the Next Level, March 2009,
[xv] Cleantech companies develop products, services or processes that enable industrial users to harness renewable materials and energy sources, reduce the use of natural resources, and minimize or
eliminate emissions or waste.
[xvii] Deloitte and Sustainable Technology Development Canada, Clean Tech, Positioned for Growth, Western Canada Clean Tech Report, 2009.
[xviii] Pulp and Paper Canada, Kruger’s Biomass to Syngas Venture Pays Off, May/June 2010.





Tuesday, 23 June 2015

U.S. Gasoline Consumption Up, Shale Oil Production Down

By: David Yager, National Leader Oilfield Services

Originally published in MNP's Oilfield Services News - June 23, 2015

On June 17, Bloomber News reported U.S. gasoline consumption in the first quarter of 2015 was 100,000 barrels per day higher than Energy Information Administration estimates of 8.71 million b/d for the period. American drivers apparently travelled a record 720.1 billion miles in the first three months this year, a distance Bloomberg described as "...3,900 return trips to the sun."

The article said the U.S. economy added 3.1 million jobs in 2014, the most since 1999, which should translate into a robust summer driving season when Americans hit the road for summer vacations. Despite recent price increases following higher crude prices, gasoline is selling for about a dollar a gallon less than a year ago. Refineries on the Gulf Coast of Mexico processed record amounts of crude for the week ended June 2. U.S. refineries are running at an average 95% capacity and refining is so profitable at the moment refiners are delaying scheduled maintenance. 

Meanwhile, U.S. shale oil production is declining. Estimates for crude production from the Bakken and Eagle Ford for July will see output fall to 5.49 million b/d, down nearly 100,000 b/d from estimates for June. These declines are expected to continue until drilling picks up, which hasn't happened yet. 

World oil prices, however, continue to be haunted in the business press by threats of production increases from Iran, Iraq, Libya, and Saudi Arabia. 

Tuesday, 16 June 2015

A Primer on the Carbon Bubble

Originally published by the Delphi Group. Can be retrieved from their website at: http://delphi.ca/a-primer-on-the-carbon-bubble/ 

In the lead up to the UN climate change talks in Paris this year, there has been a great deal of speculation regarding whether a new international GHG reduction target will be set, and ultimately what this would mean for businesses and the average person. Regardless of what happens in Paris, there is increasing climate change related pressure on energy producers on a number of fronts. One key shift has been around the concept of the carbon bubble, and the related impact of the divestment movement.

What is the carbon bubble?

It is an accepted fact that carbon dioxide is causing an enhanced greenhouse effect that is increasing global temperatures.  Scientists and the countries of the world have agreed that the planet cannot warm by more than 2°C without catastrophic impacts.

Of significant concern to investors is that some fossil fuel companies aren’t taking this target or threat seriously, which could lead to stranded assets and devaluation of companies across the industry.

How is the investment community responding?

The perceived risk associated with investing in fossil fuel companies is exacerbated by the carbon bubble concept. Universities like Stanford and Georgetown, the Rockefeller Foundation and Norway’s sovereign wealth fund are divesting their fossil fuel investments, and some investors and environmental advocates are pressuring other organizations (especially universities, pension funds and community groups) to do the same.

While the divestment movement is gaining momentum, many critics argue that it is not having a financial impact on organizations. By giving up their shares, divestors are losing their voice within companies to those that may not care about environmental impacts. Engaging and participating in a dialogue with energy companies – as investors, consumers, or members of the community – can shift decision making. One recent example is Shell and BP agreeing to be more transparent with respect to their GHG risk, in response to shareholder resolutions on the issue.

What does this mean for organizations in the energy sector?

There is no immediate replacement for fossil fuels at this stage: renewable sources of energy will need to be scaled up significantly before they can truly displace traditional sources of energy. However, the reality is that social license issues continue to grow, as do carbon regulations (in the form of GHG reporting, carbon pricing, or other types of activities, e.g. renewable portfolio standards, energy efficiency initiatives, etc.) and voluntary reduction commitments from both governments and companies.

Many forward-thinking companies and governments are taking this in stride and diversifying into various renewable or other low-carbon opportunities. These organisations will be in a strong position to lead as we transition to a low-carbon economy. While quantification is sometimes difficult, in 2013 E&Y valued the Cleantech industry at $170 billion (grew 18% in 12 months),  the UK’s low carbon economy (and supply chain) have been calculated to generate £120 bn and provided 460,000 jobs in the years 2010 – 2013 and in BC has 14,100 jobs attributed to clean energy on 156 projects.

Demonstrating these values in action at the G7 Summit this week, leaders not only committed to decarbonization, but PM Stephen Harper said, “We simply have to find a way to create lower carbon-emitting sources of energy.” This issue is not going away.

Friday, 12 June 2015

Six remarkable energy facts from 2014

Originally published in BP's Statistical Review 2015, article can be found here: http://www.bp.com/en/global/corporate/press/bp-magazine/conversations/six-remarkable-energy-facts-from-2014.html 


How did the energy world change in 2014? Now in its 64th year, the BP Statistical Review of World Energy gathers thousands of numbers that reveal what has happened in the energy markets over the past 12 months. Here, BP’s chief economist, Spencer Dale highlights six significant statistics from the review that help to paint the big energy picture


The overriding story from this year’s BP Statistical Review was a change in ‘weather’ conditions in the energy market during 2014. We saw an end to the eerie calm that had settled over the energy markets from around 2011 and more volatile conditions – that tend to characterise these markets – resumed once again.
Here are six of the most remarkable facts from the energy world in 2014. Each of them raises questions for the industry about the future path of energy; the BP Statistical Review and its data don’t provide all the answers, but they do afford us a foundation to start thinking through the issues.

1. The American energy ‘eagle’ soars: US becomes the #1 oil producer


“US oil production rose by 1.6 million barrels a day in 2014, by far the largest growth in the world, taking its total overall production to just over 11.5 million barrels a day. It’s also the first time any country has increased its production by more than one million barrels a day for three consecutive years. 


As a result, oil production in 2014 exceeded the previous peak level of US output set in 1970. This is interesting because it challenges the ‘peak oil’ theory, when people say the world will never be able to produce as much as oil as it did in the past. For the US to go beyond its previous 1970 peak is significant.
It also means the US passed both Saudi Arabia and Russia to become the world’s leading oil producer for the first time since 1975. We have truly witnessed a changing of the guard of global energy suppliers.”

2. Record breakers: non-OPEC producers hit new production highs


“Driven by the strength of US oil production, countries outside of the Organization of Petroleum Exporting Countries (OPEC) increased their supply by 2.1 million barrels a dayin 2014 – the largest increase we’ve ever seen from non-OPEC output. This growth figure represents more than double its ten-year average.
This increase was at the root cause of the supply imbalance we saw in the oil market - and the adjustment the industry is now living through in terms of lower oil prices.
Among the non-OPEC producers, although the US set the pace, Canada and Brazil also enjoyed record increases in production.”

3. The big picture: growth in global energy demand slows


“The big picture for energy in 2014 was one of surprisingly weak growth in energy consumption; with supply growth outstripping demand and a consequent softening in energy prices.

Growth of primary energy consumption slowed to just 0.9% in 2014, which – with the exception of the financial crisis – is the slowest growth of energy demand since the late 1990s. This sharp deceleration in demand occurred despite the global economy expanding at 3.3%, a similar rate to 2013.
Energy consumption grew more slowly than recent averages in all regions, except North America and Africa. Overall, it’s a significant slowdown relative to the previous year, some of which can be explained by weather-related factors in both the US and Europe, but a fundamental driver is what happened in China.”

4. The inexorable link: China slows, coal consumption brakes


“China is the world’s largest energy market and is also the single biggest source of global energy demand growth. And in 2014, while the Chinese economy grew by more than 7%, energy consumption grew by only 2.6%. What we’re seeing is that energy market changing very dramatically as the Chinese economy adjusts, with a gradual slowing in its overall growth and a rebalancing away from the energy-intensive industrial sector.
For many years, the fortunes of coal have been inexorably linked to China. That was true as China industrialised rapidly, causing coal to be the fastest-growing fossil fuel over the first part of the 21st century. It was equally true in 2014 as Chinese demand braked sharply and coal consequently became the slowest growing fossil fuel.
This raises an interesting question: is what we’ve seen in China the start of a new trend? Or, is it likely that this slowdown in Chinese energy demand and coal consumption is just a one-off and may be reversed? I think the jury is still out on that.”

5. The carbon factor: emissions at slowest growth since 1990s


“In the context of the climate change debate and on the road towards the United Nations conference in Paris at the end of this year, carbon emissions attract significant attention. And what we saw in 2014 was a sharp slowing in the growth rate of carbon emissions.
We estimate that global carbon emissions from energy use rose by just 0.5% in 2014, the slowest rate of growth since 1998 (other than in the immediate aftermath of the financial crisis). That compares to an average increase in carbon emissions of about 2% over the last 10 years. The single most important factor driving this slowdown in emissions growth was the developments in China.”

6. Two sides to every story: how renewables fared


“I’d describe the renewables story as one that can be viewed as ‘half-full’ or ‘half-empty’. On one side, there’s the fact that the growth in renewables (including biofuels) accounted for almost a third of the total increase in primary energy in 2014, and provided more than 40% of the increase in power generation. These are big numbers.
On the other side of the coin – a more ‘half-empty’ story – is that renewables energy growth in 2014 remained robust at 12%, but that’s below the 10-year average of 15.4%. This slowdown was driven by wind which grew at less than half of its ten-year rate, reflecting both less public policy support (in EU and US) and low wind speeds (in China). Overall, renewables only provided 3% of primary energy.
So, how to explain this growth at the same time as a seemingly static state for renewables? Essentially, overall growth rate of energy demand slowed, but the renewables sector continued its ‘normal’ growth as it’s not sensitive to the demand side. But, because the overall growth in energy demand slowed so sharply, renewables accounted for a larger share of a smaller pie.”

Tuesday, 9 June 2015

Tim Hortons' Enbridge Reaction - The Real Issue

By: David Yager, National Leader Oilfield Services

Originally published in MNP's Oilfield Services News - June 9, 2015

The story was impossible to miss. Oil and pipeline haters used the internet (social media and email) to demand Tim Horton's drop its paid advertising from Enbridge from their in-store TV information service. Based on 29,000 electronic signatures on some sort of online petition, Tim Horton's (now owned by global conglomerate Burger King) wilted and dumped the ads immediately. 

This caused predictable outrage from all manner of commentators. The theme was that Tim Horton's is the working oilpatch's favourite coffee and donut outlet, but Tim Horton's fears the online oil haters more than a negative reaction from its own blue collar clientele. This will be a news story for a day or so, another in a seemingly endless stream of corporations having their activities driven and shaped by organized but largely anonymous citizens who threaten their top and bottom lines if their behaviour isn't satisfactory. 

The problem is not the action, but the numbers. It's a free society. Sign petitions. Issue news releases. Say whatever you want. The issue is the number of people - real or alleged - who are able to shape a corporation or society's agenda without names, addresses or actual appearances. 

If Tim Horton's did indeed receive 29,000 real names from real people on this petition, this only accounts for 7/1000 of 1% of the population in Canada and the U.S., the major markets in which Tim Horton's operates. It is 7/100 of 1% of the population of Canada. It is 7/10 of 1% of the population of Alberta, the province in which all that nasty bitumen is produced. This is nobody. Twice that many people were at the Women's World Cup soccer game in Edmonton on June 6. This is not representative of anything but some corporate public relations hack at Burger King freaking out because one of its operating units got a bit of negative publicity. 

While many in Canada regularly complain about the activities of Prime Minister Stephen Harper, at least he has a huge and legitimate mandate from Canadians to go about shaping the country compared to the Tim Horton's fiasco. In the 2011 election over 5.8 million Canadians voted for the PCs and nearly 15 million people of half the population voted. These are the sort of numbers that should be required to change direction of a society or civilization, not 29,000. 

Which is the root of the problem. Corporations and politicians are becoming increasingly sensitive to increasingly smaller groups of people who have figured out how to use the internet to advance causes. Canada's bruised bitumen producers and pipeline operators must figure out how to fight back and separate hijack tactics from legitimate public concern or dissent. 

Monday, 8 June 2015

Behind the Eight Ball & Fighting an Uphill Battle

By: Lucas Silva, CAGC

Article originally featured in the summer 2015 edition of their quarterly magazine, The Source. Article can be retrieved here: https://www.cagc.ca/resources/source_magazine/1502/

In recent years, the oil and gas industry has seen a number of negative situations play out, partly due to a lack of effective communication within the public body. Keystone XL, Energy East, Northern Gateway and Kinder Morgan expansion have all been, directly or indirectly, negatively affected by public opinion, whether justified, or not.

These are just a few examples of projects that have been affected, or even halted, but negative public opinion can be felt throughout the industry, hurting its ability to take full advantage of the opportunities in place.

This has forced the industry to change its approach to communicating with the public. The Canadian Association of Petroleum Producers (CAPP) has introduced a brand new approach, calling it: From Passive Endorsement to Active Engagement, where they’re essentially trying to reach individuals at a personal, emotional, and grassroots level in order to create unprompted supporters for the industry.

Their goal, in essence, is to mobilize people and create positive public influence for the entire industry, and to humanize the industry. For years, it’s been the opposite; and CAPP is leading the way in trying to change that.

Cenovus has also undergone a recent shift, but instead of externally trying to affect people first, their goal is to create ambassadors from within their own company. With that, their goal is to have those people positively affecting those in their inner circle, which will have an indirect impact on public consensus in the long term.

These types of shifts are being seen more and more from industry, and while it’s a good start, they’re behind the eight ball. ENGO’s and various environmental groups have been reaching individuals at this emotional and personal level for quite some time. They’ve been able to not only convince members of the public to support the environmental opposition, but have those members become unwavering radicals in some cases.

While the opposition was creating an army of support by playing on people’s emotions, having real conversations, and putting a face to the message, the industry was hiding behind reams of lawyers, public relations representatives, and advertisements, failing to reach people at the level they’re trying to reach them now.

This has put them behind the eight ball, and created distrust among the public. In an Alberta Oil Magazine exclusive, called The National Survey on Energy Literacy released in early February, they polled individuals across Canada on a number of energy related topics, including trust issues.

The question was posed as “Please select which group or groups you believe to be credible and trustworthy when it comes to providing information on each of the following areas:” The areas in question were Oil Sands Development, Clean Energy in Canada, and Carbon Emissions. For the three areas, oil and gas companies and industry groups received rates of 32%, 19.3%, and 21.2%. Environmental groups received rates of 28.5%, 37.7% and 34.7%. Clearly, there isn’t just an issue with trust for the industry, but there’s the added issue of environmental groups receiving more trust in two of the three areas. This is a significant problem, as these environmental groups often use fallacy, as opposed to facts to sway public opinion.

This goes to show that ‘fact pushing’ and ‘economy benefit’ angles aren’t the only methods that need to be used by industry, because they haven’t been proven to be effective.

The industry is shifting towards an approach that mimics organizations like Greenpeace, but they seem to always be once step behind. These new efforts are an attempt at mobilizing people to create a change; create some trust; and create positive public discourse. The industry has all the resources: the funds, the information, the facts, the power, to be able to make a stronger impact on public consensus, and they’re finally doing what it takes to reach people and make a difference.

However, with all of that being said, this is constantly an uphill battle for industry. Not only due to their own fault, but the industry simply can’t play the same game as the environmental groups, who often use extreme measures to gain support and sway public trust.

It’s often suggested that industry “needs to take their gloves off.” To an extent, that could be effective, but the industry can’t lie or make up information, they can’t pull off public stunts in order to gain attention, and putting a target on their back won’t help.

Environmental groups attempt to put a target on industry’s back, that’s how they get media attention, and ultimately broadcast their message to a larger audience. They can lie, cheat and do whatever they can to gain this kind of coverage.

It’s a different game; they play by different rules, and quite frankly, the opposition makes their own and don’t always follow them.

When it comes to mainstream media coverage, it’s also a difficult area for industry. Among the biggest stories regarding the industry, are those where they’re usually shown through a negative lens. Environmental disasters, massive corporate layoffs, and anti-oil and gas protests are some examples. The media is going to show what’s popular, and as long as people will tune in, it’s not going to change.

The good news, the successes, and the positive impact of the industry is rarely seen on mainstream media. Media thrives on the “David taking down Goliath” sequence when organizations attack large corporations, and the “us versus the world” attitude that many of the ENGO’s use. The same could be said for engaging and negotiating with Aboriginal communities.

In an article for the Daily Oil Bulletin written by James Mahony on April 21st, he summed up the coverage of these negotiations:
The belief that Canada's First Nations usually prevail in this country's courts, often at the expense of government and industry, is widespread but mistaken, according to a lawyer in aboriginal law.
“What you often hear said is that government and industry always lose, and First Nations always win,’ said Keith Bergner, a partner at law firm Lawson Lundell, LP. “But the truth is more nuanced than the media might lead you to believe.”
Media is an inconsistent variable that doesn’t offer much opportunity for control within the communications battle between industry and the opposition. What’s popular within the public body will always come first when the media is calling. What’s popular can somewhat be controlled, or affected, by either industry or the opposition, but as of now, the industry isn’t close to making that popularity a positive angle for itself.

As explained above in the DOB article, this causes reality to be skewed, often in favour of the opposition. Later in the article, Mahony continues the same thought:
By and large, he said, the court decisions that are getting the most airplay in Canada are those, where government “takes a hit” and a First Nation litigant is successful. Yet, the decisions getting much less coverage by media across the country are those in which a First Nation loses and the government prevails.
This poses an interesting problem for industry, and reversing the trend will be difficult. It starts by changing people’s mindsets, and that only begins when you start to communicate on a personal level like CAPP and some companies have started to do. However, the process of reversing tactics won’t happen quickly.

How does industry work around this disadvantage?

The aforementioned shift in communications is obviously a good start, but the industry as a whole, needs to embrace this shift. For far too long, oil and gas employees have been told to stay off social media, stay out of trouble, and keep quiet. This needs to change, and needs to be a wholesale change.

The internet gives the ability to publish anything at any time, all the time, on a number of different platforms. What the industry needs to collectively do, is use this to their advantage and support the good the good news stories, criticize the negative mistruths, and spread positive messages about the industry. 

Of course, this must be done in a smart and responsible manner. Staying silent has hurt the industry.

An example of the type of communication and online presence that needs to be adopted by the entire industry can be seen in Cody Battershill. He’s become a self-made oil sands advocate, garnering nearly 12,000 Twitter followers while promoting the industry, spreading energy facts, and challenging environmental activists. 

He’s creating an educated conversation and his work with organizations such as Canada Action, and Oil Sands Action have created a movement within in industry; however, Battershill sits outside the industry, and the hope is that his work can lead to change within it, but that’s hardly a guarantee.

A scenario within seismic that’s playing out right now that acts as a good example of the problems previously mentioned, is what’s going on in Clyde River.

By doing a very quick online and social media search, I found that there’s next to nothing in terms of support for the National Energy Board’s (NEB) decision to approve the land for marine seismic activity.

Almost everything, including both news articles and social media posts, is in favour of the federal government reversing the decision. When it’s suggested that industry is losing the battle, this is a terrific example of that.

The news articles, as explained previously, are for the most part an uncontrollable variable in this scenario, but the fact that there was no support in the massive online world is alarming. For anyone curious about the case, the only thing they’ll find is photos of protests, the town’s mayor fighting for the reversal of the decision, and environmental parties doing the same.

Clearly, for the original decision to be approved, there has to be substantial evidence, or some sort of scientific claim that would suggest that marine life won’t be greatly affected by the seismic activity. A CBC reporter who live tweeted the hearing on Monday, and one his tweets read that the Petroleum Geo-Services (PGS) lawyer said it’s not for court to determine the soundness of the scientific reports used in the NEB decision. 

So, clearly, they used scientific based evidence in order to get the original decision in their favour, but where is all that information? Why isn’t anyone from industry putting that science in a public forum? The argument can be made that facts and evidence won’t win over supporters, but doing so in a manner that meets people on a personal or emotional level could have a huge impact.

At the very least, this information should be made accessible for the public. If not, it looks suspicious, as if the industry is hiding something, or as if they’re withholding information for self-serving reasons.

Furthermore, in an article for CBC, a PGS spokesperson was interviewed and explained the effect on animals in the area:
In an email interview with CBC News, PGS spokesman Bard Stenberg said the company avoids sensitive feeding and breeding areas, and that professionally trained observers onboard the ships look for signs of animals in the area and will order a temporary stop to the testing if they spot anything. Stenberg said the industry has done seismic testing for 40 years, and in that time has demonstrated it is safe. The company says there is no scientific evidence that seismic testing is harmful to marine mammals.
While it’s good that this information is accessible, it’s coming from a spokesperson. Most people have the ability to read right through a public relations report. This is what CAPP is trying to avoid with their new campaign approach, and trying to make it humanized. The statement from this spokesperson is hardly that.

This is also a good example for what happens in the mainstream media. The original decision to approve the land for marine seismic has a chance to be overturned, and the media jumped all over it.

As a whole, this situation shows how industry is losing. Their communication approach is dehumanized, advertised, and behind the scenes. No one will want to stand up for industry if this type of communication continues from companies. It’s an uphill battle. Industry needs to help itself before supporters in the public will come out to help.

In an article from EnergyNow on April 29th, Canada’s resource minister, Greg Rickford, addressed this exact issue. Comments were made in October during a closed door meeting, including 40 to 50 oil executives in attendance. Excerpts from the article are below.
Canada’s resource minister is privately urging oil and gas executives to get outside the board room and pitch projects to the public, boost spending on environmental research and work more closely with aboriginal groups to win the public relations battle over energy. 
Greg Rickford spoke to a closed-door meeting of about 40 to 50 oil and gas executives in October. In the private address, Rickford congratulated industry on its achievements and touted his government’s record, as he regularly does in public speeches, according to the prepared remarks. He then called for industry to do more.
“You are fighting an uphill battle for public confidence” and “our messages are not resonating,” Rickford told the annual strategy session of the Canadian Association of Petroleum Producers, the industry’s top lobby group. 
“Enhance and expand your outreach. Communicate more effectively and clearly to Canadians with solid facts and evidence,” Rickford said, according to the documents. “Bottom line? We have to organize ourselves for success. And we have to do it together. Together. We can no longer look to others to do it for us.”
Rickford’s recommendations and remarks came back in October, and there now seems to be some action that are parallel to what he said. CAPP’s previously mentioned engagement tactics are an example, their Energy Citizens (energycitizens.ca) movement is gaining steam, and they plan to continue rolling out new tactics throughout the summer.

It’s a good start from industry, but it will be interesting to see if it continues, or if it’s all just a bunch of talk. Action needs to be taken, and while industry is behind the eight ball and fighting an uphill battle, there needs to be a collaborative effort to address the issue.