Oilfield fears job loss as province moves ahead with new curtailment plan

Possible layoffs during curtailment plan An oil and gas company claims the province’s oil production cuts will impact their workers. CTV Edmonton’s Bill Fortier reports.

An Alberta oil and gas company is warning of major layoffs if the provincial government goes ahead with a revised curtailment plan.

In a letter obtained by CTV News, Canadian Natural Resources Limited told suppliers it will have to stop operation of its ECHO pipeline, east of Edmonton, if Alberta does not reconsider February changes to the production cap.

“The revised methodology is flawed and clearly discriminatory to Canadian Natural,” read the CNRL statement.

“The disproportionate February 2019 curtailment numbers will hurt jobs, specifically in the Bonnyville/Elk Point/Lloydminster area.”

Alberta announced in December it would cut oil production by 325,000 barrels per day starting January, which was the difference between its production target and Q1 2019 forecast production of 3.89 million barrels per day. The mandated cuts were based on each company’s average production level over six months.

However, a recent amendment of the curtailment order changes the formula to use a company’s highest month of production over a year-long period beginning Nov. 2017.

CNRL said it supported the original curtailment plan, but is “extremely concerned” with the revised formula.

According to Canadian Natural, it is “burdened with 35 per cent of the curtailment total target volume” while only producing 24 per cent of the product being capped.

“As a result, Canadian Natural is taking 46% more curtailment than its share of production.”

Additionally, the company said it cut production in 2018 in response to the widening price differential between Western Canadian Select and West Texas Crude, and Alberta’s backlog of product.

Further curtailment would be unsustainable, the company said.

A Bonnyville-based trucking and repairs company estimates the area could see job losses number in the thousands if CNRL closes off ECHO pipeline. CNRL accounts for 95 per cent of Jacknife Oilfield Services’ business.

“We’re all really concerned here right now,” said its general manager, Kurt Muller.

“Those people, even if they were to shut down for a month, they wouldn't be able to make their truck payments, they wouldn't be able to make their house payments,” Muller said.

“The effect on everyone would be drastic.”

At the suggestion a new production cap will endanger employment, municipal leaders have teamed up in an appeal to the provincial government.

“We want the Alberta government and Energy Minister Margaret McCuaig-Boyd to revisit the revisions based on the economic impact this will have on our communities, and to ensure the curtailment is applied equitably across the industry,” Bonnyville Reeve Greg Sawchuck said in a statement to the municipality district.

“If curtailment is not properly implemented it threatens to be another economic blow in a region already embattled by a prolonged downturn,” wrote Cold Lake Mayor Craig Copeland.

So far, the provincial government has remained steadfast on the amendment being a fair strategy.

“We disagree with (CNRL’s) characterization and it's disappointing to see them threatening suppliers with job losses when they're being treated the same as other producers,” spokesperson Michael McKinnon told CTV News.

“The company will need to be accountable for their own regional business decisions.”

The government said the amendment followed discussions from the Alberta Energy Regulator and unintended consequences of limiting production.

It acknowledged few companies will produce at its highest level every month, but said that if all did, Alberta’s total production would be higher than what normally occurs.

McKinnon also suggested companies are using different production forecasts than the government.

“We will never achieve full support for this policy but that doesn’t change what we need to accomplish,” he said.

The United Conservative Party has asked the New Democratic Party to explain the new formula.

“Our support for curtailment as a temporary measure was never meant as a blank cheque for the government,” UCP MLAS Dave Hanson and Scott Cyr said in a statement.

Neither CNRL nor McCuaig-Boyd provided an interview to CTV News.

With files from Bill Fortier