Parasitic Capitalism (Oilpatch Edition)

I have little love for the oil & gas industry in Alberta.  Having grown up here, worked in and adjacent to the industry for years, I have become increasingly disillusioned, and then angry with both the industry and the government.  At this point in our history (2025), I'm pretty much at the point of saying that not only has the industry captured the UCP government, but it has become a parasite on the Alberta and Canadian economies.  

"Oh, but what about the billions it brings in?" proponents say.  Those billions mean nothing if they leave the people holding the bag with billions more in costs after projects are shut down.  We have a massive problem with oil companies leaving their industrial wastelands lying about and simply doing nothing to clean up after they are done with production on a site. 

Further, they refuse to pay municipal taxes to municipalities because they know they can ignore it and the government will do nothing, and they can tie any legal actions up in courts until the municipality runs out of money to pursue the matter with.  Landowners are supposed to be paid money for access to the surface area where they put wells down, and companies ignore those obligations too - often for the same reasons. 

All of this makes me quite furious - both with the government and with industry - however, my ire is focused much more on industry because they are the ones making profits off the resources, and ignoring their responsibilities beyond those profits. 

The International Game Of Chicken

The current low oil prices have been characterized as a high stakes game of "chicken" between OPEC countries and "non-conventional" producing countries like Canada and more recently the US.

I don't pretend to know the state of the books for OPEC's countries, but I imagine they have a significant chunk of change set aside, and won't find that prolonged low prices won't be a particular impediment.

The extraction techniques for both Alberta's Tar Sands, and the Shale fields in the US are much more expensive to run.  Back in August of this past year, the rumblings of "cutting costs" were already starting to roll around the oil patch in Calgary.

I predict that the downturn we will experience in Alberta will be at least as severe, if not more so, than we saw in 1980.  If prices stay low for more than a couple of months, the oil patch will start axing investment and people at a ferocious rate.  We're just coming through to the end of the first full quarter of these low prices, and probably around the end of the next quarter we will start to see things happen as companies start to try to keep themselves profitable.

There are already modest scale layoffs happening in downtown Calgary, and larger cuts are yet to come.  Companies like Talisman Energy have bought themselves a bit of time by selling off to new ownership - it will take a few months for the new owners to start intervening.  But other companies are already making major changes to their capital investment plans, with cuts being announced almost daily.  If you don't think this is going to be a messy time in Alberta, just wait and watch - it's not going to be pretty.

Will Fracking Be The Catalyst?

In the last couple of weeks, there has been a lot in the news regarding Canada's First Nations.  The UN Special Rapporteur finished his tour and quite correctly stated that Canada is facing a crisis with respect to its relations with its First Nations.

Harper threw a couple of ambiguous references to Aboriginal peoples in the Speech From The Throne, but it seems unlikely that any of those represent meaningful change as the aboriginal peoples would like to see.

Ironically, the thing that might just serve as a catalyst for a meaningful change for Canada's First Nations in the national dialogue is resource exploitation.  Whether that is Fracking, Oilsands, or Transportation of those resources, the public is not entirely in love with these practices.  Industry hasn't been very successful in gaining public support for their efforts.  Outside of Alberta (which is a political anomaly in Canada), there seems to be a great deal of discomfort with these practices, and events like today's rail explosion will only serve to make more Canadians uncomfortable with the implications of how these resources are being exploited.

While the events this week in New Brunswick are profoundly troubling on a number of levels, the protest itself is aimed at a target which I think a good many Canadians will be able to get behind and support - namely putting the brakes on exploiting resources using techniques which are coming increasingly into question.  What exactly happened between the RCMP and the protestors to provoke the heavy response from the RCMP and the escalation into violence and property destruction is not clear to me, and the accounts that I have been able to find have all suffered from a distinct feeling of being incomplete.  

That said, Canada's First Nations people are at a crossroads with respect to the national dialogue.  If they play their hand carefully, First Nations will be able to use this to initiate a much broader discussion with the engagement of Canadians as a whole.  Canadians are becoming more and more wary of the activities of large corporations and a government which is increasingly willing to bend to their will, and the combination of ongoing problems related to fracking activity, issues with the oil sands developments and the repeating problems with transportation of oil and bitumen creates a point of shared intersection where a conversation might be started.