Alberta’s Oil Industry Getting a Revamp from a 2.5 Years Slump
Alberta still has not recovered from the oil price 2.5 years ago but the provincial economy is forecast to get out of the recession this year but there are over 200,000 persons without jobs since December 2016. Out of this number, over 14,000 of them have been out of the job market for more than a year.
As much as the provincial government wants to bring back jobs, it has to take care of its current problems of abandoned and inactive oil and gas wells. There are tens of thousands of them!
The Orphan Well Fund that is responsible for reclaiming wells in cases of bankruptcy went from having 162 in its inventory to 1,400 since 2014.
How to get folks back to working?
According to Investment banker Ian Thomson with the PSAC (Petroleum Services Association of Canada) are thinking about pitching an idea about how to get folks back to work to the federal government among other things pertaining to the oil industry.
One of these so-called “other things” is the inclusion of an SEEI—Sustainable Environmental Energy Investment. This investment fund will be for smaller gas and oil companies.
According to this plan, for every dollar invested in one of these companies, 47.5cents will be spent on drilling and exploration while the balance will be used to clean up old wells.
Why do they need the government’s help for this to work?
Simple. This fund is what is called a “flow through fund”. Individual investors will be able to write off the entire investment against their own taxes. This means that the provincial and federal governments will lose tax revenue.
This kind of funds are not unusual; they have been used to promote development in the country but of course, it is not conducive to the Canadian government because of the loss of tax revenue. $37.8M will be lost in tax revenue from the estimated $450M that is required.
Last year, the President of the PSAC had a different proposal. Mr. Mark Salkeld “asked” for $500M in infrastructure in order to take care of the old gas and oil wells. This would have bring back the oil service workers.
The government wasn’t having any of this; proposal, denied!
Getting rejected by his government was not the worst thing that happened to Mr. Salkeld; he also received hate mail from across the globe.
Why?
The abandoned wells are a sensitive topic in the gas and oil industry simply because it is the norm to drill new wells which will rake in the cash rather than maintenance old wells. However, President Salkeld has won over the heart of CEO Phil Hodge of Pine Cliff Energy. Mr. Hodge says that he will have to find what it entails economically but he is interested.
In conclusion
I hope that the government finally understands that this is about bringing people back to work so they can take care of their families and themselves.
