Note – as I write this, Canada’s forest fire season from hell continues to rage unabated. We at Stormont have clients, friends and family all affected by the current evacuation and emergency orders in Yellowknife NWT and the Kelowna area. Please consider a donation to the Red Cross to assist those in need across the country. Links for 2 options are below – one directed at NWT efforts, the other a collective “Canada” option. I did both. Together we can make a difference.

RED CROSS CANADA – NWT

RED CROSS CANADA – WILDFIRE FUND

Good afternoon all – I hope no one has missed me too much? It feels like years since I’ve written a post and I am admittedly a bit shaky and out of practice. Which is odd, right? I mean I used to just bash these things out in one sitting – thousands upon thousands of words tumbling along the craziest of tangents, chasing ephemeral themes and generally filling space with loosely connected and occasionally thematically consistent thoughts.

But you take a few weeks off, move to a biweekly blog and suddenly that all dries up and you have to cast around desperately for even the slightest of inspirations to get the so-called “juices flowing”. Or whatever term you prefer to use. Of course this doesn’t really let me off the hook, because I still have to write a blog this week since I missed last week.

And I really am out of time to actually sit down and write, mainly because we are incredibly busy. We closed a deal last week and are working on two more that are occupying a LOT of my time. Plus summer vacation, travel etc. I do have to say I am looking forward to my “deal review and summary” blog. Bragging about Stormont successes is something I will never tire of.

Fortunately, the day was saved for me and I don’t actually have to write much since I recently received an email from a mysterious and anonymous benefactor, an confidential copy of an internal government document discussing the findings and recommendations of the “Alberta Energy Future” panel.

That’s right, a review of the mysterious document that Danielle Smith thinks is so aspirational and potentially earth and economy shattering that she has decided NOT to share it with anyone outside of her inner circle lest the citizens of the province and the investment community start to get ideals about, you know, what direction the province is going, what policy might look like to support this and the like.

I had hoped to just post the PDF that I have, but I think there is a risk of doxing the source and I would hate to do that. Instead, I am going to cut and paste some of the text into this blog, along with some of the annotations, requested edits and commentary from the government. It’s a pretty intense document, so I’m just going to take my favourite parts in a kind of top 10.

Original text is in regular font. Government commentary is in italic. Enjoy!

Memorandum!

From:    The Desk of Premiere Danielle Smith, Empress of the North and Duchess of the Prairie

To:          The Inner Circle

Re:         The Alberta Panel Report on Energy

OK folks, here it is. The famous report we commissioned. It’s got some good stuff I guess but there are some whoppers in here that I have no idea where they came from. What in the world is with all the nonsense about renewables and energy transition and working with the Federal government? I suppose this is what I get when I appoint “independent” panelists, but you’d think at least Yeager would toe the company line on this one. I can’t even tell which parts he wrote (not that I ever read anything he gave me, I just told him I did!). And that Hal guy – what makes him think he knows more about pipelines than me! Honestly. Don’t these people know that I have people I am accountable to? And I’m not talking about just the electorate. Anyway! There is zero chance I am going to release this report to the public. It makes too much sense and I need to reserve the right to do whatever I want. That said, I’ve put in some proposed language changes and comments to the exec summary in case we ever want to release it or have the War Room leak it out.

DS Over and Out

• Can’t we just say we need to double down on Natural Gas? Sounds way more decisive. Alberta has an abundance of natural gas. You could say we are sitting on a veritable sea of gas (don’t light a match! Heh heh heh). So we should be doing everything in our power to utilize that bountiful resource to power our province and drive a natural gas future that includes replacing coal with natural gas electricity generation, expanding the value-added plastics industry and exporting our natural gas via LNG developments in BC to countries such as China that are coal-burning, emissions belching climate laggards and in return get some credit for our sweet, sweet, beneficial, and, dare I say it, perfect gas.

• In world where oil demand is set to increase substantially in the short term before gradually tapering off as the energy transition unfolds, we must do everything in our power to encourage responsible development of our conventional, unconventional and oilsands resources. This includes a proper cleanup regime, the highest regulatory standards, respect for indigenous stakeholders, shared economic prosperity, economic return to the taxpayers and citizens of this province and a commitment to net zero though innovation and technology around carbon capture, reducing and eliminating fugitive methane leaks and making ourselves the supplier of choice for both the United States and other markets. Phew! Talk about hot air and emissions! Here’s what I think. Oilsands investment should be encouraged and all projects will receive provincial approval.

• As we enter the Energy Transition, it is important to work collaboratively and positively with the Federal government, regardless of who is on power, to manage the transition and ensure that the province is well-positioned to survive and thrive. <<No, no, no, no, no. This is the biggest eye roll of the bunch – what nonsense – The Federal government is the enemy and annoying as F*** to boot with all this environment and climate change claptrap and the Sovereignty Act is the bestest idea ever! I got elected on a populist wave of anti-Trudeau mania – why I the world would I give that up? What’s in it for ME?>>

• We should encourage as much solar and renewable energy investment as possible through programs and incentives in order to meet our climate objectives and get the Federal government to give us credit for efforts to mitigate climate change and lower emissions. While grid stability is a legitimate concern, we have regulatory processes that allow us to manage approvals, much as we can do the same for end of life reclamation and clean-up, which should address the concerns of private landowners who are the front lines to these projects. Finally, some have expressed a concern about the blights on our landscape that these renewable projects create and the potential misallocation of land to highest and best use (i.e. farmland). We believe this can be addressed best via incentive, whereby private landowners of remote sites can be encouraged to use uneconomic or fallow ground for value-added projects like solar farms while productive land remains just that. In a province as large as Alberta, surely there are places where all this works. <<we need to scrap all of this. Solar farms are butt ugly and my neighbour says that windmills cause headaches and kill bats. Isn’t there a way we can chase away all this so-called “development”. I would like my idea of shutting down approvals of projects taken more seriously. Note to File: I guess I’m premier and I can just do this, right? Better check with legal>>

• All things being equal, we should develop a more effective way of managing end of life issues for energy development including tailings ponds, wellsite cleanup, pipeline and gathering system reclamations and orphan wells. This approach respects current and future generations of Albertans and should be a measured and defensible implementation of strict polluter pay rules that don’t allow any parties to shirk their environmental responsibilities. The projected cleanup costs are only going to increase and we owe it to our citizens to be firm. Any approach should avoid any perception of bias to or being in bed with the oil and gas industry – regulators should be above reproach. A stick and carrot approach should be used. Punishment and fines for laggards and some form of reward for any company that uses existing funds to address their ARO ahead of schedule. <<well this is just dumb. I thought the proposal was going to be cutting royalties if companies did what they were required to do anyway? That R-star thing that everyone wanted just a year ago. The oil companies are busy. We need to throw money at them to get their attention. You’d think a panel of “energy experts” would get that! More taxpayer money to the oil companies means more political donations to me and the party. Honestly.>>

• A diversified energy industry is and will always be an overriding goal <<how is this even a recommendation? I don’t know what this means. Does it mean we need to build another refinery? That would be cool. I guess. Or does it mean we need to buy the TransMountain Expansion from the federal government? What about hydrogen? Is that diversification? Can’t we just do oilsands and natural gas and collect our royalties? It’s worked for decades. Why rock the boat with “diversification”. This panel should never have been located next to a pot store.>>

• It is imperative that the province wean itself off coal production and use. The citizens of the province demand it and the energy transition makes it inevitable. Blah blah blah. I get it. Coal is out. Can we stick a fork in this already? No one wants development on the Eastern Slopes, even if most people can’t find them on a map.

• In order to maintain an air of impartiality the government should refrain from any overt or covert market interference or manipulation. This will restore investor confidence and reassure the public at large that government is in their corner as opposed to the pocket of the energy industry. <<Bwahahahahahahahahaha! Are these people new here? Good lord. Fine. We will shut down the war room. Their stuff is garbage anyway.>>

• Government should act as a steward of industry and not a direct participant. Governments should not be in the business of investing in pipelines or other infrastructure regardless if temptation. It is important to let market forces determine winners and losers. <<Sure, but if Keystone XL and/or Energy East ever get revived, we will be backing up the proverbial dump truck of Alberta Pension Plan cash to fund the proponents and get a piece of the action. This is what I promised all my oily campaign sponsors. What could possibly go wrong?>>.

• If at all possible, the Alberta government you should hire Stormont to develop, write and implement policy for you. It would be fun. <<This is a weird recommendation – I don’t know these guys from a hole in the wall. Are they TBA affiliated? Did they even vote for me? This feels like we’re being played. Please hire the Baker Law firm to investigate.>>

Prices as at August 18, 2023

• Oil prices are down a bit for the week on China, China, China.
• Storage posted a decrease week over week
• Production held pretty much flat
• WTI Crude: $80.94 ($83.05)
• Western Canada Select: $61.64 ($65.46)
• AECO Spot: $2.67
• NYMEX Gas: 2.644 ($2.800)
• US/Canadian Dollar: $0.738 ($0.744)

Highlights

• As at August 11, 2023, US crude oil supplies were at 439.7 million barrels, an decrease of 6.0 million barrels from the previous week and an increase of 14.7 million barrels above last year.
  • The number of days oil supply in storage is 26.5 compared to 26.2 last year at this time.
  • Production was down for the week at 12.700 million barrels per day. Production last year at the same time was 12.100 million barrels per day.
  • Imports rose to 7.158 million barrels from 6.682 million barrels per day compared to 6.132 million barrels per day last year.
  • Crude exports from the US rose to 4.599 million barrels per day from 2.360 million barrels per day last week compared to 5.000 million barrels per day a year ago
  • Canadian exports to the US were 3.505 million barrels a day
  • Refinery inputs rose during the during the week to 16.746 million barrels per day
• As at August 11, 2023, US natural gas in storage was 3,065 billion cubic feet (Bcf), which is 11% higher than the 5-year average and about 22% higher than last year’s level, following an implied net increase of 35 Bcf during the report week
  • Overall U.S. natural gas consumption rose by 0.3% for the week. Imports from Canada were up 1.8% from the week before. Exports to Mexico decreased 1.5% for the week.
  • LNG exports totaled 89 Bcf for the week.
• As of August 18, 2023, the Canadian rig count was down 1 at 189 (AB – 131; BC – 17; SK – 36; MB – 4; Other – 1). Rig count for the same period last year was 201.
• US Onshore Oil rig count at August 18, 2023 is at 520, down 5 from the week prior.
• Natural gas rigs drilling in the United States was down 6 at 117.
• Offshore rig count was down 1 at 16.
• US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 40%/60%

Bizarro Factoid of the Week

Taylor Swift’s Eras tour is expected to haul in about $2.5 billion US in gross revenue in 2023 and have an economic impact of about $5 billion. Put in context, on a revenue basis the show is the same size as Whitecap Resources, a Canadian intermediate and twice the size of Precision Drilling, Canada’s largest oilfield services company. If she were a country, she would rank in the mid 160’s of 213 on a GDP basis, just ahead of Fiji.