Alright. Well then. Ahem. I guess last week’s blog was deemed by some to be a bit, shall we say, unsettling given the political conclusions, forecasts, predictions that I laid out. I think it’s fair to say that the audience this blog reaches is diverse and politically astute. Many were in agreement with the conclusions I made, many were not. Some were distressed to see it in writing, especially during summer vacation.

 

So if I upset anyone, I apologize. That wasn’t (entirely) my intent. It was more of a wake-up call.  A “folks, this is where we’re headed” moment. If you like it, great. If you don’t, here is your call to action. Don’t be complacent.

 

Speaking of complacency, I am going to continue my summer habit of chill shortened blogs by talking about something that many of you won’t care about in the least and avoiding the topic du jour which is the incredible disconnect between oil prices, micro and macro factors, Canadian producer profitability and stock prices. And I promise not to mention pipelines.

 

Rather this week, I am going to talk about something not really near and dear to my heart, but topical nonetheless, at least for my Calgary-based readers. That’s right folks, this week I am going to dip my toe into the dreaded swamp of “Arena Politics”! (cue dramatic music)

 

And warning – this is a stream of consciousness, straight up download from my brain. Not even proofread.

 

First, let’s set the stage for why this topical.

 

Last Friday, after months of protracted negotiation, a committee established by the City of Calgary to negotiate an arena deal, the Calgary Sports and Entertainment Corp (CSEC or the Flames) and the Calgary Stampede announced to council and the city at large that they had struck a deal to build a new arena. Oops, “Event Centre”.

 

The details are still coming out but the basics are as follows.

 

The $550 million project would be paid 50/50 by the City and the Flames. The City would own the event centre. The Flames would manage it and be responsible for maintenance. The City would receive a 2% cut of all ticket revenue. Stampede gets the parking revenue because all the parking is owned by it.

 

The new stadium will be in a blighted and run down area near the Saddledome called Victoria Park that the city is renaming “The Rivers” to make it sound nicer. This land is owned by the Stampede but the City proposes to swap ownership of the Saddle Dome land for it.

 

The Flames get two options to purchase land nearby for redevelopment.

 

The eventual development is expected to ultimately be a bustling area of residential, retail and festival space, all anchored by the new event centre.

 

Oh, and council was given a week to review and approve.

 

Wait, what’s that you say? That doesn’t seem very long, does it? In the middle of summer, no less!

 

While I agree that there isn’t a lot of time for public consultation, it’s actually not that complicated a deal. And the whole mandate of the committee was to negotiate a deal and bring it back to council for approval. So in a way, I’m sympathetic to the desire for more time, but in all reality they should have been prepared for this. Any amount of consultation/engagement isn’t going to change the deal – the terms have been negotiated. The decision is do you want to commit City capital to an event centre and, given that they struck a committee to negotiate that very thing, it should be very straightforward.

 

So, what do I think?

 

Well, I’m not an economist. I haven’t really studied the numbers. I know all the literature that says arena deals aren’t the economic boost that everyone says they are. I get all the feel good boosterism that underpins a major project like this.

 

Everyone does.

 

But I’m all done with stadium talk. Or event centre talk. Or arena talk.

 

Calgary likes hockey and loves the Flames. They are consistently one of the highest drawing teams in the league – even when they are doormats. Can the same be said for other teams playing in marginal markets with far superior facilities? No!

 

And let’s face it, the Saddledome is tired and old. It’s in a lousy, poorly accessed location with pretty much zero pre or post event retail activity. It’s behind a fence. It has marginal parking. And the beer smells funny. Large concert acts won’t come there. It’s owned by the City and we get absolutely zero return for an asset that is probably worth less than its demo costs.

 

We need a new stadium. Badly.

 

I know it’s easy to say billionaire owners should pay for their own playpen, but the reality is that a stadium on its own doesn’t actually make much economic sense given the large capital costs. And the benefit of an “event centre”, if you decide you want one, accrues in much larger fashion to the city than it does to the team.

 

Look, if the Flames really wanted to double down and make egregious amounts of money, why spend $275 million in a hockey palace when the sheep are going to go to the stinky old barn regardless? Do you ever consider how much we pay to have a subpar viewing experience?

 

It’s not actually about the money as much as people think. There’s lots of talk about luxury boxes being a driver for the Flames as a way to boost revenue. Maybe. But their current sales have got to be down I the current environment, so not sure how much they can hang their hats on this.

 

To me the decision for the city is – do we want a new stadium or not. Not will it make money. It won’t. Maybe the City could get another percent or two off ticket sales, maybe not, but what’s the trade off? Right now the City gets nothing.

 

The Flames owners are saying we will pay for half the building costs. You can own it. We will manage it for 35 years and we won’t move the team. Is this not a win for the City? Even if you don’t like hockey. Sure they could pay more, but that train has left the station and the last time I checked, in the great scheme of things, no other private entity is investing $275 million into a facility they won’t own and that is for the greater good of the community at large.

 

That’s real money. It’s the private sector stepping up for something that benefits the whole city directly, indirectly, whether you use it or not

 

Sure these owners are billionaires. But a few years ago they had way more. But they still support the team, pay the US dollar salaries as the Canuck buck craters to keep a competitive exciting team here and still want to contribute to the city. They made their fortunes here and have their roots here. They have scooped up the Stampeders, the Roughnecks and the Hitmen and have kept them all viable and well run franchises. They are doing it the right way and are willing to put up cash to enhance the product.

 

Finally, as Calgarians, don’t we actually want to have a win?

 

I’m tired of no.

 

I’m tired of all the negative feelings.

 

I’m tired of the City not having the guts to step up and instead being a navel gazing repository of negative nellies.

 

We’ve got big problems, sometimes a big solution can work.

 

Build it, don’t build it. I’m tired. I’ve been doing this discussion with clients and colleagues since 2005. Just make up your mind and move on.

 

And presuming the answer is what it is expected to be, ask the Flames to step up and help do something about McMahon. Maybe as part of a field house. Who knows, right? Would it hurt to ask?

Prices as at July 26, 2019

• Oil prices – WTF?
  • Storage posted a decrease week over week
  • Production was down
  • The rig count in the US was down and Canada was up
  • Prices fell then rallied. Makes perfect sense.
  • Natural gas storage was up and remains higher than this point last year

• WTI Crude: $56.16 ($55.90)
• Western Canada Select: $41.26 ($41.15)
• AECO Spot : $1.05 ($1,05)
• NYMEX Gas: $2.169 ($2.262)
• US/Canadian Dollar: $0.7605 ($0.7683)

 

Highlights

• As at July 19, 2019, US crude oil supplies were at 445.0 million barrels, a decrease of 10.9 million barrels from the previous week and 40.1 million barrels above last year.
  • The number of days oil supply in storage is 25.8 compared to 23.2 last year at this time.
  • Production was down for the week at 11.300 million barrels per day – impacted by GOM storms. Production last year at the same time was 11.000 million barrels per day.
  • Imports rose to 7.028 million barrels from 6.832 million barrels per day compared to 7.770 million barrels per day last year.
  • Exports from the US rose to 3.292 million barrels per day from 2.524 million barrels per day last week compared to 2.683 million barrels per day a year ago
  • Canadian exports to the US were 3.725 million barrels a day, up from 3.536
  • Refinery inputs fell during the during the week to 17.034 million barrels per day
• As at July 19, 2019, US natural gas in storage was 2.569 billion cubic feet (Bcf), which is about 6% lower than the 5-year average and about 13% higher than last year’s level, following an implied net injection of 36 Bcf during the report week
  • Overall U.S. natural gas consumption rose by 0% during the report week
  • Production for the week was up 1% week over week due to storms. Imports from Canada were down 4% from the week before. Exports to Mexico were down 1%
  • LNG exports totaled 37 Bcf
• As of July 26, 2019, the Canadian rig count was up 9 at 127 (AB – 73; BC – 11; SK – 38; MB – 3; Other – 2). Rig count for the same period last year was 194.
• US Onshore Oil rig count at July 26, 2019 is at 776, down 3 from the week prior.
  • Peak rig count was October 10, 2014 at 1,609
• Natural gas rigs drilling in the United States was down 5 at 169.
  • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
• Offshore rig count was down 2 to 23.
  • Offshore peak rig count at January 1, 2015 was 55

US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 67%/33%

 

Trump Watch: Mueller. Infatroon.

Kenney Watch (new!): Poorly researched anti-Trudeau tweet. Electricity sector upheaval.