CNRL Warns Curtailment Will Cause Oil Worker Layoffs In Northeast Alberta

Oil workers in northeast Alberta are bracing for layoffs after a Calgary-based energy company warned in a letter to suppliers that the province’s curtailment policy will hurt jobs.

“Canadian Natural will be required to curtail a third more production in February compared to January, and the reduced production will unnecessarily impact jobs significantly in the heavy oil region,” said Canadian Natural Resources Limited (CNRL) in a letter on Jan. 22.

The company will shut-in its ECHO pipeline, which delivers heavy crude to the CNRL blending facility in Hardisty. CNRL signalled that could lead to job cuts in Bonnyville, Elk Point and Lloydminster. In its letter, CNRL did not specify how many jobs were at risk.

But the province argues the company is mischaracterizing the situation and fought hard for the policy that aimed to reduce the punishing price differential.

In December, Premier Rachel Notley announced that Alberta would cut oil production by 8.7 per cent starting January. It amounts to a cap of 3.56 million barrels per day (bpd) of raw crude and bitumen, and a targeted reduction of 325,000 bpd. There were 28 companies affected.

“CNRL has benefited substantially from this temporary policy,” said Ministry of Energy spokesman Mike McKinnon in a statement Monday, adding the company is threatening its suppliers. “CNRL is being treated fairly and equitably under this policy, which they support, and the company will need to be accountable for their own regional business decisions.”

A CNRL spokesperson said in an email Monday that the company wouldn’t comment on the issue.

“From what we understand, this is a done deal if nothing changes by Friday,” said Bonnyville Reeve Greg Sawchuk, adding that he estimated 500 jobs could be lost.

“I can’t even guess how bad it would be,” he said in an interview Monday. “There are already a ton of houses on the market up here. People are seeing their assessments drop and selling for well below what they bought them for.

“It’s almost like it’s the last straw for a lot of folks.”

In its letter, CNRL said it has a number of serious concerns with the curtailment formula used by the province.

In December, the province amended the formula to base cuts on each company’s single best production month in the last year, instead of averaging out the best six months.

Provincial officials made that decision with advice from the Alberta Energy Regulator. The new formula, rolling out in February, aimed to take into account the ramp up of production in the fall.

CNRL argued the revision burdened the company with 35 per cent of the curtailment target volume when its production accounts for less than 24 per cent overall.

“Canadian Natural’s revised curtailment volume is clearly unreasonable and discriminatory as a disproportionate share of the province-wide volume,” said the letter.

The UCP slammed the formula Monday.

In November, UCP Leader Jason Kenney called for production cuts and supported Notley’s decision to bring in curtailment.

“Our support for curtailment as a temporary measure was never meant as a blank cheque for the government … we are calling on the NDP government to explain this formula change decision,” said a statement from Lac La Biche-St. Paul-Two Hills UCP MLA Dave Hanson and Bonnyville-Cold Lake UCP MLA Scott Cyr.

“United Conservatives called for and support temporary curtailment as a measure that prevented wider job losses from the low price of oil at the end of 2018,” the statement added.

Source: Edmonton Journal