Tuesday, June 19, 2018

Canadian indigenous groups and others purchase Hudson's Bay railway

A tentative deal has been reached to bring both the port of Churchill and the rail line from the port on Hudson's Bay south to the Pas back under Canadian ownership after the US company Omnitrax refused to repair flooded and damaged tracks.

Indigenous groups and others involved in the deal
The Canadian federal government announced that a number of First Nations many of whom depend on the rail line and also groups representing northern communities, One North and Missinippi LP, have joined up with Fairfax Financial Holdings to purchase the port and railway from Omnitrax. Fairfax, an investment company based in Toronto had announced back in November 2017 their intent to try along with others to purchase the railroad There are 30 First Nations and 11 communities in northern Manitoba as well as others participating in the project.
Specifics of the deal have such as financing, and a timeline have not been announced.
Omnitrax owner Pat Broe and Fairfax president Paul Rivett negotiated the agreement but a number of legal issues need to be completed before the deal is finalized.
Churchill Mayor Mike Spence calls the agreement historic
Spence said: "This is an historic partnership involving Indigenous and northern communities with industry leaders that now positions the Port of Churchill as an Arctic gateway for future prosperity...Priority No. 1 will be rail line repairs in the very near future and to finalize the acquisition." Spence is also co-chair of One North. Spence has been lobbying to purchase the port and rail system from Omnitrax since the US company began cutting service to his community almost two years ago.
Jim Carr Manitoba Natural Resources Minister said: "The people of northern Manitoba have long understood the value of the rail line. This agreement in principle allows those most affected to have a direct stake in the future and long-term interests of their communities."
Christian Sinclair, Chief of "Bold investments into much needed infrastructure will create long-term socioeconomic growth for the North. We see immediate opportunities to support the success and growth of the business, creating opportunities for OCN and for all of our partners in northern Manitoba."
Lack of a rail line isolates Churchill
The lack of a rail line has created great hardships for the eight to nine hundred inhabitants of Churchill. Omnitrax shut down both the port and major railroad operations in August of 2016. It continued to bring goods and passengers until the damaging floods in May of 2017. The company has not repaired the line and insists it has not the money to repair it.
The only way out of the town is by air which is very expensive. A return flight to the Manitoba capital city Winnipeg is about $1,200. The town attracts some tourists in winter to see polar bears which are common in the area- as shown in the appended video- and also to see fantastic displays of northern lights. However, tourist numbers have dwindled drastically since the rail link to the south has been closed. There are no roads into the town connecting them to the south. The costs of basic foodstuffs has also skyrocketed. Many are leaving the town.
Omnitrax taken to court by federal government
After Omnitrax refused to repair the tracks last year, the Canadian government took Omnitrax to court. Omnitrax says it simply cannot pay up to $60 million to repair the line. However, a consultant puts the cost at more like $43.5 million. The federal government has offered subsidies to northern residents to help with rising costs to those affected by the rail closure.
At least now, the railway and port will be owned by those in communities served by the railway and are interested in seeing that it does not shut down as it did before because it was no longer profitable for a large US corporation Omnitrax.
Previously published in Digital Journal

Sunday, May 20, 2018

Canada's revenue from oil and gas industry in decline

A new comprehensive report on Canada's energy sector has been released. The report claims that Canada's remaining fossil fuels are being sold off at low prices and with declining returns to federal and provincial governments.
The full report or a summary can be downloaded here.
Revenues from Canadian oil and gas production are declining
Three decades ago, many Canadian governments earned substantial income from the country's oil and gas production mostly through royalties or taxes. This is no longer the case the report claims.
Just since 2000 revenue from hydrocarbon production has plummeted 63 percent. Revenue from corporate taxes on drilling and refining activity has declined by more than half as well.
The report, Canada's Energy Outlook
The report is researched and written by David Hughes, an earth scientist and one of Canada's foremost energy experts. His report takes a hard look at Canadian energy production, emissions, low carbon alternatives, and the decline of revenues over time from our energy resource-based industries. The data used comes from a wide range of resources and data bases such as that of Natural Resources Canada, Drillininfo, BP Statistical Review of World Energy and also provincial budgets.
The lucrative energy industry is putting less and less money into the governments coffers even though it is claimed that the energy company profits are paying for such items as better schools and hospitals. The overall picture is one of dramatic and continuing revenue shrinkage.
Many sources show that revenue to the government from fossil fuels actually peaked in 2008 along with a spike in the price of gas and oil but since then revenues have been in decline.
As mentioned, just since 2,000 royalty revenue has declined from oil and gas production by 63 percent even though national oil production grew by 75 percent.Hughes notes: “Canada’s non-renewable energy resources are clearly being sold off for ever-decreasing benefit."
Alberta as a case study
The province of Alberta is Canada's largest extractor of oil. Oil and gas production in Alberta has doubled since 1980, primarily due to expansion of production in the Oil Sands. Yet, revenue from royalties has declined from 80 percent of provincial revenues in 1979 to just an estimated 3.3 percent in 2016 according to Hughes, a huge decline.
There was a peak in Alberta's revenue from oil and gas of $14 billion in 1979. The next record was a spike to $17 billion in 2005 much of this from natural gas. Ever since that time there has been a steep decline. The government has a policy of favoring an increase in production rather than attempting to maximize value produced for the government. The report said that in 2016 the estimated revenue from oil and gas extraction was only $1.4 billion — down fully 90 percent from the 2005 levels.
The report also claims that data compiled by the Canadian Association of Petroleum producers shows that royalty revenues paid to oil exporting provinces, Alberta, Saskatchewan and Newfoundland, declined from 2000 to 2015 from $11.1 billion to $4.1 billion. This was a period during which the price of oil had climbed to highs of more than a hundred dollars a barrel.
Corporate tax payments from oil and gas extraction also declined
Between 1997 and 2015 tax revenue from oil and gas extraction, made up 30 percent of total government revenues. But that amount has been declining. Corporate income tax peaked back in 2006 and has declined 51 percent since that time. Although there has been a 45 percent growth in oil production since 2006. The report notes that the oft-cited claim that growing oil and gas production is vital to Canada's economic being has become less true over the past decade.
British Columbia is also experiencing declining royalties
Gas production has doubled in BC since 2005 but royalty and other revenue from non-renewable resource has declined by 84 percent and constituted only one per cent of government revenue last year.
The Tyee has reported that between 2009 and 2014 the BC government subsidized oil and gas companies fracking shale basins by extending them more than $1 billion in tax credits.
The energy industry is mature and shrinking
The industry is now becoming dependent upon extracting resources of lower quality and which require intensive use of energy to extract and often contribute to greenhouse gases.
The percent of the overall workforce in the oil and gas industry is only 2.23 percent and often the jobs are temporary construction work, such as that in the Oil Sands. Even in Alberta there are fewer than seven percent of the workforce employed in fossil fuel extraction and distribution.
In 1997, the percentage of Canada's GDP contributed by the energy industry was 9.2 percent, whereas in 2015 it was only 7.4 percent.
The report claims that politicians do not understand that oil and gas producers exploit the most high grade resources first and leave "the lower-quality, higher emissions, and higher environmental-impact resources for the last."
We do not know how long it will take to transfer to renewable energy resources. Currently, renewable sources make up only three percent of the energy supply. Hughes argue that we should not be selling off our dwindling oil and gas resources at low prices as they remain a valuable backstop for us. Hughes claims: “Selling off the best of Canada’s remaining non-renewable resources at low prices, with minimal and declining returns to the public, compromises future energy security.”
Previously published in Digital Journal