Notley and cabinet set legal wheels in motion to begin cutting oil production

Click to play video: 'Industry responds to government-imposed oil production cap'
Industry responds to government-imposed oil production cap
For the first time in a generation, the Alberta government will impose a cap on the amount of oil that industry is allowed to produce. As Tom Vernon explains, the move is not without its critics – Dec 3, 2018

Alberta Premier Rachel Notley and her cabinet have put the legal wheels in motion to begin cutting oil production, while calling on the federal government to step up.

“We don’t actually need Ottawa’s sympathy. We need Ottawa’s full attention,” Notley said prior to a cabinet meeting Monday morning.

The meeting was called to hash out legal directives to give the Alberta Energy Regulator the power to direct oil producers to cut production by 8.7 per cent starting Jan. 1.

WATCH: Global’s Scott Fee explains what Alberta’s oil curtailment means and why it’s needed.

Click to play video: 'What does Alberta’s oil curtailment mean?'
What does Alberta’s oil curtailment mean?

READ MORE: Alberta orders 8.7 per cent oil production cut to help deal with low prices

Notley said it will be a short-term solution designed to be monitored and adjusted monthly as necessary. It ends on Dec. 31, 2019.

Story continues below advertisement

“We will continue to work with industry to make sure that this curtailment is done in a way that is most effective, and that is responsible, and ensures that we don’t curtail one extra drop more than we need to,” said Notley.

The market price for Alberta oil rebounded Monday, but the discount Canadian producers have to stomach compared with the price their U.S. counterparts get is still north of $30 a barrel.

READ MORE: Shares in Cenovus, CNRL soar on news of Alberta crude production cuts

Watch below: Premier Rachel Notley has given orders to direct oil producers to begin backing off on oil production by 8.7 per cent in the new year. The move has the support of former Alberta energy minister Ron Liepert. The now MP for Calgary Signal Hill joins Gord Steinke from Ottawa to explain why he the thinks the mandatory production cut will help Alberta.

Click to play video: 'Former Alberta energy minister weighs in on oil production cut'
Former Alberta energy minister weighs in on oil production cut

The glut in reserves driving down prices needs to be addressed before producers begin taking more drastic steps such as slashing capital projects or laying off workers, Notley said.

Story continues below advertisement

Alberta Energy Minister Marg McCuaig-Boyd said they’ve also talked to Saskatchewan about the cuts and are working together to resolve the price quandary.

“This is a national priority, so the more we can get on board the better,” said McCuaig-Boyd.

“They’re in the same boat we are. They’re seeing the differential hurting their prices. It’s about jobs there. They’re not as big a player as us, but they’re still a player.”

Saskatchewan Premier Scott Moe said in a statement that the province isn’t considering following Alberta’s example.

Saskatchewan’s industry is conventional oil, not oilsands production, Moe said. A mandated cut would have little impact on price, but would prompt job losses and a decline in economic activity, he said.

“That said, we understand the actions being taken in Alberta and will be working with our industry partners to ensure Saskatchewan is not undermining these efforts,” said Moe.

Story continues below advertisement

Alberta’s price cut is rare but not unprecedented — in 1980, Tory premier Peter Lougheed forced oil production cuts to protest then-prime minister Pierre Trudeau and his Liberal government’s national energy program.

Notley said a lack of pipeline capacity is a big part of the problem.

READ MORE: Who are the winners and losers from the Alberta oil production cut?

She announced last week that her government will purchase rail cars to get more oil moving while the province waits for the Enbridge Line 3 and the Trans Mountain expansion to the B.C. coast to come on line.

Notley said Prime Minister Justin Trudeau’s government must do its part by rolling back proposed legislation that she says will make it much harder for energy megaprojects to be approved. She said Ottawa must also revisit its proposed tanker ban on the northern B.C. coast and help Alberta with its rail purchase plan.

READ MORE: Rachel Notley says Alberta is ‘essentially giving oil away for free’ in Toronto speech

Federal Natural Resources Minister Amarjeet Sohi said Monday he is asking the National Energy Board to make sure Canada’s oil pipelines are being used as efficiently as possible. Sohi said he shares Alberta’s frustration about the oil-price crisis and has asked the NEB to report as soon as possible.

Story continues below advertisement

He said the status quo on Canadian oil shipping cannot continue, but defended his government’s record on pipelines and the oil industry, noting the recent $4.5-billion purchase of the Trans Mountain pipeline in a bid to get it expanded despite political controversy.

READ MORE: Maximize existing pipelines’ efficiency to help with oil glut, federal minister says

The Trans Mountain pipeline expansion, which would triple capacity to move oil to the west coast, was approved two years ago, but is now in legal limbo as Ottawa revisits the impacts on First Nations and B.C.’s marine environment.

The federal government has not yet decided whether it will contribute anything toward Alberta’s purchase of new rail cars so that two more trains a day can transport crude from Alberta to refineries in Canada and the United States.

WATCH: The politics of Alberta’s oil production reduction

Click to play video: 'The politics of Alberta’s oil production reduction'
The politics of Alberta’s oil production reduction

Federal Conservative Leader Andrew Scheer said Alberta’s dilemma is a direct result of the Trudeau government’s failure to get pipelines built while cancelling ones like Northern Gateway.

Story continues below advertisement

“I believe what we’re seeing is a systematic strangulation of our energy sector by this Liberal government,” Scheer said in Winnipeg.

— With files from Mia Rabson in Ottawa and Steve Lambert in Winnipeg

Sponsored content