Oilsands Allies

Inside a growing trend toward industry collaboration in support of environmental technology and strategy

This article appears in the 2012 Heavy Oil and Oilsands Guidebook

By Peter McKenzie-Brown

Momentum is building in Canada’s heavy oil and oilsands sector towards a new reality where project owners are able to work together to achieve successes they could have alone either as quickly or as completely. Make no mistake, competition in the sector is fierce, but not in all areas of development—companies are finding that in many cases it makes more sense to collaborate than to fight.

“The idea has really caught fire,” says Greg Stringham, vice-president of oilsands and markets with the Canadian Association of Petroleum Producers (CAPP). “This is the first time [industry has] come together in such a collaborative manner.”

Canada’s petroleum industry has long been an alphabet soup of industry associations and other forms of joint ventures. But new developments such as the 2010 creation of both the Oil Sands Tailings Consortium (OSTC) and the Oil Sands Leadership Initiative (OSLI) may represent the beginning of an unstoppable trend.

Beyond the OSTC and OSLI, many technical organizations help contribute to industry innovation, including the Canadian Oil Sands Network for Research and Development (CONRAD) and Petroleum Technology Alliance Canada (PTAC). Indeed, OSLI members support both PTAC and CONRAD. But the newer groups are designed to have a wider scope and faster uptake.

Environmental consortia like OSLI and the OSTC are focused on the idea that the industry should share its resources in those technical areas in which everybody can benefit from shared innovations.

The OSTC includes all the major oilsands mining companies: Canadian Natural Resources Limited, Imperial Oil Limited, Shell Canada, Suncor Energy Inc., Syncrude Canada Ltd., Teck Resouces and Total E&P Canada Ltd. Stringham says that the group “Brings together all of the stakeholders that are involved in tailings through collaboration, breaks down the corporate barriers and enables companies to work together to find solutions” to a difficult environmental problem.

Similarly, OSLI is based on the assertion that the industry should only compete in areas where it makes economic sense to compete.

A collaborative network that includes ConocoPhillips Canada, Nexen Inc., Shell, Statoil Canada, Suncor and Total, OSLI has four main areas of focus: water management, technology breakthroughs, sustainable communities and land stewardship. The ultimate beneficiaries of the approach are local communities and the air, water and land affected by oilsands development and production.

One of the key elements of OSLI is that it is designed to reduce cycle times and paperwork. Companies can share research without first signing joint venture agreements, for example. Also, it reportedly honours each company’s intellectual property but honours rules about non-competitive behaviour.

The Public Relations Factor

It’s important to distinguish these new collaborative organizations from others—which are many—that exist. For example, the In Situ Oil Sands Alliance (IOSA) describes itself as having been formed in 2007 to address “Geopolitical, economic, ecological, infrastructure and social realities” facing in situ oilsands producers. Largely the responsibility rests on CAPP’s shoulders to manage oilsands communications.

By contrast, OSTC executive director Alan Fair says his organization and OSLI do very little in terms of communication with the public. “It is quite important to keep [technical] organizations separate from the ones that have communication as their focus. [Our] purpose is to raise the environmental bar for the industry.”

From his perspective at CAPP, Stringham recognizes the importance of both functions. “We understand how foundational environmental performance is. It isn’t only about perception. It’s also about the performance aspects of the development of the oilsands.”

For its part, in 2010 CAPP launched a program called Responsible Canadian Energy based on transparent communication of performance data from energy production operations across the country. Stringham says that the issue isn’t really about collaboration or competition. The industry needs both.

“In downhole and extraction technologies and everything else that’s involved with taking oil out of the ground, the competition is intense. However in the environment, we don’t compete. By working together we can make sure that everybody is using the latest and the best environmental technologies…Environmental issues are not a competitive concern, but something that needs to be worked on collaboratively.”

For example, as Fair points out, there really aren’t any serious issues around land ownership in the oilsands sector anymore. For the most part, land ownership has already been established; properties don’t often change hands.

“Now the public has an expectation that the companies will work together to meet some of these environmental challenges. From a business perspective, any time you can get a group of companies to work together, you eliminate duplication of effort and the industry as a whole becomes much more efficient.”

This is particularly important for an industry that faces not only a volatile market environment and uncertain global outlook, but also an increasing level of hyper-scrutiny from environmental groups.

Role Reversals

In a very real sense, the industry’s use of these technical consortia is a leveraging of one of the great traditions of the oilsands sector. The leading edge of good oilsands development has always been science, and some of the most significant developments have been the result of collaborative groups.

One of the first important investigators of the oilsands industry, about 100 years ago, was a scientist employed by the Geological Survey of Canada named Sidney Ells. In the 1920s came the Alberta Research Council’s Karl Clark, whose hot water extraction process fundamentally transformed the sector.

The continual presence of provincial funding for basic oilsands research--even during the Great Depression, when Alberta defaulted on its debt--has played a vital role in helping make the industry viable.

After the Geological Survey came the Alberta Research Council, which was followed 50 years later by the Alberta Oil Sands Technology and Research Authority (AOSTRA). AOSTRA used government funding to encourage the industry to invest in the oilsands. According to industry consultant Bob Taylor, it “was the major catalyst in leapfrogging oilsands development forward.” AOSTRA’s main focus was to make in situ resources both technically and economically recoverable. More than $1billion of spending in field pilots resulted, and AOSTRA activity led directly to the definitive proof of steam assisted gravity drainage (SAGD).

Fast forward to the present. One of the present iterations of public investment in the industry is Alberta Innovates -Technology Futures. This Crown corporation trend incorporates the 90-year-old Alberta Research Council and plays an important role in moving technologies along the development path. Another is Alberta Innovates – Energy and Environmental Solutions, another highly respected Crown Corporation led by president Eddy Isaacs. It’s an important source of expertise for the sector, with a tremendous reservoir of expertise and experience – for example, senior advisor Duke du Plessis began research on the oilsands more than 50 years ago.

But as it applies to energy, the Alberta Innovates initiatives are relatively small. This raises the question of whether the province – the owner of the resource – is doing enough to encourage the development of new oilsands technologies. Put another way, in recent years there has been no AOSTRA-like leadership in advancing oilsands related technological innovation in the province.

AOSTRA 2 and NASA II?

Last May, the Premier's Council for Economic Strategy recognized this issue, identifying it in a report titled Shaping Alberta's Future. The group proposed creating the Global Centre for Energy, which would “require collaboration among industry, researchers and government,” the report proclaims, adding that “To ensure Alberta realizes the full potential of its energy resources over the decades to come, it is time to launch another large-scale collaborative effort like AOSTRA and make it a strategic priority for the province.” 

The authors suggested a program that is “a crucible for accelerating innovation to transform environmental and operational performance. Design it to be a catalyst and funder of collaborative research, a meeting place of diverse interests, and a showcase of achievement. Make Alberta internationally respected for pioneering research, with authoritative evidence and industrial-strength solutions.”

Unfortunately, the Premier’s Council on Economic Strategy now reports to the Cabinet Office rather than the Premier's Office, Perhaps this explains why there are no bold initiatives in sight.

Doug James and Bob Taylor--the main forces behind the Energy Futures Network, a think tank--have put forward to both government and industry the notion that the province needs to bring more resources to bear on the oilsands. In a paper titled AOSTRA 2, they make a strong case for a new collaborative industry/government research and development program. “This must be a private-public initiative from the beginning,” they argue, “but it would be best if it were industry led.”

The paper is full of ideas and principles, but the authors’ main concern is that “multiple technologies needed to be developed in parallel, both to share cost and risk and to move more quickly.” They propose an organization that sets the goal but doesn’t predetermine how – a bit like NASA’s approach to landing on the moon.

On the issue of NASA, perhaps it’s best to leave the last word to Preston Manning – head of the Manning Foundation for Building Democracy. In a recent presentation to an OSLI “Big Ideas” forum, Manning proposed the notion of collaboration on a continental scale. “Today, both Canada and the US have a somewhat different security concern – the need to reduce North American dependence on offshore petroleum resources and increase the availability and delivery of North American sources energy. So why not agree on sustainable continental energy security as a mutual goal and establish a similar organization to NASA – NASA II, where NASA stands for the North America Sustainability Agency – to bring large-scale public and private resources and scientific expertise in both our countries to bear on the goal of sustainable continental energy security?”

Team of Rivals

As executive director of the Small Explorers and Producers Association of Canada, Gary Leach leads Canada's "Silicon Valley of oil"

This article appears in the February 2010 issue of Oilweek.

By Peter McKenzie-Brown

A year ago, Stan Odut was chairman of the Small Explorers and Producers Association of Canada (SEPAC), and he was deeply worried about the industry’s immediate future. “The sources of capital for the junior sector are equity, debt and cash flow,” he said, “but many companies are already mired in debt and credit lines are being pulled. You can’t get additional debt coverage. You can’t raise any equity because there is no reason for investors to put money into the energy business right now (because of collapsing commodity prices). And governments (provincially in particular) have strangled cash flow. So help me with the equation: you’ve got to get one of those factors to change to get the business going again.”

In the last year, what has changed? I put the question to Gary Leach, SEPAC’s executive director. He describes a cautious sense of optimism within the junior sector of Canada’s petroleum industry. There’s been a strong recovery in oil prices, for example, although gas prices are still languishing. “In recent months equity markets have been more supportive of the industry,” he adds, although they have been “selective”. They are targeting companies with “strong management, in certain commodity niches. But there is no tide that is lifting all boats.” Bank credit is still a problem for some companies; many are carrying a lot of debt, and lower commodity prices have reduced the value of their assets in the ground. Technically, this is known as a double-whammy.

On the positive side, “Banks have tried to be nimble and flexible. They don’t want to cause a lot of financial wreckage in the junior and midcap sector. A lot of the equity raised in recent months has been used to reduce debt, so things are improving.” However, he cautions, “If we don’t see a sustained rebound in gas prices in 2010, that may change.”

The Gas Story
Gary Leach describes himself as a “pure prairie product”. He was born in Manitoba, raised in Alberta and received post-secondary education (including a law degree) at the University of Saskatchewan. He spent much of his strictly legal career putting together international joint ventures, petroleum production sharing agreements, and international financing loans with multilateral institutions such as the World Bank and the European Bank for Reconstruction and Development.

He joined Calgary-based Canadian Fracmaster in 1995 and stayed with the business after it was acquired by BJ Services Company, the Houston-based petroleum equipment and services giant. His background in down-hole completions is a notable asset for a spokesman in an industry being transformed by horizontal drilling and new fraccing technologies. Soft-spoken and articulate, Leach joined SEPAC – the trade association for 350 small oil companies – in 2006.

We began our discussion with the natural gas story. At time of writing, gas prices are sitting well below their ten-year average. Where are those prices headed? “I think right now there’s possibly a larger gap in opinions about where gas prices are going than any time I can remember,” Leach says. “There are people who say the potential international demand (for gas) has barely been touched, so prices should go up. Others talk about the huge international supply potential, and they see things the other way.” Perhaps remembering the adage that predictions are especially perilous when they pertain to the future, he says “We are never going to get out of these swings in gas prices. I think there are going to continue to be big swings in the gas market. I don’t think anyone can accurately forecast gas prices beyond a couple of quarters.”

“For companies carrying a lot of gas assets on their balance sheets, it’s not a great time to be selling. “There are going to be a lot of assets put on the market. A lot of big companies” – he mentions Talisman, EnCana and Suncor – “are talking about moving conventional gas reserves off their balance sheets. The lowest cost gas resources are the ones they are going to pursue, and those resources are now shale gas resources.”

Since gas-price volatility is a fact of life, he says, “The low-cost suppliers are the ones that are going to do best. Companies have to learn how to drive down their costs.” For the junior sector, which has a lot of conventional gas on the books, the outlook is particularly uncertain. “The leading shale gas resource in western Canada is in a place that’s so remote and so expensive that mostly big players can participate. However, as the technologies and the infrastructure are developed, the smaller players will get in.”

Behind the Curve
When you ask Leach about Alberta’s place in western Canada’s industry, he is oddly ambivalent. For example, on the matter of shale gas he says, “If we were further along the curve in Alberta in developing shale gas resources, the smaller players would be developing them. But Alberta’s industry is behind the curve.”

He notes that both British Columbia and Saskatchewan long ago introduced important incentives for the industry, but that those policy environments didn’t spur high levels of petroleum sector growth until the technological environment changed in recent years. For example, Saskatchewan’s “Bakken field has been known for years. We used to just drill right through it. However, it is only recent that the technologies of horizontal well completions and multistage fracturing” – the technologies that led to the shale gas revolution – “made that reservoir viable.”

Alberta, of course, is quite different from either of those provinces. “The (Western Canada Sedimentary) Basin covers the province from north to south. We have every conceivable hydrocarbon opportunity here. There’s a lot of excitement about using those technologies to improve production from formations in Alberta that are well past their glory days – the Viking formation, the Cardium formation. A lot of companies are looking at targeting oil in these formations, but using horizontal wells and multistage fractures.” Leach thinks the industry will soon successfully use these methods to increase oil recovery in Alberta.

What is SEPAC’s single biggest challenge? Here his message is particularly striking. “We have to help policy makers and politicians understand what a tremendously exciting, dynamic, vibrant group of junior and mid-cap companies we have in Canada. Almost half the world’s publically traded oil companies are here in Calgary. It’s a remarkable statistic. It’s the closest thing to a Silicon Valley type business culture and industry cluster we in Canada have ever developed. It’s emerged on its own without government help. But over the years, we have had all these companies competing with each other. Hundreds and hundreds of companies are competing with each other for land, for resources, for capital. They have a tremendous publically accessible database that puts small companies on an equal footing with big players. It’s the most unique oil industry in the world, and Canada’s most successful business story. We need policy-makers to understand that story, so they don’t see the industry as just eight or ten companies. Let’s see the big picture, and not do things to harm it. This industry is amazing. We don’t want to lose it. We want to nurture it. It’s a great incubator of new ideas.”

Leach sees the Alberta government’s recent adjustments to the royalty changes of two years ago as a SEPAC success. “Both times (Premier) Stelmach came out with revisions to the royalty regime, he specifically mentioned that he wanted to help Alberta’s junior petroleum sector. The Alberta incentives brought additional cash flow, reduced costs, drew some investment into Alberta that would. They helped, but they were not the complete answer. They couldn’t help everybody.”

SEPAC is now working with other industry associations, the financial sector and others in developing a study of investment competitiveness within the province, which will be complete in the New Year. The idea is to answer the question, “Compared to other investment places, how does Alberta rate?” The provincial government will then have to take all that information and decide on new policies. We think if the province can set itself up as one of the world’s best places to invest, its future will be bright.” Citing a report from a large bank, he points out that about 60 per cent of the world’s investible oil resources are here in Alberta. Big international oil companies have been boxed into smaller and smaller bits of the world. This is one of the few places in the world where companies can book meaningful reserves additions.”

Moving Ahead
I’m always interested in the responses of senior people in the patch to the issue of peak oil, so I put the question to Gary Leach. His response is forceful and direct. “I think we’re near peak cheap oil. I think we’re near peak easily accessible oil. But the amount of oil in the world is enormous. The biggest problem to developing oil has to do with policy restrictions – off-limits restrictions on resource development. The US has huge oil shale resources, for example, but they are politically inaccessible.” Working with their client national oil companies, oil-rich countries have put resource development off limits to private sector oil companies. He mentions Venezuela’s Orinoco ultra heavy oil belt, Alberta’s oilsands, the vast heavy oil deposits in Russia, then cites the old gag that the Stone Age didn’t end because we ran out of stones.

He’s now just warming up. “The petroleum age won’t end because we run out of petroleum. Western European countries are consuming less oil than they did 30 years ago, and the United States is consuming less than it did in 2007. The petroleum age may end in a gentle decline because some of the advanced countries begin to move away from (oil). I don’t think it will end with apocalyptic change. Price signals will put a limit on demand.”

I mention the often-cited rapid demand growth in China and India among developing countries and the rapid growth in OPEC countries like Venezuela, where consumer prices are greatly subsidized. “Rapidly growing countries like India and China are still poor countries,” he counters. “They can live with a price around today’s price (US$77 per barrel) but they cannot afford oil at $150-$200 per barrel. (If prices rise to those levels) there will have to be some kind of market response. Before 500 million Chinese own a car, they will be driving something that doesn’t rely on oil: Maybe electricity-fuelled vehicles charged from nuclear reactors.” Whatever those vehicles are, Leach has no doubt “there are going to be other factors on the demand side, the technology side, that will temper those straight-line graphs that say oil demand will outstrip oil supply and prices will skyrocket.”

Of course, a basic principle of free-market economics is that supply and demand must always be in balance. Neither does a world with global economic growth constrained by energy shortages sound reassuring. Indeed, the situation he is describing seems compatible with mainstream peak oil theory, so I wonder whether his arguments against worldwide economic destabilization have settled the issue. All the same, I have thoroughly enjoyed the discussion. We shift gears, moving to lighter topics.

Has he read any good books lately? Yes, he says. He reads a lot, and is now reading Team of Rivals: The Political Genius of Abraham Lincoln by Pulitzer Prize-winning historian Doris Kearns Goodwin. This thick book describes Abraham Lincoln’s leadership skills by focusing on his war cabinet, which included three of the political rivals he beat in the 1859 presidential campaign. According to Leach, “it was amazing how he turned these diverse people into a team during the most cataclysmic period of American history.”

For a guy with responsibility for managing SEPAC’s affairs and representing its views to government, the news media and the public, political genius may be just what the doctor ordered. Bear in mind that “nearly half of the world’s public oil companies are here in Calgary.” Within the modern petroleum age, those hundreds of companies have become a team of rivals for the global oil industry to reckon with.

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Centre of a Storm

A reflection of the trauma of Canada’s energy wars; cover courtesy Maclean’s Magazine. Left to right: federal Energy Minister Marc Lalonde, Alberta Premier Peter Lougheed, Prime Minister Pierre Trudeau and Alberta Energy Minister Merv Leitch. From the book Barbecues, Booms and Blogs: Fifty Years of Public Relations in Calgary, this chapter is excerpted in the November, 2008 issue of Oilweek magazine.

By Peter McKenzie-Brown
The oil price shocks of 1973, 1979/80 and 1986 echoed and re-echoed around the world. Here at home, they aggravated the conflicts that historians now call Canada’s energy wars. As the drums of battle deafened public debate and affronted an industry whose allies were few, federal and provincial partisans clashed for petroleum wealth. Through the Canadian Petroleum Association (CPA), oil and gas producers gradually developed a coherent public voice and eventually played a role in policy reform. They also opened their eyes to the critical importance of good environmental practice. This chapter tells those stories.

Energy wars
The battles began with a shot from Prime Minister Pierre Trudeau. Inflation had become a national problem and oil prices were rising, and on September 4, 1973, he asked the western provinces to agree to a voluntary freeze on oil prices. Nine days later, his government imposed a 40-cent tax on every barrel of exported Canadian oil. The tax equalled the difference between domestic and international oil prices, and the revenues were used to subsidize imports for eastern refiners. At a stroke, Ottawa began subsidizing eastern consumers while reducing the revenues available to producing provinces and the petroleum industry. This outraged Alberta, which had fought long and hard for control of its natural resources.Britain’s Privy Council didn’t award resource ownership to the province until 1930, after a drawn-out legal battle between Edmonton and Ottawa.

Premier Peter Lougheed soon announced that his government would revise its royalty policy in favour of a system linked to international oil prices. His timing was impeccable. Two days later, on October 6, the Yom Kippur War broke out – a nail-biting affair between Israel and the Arab states. OPEC used the conflict to double the posted price for a barrel of Saudi Arabian light oil, to US$5.14. Saudi and the other Arab states then imposed embargoes on countries supporting Israel, and oil prices rose quickly to $12. These events aggravated tensions among provincial, federal and industry leaders.

The rest of the 1970s were marked by rapid-fire, escalating moves and counter-moves by Ottawa, western provinces and even Newfoundland. The atmosphere was one of urgency, alarm and crisis, with global conflicts adding gravity to the federal-provincial quarrelling. Alberta, British Columbia and Saskatchewan (the latter two headed by NDP governments) took steps to increase their revenues from oil and natural gas production and to protect provincial resource ownership from federal encroachment.

The federal government announced a series of national policies founded on the basic notions of federal/provincial revenue sharing, made-in-Canada pricing, increasing Canadian ownership of the industry and a quest for self-sufficiency in oil through development of such non-conventional resources as oilsands and the frontiers.

A single voice
The logical voice for the petroleum industry was the Canadian Petroleum Association, a trade association mainly reflecting the interests of large, foreign-owned companies that together produced around 90 per cent of Canada’s oil and gas. Formed in 1952, the association’s primary function was to compile technical data for the industry – drilling statistics and reserves estimates, for example. The CPA asserted itself as the industry’s voice and quickly found itself in the centre of a storm.

Its Executive Director was John Poyen, a capable manager with a technical background. According to Jack Gorman, who later became the association’s Director of Public Affairs, “When the feds announced the export tax on oil, from his chair in the CPA office Poyen made some fairly blunt comments, without any reference to the CPA’s Board of Governors.” Hans Maciej – at that time the association’s Technical Director and economist – didn’t think so. “John used to call a spade a spade and the feds may not have appreciated his plain talk, but the organisation continued to put the industry’s case forward.”

Harold Millican soon took the top job at the CPA, and Gorman joined him. “It was a happy arrangement,” said Gorman. “Our focus at that time was to be conciliatory, especially because of the way Poyen had shaken the beehive and got a lot of people upset. So we developed our messages, and talked about how oil was getting harder to find and told people about different approaches to the problem. Jim Rennie joined us and we developed an educational approach, producing booklets about the ABCs of the oilpatch.”

As an aside, the CPA library became an important centre of PR learning for CPRS members, beginning with Rennie’s brief tenure there. Monthly “Library Nights” featured bottles of port and thoughtful discussion about every imaginable aspect of public relations practice. Library Night thrived until 1983, when it reappeared as Shop Talk at another venue. It soon disappeared from the historical record. “With some difficulty,” Gorman continued, “I was able to sell the CPA on a program of journalism awards to get the media to take more interest in our industry. I thought it was also important to hold seminars for reporters and separate seminars for editorial writers. So we brought them into town and set up seminars hosted by experts from the oil industry. It was a warm and credible way of working with the media.”

Perhaps, but it was powerless in the face of the worsening political struggles. As Maciej put it, “When politics entered the picture, PR people alone could not play the major role.”

The National Energy Program
In 1979/80, further crises in the Middle East led to panic-driven pricing. The Iranian Revolution came first. War between that country and Iraq soon followed. Oil prices more than doubled, to US$36 per barrel. Such high prices multiplied the amount of money at stake. Pierre Trudeau led the Liberals to electoral victory in 1980, promising vaguely to create a federal energy policy in response to rising oil prices.

The result was the National Energy Program, Canada’s most controversial federal initiative in peacetime. It ended an era of great prosperity in Alberta. On October 28, 1980, I worked for Gulf Canada, and that evening I sat glued to the television as the budget speech described the federal government’s latest energy initiative.

In a beautifully produced book prepared for the occasion by the federal government, Energy Minister Marc Lalonde said, “This is a set of national decisions by the government of Canada. The decisions relate to energy. They will impinge, however, on almost every sphere of Canadian activity, on the fortunes of every Canadian and on the economic and social structure of the nation for years to come.” Right he was, although no one could have imagined the rancour that followed.

A fuming Peter Lougheed compared federal actions to those of a rude invader blundering into Albertans’ living rooms. The province made plans to cut oil production by 15 per cent over three months, threatened to withhold approval of new oilsands projects and launched court actions. British Columbia and Saskatchewan mounted furious protests of their own. The NEP pitted vital interests against each other. Supported by eastern consumers, the federal government took one corner of the ring. Supported by regional voters, the western provinces took the other.

The petroleum industry was a spectator wishing it could score points against either combatant – or better, both. In the beginning, compromise seemed impossible. After a year, however, the two levels of government did reach a revenue-sharing agreement – memorialized in the press by photos of Peter Lougheed and Marc Lalonde toasting the deal with Champagne. Left out in the cold, the petroleum industry didn’t share in the celebrations.

Under the terms of the new deal, the sector could only realize additional revenue if oil prices, which had already begun to erode, continued to rise. Operating under new rules in a declining oil price environment, corporate cash flows dropped precipitously. In response to federal efforts to “Canadianize” the sector, foreign interests sold their assets and headed home. The Canadian sector became mired in debt – a development that contributed to the bankruptcy of once-mighty Dome Petroleum. Drilling slid into a deep funk, and rigs began a highly publicized exodus across the border. Confidence in the industry plummeted.

As the decade wore on, bankruptcies in Alberta reached new highs and real estate prices crumbled. Although exacerbated in 1982/83 by what was then the worst global slowdown since the Great Depression, the severity of the decline was unique among the world’s petroleum-based economies. Norway, for example, boomed throughout the NEP years.

New leadership
At the beginning of this period, in 1979, the CPA’s leadership changed again. Ian Smyth became Executive Director. Perhaps reflecting his civil service background but with the active support of the CPA’s Board, Smyth quickly began to enlarge the association. He began by creating an office in Ottawa to supplement divisional offices in Regina and Victoria. ‘Before long, the organization also had offices in St. Johns, Halifax and Montréal. Smyth’s ambitions, and his plans, were vast. 

“CPA staff often provided access to ministers in Ottawa and the provinces, but we never lobbied in the sense that lobbying is a dirty word,” he said. “We’d do show-and-tells. There would be half a dozen ministers around the table, and we would say: ‘Here we are, the industry, and we want to tell you what we’re doing. If you have any questions, Minister, we will be glad to answer them.’”

Gorman tells a story about this period with a combination of humour and derision: “The next thing you know they hired Allan Gregg, who had just founded Decima Research, to conduct a nationwide survey to find out what Canadians think about the oilpatch. I said to Ian, ‘I can tell you what the people of Canada think about the oilpatch. They think it is run by a bunch of Yankee fat cats who are exploiting Canadians and making high profits and sending most of the money back to the U.S.’ So they launched their campaign and surveyed Canadians and that’s exactly what they found out. “Then they decided to let the research drive a campaign to convince the Canadian people that this really wasn’t true, that the oil industry was really working in the best interests of the country. So they began this big, expensive advertising campaign, but I don’t think it was very effective.”

Norm Elliott and I joined the CPA in 1981, just before the advertising campaign began. Norm was Director of Public Affairs; I was his number two. Our day-to-day work consisted of analysing news and planning communications; preparing news releases and backgrounders; organizing news conferences; arranging publicity and media events (including the National Journalism Awards); managing publications, including a monthly magazine and the annual report; speech writing; meeting and meeting some more.

Despite technological innovation and the evolution of new forms of media over the last three decades, these functions are still the PR professional’s stock-in-trade. They are less art than craft. My role gave me a unique vantage point from which to observe the industry’s response to the NEP. The balance of this chapter describes how the CPA led the charge.

The leader
Ian Smyth was a big, wall-eyed man with a large ego, a superb mind and, when he turned it on, a huge amount of charm. Few people were able to dominate a social occasion, a meeting or an organization as completely as he did. As Norm Elliott put it, “Ian was the leader. He set the rules, he set the thinking and he knew what was going on. I never saw a better mind than his. It was unbelievable to watch him, to see how people responded to him. He came into Calgary not knowing a soul, and within a year he was right on top of things.” Smyth was a quick study, and his commentary was continual grist for the media’s mill.

“He could completely take over an interview,” said Elliott. “The best media people in the country took him on, but he always controlled the interview. No one could acquire that talent. He was just born with it.” Technical Director Hans Maciej continued to answer questions about many economic and most technical matters. On matters of policy, though, Smyth became the industry’s spokesman. The CPA was the industry’s voice, and he was the CPA’s.

When I asked him to describe the advertising campaign, Smyth began thus: “We set out to use opinion polling to find out what concerned people. What we quickly found out was that Canadians were not worried about Canada running out of oil. It was a period of high unemployment and high inflation. People wanted to have a job a year from now. That was their number one concern. As we worked through the research, we realized that we had a theme. That theme was that when the petroleum industry is at work and has the funds it needs to do what it does, it provides jobs and employment right across the country. So we began to run a series of TV commercials and print ads telling that story, and it worked.” He added, “That was the most researched campaign in the history of advocacy advertising. It became a case study in some MBA programs. We researched carefully everything we did. If something didn’t work we junked it and if it did work we did more of it. And so we gradually progressed to a stage where our campaign had a significant impact on public opinion. Partly because of what we did, voters threw out the Liberal Party in the next election.”

Hans Maciej was skeptical about the research, but supported Smyth’s conclusion that the campaign helped people understand the damage caused by the NEP. “I always questioned the numbers we were getting back from our advertising and polling people,” he said. “We would hear that something in public opinion moved by 0.2 percentage points and that was a major improvement. But Allan (Gregg) was an effective snake oil salesman, and it was always interesting to listen to his interpretations.”

“Anyway, I believe we were effective in putting forward the other side while the NEP was collapsing under its own weight,” Maciej maintained. “To their credit, the political opposition (Mulroney’s Conservatives) saw what was happening. It took them a long time to rectify all the wrongs of the National Energy Program, but they eventually did it.”

 Emerging issues
Just before the NEP died, the CPA shifted its focus toward the natural environment. The emergence of environmentalism as a public issue illustrates an important rule for the petroleum industry: A crisis for one is often a crisis for many. Take the cornerstone years of 1977 and 1982.

On June 9, 1977, Justice Thomas Berger issued Northern Frontier, Northern Homeland – the report of the Mackenzie Valley Pipeline Inquiry, and a surprise bestseller. This document raised environmental and social rather than technical objections to an industrial project. In so doing, it killed a proposal to construct a natural gas pipeline from the Arctic. The industry didn’t see this as part of a sea change, but responded with a cacophony of complaints about the “left wingnuts” in Ottawa. Wingnuts or not, 30 years later 1.7 billion barrels of oil and about 25 trillion cubic feet of natural gas remain stranded in the far north.

Five years on, two calamities struck in a single year. The Ocean Ranger disaster off Newfoundland and the Lodgepole blowout in Alberta precipitated more than gripes and grumbles. The Ocean Ranger tragedy involved a semi-submersible drilling rig going down in a winter storm. She took 84 hands into the frigid sea, and none survived. 

The Lodgepole catastrophe involved an Amoco-operated, high-pressure sour gas well. Out of control for 68 days, it took the lives of two blowout specialists and sent another 16 people to hospital. On days with strong westerly winds, residents of Winnipeg (1,500 kilometres away) could smell the rotten-egg odour of the gas. Regulatory opprobrium and public anger were intense. Inquiries went on for years, and the resulting new regulations were as tough as nails. More importantly, in Canada’s national consciousness these headliners reinforced budding concern about public health, industrial safety and environmental integrity. The CPA was the first trade association to take action on these growing worries.

According to Smyth, this, too, arose from research. “We were continually out there taking the public’s pulse. We had noticed from the beginning that the first few top-of-mind issues were always economic – jobs, taxes, inflation and so on. But after a while, people started volunteering the environment as a top-of-mind concern – the only issue that wasn’t bread-and-butter. So I said to the CPA’s Board that we should be, and be seen to be, the most environmentally responsible industry in the country, and they said, ‘See what you can do.’ We began by developing the first industrial environmental code of practice in the country, and soon set up an environmental department.”

Third price shock
As the CPA began its environmental labours, the country’s energy wars were ending. Then oil prices collapsed – a 1986 market phenomenon known as the third oil price shock. The industry’s core issue became survival in a world of lower energy prices.

Environmental policy remained a focus, but big-budget ads were suddenly out of the question. The CPA responded with its first and only community relations initiative. With the CBC and The Calgary Herald as media sponsors, the association’s Share the Earth Triathlon helped brand the CPA green. It was a sporting event with an environmental theme – the first, perhaps, in Calgary.

Why triathlon? It was a new sport and the city (gearing up for the Olympics) was sports mad. The demographics were excellent: a mean age of 36 and surprisingly large cohorts of professionals. Costs were minimal, and volunteers (led by volunteer Race Director Pete Strychowskyj) took care of planning and race-day operations. This early-season event quickly became the most popular in Alberta. The CPA’s wisdom in championing the environment became apparent as the Mulroney government began passing tough new environmental legislation. This included million-dollar fines and five-year jail terms for offending executives.

Smyth twice earned honours with The Globe and Mail’s front-page “Quote of the Day.” On the first occasion he said, “I have never seen a CEO who was prepared to trade five years in the slam for a better bottom line.” On the other he said, “We have plenty of environmental sticks. We need more carrots.”

In large part because of the CPA’s efforts, Ottawa nominated the petroleum industry for a prestigious United Nations award. In 1992, the CPA merged with its former shadow – the much smaller Independent Petroleum Association of Canada – to become the Canadian Association of Petroleum Producers (CAPP). The new organization axed the triathlon which, though still popular, had outlived its usefulness.

Legacies
The oil shocks left enduring legacies. One was an increase in industry organizations focused on telling the industry story. For example, the respected Centre for Energy is the successor to the Petroleum Resources Communication Foundation, and the SEEDS (Society, Energy, Environment and Development Studies) Foundation has been producing energy information tools for Canadian schools for more than 30 years.

In addition, companies and trade associations are now far more fluent in government and stakeholder relations than when the CPA’s pioneering efforts began. The alphabet soup of industry associations and organizations – CAPP, PSAC, CEPA, CAODC, SEPAC and the rest – are better staffed with or have access to public affairs professionals. They share key messages and backgrounders with their members, so all can respond quickly with the same basic messages. As importantly, senior managers now receive training in how to deal with public issues, and they understand that good environmental performance is the only acceptable business practice.

These developments owe much to the reverberations of the oil price shocks and, later, to the greening of Canada.