With the swallowing of Petro-Canada by Suncor, "Canada's oil company" and the national energy policy that created it may disappear into history. Or not.
The merger of the two Canadian oil giants, by the CEOs, will create a massive, integrated oil and gas company. It will be the fifth largest oil and gas company in North America with assets of $43 billion and create Canada's largest upstream producer and second largest refiner of gasoline and oil products.
The financial analysts have predictably hailed the merger as good and better, and I have read enough obituaries to Petro-Canada to believe that Canada's national energy policy is truly dead. Rick George and Ron Brenneman, the CEOs who in the finest corporate traditions reportedly put the deal together on a golf course, have also said that they want the deal to be consummated with the repeal of the so-called Petro-Canada Act.
Hold on a moment. If our political opposition has any spine, the Petro-Canada Public Participation Act will apply fully to this proposed merger -- and when it does, the whole matter of a Canadian energy policy will be forced back into the spotlight. Or not.
Sadly, since the announcement of the proposed end of Petro-Canada on March 22, all of my search engine strength could not find a single comment by a Canadian Member of Parliament. I am still trying to reconcile this strange gap between my appreciation of Petro-Canada and a national energy policy and the apparent real politic. Perhaps we have spent so much effort on characterizing oil as a dirty business that no one really cares who owns it anymore. Perhaps not even the NDP has the courage anymore to advocate public ownership, even when 16 of the largest 20 global oil companies are state owned, and together control over 80 per cent of oil reserves.
Do not let it be said that there is nothing left of Canada's national energy policy. Almost all of Canada's non-conventional oil production, from the offshore to the tar sands, has been driven by Petro-Canada. Without Petro-Canada, there would have been no meaningful Canadian ownership in oil and gas.
Moreover, we continue to have a federal law that limits ownership by any individual or group to 20 per cent, and prohibits transfer of majority ownership to any person or group, or to non-residents.
At a time when there appears to be almost nothing protecting the Canadian economy from global hedge funds and rogue investors, this is no small thing. In fact, even this merger, which is structured as a combination of shares and no cash purchases, may not meet the terms of the Act because Suncor shareholders end up owning 60 per cent of the merged company.
Why should we care who owns the oil patch? First, because we live in a cold climate and owners who are not Canadian will never understand or protect Canadian energy security.
We also must care about ownership because just as Petro-Canada led the investment in the tar sands and offshore three decades ago, we need a national energy company to lead today in transitioning the energy economy. Precisely because the tar sands is a dirty business that now has $200 billion of investments generating about one third of Canada's total greenhouse gas emissions, a national energy policy must direct profits and investment towards sustainability and a new energy economy.
Because of these imperatives, I can see the upside of a Petro-Canada Suncor merger. Suncor is already the number two producer in the tar sands, and Petro-Canada has a 12 per cent stake in Syncrude, the largest producer. Petro-Canada also has a smaller operation at Mackay River and a major new project, Fort Hills, in the development stage.
Suncor, for its part, wants to double its tar sands output with its Voyageur project -- and unlike the other major tar sands players, Syncrude (dominated by Imperial/Exxon) and Conoco Phillips, it has made a commitment to upgrading and refining oil and not merely exporting bitumen. Downstream, whereas Petro-Canada abandoned Ontario, Suncor has an Ontario refinery in Sarnia.
Refining is important because it is the primary value added product from petroleum and it is where you and I usually meet big oil. The combined company would be Canada's second largest refiner with about 20 per cent of capacity and arguably the country's most important brand recognition. Oil companies have charts aplenty justifying gas prices that can double in one month, and we with short memories have by now forgotten $1.50 per litre gasoline prices just last summer. There are a number of reasons for the hosing we take at the pump, but they will all be worse if Exxon takes over.
These are good reasons to maintain the public regulation of Petro-Canada and to make sure that the law applies to the whole company if the merger proceeds. Or not, Messrs. George and Brenneman insist. In fact, a provision in their merger agreement is that the combined company would be committed to the repeal of the Petro-Canada Public Participation Act. Any government with a barrel of self-respect would have this provision removed from the agreement before giving its approval.
The popular view from George, Brenneman and the business media is that history has turned the corner on Petro-Canada which henceforth will be a historical footnote on the Trudeau era somewhat like pirouettes and the Salmon Arm salute. Or not.
The same federal law that allowed the Minister of Finance to sell the government's shares in Petro-Canada, also allows the Minster to acquire shares. Think about that, Michael Ignatieff and Jack Layton. Yes, we still have a federal law that would allow us to take back our oil company and once again have the basis for a national energy policy.
Fred Wilson is the Assistant to the President of the Communications, Energy and Paperworkers Union.
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