Regina – With Saskatchewan Premier Brad Wall taking his leave in January, Pipeline News recently spoke to him by phone about what it was like to lead the province through the boom and bust in the energy sector over the last 10 years.
Pipeline News: Saskatchewan’s oilpatch grew tremendously during much of your tenure, at least until the downturn hit in late 2014. What was it like to see that, from the office of the premier?
Brad Wall: Well, it was very good to see, from my vantage point. I expect it was even better to see from the vantage point of people working in the industry and benefitting from the activity.
Even here, lately, we’ve seen at US$50 or less West Texas, we’ve seen a lot more drilling activity and rigs. That’s always gratifying, seeing that happening. Jobs are being created or sustained. Small businesses are being engaged as contractors, and royalties are going to get paid. That, of course, funds quality of life.
We’ve been fortunate over this last while, and we’ve tried to stay out of the way of industry. We’ve tried to practice “do no harm,” has sort of been the motto. We don’t want to get in the way of the industry when they’re creating jobs. Obviously we have environmental concerns and regulations that’s we’re very serious about. But in terms of the business climate, we want to make sure, I wanted to make sure this was an inviting place to invest and that we were competitive.
If you check out the stats, the last Fraser Institute report, we were the best environment, investment climate in the energy sector of all Canadian provinces and we’re still in the very top tier of all subnationals – states and provinces, just behind a few U.S. states. I think that’s been intentional on our part.
PN: Bill Boyd repeatedly gave the same speech, saying the premier instructed him to thank the oilpatch for the jobs and investment, and that the provincial government would not be changing royalties. You also gave similar speeches. Can you explain your thoughts behind that?
Wall: I did. I remember the very first speech I gave to the Petroleum Club in Calgary. I went and announced we would not be messing with royalties, basically. I got a huge ovation. It’s not very often the government says they’re not going to do anything at all and people clap. (laughs)
I think it was indicative both of what was elemental to our growth plan and also the commitment we had made.
We’ve actually done a few things. I think industry’s recognized we sought to improve the permitting times, the turnarounds, the consistency of the government interface with the industry. We can always get better. I’ve heard back many times, where the industry said, “That’s working.”
This is a better place to do business than say, well, I’ll say Alberta, because we’ve worked on the regulatory side. That’s the feedback we’ve had. And it was from enough that it was more than anecdotal.
But that is the speech. That’s the message. You can expect consistency and stability. Surprises are for birthday parties, not royalty structures. And for those who have massive investments on the line, we’ve tried to practice what we preach.
Politicians don’t simply say thank you enough, to industry, when they risk. We’ve used the word industry, but you and I know it’s a lot of small businesses that work here, in the province, in this sector.
We don’t say thank you enough. My dad was a small business person. I know what he was risking every day, to create a wage for himself, and also for others. That’s the foundation of the economy, it really is. It pays for everything else, and we should thank them.
PN: In 2008, early in your mandate, Saskatchewan had it’s biggest Crown land sales, ever. What was your reaction when you were told just how big it was?
Wall: It was hard to believe. The amount was hard to believe, much larger than we had budgeted.
We’ve experienced the other side of that coin as well. What we budgeted is not at all what we hit for land sales. But for that year, it allowed us to do two things – long-term investments. We reduced operating debt and reduced taxes structurally. That’s the long-term, and we did some short-term things, some important capital projects that are one-term investments but have a long-term benefit.
Whether it was record Highways budgets or very specific things like your long-term care facilities, schools, hospitals.
When I saw that, when we looked at those numbers coming in, we immediately understood we can’t hardwire this into future budgets, but we can make some long term investments with this, be it lower taxes, lower operating debt, or major infrastructure.
PN: The downturn in recent years has been tough, not only on the oilpatch, but on the province’s finances and, in the last budget, much of the province as a whole. Can you explain what that has been like, from your perspective?
Wall: Well, it’s been a big challenge. We have, for the last couple of budget cycles, we went with the private sector forecasts on commodity prices whereby many were predicting the end to this trough some time ago. They’ve been predicting the end to this trough. We’re into, I think, year four of it.
I just believe, and our team just believed, we can’t procrastinate or kick this can down the road. We have to begin to move off the dependence of resource revenue. We need to do this now, especially if prices are not coming back.
The good news is the sector is people are getting back to work, because the industry has figured out US$50 a barrel. So that’s the most important part. I’m gratified, I’m happy about that. I have neighbours that were out of work for 18 months. Their trucks are plated again. They’re working. Everyone’s making a little less, but people are working.
What has not changed, though, is the revenue picture for government. Our revenues are still off, because, obviously, they’re based on price. If the new normal for some period of time is people back to work at US$50, that’s great, but we better react as a province, because I am not prepared to do what other jurisdictions have done. I’m saying I’m not, our government’s not prepared to kind of procrastinate on this, and, “Well, we’ll wait, prices will come back.”
Even if they do come back, we need to move off of the dependence on resource revenue. So we took some tough expenditure decisions, made some cuts, stopped some services like STC, and moved taxes away from income and towards consumption. I think that’s caused concerns as well, and I understand it completely. But I really believe this is an important measure. This is a bit like the Buckley’s Mixture. It tastes awful, but in the long term, we know these kinds of changes can work, and we will not have procrastinated on the fact the prices for oil are going to remain low for some time.
PN: Is there anything you would have done differently, with regards to the oilpatch? Looking back, do you think maybe we should have implemented a sovereign wealth fund?
Wall: I think we still should. I think, that’s part of, when you move away from resource revenue, and you don’t need those dollars for the operating of the government, then you can put them away for the long term.
You know, I’m not sure of a model like Norway’s, where there’s great benefit, but if you put them too far away from the people who own them in the first place, then there needs to be some flexibility there. I do think, as a whole, since oil was discovered in Canada, provinces with oil, including us, should have been looking at this model a long time ago.
It’s part of our plan. We have our report from (Peter) McKinnon. When oil, when resource revenues hit a certain portion of budget again, they will automatically move towards a fund. That number can move up and down.
I think the steps we’re taking now to move off of resource revenue will allow the government, some future government, my successor or someone after that, can lead an approach where we begin it much sooner, where we put away money much sooner, if we do not need – if oil prices come back and we’ve sort of weaned ourselves off of the great dependence off it, financially.
This has been a factor, by the way, for governments of every stripe, where you have hardwired your resource revenue to commodity prices that are budgeted. It’s hard to be critical, because the needs are there, and if there’s revenue coming in, and you know, there’s a need, generally speaking, you want to respond to it, whether it’s an economic or social need.
PN: Is there anything you would like to add?
Wall: This particular sector, I’ve been so pleased and honored to be able to work with them.
You know, it’s very frustrating, the degree to which our own energy sector is vilified by fellow Canadians, and sometimes people in our own province who might – I’ll be a bit partisan – folks across the way in the NDP, in our Saskatchewan NDP – there’s a few of them that believe in the Leap Manifesto. The Leap Manifesto is all about really hating, not just having concerns about the energy sector, but not liking. Wishing it would go away. Taking steps to make it go away.
I’m from Swift Current. I’m grateful for the sector. I know what it does for a community, and I know what it does for quality of life. I have friends who work in it. I hope that, as a government over the last ten years, we’ve been able to send a signal to them that if they don’t feel valued elsewhere, they are valued by our government. We’ll stand up for their interests. As long as we have the honour to form the government, I hope that’s the message we gave them and continued to give to them. I’m grateful for the chance to work with them over the years.