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As politicians blame pipelines for Alberta’s oil woes, labour union says past governments ignored upgraders and refineries

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CALGARY—Alberta’s energy minister was on the defensive Monday, fending off accusations the NDP government ignored or downplayed warnings as early as this spring about the price-differential crisis now gripping the oil industry.

Shortly after Premier Rachel Notley announced on Sunday a temporary cut in oil production of 8.7 per cent — a bid, starting in January, to reduce the price gap and increase revenue — Alberta Party Leader Stephen Mandel accused the government of sitting idly by as the differential widened.

“I’m not sure why any government wouldn’t have a program in place that allowed the changes and the reduction and curtailment to happen earlier rather than wait for as long as they have,” Mandel told reporters.

While opposition parties took aim at the NDP and the federal government, political observers and industry watchers say the current crisis was decades in the making. They argue successive Alberta governments are to blame for ignoring advice to pace oilsands development and encourage energy companies to upgrade and refine bitumen into higher-valued petroleum products.

In recent months, the price differential between Alberta crude, known as Western Canadian Select, and West Texas Intermediate has grown due to an oversupply of oil and lack of pipeline access. The differential is costing the Canadian economy an estimated $80 million a day, according to the province.

Energy Minister Marg McCuaig-Boyd told reporters Monday she wasn’t sure when the provincial government learned about the impending differential crisis but maintained the NDP took action immediately.

“I don’t know the exact timeline,” McCuaig-Boyd said. “We’ve known that this has been an ongoing issue, this differential. Not sure of the timeline, but it’s certainly not like we sat back and did nothing.”

The mandatory curtailment would see the production of raw crude and bitumen slashed by 325,000 barrels a day in the New Year, with a 10,000 barrel per day exemption for smaller producers. The province expects the reduction to fall to an average cut of 95,000 barrels per day by the end of 2019.

Notley said she expected the move to reduce the price gap by $4 US per barrel and add about $1.1 billion to government coffers.

At a news conference Sunday, United Conservative Party Leader Jason Kenney called it a “difficult moment for Alberta” but said the premier’s announcement was needed to stem the differential. Still, the opposition leader slammed the federal government for failing to build pipelines in recent years.

“We never should have been in this position,” Kenney said.

The differential — while impacted by many factors — is being dealt with by government curtailment because there are currently 35 million extra barrels in storage in Alberta that can’t be moved out due to a lack of pipeline capacity.

The government is cutting production in the hopes this number goes down. However, most political leaders agree the province needs more pipelines as an ultimate solution.

Kenney criticized Prime Minister Justin Trudeau’s veto of the Northern Gateway pipeline in 2016. First proposed in the mid-2000s, the pipeline could have been operational in 2019, moving an estimated 500,000 barrels per day.

He also called out former U.S. President Barack Obama for his 2015 veto of the Keystone XL pipeline, first proposed in 2008.

TransCanada’s Energy East was another pipeline that never saw the light of day. It would have moved hundreds of thousands of barrels per day to Eastern Canada in the hopes it replaced foreign-bought oil, Kenney said.

And most recently, in August, the Trans Mountain pipeline expansion was quashed by a Federal Court of Appeal because the federal government had not consulted with Indigenous groups properly and not fully considered coastal tanker traffic. The increase would have allowed around 600,000 additional barrels per day to be sent from Edmonton to Burnaby on the B.C. coast.

Kenney said that Alberta produces around four million barrels per day, with three million being shipped through pipelines and by rail. Alberta refineries use about 600,000 for domestic consumption in Western Canada, he said, leaving 400,000 extra every day to fill the growing backlog.

Both Kenney and Notley are calling for more pipelines as a solution to the differential and in the hope it boosts the energy economy. Even though the premier has said she would buy around 7,000 rail cars to ship 120,000 more barrels per day beginning in late 2019, it’s not an ideal situation.

“You might want to think of that next time you’re held up at a rail crossing,” Notley said to activists who oppose pipelines.

But this predicament was decades in the making, says Gil McGowan, president of the Alberta Federation of Labour. McGowan points to the blueprint laid out by former premier Peter Lougheed: ensuring each approved oilsands project came with an upgrader attached.

“The policies pursued and promoted by the conservative governments that followed Lougheed amounted to nothing short of gross negligence,” said McGowan.

“If we had built more upgraders, if we had more refineries, we wouldn’t be in the mess that we’re in today because the supply glut could have been drawn down.”

He took aim at the talking point often raised by Kenney and other politicians that the Energy East pipeline would replace foreign-bought oil, noting the biggest refinery in Eastern Canada, owned by Irving Oil, can’t refine heavy crude from Alberta.

Further, he added, “Energy East wasn’t going to go to the Irving refinery; it was going to go to an export terminal owned by Irving right next door, and it could be shipped out of Canada.”

Duane Bratt, a professor of political science at Mount Royal University, said Alberta has been subjected to the price differential for decades, once referred to as the bitumen bubble by former premier Alison Redford.

While the NDP strongly advocated for additional upgraders and refineries when it was in opposition, that talk waned after the party took office in 2015 and realized how much those projects cost, said Bratt.

Refineries require billions of dollars in capital, he explained, and companies, particularly those with facilities in other jurisdictions, are understandably reluctant to invest in new projects.

“People often talk about upgrading and refineries, except for those experts in the sector and people once they get into government,” Bratt said.

Kieran Leavitt is an Edmonton-based reporter. Follow him on Twitter: @kieranleavitt

Trevor Howell is an urban affairs reporter with StarMetro Calgary. Follow him on Twitter: @tshowell

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Anglais

‘Business as usual’ for Dorel Industries after terminating go-private deal

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MONTREAL — Dorel Industries Inc. says it will continue to pursue its business strategy going forward after terminating an agreement to go private after discussions with shareholders.

« Moving ahead. Business as usual, » a spokesman for the company said in an email on Monday.

A group led by Cerberus Capital Management had previously agreed to buy outstanding shares of Dorel for $16 apiece, except for shares owned by the family that controls the company’s multiple-voting shares.

But Dorel chief executive Martin Schwartz said the Montreal-based maker of car seats, strollers, bicycles and home furniture pulled the plug on a deal on the eve of Tuesday’s special meeting after reviewing votes from shareholders.

“Independent shareholders have clearly expressed their confidence in Dorel’s future and the greater potential for Dorel as a public entity, » he said in a news release.

Dorel’s board of directors, with Martin Schwartz, Alan Schwartz, Jeffrey Schwartz and Jeff Segel recused, unanimously approved the deal’s termination upon the recommendation of a special committee.

The transaction required approval by two-thirds of the votes cast, and more than 50 per cent of the votes cast by non-family shareholders.

Schwartz said enhancing shareholder value remains a top priority while it stays focused on growing its brands, which include Schwinn and Mongoose bikes, Safety 1st-brand car seats and DHP Furniture.

Dorel said the move to end the go-private deal was mutual, despite the funds’ increased purchase price offer earlier this year.

It said there is no break fee applicable in this case.

Montreal-based investment firm Letko, Brosseau & Associates Inc. and San Diego’s Brandes Investment Partners LP, which together control more than 19 per cent of Dorel’s outstanding class B subordinate shares voiced their opposition to the amended offer, which was increased from the initial Nov. 2 offer of $14.50 per share.

« We believe that several minority shareholders shared our opinion, » said Letko vice-president Stephane Lebrun, during a phone interview.

« We are confident of the long-term potential of the company and we have confidence in the managers in place.”

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Anglais

Pandemic funds helping Montreal businesses build for a better tomorrow

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Many entrepreneurs have had to tap into government loans during the pandemic, at first just to survive, but now some are using the money to better prepare their businesses for the post-COVID future.

One of those businesses is Del Friscos, a popular family restaurant in Dollard-des-Ormeaux that, like many Montreal-area restaurants, has had to adapt from a sit-down establishment to one that takes orders online for takeout or delivery.

“It was hard going from totally in-house seating,” said Del Friscos co-owner Terry Konstas. “We didn’t have an in-house delivery system, which we quickly added. There were so many of our employees that were laid off that wanted to work so we adapted to a delivery system and added platforms like Uber and DoorDash.”

Helping them through the transition were emergency grants and low-interest loans from the federal and provincial governments, some of which are directly administered by PME MTL, a non-profit business-development organization established to assist the island’s small and medium-sized businesses.

Konstas said he had never even heard of PME MTL until a customer told him about them and when he got in touch, he discovered there were many government programs available to help his business get through the downturn and build for the future. “They’ve been very helpful right from day one,” said Konstas.

“We used some of the funds to catch up on our suppliers and our rents, the part that wasn’t covered from the federal side, and we used some of it for our new virtual concepts,” he said, referring to a virtual kitchen model which the restaurant has since adopted.

The virtual kitchen lets them create completely different menu items from the casual American Italian dishes that Del Friscos is known for and market them under different restaurant brand names. Under the Prasinó Soup & Salad banner, they sell healthy Greek options and their Stallone’s Sub Shop brand offers hearty sandwiches, yet the food from both is created in the same Del Friscos kitchen.

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Downtown Montreal office, retail vacancies continue to rise

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Some of downtown Montreal’s key economic indicators are heading in the wrong direction.

Office and retail vacancies in the city’s central core continued to climb in the fourth quarter of 2020, according to a quarterly report released Thursday by the Urban Development Institute of Quebec and the Montréal Centre-Ville merchants association. The report, whose first edition was published in October, aims to paint a socio-economic picture of the downtown area.

The survey also found office space available for sublet had increased during the fourth quarter, which may foreshadow even more vacancies when leases expire. On the residential front, condo sales fell as new listings soared — a sign that the downtown area may be losing some of its appeal to homeowners.

“It’s impossible not to be preoccupied by the rapid increase in office vacancies,” Jean-Marc Fournier, the former Quebec politician who now heads the UDI, said Thursday in an interview.

Still, with COVID-19 vaccinations set to accelerate in the coming months, “the economic picture is bound to improve,” he said. “People will start returning downtown. It’s much too early to say the office market is going to disappear.”

Public health measures implemented since the start of the pandemic almost a year ago — such as caps on office capacity — have deprived downtown Montreal of more than 500,000 workers and students. A mere 4,163 university and CEGEP students attended in-person classes in the second quarter, the most recent period for which figures are available. Border closures and travel restrictions have also brought tourism to a standstill, hurting hotels and thousands of local businesses.

Seventy per cent of downtown workers carried out their professional activities at home more than three days a week during the fourth quarter, the report said, citing an online survey of 1,000 Montreal-area residents conducted last month.

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