CALGARY — Five years after Alberta raised a record-setting $3.5 billion at auctions of provincially owned oil and gas drilling rights, sales are on pace this year to set a historic low, part of a downward trend seen across Western Canada.
Through the first seven months of this year, companies invested just over $75 million for the right to drill for oil and gas on Crown land, according to the provincial Energy Department.
If sales continue at the same pace through the balance of 2016, they will add up to about $125 million — more than $100 million less than any annual figure in records going back to 1978 when the province adopted a scheduled sales process.
A big difference between 2011 and 2016 is the political party in power — the Progressive Conservatives then and the New Democratic Party now — but even the harshest critics of NDP tax increases and climate change policies say that's not why land sales have dried up this year.
'...you can't beat the rocks.'
Nor do observers pin the lack of interest solely on the two-year global oil price slump.
"You can talk about royalty rates and tax rates and you can talk about the government fiscal regime, the investment climate, interest rates, but in the oil and gas business, you can't beat the rocks,'' says David Yager, a Calgary oil and gas consultant and outspoken supporter of the Opposition Wildrose Party of Alberta.
"What was discovered (leading up to 2011) was the source rock, the Montney and the Duvernay. The Montney in particular may be one of the greatest hydrocarbon and natural gas liquid reservoirs in Canada, if not in North America or the world.
"As soon as we find another of those, the land sales will spike again.''
Record lows for B.C., Saskatchewan
Alberta is not alone in posting lower sales for drilling rights. B.C. is also on pace to set a new record low with only $4.7 million raised from such sales so far this year. Its best year, according to government statistics, was 2008, when it raised $2.7 billion.
In Saskatchewan, about $12 million has been raised in the first half of 2016, the lowest year-to-date total since 1992. Its record year was also 2008, when it generated about $1.1 billion.
"Are we at pretty low numbers? Yes, that's a function of the cycle,'' said Brad Herald, Western Canada vice-president for the Canadian Association of Petroleum Producers.
"When cash flow is scarce, we do less on raw exploration.''
Winning bidders must drill within a few years
Sales processes differ slightly between provinces but generally, producers nominate land they are interested in developing and the province then invites sealed bids on the parcels.
The winning bidders must drill wells on the property within a certain time period — two to five years in Alberta, for instance — or it goes back to the province.
"It's a different world now,'' said Gary Leach, president of the Explorers and Producers Association of Canada. "I think a lot of people expect maybe some of those leases that were bought may be reverting back to the Crown.''
The Montney and Duvernay are still the rock stars of the oilpatch, although drilling levels have been halved since last year.
Brad Hayes, president of geoscience consulting firm Petrel Robertson, said oil and gas explorers have long known about the two formations because they drilled holes through them while seeking other zones. But it took the combination of horizontal drilling and multi-stage hydraulic fracturing or "fracking'' before they could be profitably exploited, he said.
"It's a different world now."
"Companies developed the technology and suddenly they could see value in huge tracts of land,'' Hayes said.
He said the boom turned to bust starting in 2012 simply because producers had bought up most of the best land.
In its spring budget, the Alberta government estimated it will collect revenue of just $95 million from land sales in the 2016-17 fiscal year ending next March, rising to $157 million the following year.
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Here's a look at some of the major energy industry layoffs that have affected Alberta in 2015:
Company: Royal Dutch Shell Layoffs: Hundreds of layoffs at its massive Albian Sands project. The company announced it is laying off less than 10 per cent of its 3,000 workers.
Company: Suncor Energy Layoffs: The company announced it will layoff about 1,000 people from its workforce of 14,000. It also cut $1 billion from its capital budget
Company: Schlumberger Layoffs:Schlumberger announced they would cut 9,000 jobs in January, and another 11,000 in April, but did not report on how may of those jobs would affect Alberta employees.
Company: Newalta Layoffs: The company announced it would cut 180 people from its workforce to reduce costs and improve margins. The cuts amounted to 15 per cent of its staff.
Company: Weatherford International Layoffs: The oilfield services company said it will lay off 8,000 workers worldwide, or about 15 per cent of its workforce. According to Global News, about 1,000 of those positions affected Albertans.
Company: Cenovus Energy Layoffs: Cenovus Energy Inc. said it will cut its staff by about 15 per cent, the bulk of layoffs coming from its contract workforce. The company also suspended employee salary increases for this year.
Company: Precision Drilling Layoffs: Precision announced a net loss of $114 million, and was forced to adjust to a "swift and severe" decline in crude prices, said CEO Kevin Neveu. At the time, Neveu said about 50 fewer Precision rigs, and 1,000 fewer people, were running than at the same time a year ago.
Company: Finning International Layoffs: Finning International said it will cut 500 employees, or about 9 per cent of its Canadian workforce. Some of these cuts came to people working the Alberta oilsands or based in Edmonton.
Company: Husky Energy Inc. Layoffs: Husky Energy Inc. unexpectedly laid off 1,100 workers at its Sunrise oilsands project.
Company: Nexen Energy Layoffs: Nexen said they would slash 400 jobs "in response to the recent industry downturn." The majority of Nexen's cuts affected employees at its Calgary office.
Company: Talisman Energy Layoffs: Talisman Canada said it would reduce its workforce by 10 to 15 per cent as it grapples with low crude prices. Spokesman Brent Anderson says up to 200 employee and contractor jobs would be cut, mostly at the company's head office in Calgary.
Company: ConocoPhillips Layoffs: ConocoPhillips announced that they will cut seven per cent of their Canadian staff — or about 200 people in total. Spokeswoman Kristin Ashcroft said that some Calgary-based staff and workers in the oil field would be let go.
Company: Trican Well Services Layoffs: Trican Well Service Ltd. cut 2,000 employees from its North American workforce, including about 800 in Canada, and said it will stop paying dividends to its shareholders, citing the difficult current and future market conditions.
Cenovus Energy Inc. cut between 300 to 400 jobs in the second half of this year, on top of 800 layoffs announced in February.
Penn West announced it is cutting its workforce by 400 full-time employees and contractors — most of them working at company headquarters in Calgary.
ConocoPhillips Canada confirmed to CBC News it will reduce its workforce by about 15 per cent — 400 employees and 100 contractors. The majority of jobs lost will be in the Calgary office.
Cenovus, Suncor, Athabasca Oil and Calfrac all lay off hundreds of workers. "Unfortunately, these are the necessary steps required to weather an extended downturn," company spokesman Matt Taylor tells CBC.
Enmax, Transcanada and Enbridge all announced layoffs, totalling more than 560 employees, CTV reported.
ATCO Group laid off more than 400 people, according to The Calgary Herald, bringing the total group layoffs of the year to over 18,000 workers.