Encana moving to U.S. because of Canadian 'hostility' to oil and gas, says founder
The Canadian government has 'debilitated the industry', says former president and CEO, Gwyn Morgan
Encana was a Canadian giant. The oil and gas company's name was short for Energy Canada and its roots go back to the early days of the country.
But the company announced Thursday that it will be changing its name to Ovintia and moving its headquarters to the United States.
Encana's CEO says the move has has nothing to do with Canadian politics. But Gwyn Morgan, the company's founder, isn't so sure. He explained why in an interview with As it Happens guest host Megan Williams.
Here is part of their conversation.
After all the years you spent at Encana, how does it feel for you to hear they're moving to the United States?
Well, I guess you start with your personal feelings. As you said, I spent 30 years doing this. And my motivation for building the company to where it got to — especially when we did a big merger with the pan-Canadian group — was because there were a lot of companies in Canada being taken over by foreign investors and foreign companies, especially from the United States.
And so I felt, you know, maybe we can build a company that's the biggest, strongest oil and gas company headquartered in Canada, which we did. And therefore, we'd have no chance — really no chance — of being taken over.
But what I didn't, of course, anticipate is that, through government policy that actually debilitated the industry, it would find it necessary to kind of export itself, if I could put it that way.
In other words, rather than somebody else taking over the company and moving the headquarters, it did it by itself. And that's because, you know, it felt it had no choice with the business climate here in Canada for that industry.
What kind of blow is this for the Canadian oil patch?
Over the last few years, they've had so many blows. I think they understandably feel — universally pretty much throughout the oil patch, but most Albertans generally — that they've had a government, a central government, that is against their very reason for being.
So this is unfortunately another big, big kind of blow that they're enduring. And it's heartbreaking.
Encana CEO Doug Suttles was asked ... whether the decision had anything to do with the current political climate. And he said, "The answer is unequivocally no." He says that this is about opening the door to U.S. investors. Why don't you believe him?
Because I built the company from scratch to $60-billion market-value company that had shareholders around the world, including in the United States. And, you know, the reality is that we never had any problem at all accessing capital. But that was because there was a really positive business climate in Canada, and because we were a successful company with a lot of opportunity and growth.
I'm not going to criticize Doug, because I know what he has to do. He has to be kind of correct about it. He still has an operation in Canada. He can't come out and overtly say exactly what the reality is.
But the reality is that the business climate has forced Encana over the last few years to build assets in the U.S., reduce assets in Canada, with sales in Canada and purchases in the U.S., and move people.
And of the capital program — we had at one time like a $3- [to] $4-billion a year program in Canada, every year — has moved south, because if you can get the product on stream and if you're dealing with what you believe is a hostile policy climate in a country, you have no choice but to do that.
So I'm not going to criticize him for using his rationale, but I don't believe it.
Conservative leaders made a lot of promises to the oil and gas industry. But [Prime Minister] Justin Trudeau has the Trans Mountain pipeline under construction. Isn't that going to help raise the price of Canadian exports and protect the industry in some way?
It's a small thing, you know. It's important, but it's small. And who knows when it's good actually be on stream?
But the fact is that the combination of the business climate, of all the actions of the government — of killing three other pipelines, some of which would have been on stream, and one of which would have actually taken oil — to displace that foreign oil coming up the St. Lawrence.
For a large company like Encana, one of the first criteria of an investor is look at the business climate. And that has to do with the political climate as well. And if you develop a reputation as a country and as a government for being negative to a given business, investors simply are not going to invest.
It's all because of the investment climate.
Well, could it also be because it's cheaper to produce a barrel of oil there than it is in Alberta?
It doesn't do a whole lot of good to be cheaper if you can't move it. Alberta has a very efficient operation. In fact, Alberta can be totally competitive on a production basis, and profitable — with the United States that's for sure. But it's all about business climate. We're talking about investors.
Sixty-five per cent of Canadians voted either for parties committed to transitioning away from fossil fuels, or more specifically for parties investing in alternative energies. Is it not the government's responsibility to reflect the priorities of the majority of Canadians?
It depends on what you tell them. I mean, the reality is that fossil fuels are going to continue to increase in use in the world.
So all Canada's doing by destroying its own industry is giving those production barrels and that opportunity to countries that are quite frankly not nearly as — they don't have both the ethical system, and they don't have the human rights system and they don't have even the production efficiencies of Canada.
Interview produced by Kevin Robertson. Q&A edited for length and clarity.