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Alberta Production cuts heighten job-loss fears in oil-dependent Alberta towns

Local politicians and oilfield service providers in several communities in central Alberta worry that workers connected to the region’s oil wells could be off the job as early as Friday despite the provincial government’s decision this week to ease production limits.

The mayors of Bonnyville and Cold Lake said Thursday that they hadn’t heard whether Canadian Natural Resources Ltd. (CNRL) had changed its plans to temporarily shut down its ECHO pipeline, which could affect hundreds of workers at nearby wells, truckers and contractors who provide support services.

The company wrote to suppliers earlier this month warning that revisions to how the province’s recently imposed production limits are calculated meant it would shut down the pipeline, which transports heavy crude to the company’s blending facilities at Hardisty, Alta., for February and March.

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Premier Rachel Notley announced production cuts in December that saw 325,000 barrels a day shaved off the province’s oil production at the beginning of January. On Wednesday, the government announced it was easing those production limits by increasing production by 75,000 barrels a day for the next two months.

Mayor Craig Copeland of Cold Lake, a community of about 15,000 people northeast of Edmonton, said he had put in calls to CNRL on Thursday but had not heard anything in response. He said a shutdown or at least a reduction in activity appeared inevitable, though he was confident any disruption would be temporary.

“I think there’ll be a reduction if not a complete stop of the ECHO," Mr. Copeland said in an interview. “But they can quickly put that product back in the pipe.”

Ms. Notley and Energy Minister Margaret McCuaig-Boyd have defended the curtailment policy, which CNRL initially supported. Ms. McCuaig-Boyd said the decision to allow additional oil production for February and March was unrelated to CNRL’s complaints, but rather was driven by a reduction in the amount of oil sitting in storage tanks.

CNRL has not commented publicly about its letter to suppliers, the status of the ECHO pipeline or this week’s increase to production limits. On Thursday, the company would say only that it expects to provide an update on Friday morning.

The production limits, which affect 28 producers, were initially calculated based on each company’s highest six-month average from November, 2017, to October, 2018. The province later changed the formula for February, instead looking at producers' best single month over the same period.

CNRL said in its letter that the revised formula was unfair to the company and forced it to shoulder a disproportionate share of the production cuts. The letter urged suppliers to contact Ms. Notley and Ms. McCuaig-Boyd.

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The company has a history of weighing in on provincial politics and taking a confrontational stand toward the NDP government. When the New Democrats were elected in 2015, the company cancelled an annual day-long seminar with investors and said it couldn’t create a detailed business plan due to uncertainty created by the new government.

Responses from other producers to the curtailment policy have been mixed. Integrated producers with refining capacity, which benefit from low prices, objected to the measure, while producers such as CNRL and Cenovus Energy Inc. initially urged the province to order production cuts.

Kurt Muller, general manager of Jacknife Oilfield Services, which provides transportation and mechanical services, said nearly all of his company’s business is related to the ECHO pipeline.

“It’s really worrying because I have 80 people reporting to me and they’re all calling me and asking what’s happening tomorrow," Mr. Muller said.

“We’re talking about a temporary closure, but the way the oil and gas industry has been during this downturn, everyone is living paycheque to paycheque.”

He said even a short disruption could have long-term consequences if subcontractors or independent truckers miss payments on their transport trucks or mortgages.

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