TransCanada Corp., hit by low oil prices and regulatory delays stemming from environmental opposition to some of its projects, says it will cut a fifth of its senior leadership positions, and in the months ahead lay off some rank-and-file employees.
The move from one of Canada's largest pipeline players, the company behind projects such as Keystone XL and Energy East, begins what is expected to be a grim period of layoffs in the energy sector this fall. Oil has lost more than half its value from its peak price last year, and virtually no one expects a quick recovery. The Canadian Association of Petroleum Producers says at least 35,000 oil patch jobs have already been lost in 2015.
Most of the job cuts have been at the companies that mine or drill for oil, while the pipeline companies have been less affected by $45-a-barrel oil.
Among TransCanada's recent troubles is uncertainty over some projects, including its $8-billion Keystone XL project, which is waiting for approval from the U.S. government. Many wonder whether the pipeline will ever be built. Keystone XL, first imagined seven years ago, has become a symbol in the fight against climate change and oil sands expansion, and the decision has been delayed many times. Hillary Clinton, the front-runner for the Democratic Party's presidential nomination, stated this week she opposes Keystone XL because it has become "a distraction from the important work we have to do to combat climate change."
James Millar, a spokesman for TransCanada, said on Thursday that the company must shed jobs to remain competitive.
"You have a combination of delays in building energy infrastructure coupled with lower oil prices," he said.
"You know the delays we've experienced with Keystone and some of the pushback we're experiencing with Energy East, and I would say that in North America in general, companies are facing pushback primarily from activists – not exclusive to but primarily from – activists that want to see fossil fuels kept in the ground."
TransCanada has 6,000 employees – about 4,000 in Canada. Its first phase of staff cuts came in June, when the company laid off 185 people from its major-projects division.
Employees heard on Monday that the cuts to senior staff positions will be made through layoffs and retirements – although it will not be clear for several weeks how many jobs will be affected. Mr. Millar said this round will include about 20 per cent of vice-president and senior vice-president positions. The cuts will even include a member of the executive leadership team, Jim Baggs, executive vice-president for operations and engineering, who will retire in the coming months.
After the cuts to senior leadership positions, the company will take a hard look at which rank-and-file positions can be trimmed. The entire process should be completed by the end of November.
The moves, he said, will ensure that TransCanada's three business units – natural gas pipelines, liquids pipelines and energy – remain competitive. He added that TransCanada has an ambitious growth plan that includes $46-billion in projects slated for completion by the end of the decade.
Mr. Millar said the job cuts are not related to any one project. But he said low oil prices mean TransCanada's customers – including oil and gas producers – are demanding that projects are completed more cheaply, since they often end up paying a portion of the capital cost.
Last year, TransCanada said delays in receiving U.S. approval for Keystone XL have increased costs by almost 50 per cent, to $8-billion, meaning customers who have signed up to use the pipeline would have to pay higher tolls. The proposed pipeline would carry 830,000 barrels a day from Alberta's oil sands to Gulf Coast refineries set up to process heavy oil. TransCanada chief executive officer Russ Girling has said delays could drive the cost to $10-billion.
And in July, the company said the $12-billion price tag attached to its Energy East project is expected to grow due to adjusting the pipeline's route in response to feedback from communities, governments and indigenous peoples, as well as higher construction costs. The project would ship 1.1 million barrels of crude a day from Alberta and Saskatchewan to refineries and port terminals in Eastern Canada.
In Calgary on Thursday, Alberta Premier Rachel Notley stuck to her decision not to advocate for Keystone XL, which she said would export upgrading and refining jobs as well as bitumen. But she added that she is committed to improving the access to world markets for the landlocked province's energy producers, "which means essentially getting at least one new pipeline built to tidewater."
While not naming Energy East or any other pipeline project, she said "your government is working on this matter through drama-free, ongoing discussions with our key provincial partners in British Columbia, Ontario and Quebec."