Crude Observations

Scandal! But not what you think…

I know all of you think I am some loser who sits around all day reading technical articles about oil & gas, energy policy and energy services, while also spending way too much time on twitter debating politics from all sides of the aisle. And that armed with all that, I sally forth and spend the balance of my time holding industry and the political establishment to task – critiquing their policies and market interpretations, busting myths, spreading truths. The usual blog hero stuff.


And you what? You would all be absolutely right. In my dreams, I am all that and more.


And that more part is what we are going to be looking at today, February 29, 2019, because in addition to being a crackpot, I am also a crackerjack investigative journalist and I have an expose, a story so explosive that it could take down the highest levels of political office in the country. It’s a tale that runs through the boardrooms of Houston to the depths of the Great Bear Rainforest to highest peaks of the Rocky Mountains and involves a cast of characters that includes ruthless profiteers, malleable judges and greedy, corrupt politicians. So, I encourage you to follow this story as it unfolds – a true testament to this day – Friday, February 29, 2019.


I will first caution that this has been told to me in the strictest confidence, some names have been changed to protect the innocent and that all environmental laws were respected in writing.


So, what follows, to the best of my ability, is a transcription from a series of recent interviews I conducted with a contact of mine, a man who I have decided to call Mr. Big, a consummate insider, bon vivant, deal-maker, mover and shaker and, ironically, now turned anonymous whistleblower. Some of this is recitation of facts and some of it is dramatic first person accounts of events this individual attended.


It is remarkable. So remarkable, it may make you forget about Jody Wilson Raybold, Michael Cohen and Donald J. Trump. This my friends, is his story.


Crude: So, for the record, can you tell us a little bit about yourself?


Mr. Big: Well, I don’t know what there is to tell, I’m probably headed for witness protection so I probably shouldn’t say too much. How about that I am someone who was in a position to know things and to get things done. I got around, saw things, heard things, did things. Stuff I am not proud of, but it is what it is. Politics and business are rough and when combined – watch out! I really can’t say much more than that, since I am still under several forms of investigation.


Crude: OK, thanks, I think. Evasive, and not really useful, but whatever. OK, tell me a bit about your story.


Mr. Big: Well, my story begins in 2013 in a Houston Texas boardroom where the management of Kinder Morgan had gathered to finally approve for submission the completed application for the expansion of their TransMountain Pipeline system. This is the application that is to be delivered to Canada’s National Energy Board where, along with a series of hearings, it is expected to be deliberated, yet ultimately approved and sent for consideration to the Federal Government for final approval. Lots of cigars were being smoked and high fives were being exchanged all around when all of a sudden one of the executives received a phone call that will likely alter the course of Canadian history.


Crude: OK then. That’s a little dramatic. What was this call about?


Mr. Big: Look, who’s telling the story anyway? It will all come out in in good time. So this phone call happens, there’s a bit of whispered conversation on the side, the mood darkens, but the party goes on. Now, fast forward a bit and we are back in Canada. The contentious TransMountain Pipeline expansion is being reviewed by the NEB and from all appearances, it’s going OK albeit a bit contentious, although nowhere near as much as Northern Gateway.


In early 2014, I get a phone call from a burner phone with a Montreal areas code and soon find myself visiting the NEB in Calgary and delivering a no-questions asked paper bag. Shortly thereafter, the Northern Gateway pipeline receives approval, but quickly the wheels start to come off. First, the energy sector collapses and investment starts to flee Canada. Then in maybe the biggest shock, an anti-fossil fuel, pro carbon tax NDP government of all things is elected in Alberta. Finally, the Conservative government of Stephen Harper loses the Federal election, ceding the national stage to the “not ready yet” virtue signalling, enviro-drama teacher Justin Trudeau and his rascally Rasputin – the scheming Gerry Butts.


And all these parties are seemingly lined up against the pipelines and now the green-leaning anti-fossil fuel crowd is leading the show. Doomed, right? Maybe, but not in the ways that you think perhaps.


Because already in early 2015, presumptive prime minister Trudeau was using back channels to contact the judges on the Federal Court of Appeal who are hearing the Northern Gateway case and promising them media and political cover if they were to, you know, find against it. And in September of 2016 the FCA did just that, allowing the Trudeau crew to pull the permit and Enbridge to shelve the project, never to see the light of day again.


Meanwhile, while all this is going on, Transmountain hearings have been trucking along. Rumour has it that the PMO is, of all things, staying in regular contact with the NEB all this time, looking for updates. Ultimately with enough prodding (and a few more paper bags courtesy of yours truly) the NEB approves the pipeline sending it to Cabinet where pretty much everyone assumes that it will wither and die.


I wasn’t in the room for the deliberation, but I have heard that while there was vigorous debate in Cabinet there was also a lot of arm-twisting and ultimately, thanks to the influence of the PMO, the PCO, surprising support from Quebec MPs (hmm ) and the PM, in November of 2016 the pipeline is approved. And then, in January of 2017, after a number of visits by myself between Alberta and BC to discuss “revenue sharing”, Christy Clark approved the project on behalf of the province of British Columbia.


Of course at the same time I have been in constant contact with the proponent who is getting increasingly nervous about timelines, escalating costs, hands out at all levels of government and near constant protest affecting the status of the project.


Crude: OK, so not much more than what we already know. Aside from a little political arm-twisting, some small bribes and the involvement of the PMO, which appears appropriate given all these good paying middle-class jobs, what else do you have?


Mr. Big: Oh ye of little faith. Strap yourself in. The next part goes fast and there’s a lot of moving pieces.


Shortly after the approval, a BC election fluke happens and the John Horgan NDP are elected and form a coalition government, surprisingly supported by Andrew Weaver and the Green Party. Or is it a surprise? Unbeknownst to many, the PMO mobilized a strike team just after the election and I was asked to pay a visit to one Andrew Weaver post-election and suggested to him that it might be good for the green cause if he were to support the NDP.


Shortly thereafter, (after further prompts from the PMO) vowing to use every tool in the tool box, the BC government joined the court case that had been filed with the Federal Court of Appeal to overturn the NEB’s approval, and launched a reference case to see if it could overturn the ability of Alberta to export oil through British Columbia and generally act like a fly in the ointment. I hate to say I had any part in that but the Federal government then doled out transportation cash to the province like it was going out of style. Come to your own conclusion.


Lost in all this noise, the PMO stealthily intervened in the appointment of the judges for the appeal, ensuring that the key judges that served on the Northern Gateway file are there. While many consider this appeal a non-issue given the strength of the application, the new “consultation” process the Liberals implemented and the general liberalliness of the Trudeau government, they are mistaken. I’m tasked with participating in the consultation process as a “representative” but spend most of my time playing Candy Crush and posting pictures on Instagram, in essence torpedoing any chance the consultation will be found adequate or meaningful. During one of the meetings, as asked, I innocently ask “what about the whales?” hoping to start a new line of discussion.


In addition to this, I had been instructed by the PMO to keep up the pressure on the project in Burnaby, so I paid a visit to the mayor of Burnaby and suggested to him that a little protest might not be a bad thing and that a certain JT would make it worth his while. So he also joined in the lawsuit and started kicking up even more noise about the project. Slow footing approvals was my idea, because we felt we needed to make the NEB look bad. Also, it didn’t take much more than a few phone calls to get some First Nations protestors to set up shop at the TransMountain terminal in Burnaby. A phone call to the Tides Foundation to tell them about a sizable US NGO donation and we had a full blown protest happening.


The RCMP was dispatched to intervene, but upon receiving a phone call from the PCO pointing out the bad optics of the situation, they stayed back, avoided making any arrests and generally letting the protestors run amok.


Also in 2017, I am encouraged by a member of the Prime Minister’s inner circle to fly to Edmonton to let Premier Rachel Notley know in “no uncertain terms” is she to enact and use any legislation to poke BC in the eye – “nod, nod, wink, wink”. We discussed both wine and fuel embargoes/restrictions. Ultimately I left it up to her, but it is strongly suggested (and supported by confidential calls from JT) that there will be extra federal dollars for Alberta (maybe even the Olympics) if she makes a huge deal out of the conflict and is as over the top as possible.



Fast forward again to the spring of 2018, post all for show wine embargo and I find myself back in Houston. It’s another executive meeting and the discussion revolves around deciding once and for all what to do with this seemingly snake-bit TransMountain project. Let’s face it, in the amount of time we have been messing around, we could have had three Transmountains. As the discussion goes on, my cell rings and I recognize the number. Gatineau. Moment of truth.


“For you” I tell one of the executives and toss him my phone. He left the room and for quite a few minutes he can be seen talking quite animatedly until he finally hangs up, pauses dramatically and then hurls my phone down the hallway, smashing it to pieces in the process.  He then came back in the room, looked at the CEO and shook his head emphatically “no” before slumping into his chair in defeat. “Sorry about the Blackberry dude.”


Crude: Wait, so you got a mystery call from Canada while you were in the Kinder Morgan boardroom in the months before the Feds took it over?


Mr. Big: Shush. Who’s telling this story anyway? Where was I? Oh right. It’s at this point that the CEO of Kinder Morgan says to the assembled group what they thought they would never hear, and I’m paraphrasing: “I am so sick of this BS and interference out of Canada – if they don’t want us or our project, let them find someone who does! Tell them I want certainty by May 31 or we are out!”


So at this point, the whole shebang is clearly up in the air and Cabinet has to meet in a panic to discuss what to do. At the same time a massive lobbying effort is underway with PMO, the PCO, Cabinet members. Meetings by the hundreds. Out of this, it ultimately emerges that the Finance Minister, supported by the Prime Minster (and Gerry Butts) agree that the only viable option is to purchase the pipeline. Which they do – for $4.5 billion. With the deal to close by end of summer 2018. In the meantime, Kinder Morgan is allowed to continue its approved construction work. It is hard to state how grateful Kinder Morgan is to escape this madness.


During this period, there are apparently multiple visits to the Federal Court of Appeal on behalf of the Federal Government by pretty much anyone who has a pulse trying to influence these judges to rule against the TransMountain Pipeline notwithstanding the fact that the judges are actually inclined to rule in favour of the project.


Never one to miss the dramatic, in one of these secret meetings, the PMO convinces the court to issue their decision on the same day the Kinder Morgan shareholders capitulate and hand the project over to Canada. The Federal government, and by extension, the PMO and the Prime Minster basically hold the fate of Alberta in their hands. Back to the drawing board with the consultations and, ironically, a review of my whale question by the NEB, which, not surprisingly, was approved. Meantime, the Federal government is TransMountain and detailed engineering reviews begin.


So we are almost caught up, right? And last week, the NEB approval comes down. That same day, I am directed attend a secret meeting with Alberta Premier Rachel Notley, Opposition Leader Jason Kenney, the President of TransMountain, the Premier of Quebec and a secret representative of the PMO (distinguishing feature – he was a one-armed man) where I witnessed the delivery of the following message from no less than the Prime Minister himself …


“Alright you idiots. The NEB approval is in. We have 90 days of deliberation and need to finish the First Nations consultation, but we think we have that in the bag because we are just going to give the nations along the route some equity in the project. So. We own the pipeline. We own the judges. We’re going to win re-election. We have our carbon tax. And we have introduced legislation that means that there will never be another major pipeline project in Canada again. So, if you want to save this province with this pipeline, you need to suck it up and get with the PM’s program. That means Jason you are getting a Federal carbon tax and Rachel you can’t take credit for anything – it’s all Trudeau, all the time. We’re moving forward with this project on our terms and you’re going to shut up about it or we bankrupt the province.”


At that point his cell rang and he answered it then told the two stunned Alberta politicians that “the big guy” wanted to talk to them and off they went huddled around the phone and shortly came back, faces ashen.


“What happened,” I asked?


Shaken, Ms Notley said “He said it wasn’t personal, it was always all about creating good paying middle class jobs”


“And then,” Mr Kenney added, “He said one other thing. He said… He said… He said he’s appointing SNC Lavalin as EPCM to oversee the project, and moving the project head office to Montreal.”


Crude: What!?!?!?


Mr. Big: Yup. Remember that phone call? That fateful first phone call? It was from Trudeau. He told the execs in Houston back in 2013 that he expected to be prime minister by the time the project was underway and asked if the TransMountain people would consider using SNC Lavalin and when the execs said no, the guy said “Just watch me”. He master-minded the whole thing and had me do his dirty work all the way through, until I just couldn’t take it anymore and had to tell someone. He almost pulled it off.


Crude: Well what now?


Mr. Big: Who knows. I know I’m getting three squares a day for a minimum of three years for my role. But hey, maybe when I get out there will be a pipeline.



Preposterous? Sure. Absurd? Yes.




Up until last week I would have said no. But after watching events unfold over the past several weeks, I have no doubt that certain elements in the Federal government would twist themselves into a pretzel to help favoured companies win work, avoid penalties and curry favour. All in the name of jobs, re-election and pwer. Integrity and ethics optional.


I have often joked to people that if Quebec were the centre of the oil and gas industry in Canada we would have the largest energy sector in the world, albeit with slightly less stringent regulation and more corruption because, well that’s just how things work in Quebec.


Come to think of it, maybe we have hit on the way to solve all of this. How about we say screw it and tell TransMountain to just go ahead and hire SNC Lavalin. I’m sure their behaviours won’t cross any gender lines. But you know what? Once they are in there it can’t be shut down can it? Because that would mean jobs. The important Quebec based ones, preferably of voting age.


Plus that one other really important job, the only one that apparently matters.


Prices as at March 1, 2019 (February 22, 2019)

  • The price of oil was rose early then fell on a tweet. Who needs fundemantals!
    • Storage posted an increase
    • Production was up
    • The rig count in the US was down marginally
  • Withdrawals from storage were much higher than anticipated for natural gas. The market was unmoved
  • WTI Crude: $55.74 ($57.17)
  • Western Canada Select: $43.99 ($44.37)
  • AECO Spot *: $3.42 ($3.28)
  • NYMEX Gas: $2.838 ($2.710)
  • US/Canadian Dollar: $0.7594 ($0.7561)



  • As at February 22, 2019, US crude oil supplies were at 445.9 million barrels, an decrease of 8.9 million barrels from the previous week and 22.4 million barrels above last year.
    • The number of days oil supply in storage is 27.9 compared to 26.2 last year at this time.
    • Production was up for the week at 12.100 million barrels per day. Production last year at the same time was 10.283 million barrels per day.
    • Imports fell to 5.917 million barrels from 7.522 million barrels per day compared to 7.282 million barrels per day last year.
    • Exports from the US fell to 3,359 million barrels per day from 3.607 million barrels per day last week compared to 1.445 million barrels per day a year ago
    • Canadian exports to the US were 3.047 million barrels a day, down from 3.288
    • Refinery inputs rose during the during the week to 15.90 million barrels per day
  • As at February 27, 2019, US natural gas in storage was 1.539 billion cubic feet (Bcf), which is about 22% lower than the 5-year average and about 9% less than last year’s level, following an implied net withdrawal of 166 Bcf during the report week
    • Overall U.S. natural gas consumption fell 2% during the report week
    • Production for the week was flat. Imports from Canada increased 2% from the week before. Exports to Mexico increased 3%
    • LNG exports totaled 27.8 Bcf
  • As of March 1, 2019, the Canadian rig count was down 1 at 211 (AB – 145; BC – 16; SK – 48; MB – 2; Other – 0. Rig count for the same period last year was 303.
  • US Onshore Oil rig count at February 22, 2019 is at 843, down 10 from the week prior.
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States were up 1 at 195.
    • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
  • Offshore rig count increased 3 to 22.
    • Offshore peak rig count at January 1, 2015 was 55

US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 68%/32%

Trump Watch: Met with Kim. Not so good. Cohen testimony. Not so good.

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