An oil man recently pointed out to me that Calgary oil producer Renaissance Energy Ltd. has roughly the same value in the stock market as does gigantic Petro-Canada. Few people have ever heard of Renaissance, which started off in 1982 as a numbered company whose major shareholders included publicity-shy, talented Calgarians. Petro-Canada, on the other hand, is a household word that the federal Liberals launched with great political fanfare in 1975 to become Canada’s oil flagship. But the comparison of the two enterprises provides the most stunning example of the failure and waste that has accompanied most public enterprises in this country. It’s a disgrace that Petro-Canada, for all its billions in taxpayer subsidies, in terms of current stock-market value is only about 10 per cent bigger than Renaissance.
Canada is not the only country that has blown its brains out giving money to civil servants who don’t understand the marketplace. And Petro-Canada is not the only misadventure. Most of Canada’s public enterprises, from airlines to hydro utilities, have racked up billions in debts for us to pay for generations ahead. Similar misadventures occurred in Mexico, France and Britain. Many government enterprises around the world are on the block. That does not include the entire Communist world, whose incompetent public enterprises are slowly being transformed.
Liberal defenders will argue that PetroCanada, and the others, cannot be judged by financial criteria because they served publicpolicy purposes, too. But it is precisely that excuse which makes it doubly instructive to examine just how unnecessary Petro-Canada has been from any policy viewpoint.
Renaissance has achieved the goals that the Liberals claimed that they wanted to achieve, including securing Canada’s oil supply, increasing Canadian ownership and creating jobs and economic activity. By June, Renaissance’s 83 million shares traded at
Two Alberta free enterprisers, both former farmboys, have achieved goals that Ottawa sought through Petro-Canada
around $31 each or almost $2.6 billion in total value. Petro-Canada’s 246.5 million common shares, based on the portion that trade publicly for around $11.50 apiece, are valued at more than $2.8 billion. While Petrocan is still bigger, Renaissance is remarkable.
Petro-Canada, armed with its policy objectives and Ottawa’s purse, may have been impeded because of resentment in Canada’s Oil Patch, which may have prevented it from acquiring partners or hiring the best people. For years, Calgarians have referred to the Petro-Canada headquarters as Red Square and its former chairman, Bill Hopper, and others as commissars. The Liberals’ oil giant represented to Albertans the hated and incompetent face of public enterprise. And its intrusive headquarters in a city of free enterprisers was an affront to oil men who lived off a combination of wits and bank borrowings. Renaissance, in the 1980s, grew several blocks away in a building named after some other tenant.
Part of the dislike was partisan: Tory versus Liberal or socialist. But the underlying hatred also had to do with the fact that there was absolutely never any need to create a national oil company because of the way Cana-
da’s resource ownership is structured. PetroCanada represented a colossal waste of taxpayers’ money because it overpaid for assets bought from private companies and gained ownership of resources already owned by Canadians.
Unlike the United States, most resources in Canada are retained by the Crown or are publicly owned in some other way. For instance, the lion’s share of Canadian oil and natural gas deposits are in Alberta and the subsurface mineral rights, or actual resource ownership, on 80 per cent of the province’s mineral rights belongs to the Crown. The province leases these rights when they come up for renewal. Oil companies bid for them at regular auctions and strings are attached. Big foreign companies cannot snap up all the leases and simply sit on the lands. Leases contain drilling rules, depth specifications and always revert back to the Crown after a period of time or if certain requirements have not been met.
Once oil or gas is discovered, the governments may collect levies even on so-called freehold lands where the subsurface mineral rights are owned by the farmer or landholder. About 20 per cent of Alberta is freehold because homesteaders acquired the land before a change in land law in 1887, after which acquisitions excluded subsurface mineral rights. The same applies to all western provinces.
But on July 30, 1975, by act of Parliament, Ottawa created Petro-Canada to increase Canadian “ownership” in our oil industry, then went on a buying spree with our money. In 1976, the government bought Atlantic Richfield Canada Ltd., an oil production and exploration company, for $342 million; Pacific Petroleums Ltd. in 1978 for $1.6 billion; Petrofina Canada Inc. in 1981 for $1.5 billion; BP Refinery and Marketing Canada Ltd. in 1983 for $121.6 million; Gulf Canada Ltd.’s gasoline stations in 1985 for $611 million; Norcen Energy Resources Limited’s Edmonton refinery in 1986 for $301 million; and Inter-City Gas Corporation’s retail propane business in 1990 for $235 million.
Those questionable acquisitions add up to $4.7 billion. Add to that the constant losses over the years that Petro-Canada cost taxpayers and you have a king-sized boondoggle of billions which taxpayers are still paying interest payments on.
Renaissance began life in 1982 and in 1983 was led by a partnership between two Alberta farmboys, Ron Greene and Clayton Woitas. Greene came up through the business as a landman (who acquires leases and freehold lands for drilling) and Woitas is a petroleum engineer. They put together a talented team, which, through active exploration and not mere acquisitions paid for by a sugar daddy, has found substantial volumes of oil. And these two Alberta farmboys have made their shareholders, government, employees and suppliers rich doing so. They have achieved the goals that Petro-Canada failed to achieve. This is because politicians and civil servants have absolutely no business in the world of business. Not then, not now and not ever.
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