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What’s next for oilpatch hit by ‘perfect storm’?

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Alberta oil producers have been struggling with low crude prices for months, but the situation leapt to national prominence this week as prices skidded below $14 US a barrel and some companies began calling for the provincial government to mandate production cuts.

Opinion on whether Premier Rachel Notley should intervene in the marketplace is divided — not all companies agree that the market is failing. But the fact the idea is being raised at all highlights the extraordinary concern now surfacing in the oilpatch.

These kinds of interventions weren’t even brought forward during the 2014 oil price collapse that lead to thousands of job losses.

There’s much at stake for the industry and government, which benefits from taxes and royalties, says Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy. He estimates that the situation is costing the provincial and federal governments, cumulatively, tens of millions of dollars every day.

“It’s a huge loss for all of us,” said Masson, former head of the Alberta Petroleum Marketing Commission. 

“The challenge is, as this loss continues, people are going to have to scale back on the number of barrels produced and it’s going to impact jobs in the near term as we go through this pain.”

CBC News asked Masson — who has three decades of experience in oilsands development, energy marketing and finance — about how the oil sector arrived at this situation and the idea of mandated production cuts.

The interview has been edited for length and clarity.

Richard Masson is the former head of the Alberta Petroleum Marketing Commission and an executive fellow at the University of Calgary’s School of Public Policy. (Anis Heydari/CBC)

Why are we at this point where the price of Western Canadian Select oil is trading so low?

“A few years ago oil prices were quite strong and there was a lot of development in the oil sector. A lot of big oil sands projects were approved. Many of them take four years to construct and employ thousands of people during that process. A number of them have actually started up in the last year or so.

“There’s been a lot of big projects come on stream, bringing on hundreds of thousands of barrels a day of new production. The challenge has been the pipelines that folks were counting on to move that production to market have found either cancellations or delays.

“So we end up with a lot of production coming out of Alberta that doesn’t have a physical way to get to a good refinery that could process process it.”

Canadian drivers are seeing the lowest prices for gasoline in months, as a slump in the price of crude oil has hit gas stations. That slump though has been a big blow for the industry as the price of oilsands crude has fallen to a record low of less than $14 a barrel, sparking calls for production cuts and government intervention. 4:39

Since September prices have really crashed. What’s happened more recently? 

“There’s been refineries go through a process called a turnaround where they have to take down their processing units and typically change out catalysts to make sure everything is going to be safe. That can last a period of weeks. So there are big refineries in the U.S. and the Midwest — in Minnesota for example — that have gone down that typically process a few hundred thousand barrels a day of Alberta’s bitumen production.

“So there’s even less of a market right now than there typically is because of those turnarounds. We have the challenge of increasing production from from new projects, no new pipelines to move it to market, and at the other end of the line some refineries that are not online making sure that the market isn’t even there for what we had intended to produce. It’s made it into a perfect storm.”

How long might this perfect storm last?

“The challenge is we’ve filled up all the storage that’s available and we don’t have any near-term options to reduce that storage. So people are trying to ramp up rail but that’ll take a period of months — to ramp up rail exports. So it’s unclear how long these big differentials of $40 to $50 dollars a barrel are going to last. Clearly we’ve got to get the market back in balance and then start to drive down inventories for us to get back to the normal kind of $12 to $15 per barrel differential.”

We know that some of those big refineries are going to come online shortly. Does that make much of a difference?

“Well, I sure hope it does. I mean we’re losing so much money as a country right now because we’re essentially getting $15 a barrel for our Western Canadian Select production. So if the big refineries coming back online can help that, and if new rail can help, maybe we’ll move into the high $30s but it’s still probably a tough go for the next few months until the supplies from Alberta balances back up with where it should be.”

This situation has led some companies to talk about government needing to step in and mandate production cuts. Has the province done anything like this before? 

“Folks recollect back to when Peter Lougheed turned down the taps in response to the National Energy Program and reduced exports out of Alberta by 15 per cent. However, we haven’t had to do anything like that for a very long time. 

“There are risks involved with trying to turn back production. They would affect different companies differently. So some would be supportive; some would be against. Companies have different commitments on pipelines. If you don’t give them all the production that they are committed to down a pipeline, that’s not a good situation for that particular company. The production reservoirs can be impacted if production is turned down, so you need to plan.

“Oil is traded in the marketplace, and so you’ve got to be careful about any information leaks around these kind of things because people could use it to their own financial advantage. So the government, I’m sure, is giving serious consideration to these ideas, figuring out if it’s possible. But there’s a lot to think about.”

What do you think the likelihood is that we could see mandated production cuts?

“I think it’s difficult to say whether this is going to happen or not. But I do know Alberta has to be very motivated to try and find a solution. As I said, we’re losing — as a province and as a country — so much money right now by selling our product way below market prices that it’s unprecedented.”

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Window repair or replacement is the responsibility of the condo corporation

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If the windows in your condo are hazy, drafty, or have rotting frames, it’s an indicator that they need repairs or outright replacement.

However, under the Condominium Act, it is the responsibility of the condo’s board to carry out such changes as a replaced window is a common element.

“Under the Condominium Act, a declaration may alter the maintenance or repair obligations of unit owners and the corporation but cannot make unit owners responsible for repairs to the common elements,” said Gerry Hyman is a former president of the Canadian Condominium Institute and contributor for the Star.

“A declaration for a high-rise condominium invariably provides that the unit boundary is the interior surface of windows. That means that the entire window — whether it is a single pane or a double pane — is a common element. Necessary repairs or replacement of a broken pane is the obligation of the corporation.”

According to Consumer Reports, selecting an installing windows replacement can be very overwhelming for homeowners. Therefore, if you aren’t covered by your condo’s corporation, it would be necessary to hire professional hands.

Wood, vinyl and composite windows need to be tested on how they can withstand various natural elements. For wind resistance, a window can be very tight when it’s warm but get quite cold too—especially when it begins to leak a lot.

Whatever the case may be, the bottom line remains that replacement windows can save you heating and cooling costs, but it’s best not to expect drastic savings.

Additionally, while getting a new window might help you save on your electric and gas bills, due to their expensive cost, it may take a long time to offset their cost.

Mid-last-year, the government withdraw a $377 million Green Ontario program that provided subsidy on windows to installers and repairers. Window companies had to install energy-efficient windows in order to qualify for the government subsidy that pays for up to $500 of a $1,000 to $1,500 window.

Due to the largely generous subsidies from the government under the Green Ontario program, a lot of window dealers were fully booked for months—even after the program had ended.

“We’re fine with the program ending, we just need more time to satisfy consumers,” said Jason Neal, the executive director of the Siding and Window Dealer Association of Canada, the industry group representing window dealers in a report.

According to Neal, the Progressive Conservatives acted hastily, making massive changes with no prior notice.

“No notification was given to us by anyone,” he said, noting he learned about the change through one of his dealers.

“It’s created a ripple effect.If they had just given us notice we would have pushed that down the line from the manufacturer right into the dealer right down to the consumer.”

Neal noted that he wasn’t particularly sad to see the Green Ontario program end, as it was “the worst rebate program in the history of the window industry.”

“It’s been horrible,” he said. “$500 a window has created such hysteria.”

However, despite the program ending about a year ago, numerous homeowners have been contacting window dealers consistently with concerns that they might not be able to afford replacement windows without the government’s subsidy.

“I understand their concern,” said window dealer Chris George. “I would suggest they reach out to their local representative of the government in their riding and let them know about their concerns.”

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7 Vancouver Real Estate Buying Tips

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The real estate market in Vancouver is turning around for good for everyone looking to purchase a home.

Previously soaring prices are now beginning to ease up, making it a perfect time for buyers—with real estate agents already getting ready for a very busy spring and summer season.

However, before splashing cash on a new property, there are some very important tips you need to know to ensure you make the most of the buyer’s market.

Here are some few expert tips that would guide you when purchasing a home in the sometimes frustration Vancouver seller’s market.

  1. Get adequate financing

It is very important that before you make the move to purchase a property, you put into careful consideration your credit score.

Normally, home buyers with lower scores use the secondary mortgage market to finance their purchase, as they’re more likely to pay a higher interest rate.However, it is advisable to get loan approval long before purchasing the house. This way, you are fully aware of how much you are able to spend—but never be tempted to borrow the maximum amount of money available.

“What’s your mortgage payment that you’re comfortable with? And take into the fact the taxes you’re going to have to pay, if it’s a strata – what the maintenance fees are, if it’s a home what type of maintenance are you going to have to pay in the future?” said Phil Moore, president of the Real Estate Board of Greater Vancouver in a report.

Always be careful of the type of loan you secure and ensure that you can comfortably afford it over a long period of time.

  1. Get a real estate agent

Buying a property without professional help is a very risky move and can be likened to choosing to represent yourself in court without a lawyer. While you might trust your negotiation skills, only realtors are permitted to present offers directly.

Therefore, it is necessary to get a professional real estate agent in the area to represent you. So, screen a few agents and select the best one who has in-depth knowledge of the markets and has a great reputation.

“They’re there to protect you. They’re there to walk you through each step of the process,” Moore said.

  1. Sign up for automated alerts

Most—if not all—realtors have access to the Vancouver real estate board’s database which is updated approximately two days before the public MLS website.

Therefore, you can request from your realtor to sign you up for automatic real-time alerts of all new listings. Doing this gives you an edge as you’re among the very first to know about new properties.

  1. Do a thorough inspection

After receiving an alert for a new listing, it is necessary to push almost immediately for an inspection from your realtor. In this current market, buyers now have time to make an inspection.

Making a quick inspection eliminates any surprises—as there could be major maintenance or repair issues that could spring up. Therefore, you can now table your offer based on the outcome of the inspection, with clauses about claiming your damage deposit back if everything isn’t as was advertised.

Additionally, if you notice that renovations were done, you need to be sure that it was permitted work and carried out appropriately. Failing to do this would ultimately lead to further cost down the line and simultaneously affect the resale value.

  1. Have a back-up plan

There’s always the possibility that everything may not go as smoothly as you’d want. From the inspection being a failureto the property not living up to your expectations—or not being able to agree on the closing date that matches with your needs.

However, a professional real estate agent will definitely help you get past all of these things. If you plan on selling the property as you buy, you can table that and make it part of the deal.

“You’ve got an option, especially in a buyer’s market: you can put in an offer subject to selling your place. So maybe you want to have a place lined up,” Moore added.

Additionally, building contingencies into your buying plan is necessary. Things such as unexpected delays in closing the deal, closing cost and moving costs that could result in added living expenses if that’s your permanent home.

  1. Don’t fall for the buyer frenzy

The Vancouver market buying frenzy that caused a serious climb in the prices a couple of years ago has ended. Thus, it is important not to get caught up in bidding wars with properties that have been deliberately under-priced—with the hope of initiating multiple offers.

“Some of the sellers have been on the market for over a year and they’re eager to sell. So what I’m saying to consumers is: you have a lot of choices, you’re in the driver’s seat, let’s go out and take a look at what’s available,” said Moore.

  1. Never be wary of multiple offers

When purchasing a property, don’t be afraid of multiple offers as you have the same opportunity as anybody else.

Typically, there are just a few offers below the asking price: a couple priced fully, and two or three above the asking price—depending on how close the fair market value is from the asking price.

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Do you know what kind of condo you’re buying?

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(NC) Condominiums can come in all shapes and sizes. But it’s important to know that not all condos are created equal when it comes to warranty coverage.

Whether you’re buying a condominium townhouse, loft-style two-bedroom or a high-rise studio, they are all classified as condominiums if you own your unit while at the same time share access (and the associated fees) for facilities ranging from pools and parking garages to elevators and driveways, otherwise known as common elements.

The most common types of condos are standard condominiums and common elements condominiums. The determination of how a condominium project is designated happens during the planning stage when the builder proposes the project and the municipality approves it.

When you’re in the market to buy, you need to know how your chosen condo is classified because it affects the warranty coverage under the Ontario New Home Warranties Plan Act. Standard condominiums have warranty coverage for units and common elements, but common elements condominiums only have unit coverage.

How could this affect you as the owner? If your condo complex has underground parking and, for example, there are problems with leaks or a faulty door, the condo designation will determine whether there’s warranty coverage.

If your unit is a standard condominium development, then the common elements warranty may cover the repairs. If it’s a common element condominium development, then repairs might have to be covered by the condo corporation’s insurance, which could impact your condo fees or require a special assessment on all the owners.

To avoid surprises, you should have a real estate lawyer review the Declaration and Description attached to your purchase agreement to be sure that you know the designation and boundaries of the unit you’re looking to purchase. Find more information on the types of condos and their coverage at tarion.com.

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