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Alberta bets on oil production cuts but industry remains divided on market intervention

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Premier Rachel Notley said it would be one of the toughest decisions that Albertans would make as a province.

And now she’s made it.

Beginning January, Alberta will impose mandatory production cuts on the energy sector for the first time in decades — a measure aimed at reducing an oil glut that’s punished the price of Canadian crude.

“In Alberta, we believe that markets are the best way to set prices,” Notley said Sunday night. 

“But when markets aren’t working, when companies are forced to sell our resources for pennies on the dollar, then we have a responsibility to act.”

Watch Notley explain why she believes production cuts are necessary:

Alberta Premier Rachel Notley answers questions from reporters following announcement of a temporary oil production cut in the province. 1:11

It’s an extraordinary intervention, a step taken with the encouragement of some — not all — oil producers. 

The hope is it will be temporary, short and effective — improving company cash flows, bolstering government revenues and staving off further layoffs.

‘Winners and losers’

It’s an imperfect solution, one that continues to divide the oilpatch and still appears to pose risks, including potential trade issues and negative impacts on future investment in the province.

“The government has, in its mind, the justification,” said Richard Masson, an executive fellow at the University of Calgary School of Public Policy.

“But to have a government intervene in a free market, which will create winners and losers, is just such a big step from the past 30 years of a deregulated marketplace.” 

Much of Alberta’s oil sector has been hit hard by steep discounts on Canadian crude. (Larry MacDougal/Canadian Press)

No question, the province is under significant pressure to find a quick fix.

Production growth and pipeline bottlenecks have contributed to an oil glut that’s weighed mightily on Alberta crude prices, cut into company cash flows and stung the province’s finances.

It led some producers — like Cenovus and Canadian Natural Resources — to call for mandatory production cuts.

Watch Notley’s oil production cut announcement:

Alberta Premier Rachel Notley has announced a temporary 8.7 per cent oil production cut, or decrease of 325,000 barrels a day, starting Jan. 1, 2019. 1:37

On Sunday, Cenovus CEO Alex Pourbaix commended the premier for making “the difficult but necessary decision,” while Canadian Natural Resources called the action “swift and bold.”

In contrast, companies with their own refineries and retail operations — Suncor, Husky Energy and Imperial Oil — maintain the market is working, pointing to the fact some companies were already reducing production.

“Our view remains that free markets work and intervention carries trade risks and sends a negative message to investors about doing business in Alberta and Canada,” Imperial Oil CEO Rich Kruger said in a statement Sunday. 

But with warnings about big job losses and a ballooning impact on the provincial treasury, the premier clearly felt she had to do something fast.

A production cut of 325,000 barrels a day is a major step that will affect 25 larger bitumen and conventional producers.

If it works, bloated inventories will shrink and discounts will return to more normal levels over the coming months. 

How will the market respond?

But this move comes with some considerable challenges, questions and, as some critics have said, the potential for unintended consequences.

For one, there are potential technical and operational issues that will need to be addressed. For example: If companies have commitments on pipelines, how do they meet those obligations if they’re also cutting production?  

Hundreds of people gathered to protest federal Finance Minister Bill Morneau’s appearance in Calgary last Tuesday. (Dave Gilson/CBC)

Government officials said they have provided latitude for producers to manage the cuts by assigning them on a per-operator basis, rather than on individual wells or projects.

But there are also questions of how the market will respond — not only to what happens to oil prices but, more broadly, how investors or companies will respond to such government intervention.

Both Husky and Imperial said they would comply with the regulation but continued to warn of the impact Sunday evening.

Imperial’s Kruger said the province’s intervention doesn’t appear to recognize the investment decisions companies have made to access higher-value markets.

“We regularly manage a wide range of risks associated with technical, operational and market considerations,” he said.

“Now, government has introduced a new risk which will unfortunately need to be considered as it relates to future investments.”

Still, some analysis has suggested mandatory cuts could send a positive message to the market.

“This policy option could bolster the government’s flexibility in responding to other sudden disruptive events,” said a Scotiabank Economics report last month.

“The flexibility to respond to unforeseen events and keep the industry on steady footing would also signal to the market that the distressed discount situation is under some degree of control.”

Yet others worry it could set a precedent for government intervention that the oilpatch might later regret.

‘The devil will be in the details’

Husky Energy also raised the prospect of potential trade issues with the government’s move.

“We believe the market is working and view government-ordered curtailment or other interventions as possibly having serious negative investment, economic and trade consequences,” said Husky spokesman Mel Duvall in a statement.

“The devil will be in the details.” 

Prime Minister Justin Trudeau and Minister of Natural Resources Amarjeet Sohi have both said they are listening to the energy industry, but critics say they aren’t doing enough to help the sector. (The Canadian Press)

Indeed, it will be interesting to see how U.S. refiners — who have benefited significantly from the discounts — will respond to Alberta’s decision.

As significant as Sunday’s news was in Alberta, it’s unlikely to reduce calls on Ottawa to help build new pipelines and stop legislation that might make them more onerous to construct, namely Bill C-69.

“The problem is that we don’t have enough pipeline capacity,” said Martha Hall Findlay, president of the Canada West Foundation. “The problem is how did we get here in the first place?”

For many Albertans, the big question will be what happens next.

With a month to go before the regulations take effect, the response of the market, energy companies, investors and U.S. refiners in the coming weeks will be telling. There will also be hope that job cuts don’t come.

The premier will hope she’s found an answer to Alberta’s crude problems, but many challenges still lie ahead. 

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Real Estate

The cost of renovating your bathroom in Toronto in 2021

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Home renovations can be a big task, especially bathroom renovations where you have to work with either an awkwardly shaped space, or one with lots of pipework and very little natural light.

Nonetheless, getting a bathroom renovation by Easy Renovation to change your existing bathroom layout, improve the ambience or add more natural skylights can be worth all the trouble. But determining how much a bathroom renovation would cost is important while setting a budget.

The pandemic has changed a lot of things with social distancing rules, working from home, and for some, being made redundant. Therefore, having a complete grasp of the financial implication of a bathroom innovation is very important.

Owning your dream bathroom can be made a reality and the good thing is, regardless of your financial situation, there are always available options. If you also decide to put up your property for sale in the future, a bathroom upgrade would be a great investment—as it would add significant value to the property. Your bathroom renovation project, like every home renovation, can either be very affordable or extravagant, but one thing is certain, you’re bound to have a more refreshed, stylish and modernistic space.  

Looking through detailed sketches of luxurious and expensive bathrooms can be quite tempting, especially when you’re on a budget. However, your bathroom can be equally transformed into something that looks just as modern, stylish and refreshing but without the heavy price tag.

Conducting a partial bathroom renovation means you only have to change a little part of your existing bathroom rather than tearing it down and starting from scratch. If you intend to carry out this type of bathroom renovation in Toronto, depending on the size of your bathroom, you can spend between $1,000 – $5,000. With a partial bathroom renovation, you can save money by tackling smaller problems that exist in your present bathroom—or you can just upgrade a few of its features.

Partial bathroom renovations are quite affordable and would leave your bathroom feeling new and stylish without being time-consuming or a financial burden—which is important considering the economic impact of the pandemic. Repainting the bathroom walls, replacing the tiles on the floor and in the shower area are examples of partial bathroom renovations which is the cheapest to accomplish.

A more expensive and popular bathroom renovation is the standard 3- or 4-piece renovation. This renovation type involves a lot more services that are not covered by a partial renovation budget. To execute a standard bathroom renovation in Toronto you need a budget of about $10,000 – $15,000.

Unlike with a partial renovation, you would have to make a lot more changes to various elements of your bathroom without the hassle of changing the overall design. You can easily restore your current bathroom into a modernistic and classy space that fits your existing style. Making changes to more aspects of your bathroom is quite easy since there is more room in your budget to accommodate it.

A standard 3- or 4-piece renovation includes everything in a partial renovation plus extras such as revamped baseboards, installing a new bathroom mirror, buying new lights, installing a new vanity, changing the toilet, and buying new shower fixtures.

If you’re one of those looking to make a complete overhaul of your existing bathroom, then the option of a complete bathroom remodel is for you.

Unlike a bathroom renovation, remodelling means a complete change of your current bathroom design and layout for one that is newer and completely unrecognizable. The possibilities when remodelling a bathroom are endless especially when you have a large budget of over $15,000. That way, you can get the opportunity to create the perfect bathroom for yourself.

In addition to all that’s available with a standard bathroom renovation, bathroom remodelling allows you to make bathtub to shower conversion, relocation of plumbing, relocation of the toilet, reframing the bathroom and even relocating the shower.

In conclusion, a bathroom renovation can be a very important upgrade to your home and depending on the features that you decide to include, in addition to the size of your bathroom, this would influence the total cost of the project.

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7 Tips For First-Time Home Buyers In Calgary

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Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market

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The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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