Sunday, January 27, 2019

Adaptability in Canada’s Oil Patch

Like many last month, I was intrigued with the media coverage of CN Rail’s CanaPux. “Amid an oil glut and pipeline shortage to U.S. refiners, Canadian National Railway Co. hopes to be sending pellets of solidified oil sands bitumen to overseas markets within three years.” (“Plan for oil pellets moves ahead with eye to easing bottlenecks, tapping new markets,” Globe & Mail, 27 Dec. 2018, B1,B8.)

CanaPux are a “…CN innovation under development for an environmentally secure and protected way of transporting bitumen or heavy crude.” Looking about twice the size of a single-serving yogurt container, the blackish “puck” floats in water, is not combustible or explosive, and is “environmentally inert” according to company website www.cninnovation.ca.

No doubt Canada’s oil patch is full of innovation. But, for a long time, it has appeared that the best options for transport of bitumen from Alberta related to “flexibility” or “efficiency” and not “adaptability.”

Flexibility:
When a business or organization copes well with an unexpected event – an emergency or a sudden crisis – it can be categorized as “flexibility.” A flexible organization shows a quick response to sudden overloads or unusual demands. A well-publicized example of this reactive business acumen – Maple Leaf Food’s response to tainted meat – form part of MBA case studies. (See Western’s Ivey School of Business “Urgency. Accountability. Transparency. Lessons from Maple Leaf Foods Senior VP Randy Huffman.” (2014))

In the case of the oil patch, a company shows flexibility by how well it deals with freakish weather or a mechanical breakdown. Similarly, the Alberta Government tried to use this flexibility approach when it ordered a scaling-back of oil production in early-December 2018. “The government says that this action will help to reduce volatility and narrow the differential by at least $4 per barrel and add an estimated $1.1B to the economy,” reported CTV Calgary at the time.

But flexibility is just the first step for an effective organization, business, or industry.

Efficiency:
Over recent decades, businesses and organizations did well to “find efficiencies” to achieve successes. A business could satisfy its owners or shareholders by continuously improving their current routines or methods. Goals to make more widgets or make better widgets for the same or lower price can be considered seeking efficiencies. In the auto sector, Honda and Toyota were seen as efficiency experts by North American car companies for many years.

The goal of efficiency even crept into the approach by governments and legislators. How might we provide that public service at a cheaper cost? How might we cut the red tape and remove the regulatory burden so that we can get those plans approved more quickly?

This efficiency approach came forward in Albert and BC in a few ways as governments answered the challenge “How might we transport more bitumen?” The Federal Government took steps a few years ago to add more pipelines or twin existing pipelines. And when the private sector found it too risky to continue with the pipeline addition, the Government announced they would purchase the pipeline so that it would be built.

Then, after the Federal Government’s plan hit a few timing snags, the Alberta Government announced they would purchase 7,000 new rail tankers so that an additional 120,000 barrels of oil a day could be shipped.

These are efficiency solutions to the challenge of transporting more bitumen.

Adaptability:
The CanaPux approach of CN Rail is a little different – by offering an “adaptable” solution. Having worked on the challenge a bit longer, they proactively anticipated the problem ahead of time. The CN team took the time to turn that problem into a solution.

CN developed not only a more efficient method of transport, they changed the product altogether so it could be moved more safely and easily.

First, one open-top rail car can carry 615 barrels worth of heavy crude pellets versus 390 barrels by a tank car (not including dilutive chemicals); that’s 57% more!

But, more importantly, CN’s pellets overcome many environmental worries – because the pellets are “inert”– and can be moved by existing conveyors into and from railcars and ocean freighters.

CN still has a few hurdles to overcome before the broader market uses their system. In fact, they only recently signed a “memorandum of understanding with an Asian partner to build a full-scale production facility converting 50,000 barrels a day into pellets.” (G&M B1).

Yet, if action can occur quickly, the CanaPux technology has the potential to disrupt the ways in which we currently move oil and bitumen. Can you also imagine, for instance, an environmentally-minded regulator insisting on the transport of “inert oil” only? It could also open new markets of other products might be converted to pellets and easily transported.

As Basadur Applied Creativity puts it, “Adaptability is a process of continuous deliberate change-making, beginning with the generation of new problems that ultimately may morph into new opportunities.”

In the end, however, Canada’s oil patch needs to hurry with their adaptations and innovations. Why? Because many other innovators are working on a post-oil economy that will discontinue and disrupt most oil-dependent industries.

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Dave Augustyn holds a Professional Innovation Advisor designation with Basadur Applied Creativity (www.basadur.com) and served as the Mayor of the Town of Pelham and a Niagara Regional Councillor from 2006 to 2018. You may provide your ideas and feedback to Dave at daugustyn@cogeco.ca or check out his Dave Augustyn NOW columns at www.daveaugustynnow.blogspot.com

Tuesday, January 15, 2019

Plan the Work, then Work the Plan

Following municipal elections last Fall, new City and Town Councils across Ontario started their 2018-2022 term of office on December 1, 2018.

In addition to their formal inaugurations in early-December, municipal Staff helped orient old and new Councillors alike and the work of municipal governance began.

Many Starting Budget Discussions
Many Councils immediately began their 2019 budget deliberations in December and extended them into January. After Staff explained the financial position and needs of the City, Town or Region, some Councils sought or are seeking public input.

Councils with a majority of veteran members may have carried on with their past direction – discussing whether the 2019 increase needed to be 2%, 3% or 4%. Alternatively, Councils with a majority of new members began discussions on how they can get each member’s “pet project” into (or out of) the new year’s spending. And a few Councils (like the City of St. Catharines on December 18 or the Town of Erin on December 19) have already approved their 2019 capital and operating budgets.

Common Strategy, Common Goals
While fiscally prudent – an early budget can mean early tendering and reduced costs for major projects – jumping right into budget debates for a new Council can have significant drawbacks.

First, a new Council needs time to gel as a team. How well do the new Councillors know their colleagues “around the horseshoe”? Has there been time for each Councillor to understand each other and therefore respect their positions and ideas? In what direction is Council headed? How well do the new Councillors know the senior Staff? Have they been able to build a rapport with the public servants who work to offer their best, professional advice?

Where the danger lay is best described in a Tanzanian proverb: “A boat cannot go forward if each rows his own way.”

Second, each budget should advance the goals of Council and help address the needs, dreams, and aspirations of local residents and businesses. Did the Council simply add or remove a few favored projects, add an inflationary factor, and keep the rest of the operations intact? How does the new budget fit within the overall strategy or strategic direction for the Town? What are the innovations in the new budget? Or, did Council abdicate the role of strategy to senior Staff and/or the Mayor? Will Councillors find out about the City’s strategic focus at the Mayor’s upcoming “State of the City” address?

Will the City’s 2019 budget drive the municipality’s strategy? Or, will the Council’s and the community’s strategy drive the budget?

James W. Frick, former VP of Notre Dame University, said it well: “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.”

And, Joe Biden, US Vice-President, said something similar in September 2008: “My dad used to have an expression: ‘Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.’”

So, what is a new Council to do?

Plan the Work and Work the Plan
The first priority for new Councils should be developing a Strategic Plan.

After listening to the public during the recent election, bring those the ideas, hopes and dreams to the Council table. Use the information from the professional staff as a foundation and get the senior staff involved as resources in the strategy work.

While one must recognize that every participant will approach this work from a different perspective, it will be important for new Councils to meet for a suitable period of time – a half-day or a full-day – to develop a draft Strategic Plan, including vision, mission, values and goals. The best version I’ve used is in the form of a “Challenge Map.” Then, turn it over to Staff to develop operational plans based on the overall strategies and goals. Once Council reviews and approves this direction, the budget work follows logically.

This approach might be more difficult for a Council’s first year – because budgets should get approved at least by late spring. Yet, strategic planning now will help set the course for the municipality and provide a foundation for this Council’s three other budgets. Those future budget discussions should absolutely start with strategic planning updates or revamps.

Still not convinced? Who can dispute the wisdom of Yogi Berra from 2001? “If you don’t know where you’re going, you might not get there.”


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Dave Augustyn served as the Mayor of the Town of Pelham and a Niagara Regional Councillor from 2006 to 2018. You may provide your ideas and feedback to Dave at daugustyn@cogeco.ca or check out his Dave Augustyn NOW columns at www.daveaugustynnow.blogspot.com.