Managing director Brad Maynes presents a review and look ahead of energy division projects ahead of the 2021 municipal election. The official who said the utility division must spend the next decade evolving to shield customers from carbon pricing is leaving the city this month.--News File Photo
cgallant@medicinehatnews.com@CollinGallant
Brad Maynes came to Medicine Hat to stem shuddering losses in the historic city-owned natural gas company.
Eight years later he leaves a much smaller gas entity, but one in the black, as well as a much larger power plant and with renewed optimism in the energy sector in general.
And, he says stability in gas and capacity in power gives the city opportunities in the future.
“Medicine Hat, with strong leadership, creative ideas and some really good technical knowledge, will decide what the future will look like,” Maynes told the News on Monday, adding the future of power and energy markets may be in flux, but further evolution must and will occur.
“It’s very bright as a power house … but unless we address it, the City of Medicine Hat’s power company could become stranded and may have to fold back into the provincial grid.”
“The steps that we’ve taken, and are taking, will keep us independent for decades,”
Maynes, who became managing director of the utility and infrastructure division in 2021, leaves the city on June 15 to return to the private sector with an unnamed company in the energy sector.
For three years, the utility division has worked on a carbon capture and sequestration project for the gas-fed power plant and industrial partners, how to potentially blend hydrogen into its supply and home heating systems.
That is to address mounting carbon costs – the city will pay $6 million this year at the power plant alone.
Maynes declared three years ago that shielding customers should be the top priority of his department.
That’s after seven years of dedicated work to right the ship in the Gas City’s defining natural gas production company that eventually led to a drastic pull-back of operations, production and moving liabilities off the books.
“Gas production is manageable and profitable, even compared to four years ago,” said Maynes (gas sales made a $14-million profit last year in an historic price run-up, and is scheduled for a $1-milion loss as prices settle this year).
“It’s hard to fully describe the angst that was there (in 2015) – How are we going to face mounting environmental liability while we’re losing $35 million per year?”
Maynes joined the city in 2015 as general manager of the natural gas and petroleum resources (NGPR) department.
Gas, which had touched $15 per gigajoule in the mid 2000s, was below $2 in 2015. The production company halted dividends to the city and surrendered a gas acquisition fund to stabilize tax rates.
“There was a recognition that there were some hard choices to make, but I came in thinking there was opportunity as well,” said Maynes.
“The final option was a downsizing of NPGR, but I didn’t want to get there right away. We had a lot of really, really good people.”
Southeast Alberta had been long picked over in terms of shallow gas, but deeper oil prospects were largely unexplored, which formed half of Maynes’ plan that would be eventually called the “organic growth strategy.”
City officials had long hoped to add more oil production as a third hedge with power and gas to broaden revenue, and Maynes suggested co-mingling deep wells to seek helium, which was a proven resource in similar geology in southwest Saskatchewan.
In the end the city found small amounts of both oil and helium, but the approved three-year, $45-million exploration program was shut down after 18 months with $25 million spent.
“We had a clear view of how tough it was going to be to find another oil pool, so we called it,” said Maynes. “Then was the tough part, recognizing that we were going to have to downsize NGPR.”
He called the layoff of more than 80 employees the low point of his time in the Hat, but needed.
The city sold off half the portfolio mostly in Saskatchewan, then in 2019 announced the abandonment of 2,000 more wells considered “marginal” even at today’s much higher prices. The city retained about 500 wells, which meet abut 80 per cent of local demand.
The city’s power plant on the other hand expanded twice, in 2018 and 2022, and last year provided a record-breaking $83-million direct dividend to the city treasury after paying costs and covering its own capital needs. The payout in 2023 is already expected to surpass that.
Maynes says the city also waited as long as possible for gas prices to return, but, like the private sector, had to cut costs.
He’s bullish on the energy sector.
“The story of energy in Western Canada will be one of continual evolution,” said Maynes. “Albertans, Hatters, are going to be pleased and surprised how quickly these companies can innovate to meet these challenges. They have to evolve and figure out what markets will look like 10 years from now.”
