Saskatchewan Research president and board fired in dispute with government over petroleum research branch

Saskatchewan's new $11-million Petroleum Technology Research Centre (PTRC) is beginning operations under a cloud following the late-September mass firing of the Saskatchewan Research Council's (SRC) president/CEO and its 14-member board of directors. Saskatchewan Energy and Mines (SEM) minister Eldon Lautermilch engineered the shake-up at the top of one of Canada's most respected provincial research organizations when it became clear that the SRC's position on who should control its petroleum research branch clashed with the government position.

SRC is now being governed by acting president/CEO Dan McFadyen (an official with SEM) and an interim board appointed by Lautermilch, while its petroleum research branch is being merged with PTRC.

At issue was whether the SRC's petroleum branch should be officially merged with the operations of the new, Regina-based PTRC. The former SRC board sided against the merger, and developed a position paper outlining the rationale for its stand. For its part, the government was supposed to furnish the SRC board with a business case for amalgamation, but that document was apparently never produced.

PTRC's capital costs were secured with $6 million in federal funding through the Canada-Saskatchewan Western Economic Partnership Agreement and $5 million from the Saskatchewan Opportunities Corp (SOCO). Nearly half of the Centre's $15.5 million in operating costs over five years will be contributed from the budget of SRC ($7 million), with the remainder coming from (Natural Resources Canada NRCan) ($5 million), SEM ($1 million) and the Sask-atchewan Petroleum Research Incentive ($2.5 million).

PTRC was officially opened in August but a press release was not issued until October 2, just days after Lautermilch obtained an Order in Council to terminate the SRC board, which was executed by a series of faxes to the membership. A new board was then hastily installed, and its first official function was to relieve SRC president/CEO Jim Hutchinson of his duties. The fired SRC board was composed of volunteers from a wide variety of academic and industry backgrounds, with one member having served for 23 years.

"It was all about governance. The (old) board was not prepared to do something that was not in the best interests of shareholders," says John Cross, president of Philom Bios and the SRC board's vice chair. "I am at a loss to tell you the reasoning for (the dismissals)."

The PTRC was originally conceived in the late 1990s under the direction of former SRC president Ron Woodward as a federation of various research organizations that would share space and facilities and be administered by a business marketing manager. The PTRC partners are SRC, the Univ of Regina, NRCan and SEM and it was originally conceived that they work in leased space in a specially designed building in the SOCO's Regina Research Park.

That all changed last summer when Lautermilch attended an SRC board meeting and announced his preference for a free standing corporate entity that owned all the petroleum research elements that operated under PTRC's roof. The plan necessitated the transfer of the SRC's petroleum branch to PTRC, along with its existing contracts and expertise in reservoir engineering, chemistry and scaled physical and numerical modelling. The SRC board considered the request and ultimately rejected it, prompting a showdown that erupted when the minister dismissed the entire board.

It was Woodward who recommended Hutchinson for the top job when he left in 1998 to assume the presidency of Red Deer College. He has intentionally stayed away from the SRC blow-up, although several key individuals have contacted him since the firings. He says the when the idea for PTRC was originally developed, SRC conducted research with its client base to gauge the Council's value. He adds that SRC was nervous about officially joining the Centre, for fear it would be interpreted as being too close to government. It was decided that it would maintain a separate petroleum research branch that would participate with other players in joint research projects.

"Then the request came to combine the assets of SRC in the new building and to be transferred to PTRC. The board considered this for several weeks and decided it was not in the best interests of SRC," says Woodward. "It was a matter of survival for the SRC component. Customers may choose to do business with the Alberta Research Council which is more distant from government."

For Cross, the government's intrusion into SRC's management ends a 13-year relationship with the Council, and he remains discouraged that a middle ground could not be found. But he sticks by the maxim which he calls Business 101: "you don't separate responsibility from authority".

"This was something of immense distress t

o all of us, but we're all grown up and we move ahead."

R$