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Providing coverage of Alaska and northern Canada's oil and gas industry
April 2019

Vol. 24, No.15 Week of April 14, 2019

Alberta ‘at the crossroads’; with different strategies proposed

Gary Park

Petroleum News

The people of Alberta have repeatedly been hearing over the last month the message that seems to echo through election campaigns everywhere.

Their province, they are told, is “at the crossroads.”

Only this time the dire time-worn message is on the mark.

After five years of experiencing an economic tailspin, dragged down by the collapse of oil prices, their inability to gain access to world prices in Asia and a pullback from Alberta’s lifeline oil sands sector, they are faced with a debt that has soared from C$12 billion in 2015 to an estimated C$71 billion by the end of the current fiscal year.

Accustomed to decades of leading Canada in every positive category - employment, budget surpluses, capital investment, export returns, population growth - Alberta is turning into the national basket case.

The jobless rate is now 6.9 percent - 7.7 percent in Calgary - with an estimated 172,000 Albertans out of work in a population of 4.3 million, with unknown thousands more having given up trying to find work.

Four political parties

The leaders of the four Alberta political parties all claim to have the answer, as they did four years ago when the Conservative Party was resoundingly defeated, ending 44 years in power.

Then Premier Jim Prentice guaranteed his overthrow when he was asked to explain Alberta’s abrupt fiscal turnaround.

“In terms of who is responsible, we all need to look in the mirror, right? Basically, all of us have had the best of everything and have not had to pay for what it costs,” he said.

Albertans were not ready for that dose of truth, but their response was stunning. They did the unthinkable and turned the levers of power over to the socialist New Democratic Party under Rachel Notley.

Meanwhile, the Conservatives underwent a top-to-bottom overhaul, remerging as the United Conservative Party and chose Jason Kenney, a former federal cabinet minister, as their leader.

Two leading contenders

The two leading contenders to form the next government share a common view that Alberta desperately needs to find a way out of its economic plight, but that’s where agreement ends.

Approaching voting day on April 16, Kenney, despite worries that he will slash social programs and government union contracts, has opened up a gulf in the polls over Notley, reaching 19 percentage points at one stage, though that margin has started to shrink.

What is beyond question is that Alberta really is “at the crossroads.”

Kenney has based his campaign on a slogan of “jobs, the economy and pipelines,” while Notley is pinning her hopes on offering “leadership you can trust.”

One of the few topics they agree on is the need for new crude pipelines out of Alberta, though Kenney accuses Notley of failing to make any headway, despite what he calls her “alliance” with Canada’s Prime Minister Justin Trudeau.

Notley retaliates by taking credit for the Trudeau government’s decision to buy the Trans Mountain pipeline for C$4.5 billion and committing itself to spending another C$9 billion on expanding the export link to Asia to 890,000 barrels per day from 300,000 bpd.

Kenney has a wide-ranging platform to jumpstart the upstream sector, vowing to accelerate by 50 percent to a maximum 180 days the time needed for regulatory approvals of new wells and enshrining the same royalty rate in perpetuity.

“Tens of billions of dollars of investment have fled Alberta’s oil and gas sector,” he said. “That money has not left the industry, it has left Alberta ...”

One goal ‘fair price’ for gas

Kenney said that, if elected, he would work with stakeholders to get “a fair price” for Alberta natural gas producers he estimates are selling their output at discounts up to 70 percent. In addition, he promises support for LNG infrastructure to Pacific Coast export terminals.

Kenney also vows a “fight-back strategy” against opponents of the oil and gas sector, accusing them of feeding off money from U.S.-based foundations.

On his hit list are promises to terminate Notley’s plan to spend C$3.7 billion to lease 4,400 rail cars to move an extra 120,000 bpd out of Alberta in hopes of generating C$2.2 billion in royalties and other revenues along with scrapping the Notley government’s pledge to raise a carbon tax from C$30 a metric ton to C$50 and to cap all oil sands greenhouse gas emissions.

That would put Kenney on a collision course with Trudeau’s carbon tax that has started at C$20 a metric ton and aims at C$50 by 2022 and has already set up a legal showdown with Saskatchewan, Manitoba, Ontario and New Brunswick.

The NDP energy plan is based on a more interventionist approach, taking special aim at the downstream sector by doubling to C$7 billion government incentives for petrochemical facilities, refining, partial upgrading of oil sands bitumen and natural gas infrastructures.

Notley claims that would create 70,000 jobs over the next decade and trigger C$75 billion of investment.

- GARY PARK






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