|
Uncertainty for Alberta oil patch
The longest political dynasty in Canadian history came to a stunning end May 5 when voters in the oil and natural gas heartland of Alberta gave a resounding mandate to the New Democratic Party led by former lawyer and labor negotiator Rachel Notley.
Traditionally viewed as a left-of-center, socialist movement, the NDP at the latest count held 53 of 87 seats in the provincial Legislature - 37 more than its previous high - followed by Wildrose with 21, the governing Progress Conservatives with 10 and one each for the Liberal and Alberta parties. Entering the latest election, the NDP had only four members of the assembly.
For the Conservatives, under newly appointed Premier Jim Prentice, defeat ended almost 44 years in power by his party and 12 consecutive election victories. He immediately resigned as leader and as a member of the Legislature.
Timing, taxes, stumbles cited The dismantling of a political juggernaut has been linked by analysts to a wide range of issues, notably Prentice’s decision to call an election a year sooner than required and what he called a “generational” budget that hiked taxes for Albertans but not corporations, combined with a long list of scandals and stumbles by previous governments.
Already buffeted by shaky commodity prices, stalled crude pipeline projects and thousands of layoffs, the petroleum industry’s woes are now compounded by uncertainty over Notley’s pledges to raise corporate taxes to 12 percent from 10 percent and her decision to give up the Alberta government’s fight for TransCanada’s Keystone XL and Enbridge’s Northern Gateway.
She was emphatic during the campaign that if elected she would not follow the lead of her four predecessors as premier and make trips to Washington, D.C., to lobby the Obama administration on XL, while she rated Northern Gateway as a “lost cause.”
But Notley did endorse TransCanada’s planned 1.1 million barrels per day Energy East pipeline to carry crude from Western Canada and the North Dakota Bakken to Quebec and New Brunswick refineries and export terminals in Eastern Canada and Kinder Morgan’s application to triple capacity to 890,000 bpd on its Trans Mountain pipeline to refineries and export points in British Columbia and Washington State.
She is also making a case for increased refining of oil sands crude in Alberta - a sector littered with failed and cancelled projects - to reduce the opposition to moving raw bitumen by pipeline across British Columbia and by tanker from the Pacific Coast to Asia.
Unease over commission What has spread unease through the industry, which contributes about 25 percent to Alberta’s gross domestic product, is Notley’s plan to appoint a Resource Owners Rights’ Commission - made up of citizens from all walks of life - to hold public hearings and determine if the province is getting its “fair share” of revenues.
That turned the clock back eight years to a destructive effort by former premier Ed Stelmach to hike royalties which drove billions of dollars of investment away from Alberta and triggered a major round of payroll cuts.
Stelmach’s money grab collided with the recession that started in 2008 and with commodity prices heading in the opposite direction.
By 2010, the industry backlash forced the government to capitulate.
However, Notley made frequent attempts during the campaign to reach out to the business world and particularly the oil and gas sector by describing Alberta as “an energy economy. That’s what we are. We need to build on our strength.”
Enbridge Chief Executive Officer Al Monaco was one of the first energy leaders to say he was “encouraged” by Notley’s pledge to “build a good relationship with our industry.”
In her call for change, Notley also gave priority to diversifying the Alberta economy away from its reliance on petroleum royalties and taxes, to advancing renewable energy sources while phasing out coal-fired power plants and to working with the rest of Canada on a national climate change strategy.
But she enters power with only three others who have experience as legislators and a large team that is untested in government at any level.
The result is “completely devastating” for energy companies and investors said Rafi Tahmazian, who managed C$1 billion in energy funds at Canoe Financial in Calgary.
He said the initial assessment from investors is that the New Democrats could be “extremely dangerous.”
- Gary Park
| 