The Canadian government sent a barely-disguised message to tens of thousands of unemployed oilfield workers across the country in its 2016-17 budget: Forget about living in hopes of a return to US$100 oil; get on with building new careers in the renewable energy sector.
In delivering its first budget, the administration of Prime Minister Justin Trudeau, in laying out its strategy for boosting a weak economy with major infrastructure spending by compiling total deficit spending of about C$100 billion over the next four years (starting with C$29.4 billion in 2016-17, triple what it projected during last year’s election campaign), pointedly excluded the prospect of new export-driven pipelines in that program.
Finance Minister Bill Morneau said the government will invest C$7 billion in the next two fiscal years on environmental protection, with the big-ticket items aimed at expanding public transit, fixing aging water and wastewater systems, energy and water-efficiency upgrades and supporting provincial efforts to reduce greenhouse gas emissions.
He said the new government is committed to being a “champion of clean growth and a speedy transition to a low-carbon economy.”
That puts the emphasis on dramatic increases in spending on climate action, with several programs focused on applying clean-technology innovation throughout the economy.
It follows a meeting Trudeau had with provincial and territorial premiers in early March which laid the groundwork for a pan-Canadian “carbon pricing” deal and a greater push to achieve Canada’s international emission pledges, although there was no agreement on what form that price should take.
“Some believe we must choose between a strong economy and a clean environment,” Morneau said. “They are simply wrong.”
No signal on carbon tax
But missing from the budget was any indication of when a national carbon tax might be introduced.
In a telling sign of where the Trudeau government is heading, Morneau’s department said “resources will be allocated to those projects that yield the greatest absolute greenhouse gas reductions for the lowest cost.”
Clare Demerse, policy director of an environmental group Clean Energy Canada, said the government is moving Canada towards a “green-energy economy and it is doing so with some smart investments.”
That plainly does not bode well for the fossil fuel industry, or its desire to open up export markets for oil sands bitumen, or LNG.
However, the government has said nothing more about its election campaign promise to cut subsidies in the oil and natural gas sectors.
Instead it confirmed it will allow producers of LNG to write off their capital investments at an accelerated pace over the next 10 years, reacting positively to intense lobbying by British Columbia Premier Christy Clark.
Otherwise the pickings were slim for the petroleum industry and did little or nothing to ease the rapidly growing concerns about a possible exodus from Alberta of thousands of skilled and talented workers.
Shift of labor, capital
The shift of labor and capital from the energy sector in Alberta, Saskatchewan and Newfoundland “make it important to find ways to help displaced workers,” said Craig Alexander, vice president of economic analysis at the independent C.D. Howe Institute.
Sherry Cooper, chief economist with Dominion Lending Centers, said the budget message to Alberta “is that it needs to diversify its economy.”
In a low-key response, Alberta Premier Rachel Notley delivered only one mild admonition to the Trudeau government by reminding Trudeau of the need to speed up regulatory approval for new pipelines to get Alberta crude to offshore markets.
She said Alberta has borne the brunt of the fall in oil prices - with every C$1 drop in crude costing the province C$172 million in lost revenues over a full year.
Notley said Albertans are not “looking for a handout, they’re looking for a government that will work with them to build their economy in the best way possible.”
Otherwise, she was confident Alberta would receive its fair share of C$11.9 billion in infrastructure spending and was pleased the government will introduce immediate changes to employment insurance rules to provide benefits sooner and longer to laid-off workers, delivering an additional C$380 million to Albertans.
Alberta unemployment claims up 91%
Any help at all is welcomed in the three major oil-producing provinces after a year in which unemployment claims have soared 91 percent in Alberta, where paid employment in the industry has shrunk by 65,000 jobs, 41 percent in Saskatchewan and 12 percent in Newfoundland.
Canada’s Natural Resources Minister Jim Carr said that regardless of his government’s inability to influence investment or commodity prices, the budget is resorting to several measures to assist both the sector and its workers.
Saskatchewan Premier Brad Wall was less enthusiastic, arguing the government could have done more by injecting C$156 million to accelerate the remediation of old wells and provide jobs for 1,200.
Carr said it is up to Wall to decide how to allocate his share of the province’s share of infrastructure money.
