Kenney’s bombast, unrealistic promises, and hubris by the bucketful have led to indifferent outcomes at best, harmful ones at worst
Happy election anniversary Premier Kenney. You soundly trounced Rachel Notley and the NDP in large part because of a devastatingly effective energy narrative that tapped into Alberta angst over declining oil and gas investment, stalled pipelines, and most importantly, job losses and high unemployment. A year on, how are you doing?
If I was a teacher, your grade would be D-.
The only thing keeping you from a fail is a few smart moves, like spending $7.5 billion on TC Energy’s Keystone XL pipeline project when other investors wouldn’t touch it with a barge pole. KXL is critical to the long-term future of the Alberta oil sands, which over the past decade has essentially become the provincial oil patch (Alberta produces 4 million barrels per day of the national 4.7 million barrels per day of crude oil and the oil sands account for 3.2 million barrels per day).
You got one thing right. Well done.
On most other energy files, your government is a flop.
Before we discuss flop details, it needs to be pointed out that belligerence on behalf of the industry and slavish support for all things oil and gas doesn’t make you or your government great champions of the industry. In fact, you’re a hindrance. A liability.
You sold your political soul to the regressive junior oil and gas sector, the one that denies climate change and funds Friends of Science. The one that thinks the Canadian government is plotting the demise of the hydrocarbon industry. The one that trotted “foreign-funded activist” conspiracy theorist Vivian Krause around the province whipping up faux outrage that you used to your political advantage. The one that encouraged you to spend $30 million a year on one of the spectacular failures in Alberta political history – twice purloined logos, retracted inappropriate and inaccurate comments, greenwashing pablum stories, etc. – the “energy war room,” aka the Canadian Energy Centre.
The Canadian Energy Regulator noted in its 2019 energy outlook that if the three current pipeline projects (KXL, Line 3, Trans Mountain Expansion) are completed, Canada will enjoy an additional 1.8 million barrels per day shipping capacity and not need another pipeline until 2040. Of those three projects, you and your government have played a role in only one.
In fact, the Trudeau government put more resources on the table and negotiated more obstacles – legal challenges, for example – to shepherd TMX to completion than you have committed for KXL. And let’s not forget that the great Satan of industry, Justin Trudeau, approved two of those pipelines (TMX, Line 3) and allowed approval for the third (KXL) to stand after President Donald Trump re-invigorated it in 2017.
On the one file where you can claim a victory, you still run a distant second to the Prime Minister.
Since the United Conservative Party formed government last year, the oil and gas industry has lost over 9,000 jobs, according to PetroLMI. These losses predate the COVID-19 pandemic and the Saudi Arabia-Russia oil price war. While a few thousand jobs were gained in the services sector during that time, over 11,000 positions disappeared from exploration and production.
This is important because you cut the corporate income tax from 12 per cent to eight per cent. The big oil sands companies booked billions in saved taxes even while they were laying off head office and field personnel.
As Energi Media has documented for the past four years, new digital technologies like artificial intelligence are sweeping the Canadian industry, leading to higher labour productivity and more production with fewer workers.
It appears you provided Alberta’s oil and gas seniors with extra cash to invest in labour-saving technology at the most inopportune moment. Well done.
Speaking of the oil sands producers, they supported carbon pricing and other greenhouse gas emissions-reducing policies because they believe low carbon-intense heavy crude oil will give them a competitive advantage in international markets. They supported NDP Premier Rachel Notley’s large emitter carbon pricing because it provided a “long runway” to gradually increase the cost per tonne, which over time would lead to higher efficiencies, lower costs, and dramatically reduced emissions.
Mr. Premier, you reduced the effectiveness of the large emitter program for the oil sands by a third, according to economist Andrew Leach, have proposed significantly weaker methane emissions regulations, cancelled the province-wide carbon levy, cut energy efficiency programs, and sued the Canadian government over the national carbon tax.
To make matters worse, your energy war room is busy lighting taxpayer dollars on fire by greenwashing the industry status quo. Arguing, for example, that Alberta natural gas should be exported in great quantities in the form of “green LNG,” even though a 2019 Canadian Energy Research Institute (CERI) study found that Alberta’s natural gas industry is much leakier than British Columbia’s.
Sir, you are a climate disaster all by yourself. Your backward approach to climate policy comes as three-quarters of Canadian voters voted for political parties with strong climate plans. You have put Alberta – which accounts for 38% of national emissions even though it has only 12% of the population – on a collision course with Ottawa at the worst possible time, when you are playing a weak hand.
You complain loud and long about the supposedly terrible regulatory environment created by the federal government and guess what? Investors appear to have listened to you. Enegi Media interviewed Bay St. portfolio manager Laura Lau, who parroted your talking points throughout the interview.
Unfortunately, the evidence doesn’t support your hyperbole.
A recent study by the Canadian Energy Research Institute found that when it comes to day-to-day regulation of the industry, Canada is almost identical to American jurisdictions like Texas or North Dakota. Pipeline reviews were admittedly longer by 13 months, but Canada also has the constitutional duty to consult aboriginal peoples that US proponents don’t have to contend with. Jared Margolis, senior attorney for Biological Diversity, explained to Energi Media that American environmental groups, landowners, and native American tribes oppose, protest, and litigate every pipeline project that crosses state lines.
Canada doesn’t appear to suffer a significant competitive regulatory disadvantage, but you have spooked investors into thinking it does. Well done.
Diversification – partial upgrading, petrochemicals, crude by rail deal
If there’s one thing Albertans agree upon, it’s the need to diversify the provincial economy. Voters are sick and tired of crude oil’s boom-and-bust cycle.
Kudos to you, Premier, you earn one more bouquet for keeping the Notley government’s petrochemical diversification programs. In a short time, about $10 billion of investment was attracted to Alberta, which already has the second-largest petrochemical cluster behind Texas-Louisianna.
But you get a brick upside the head for cancelling the $2.1 partial upgrading support program. Partial upgrading is a nascent technology that upgrades ultra-heavy bitumen into a heavy or medium crude that will flow in a pipeline without blending up to 30 per cent diluent. Innovators needed government support to bridge the “valley of death” – the time between pilot projects and full-scale commercial production when investors and banks are reluctant to fund risky ventures.
Alberta needs more pipeline capacity, partial upgrading would free up space by removing diluent from the pipe – what about this picture persuaded you that partial upgrading was too risky to support, Premier?
The same question can be asked of your decision to cancel Notley’s 120,000 barrel per day crude-oil-by-rail deal and inflict a $1.5 billion loss on taxpayers? The deal was forecast to make a profit of $2.7 billion over three years at a time when producers, especially juniors and intermediates without the resources to book pipeline space, desperately needed more market access, not less.
Whither Alberta under the UCP?
The saving grace of the pandemic is that Albertans have forgotten about the $2.5 million you spent on the not-very-public inquiry into “foreign-funded activism” that contracted with Commissioner Steve Allan’s son’s law firm for $900,000. Then there’s the interim report your government refused to release to the public. Will it ever see the light of day? Not likely, given there was little to inquire into in the first place.
The inquiry is a metaphor for your government’s energy strategy: plenty of bombast, expansive promises, and hubris by the bucketful, yet indifferent outcomes at best, harmful ones at worst.
Your party was elected on a pro-oil and gas platform, yet has somehow managed to become the worst oil and gas government in recent memory, perhaps of all time.
Alberta voters will find little comfort in this fact as they face months, perhaps years, of recovery from the economic damage inflicted by the pandemic.
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