New aggressive energy narrative may hurt, not help, Alberta with global investors

A warlike, aggressive, take-no-prisoners approach domestically could turn out to be a complete disaster when it comes to the international capital markets. - Denhoff

Premier Jason Kenney at the 2018 Energy Relaunch event.

Last year, during an annual dinner in London between one of our biggest oil and gas companies and UK investment houses, the new reality confronting Alberta hit home. The dinner had been, in the glory days of $70 to $100 oil, a fun and relaxing event where the company described its upcoming plans and current finances. Money pledged by investors. Great meal, great wine, everyone happy. This dinner, however, turned into an hours-long grilling.

Eric Denhoff. Source: Canadian Hydrogen and Fuel Cell Association.

European banks and investors are starting to run—not walk—from oil sands investments as politicians and shareholders turn up the heat. What finally saved the dinner, and resulted in continuing financial support, was a detailed description by the CEO of Alberta’s climate plan.

What’s he going tell them at this year’s dinner? We changed our mind and are going with Sarah Palin’s “drill baby drill”?

Major companies like Shell, Japanese investment firms, European firms and US firms don’t want picketing shareholders outside their front door, demands for boycotts, and a public black eye. They want, as individuals and corporately, to be able to tell a compelling story of mistakes, redemption and future commitments to real climate change progress. They know they’ll never convince David Suzuki, but they want to convince the middle ground they have a legitimate plan.

My worry for Alberta is that backsliding on all or most of the previous government’s climate initiatives gives the very environmental groups Premier Kenney has declared war on a new impetus for fund-raising, boycotting, and trouble-making that is far beyond the new mostly defunct Tar Sands Campaign. It’ll mean more heat on investors, banks, lenders, and the companies themselves, and eventually boycotts.

This is what happened in forestry. While local communities, whipped up by Wildrose and later UCP local candidates, were adamantly opposed to virtually any solution to preserve caribou habitat, the forest companies themselves, having faced boycotts in the last decade or two here and there, were much more interested in working out a solution that would protect caribou habitat and limit losses in profits, jobs or production. The last thing they wanted is a US enviro-group led boycott of their pulp products (used for major magazines and newspapers) or wood products, as Greenpeace and others have done successfully in the past.

Whipping up the base is easy. International business is hard.

Even LNG investors differ widely in their ability to withstand pressure. For example, on the proposed Prince Rupert and Kitimat LNG plants there were investors from Japan, China, Korea, US/Europe etc. Shell and the Japanese investors were ultra concerned not to have big headlines of Indigenous groups opposing because they were terrified of their brand being sullied. China didn’t care much about anything but margins, security, of supply and logistics. They cared if indigenous groups could legally block the line, but not really much about protests and brand. Korea was in the middle.

So, yes, there are markets where you can ship oil and gas without worrying about having a strong climate plan, but the Best Barrel argument doesn’t work well in Europe or the US when you abandon the climate change plan, nor does it work in Japan and some other markets.

No, most of the investment comes out of the US and Europe, to some extent Korea and Japan and Indonesia, and for many of these bankers, they want more than a fig leaf to cover their investments. They want a strong narrative they can tell at annual shareholder meetings an in their communications with ESP influencers, a narrative that allows them to hold their heads up while making continued investments in Alberta.

A warlike, aggressive, take-no-prisoners approach domestically could turn out to be a complete disaster when it comes to the international capital markets.

Environmental groups will heavily lobby ESP groups and investment houses directly and indirectly, start to introduce boycotts, and generally harass already nervous investors and lenders. They’ll say, “See, we told you, they have no intention in Alberta of cleaning up their act”

It isn’t a question of Alberta being apologists. My grandparents are buried in Edmonton. My grandfather was a business partner of Pat Burns in Calgary. My parents were Calgarians through and through. None of them ever apologized for anything Alberta was doing. If Alberta made a mistake, well, we learned from it, corrected it, and moved on, like farmers in the dirty 30’s who refused to plant windrows to prevent topsoil blowing away. They eventually learned, planted windrows, and fixed the problem.

That’s the Alberta story—work hard, be innovative, change as you determine that’s what’s needed, hold your head up, and get going.

The counter Alberta narrative we call, “all hat, no cattle.” It describes the pretend cowboys from downtown Calgary corporate world who show up for Stampede with just the biggest darn old cowboy hat, but have never even actually met a cow, much less owned a herd.

We don’t want Alberta’s oil and gas climate change narrative to be “all hat, no cattle” or we’ll be laughed out of the international markets.

But now that the election’s over, the new government needs to find a way to preserve the best of the Best Barrel narrative, tone down the energy war room rhetoric, and find a brand that appeals internationally. The conservative base has been thrown its red meat. But if they want to keep their jobs, their company profits, their industry, and their future, dismantling one of the world’s most progressive climate change initiatives is fraught with real danger.

I don’t mean this in any way as disrespect for the new government. Kenney and the United Conservative Pary won a dramatic mandate based, in large measure, on telling their base they were going to fight hard for Alberta and not take the current opposition laying down.

I am old enough, though, to remember Peter Lougheed’s administration—his toughness, his grace, his tremendous story telling ability, his talent for reaching out to Canadians and other governments to make his case. Yes, he cut off the oil at one point, but that was an economic argument against Ottawa stealing Alberta revenues, not a contemporary oil sands environment fight.

A different time, a different world, a different leadership style.

Premier Kenney is one of the hardest working politicians in the country, and one of the most experienced. He has strong advisors who understand this stuff.

The new Premier, who needs no advice from me, will understand the need to pivot, from War Room to Best Barrel Branding, from lawsuits with environmental groups to his well-versed energy minister getting into rooms along with the environment minister colleague and telling a compelling narrative.

What happens when you don’t have a compelling narrative was demonstrated this week when the Indiana (Indiana!) utility commission turned down a new gas power plant because renewable energy would change so much over the life of the proposed plant that more fossil fuel investment just wasn’t warranted. This wasn’t California, (which also turned one down recently), it’s freaking Indiana, the American Heartland.

If we get on the wrong side of this story, with a sloppy narrative, we are going to get killed. I’m counting on the pragmatic side of Premier Kenney to do what the old BC warhorse Premier WAC Bennett used to do—his famous “second look” at an issue, and the resulting pivot. He did pretty well.

Alberta is blessed with the most progressive oil and gas industry in the world. To lose it would be a shame, for hard working, taxpaying families, for businesses small and large, and for Canada.

For more than 30 years Eric Denhoff has been an executive in the private and public sectors. He recently served as deputy minister of environment and climate change in the Alberta government and an advisor on market access.

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