Now that Alberta’s United Conservative Party (UCP) exists and a leadership race is underway, all candidates are promising to change or reverse provincial policy to ensure investment in the province’s economic anchor – oil and gas – will once again be competitive with other jurisdictions.
Depending who wins, NDP policies like the oilsands emission cap, carbon taxes and corporate tax increases will be reversed or modified. Twenty years of new regulations governing every aspect of oil and gas will be reviewed; the unnecessary eliminated and rest streamlined.
What’s the problem? On July 28, the Calgary Herald reported Alberta could match the rest of Canada in economic growth this year and lead in 2018. Factory sales, employment, retail sales and wages are all up from 2016. The rig count has doubled.
While obviously good news, one must remember how low the bar was set. At an average of 136 rigs drilling daily, 2016 was the slowest year since 1992, a quarter-century ago.
In June, the Canadian Association of Petroleum Producers (CAPP) abandoned traditional trade association back-room lobbying and publicly criticized the government about energy investment competitiveness. CAPP stated, “The provincial government and the energy industry could create more than 24,000 jobs for Albertans and grow the province’s economy by nearly $5 billion over the next three years by working together to enhance the competitiveness…. Industry continues to face mounting costs and barriers to growth due to changes in provincial and federal government policies and regulations such as methane emissions, carbon pricing, municipal and corporate tax increases, wetland policy, well liability and closure, and caribou management. Low commodity prices, rapidly-changing market dynamics and new policy directions in the United States have led to negative impacts on oil and gas investment and competitiveness in Canada.”
CAPP figures collectively the new rules will cost between $450 million and $750 million per year in the near term and will be a permanent reduction in free cash for reinvestment forever. This is based upon a 12 to 21 per cent increase in the estimated annual regulatory compliance expenses of $3.6 billion. This will rise further after 2023 when carbon taxes reach higher levels.
CAPP cites several expensive policies. In Alberta, it includes the Aboriginal Consultation Office and its impact on the regulatory system; the Climate Leadership Plan; the Caribou Recovery Strategy; the Alberta Wetland Policy; and the Land-Use Framework. Federally, it’s the new Canadian Environmental Assessment Agency approval prior to a National Energy Board technical review.
CAPP highlights the 2016 Fraser Institute analysis of investment attractiveness for 96 global oil-producing jurisdictions. Alberta ranked 17th in 2014 but fell to 43rd in 2017. The top 10 in descending order are Oklahoma, Texas, Kansas, Saskatchewan, Wyoming, North Dakota, Norway, Mississippi, Utah and Montana. Alberta competes directly with all but Norway.
But if the NDP accepts CAPP’s case as real and discusses competitiveness as a single issue resulting from the cumulative unintended consequence of a series of policies, things could be much better. Whether the NDP will undo what it has done is a long shot.
But the UCP certainly will, or so the candidates claim. Alberta’s next election is nearly two years away, possibly three if the NDP clings to its full constitutional mandate. Obviously the UCP must win to affect change. Until then, the industry is publicly highlighting a competitiveness issue the government won’t acknowledge exists.