A year ago, in the midst of one of the worst and prolonged economic downturns in Alberta’s history, Jason Kenney led the United Conservative Party (UCP) to victory in the 30th provincial election. Winning 54.88 per cent of the popular vote and 63 seats in the legislature (with 64 per cent voter turnout, the highest since 1982), Kenney’s UCP ran on a platform of 375 specific commitments – from lowering the corporate tax rate to scrapping the carbon tax to opening Alberta for business again – aimed at turning Alberta’s economic prospects around.
Since forming the government on April 30, 2019, Premier Kenney and his team have been busy: over 30 (and counting) bills and two budgets (with a deficit of $6.8 billion); negotiations with and amendments (including cuts) to contracts with public sector employees; numerous cross-country and border trips to foster alliances and “sell” Alberta; creation of the Canadian Energy Centre (the CEC or so-called “war room”); legal challenges against harmful federal legislation; and, creation of the Fair Deal Panel, now travelling around the province to hear from Albertans.
Nonetheless, the province continues to suffer. Unemployment remains high; the federal (and some provincial) government(s) appear resolved to eradicate Alberta’s oil and gas industry; Canadian public opposition – ranging from banal apathy to organized protests and dangerous blockades – to energy developments persists; mega-projects have been delayed (Trans Mountain expansion), rejected by the feds (Enbridge’s Northern Gateway pipeline) or abandoned (Teck’s Frontier oilsands mine and TC’s Energy East pipeline). Public sentiment in Alberta is understandably low.
How does the man in charge see things?
“I’m very happy with how quickly our government has acted to deliver on over 200 of our electoral commitments,” Kenney says frankly. “It’s been a super-packed agenda and I’m very impressed with our team. I have a largely rookie cabinet, but they haven’t made rookie mistakes.”
He acknowledges that many problems remain. “We continue to dig our way out of five years of economic malaise,” he says. “We inherited a province that was basically in recession in 2019 and we continue to face very strong challenges – from the campaign to landlock our energy to a federal government that seems hostile to our economic interests. Those challenges remain, but I like a good challenge.”
A key pillar to Kenney’s plan is the reduction of the corporate tax rate, from 12 to eight per cent over two-and-a-half years (the rate was lowered to 10 per cent last June). Critics have argued the cut is burdensome on public expenditures and is not having the intended effect. (In January, Scotiabank reduced its forecast for the province’s 2020 economic growth to 1.6 per cent from its initial 2.4 per cent projection.)
“We didn’t expect it to have a significant economic lift until closer to full implementation,” Kenney counters. “We’ve gone from 12 to 10 points, but we still have to take it down to eight. The economists all underscored the stimulative effect would be felt most in the outer years, because businesses can’t change their investment decisions overnight.”
Once it drops to eight per cent, he predicts more money will flow to Alberta. In fact, his government is in discussions with some major corporations in the financial services and aviation industries with advanced plans to move significant operations from other parts of Canada to Alberta, in large measure due to the corporate tax cut.
“When Telus announced last fall that it’s going to increase its planned capital investment in Alberta over the next five years by $16 billion, it identified the job creation tax cut as one of the reasons,” Kenney says. “We’re also working on three prospective major petrochemical projects in Alberta, each in the game for $10 billion plus in capital expenditures. They’ve all identified the tax cut as a major reason.”
Alberta competes against places like Texas for energy business, he continues, which effectively has no corporate state tax. “We believe this [Alberta’s tax cut] has got us back in the game. And I’m confident when you look back a couple years from now, we’ll see that it really has been a game-changer.”
Indeed, in February the Canadian Association of Petroleum Producers (CAPP) projected a positive turnaround in investment in the Alberta energy sector for 2020, with a projected $2 billion of increased investment this year, with eight per cent growth in the oilsands and four per cent in the conventional basin.
And the corporate tax cut is beneficial to all Alberta businesses. “It’s the best way to promote diversification,” Kenney says. “We need to create the right overall market conditions, rather than narrow subsidies or tax preferences, with some very limited exceptions.” Those exceptions include the petrochemical diversification program, necessary to compete against the Gulf Coast.
Diversification, he cautions, can’t come at a cost to the energy industry. “The two have to go together,” he urges. “We have a current global market value of over $11 trillion worth of oil in this province. And trillions more in natural gas. So, whether people like it or not, this is by far and away the largest industry in Alberta, the largest sub-sector in the Canadian economy.
“One of the best ways to continue the 30-year gradual diversification of the Alberta economy is by extracting greater value from our energy sector,” Kenney continues. He points to several sectors – for example information technology, research and development and petrochemical – which are spinoffs of energy. The tourism and agri-food industries are other sectors with promising growth potential.
Other business-boosting measures implemented by Kenney’s government include amending labour laws (elimination of automatic union certification with carding and a reduced minimum wage for youth, among other measures), the red-tape reduction initiative (to reduce by at least one-third the number of regulatory requirements imposed by government), and the Royalty Guarantee Act. “We want investors to know that when they invest in a well in Alberta, the royalty regime is not going to be jerked around by politicians,” Kenney offers. “It’s predictable and stable.
“Our goal is to be the freest and fastest moving economy in North America – to give us that competitive advantage on the regulatory cost of doing business.”
The decision by Teck Resources to withdraw its Frontier mine application in February (the blame for which Kenney places squarely on the Trudeau government) undermined that goal, as have the rail blockades and protests. “The Government of Alberta is prepared to do whatever it takes to ensure our economic future, including a future of responsible resource development,” Kenney says categorically. “We will not back down. Alberta is prepared to invest directly and support companies and indigenous groups when necessary to ensure the future of responsible resource development. We rule nothing out in that regard.”
The first bill tabled by the government in the spring session aims to prevent protesters from setting up blockades, protests or similar activities on infrastructure deemed essential by imposing stiffer fines and potential jail time.
Another critical fight with Ottawa is over Bill C-69, the so-called “no more pipelines” law. “It creates massive uncertainty and potentially endless timelines for major projects, not just in oil and gas but in other industries,” Kenney warns. The fight will end up at the Supreme Court of Canada, where nine out of 10 provinces and every major industry group will oppose it.
“We’re also looking to support prospective First Nations challenges to the constitutionality of C-69 and the tanker ban [Bill C-48],” he adds. “We’ve created the $10-million indigenous legal defence fund to level the playing field.” The first recipient of the fund is the Woodland Cree First Nation, which received $187,688 to join the province’s challenge to Bill C-69.
“So much of what we read in the news about Aboriginal opposition to resource development is completely distorted,” Kenney laments. “The truth is that the vast majority of western Canadian First Nations support responsible resource development.” Indeed, in his first month in office, he convened a meeting of all 48 Alberta chiefs who were virtually unanimous in their support for economic and resource development.
“All 20 northern B.C. First Nations, through which the Coastal GasLink pipeline is projected to pass, support it and have benefit agreements with TC Energy. All 14 northeast Alberta First Nations in the area around the proposed Teck Frontier mine supported it. We have three Aboriginal consortiums vying for prospective co-ownership of TMX. For me, indigenous inclusion in resource development is key.”
To facilitate this, Kenney’s government established the $1-billion Alberta Indigenous Opportunities Corporation, to increase indigenous communities’ access to capital and technical support to invest in natural resource projects and related infrastructure.
While his government scrapped the provincial carbon tax and won a key victory against the federal carbon tax at the Alberta Court of Appeal in February, he reiterates his government’s commitment to reducing greenhouse gas emissions. To this end, the Technology Innovation and Emissions Reduction (TIER) plan was implemented, projected to help reduce emissions by 53 megatons per year. “It took a lot to get an equivalency agreement with the federal government,” he says. “We worked very closely with industry on that.”
Apart from legal challenges, Kenney has other key parts to his plan to deal with an antagonistic federal government. “There is a wide spectrum of ideas to get Ottawa’s attention and to demonstrate our willingness, if pushed to the wall, to stand up and exercise our full constitutional autonomy,” he says.
Two options are the creation of an Alberta pension plan (which, he says, would save taxpayers $3 billion per year) and an Alberta provincial police force to replace the RCMP. He also wants to give Albertans a greater voice, and tabled the Citizens’ Initiative Act in the spring session, which gives citizens the right to propose legislation on an issue of their choice, and have it voted on in a referendum.
He also plans to build upon alliances with other provinces in order to gain more victories like that won in November at the Council of the Federation. “We got all 13 premiers to sign onto our request for a retroactive lifting of the cap on fiscal stabilization,” he says. “The feds had capped our payments at $500 million when we should have been getting roughly $2.6 billion. We calculate there’s about $2.5 billion outstanding to Alberta. That’s our ask from Ottawa, plus to lift the cap prospectively.”
If the federal government fails to pay, Kenney is prepared to hold a referendum on equalization in October 2021. “We would propose a constitutional amendment,” he explains. “To delete the principle of equalization from the Canadian Constitution. Albertans are not against equalization, but we need to send a message that if Ottawa and some provinces will not allow us to fully develop our resources and get them to global markets through pipelines, we cannot be expected to pay all the freight in the federation.”
Pipelines remain at the forefront of the issues and oil pipelines, including TMX, are essential. Kenney is optimistic that TMX will be completed, noting that pipe is now being laid. “There’s strong public support for the project across Canada and in B.C., and a growing number of First Nations on side. I believe that there will be indigenous co-ownership at some point, which will be a game-changer.”
He’s also hopeful Keystone XL and Enbridge Line 3 will be completed, and expects the latter to come online by the end of the year, adding 380,000 barrels of egress.
“But even in these challenging times and with the application of curtailment production caps on Alberta crude, we are producing and exploiting more oil than we ever have in our history, partly because of pipeline optimization,” Kenney points out. “We have seen a quadrupling of rail shipments in 2019 from roughly 100,000 to 400,000 barrels per day. Between pipeline optimization and additional rail shipments, I think we have a clear path forward until we complete TMX and/or Keystone XL.”
The public relations battle is being fought by the CEC, which, despite some early gaffes, Kenney believes is producing good content. “We need to be consistent about these efforts because we’ve been victims of a massively-funded campaign to landlock Alberta energy, which has been effective in the courts, politics and increasingly with investors,” he says.
The CEC will respond in real time to the lies told about Alberta energy and tell the positive story. “Our shrinking carbon footprint. The cutting-edge new technologies. The progress on carbon capture, utilization and storage. The huge investments in gas cogeneration and the replacement of steam with solvents in the oilsands. The fact that we are now below the benchmark for carbon intensity for energy in North America. These are the stories we need to tell to the general public and investors in Canada, Europe and elsewhere.”
It will soon launch significant advertising campaigns to promote TMX in B.C., energy literacy across Canada, the industry’s environmental, social and governance metrics, and LNG as a way to unite the country and generate prosperity.
Not in favour of “Wexit” or any form of Alberta separation, Kenney nevertheless understands the frustration and doesn’t dismiss it. “I told the prime minister: ‘You’ve got the second-largest economy in Canada’s modern history where 80 per cent of the population says they sympathize with the separatist sentiment.’ This is real. But my patriotism is unconditional, and if the people of Alberta ultimately want to secede from the federation, they’ll have to find a different premier in a different party to lead them through that.
“Having said that, it’s clear the current arrangement is not working for Alberta. We are expected to pay the majority of the bills but not allowed to develop the wealth to cover those bills. So, that’s why we’re lining up all of these points of leverage – the prospective provincial pension plan, provincial police force, equalization referendum and a number of other tools. Our government will have to calibrate when we play those cards and how to maximize our leverage with Ottawa, while at the same time reinforcing alliances.”
All in all, Kenney is confident in his government’s plan, urging Albertans not to give up. “I know it’s been a tough ride for five years, but I really believe 2020 is the beginning of the turnaround,” he says earnestly. “We are projected to lead the country in economic growth. We have the youngest population in North America and the best educated in Canada. We have a diverse society and population growth. Alberta is a value buy right now. By the end of 2020, I believe we’ll get our mojo back.”