Varcoe: Next premier will need new game plan to guide Alberta energy into future


An unabashed oilpatch supporter, Jason Kenney began the provincial election campaign three years ago in front of a rig in Leduc, pledging to make progress on jobs, the economy and pipelines.

Since then, the record on pipelines has been mixed: the Line 3 project is done while Keystone XL is dead, costing Alberta taxpayers $1.3 billion in the process. More broadly, jobs disappeared and the economy tumbled during the early months of the COVID-19 pandemic, although both have rebounded.

Following a UCP party leadership review, Kenney announced Wednesday evening he will step down as party leader, but it’s unclear what a new premier will mean for provincial energy policy, Alberta’s economy and the tone from the top.

“The economy is better, but not jobs and pipelines,” said Mount Royal University political scientist Duane Bratt, noting Alberta’s investment in Keystone XL backfired after the U.S. cancelled the pipeline’s permits, while the Trans Mountain expansion project began before the 2019 campaign.

“The victory is higher oil prices, but that had nothing to do with a ‘fight-back’ strategy.”

Much has changed in Alberta’s economy — and within the province’s largest industry — over the past three years.

At the time of Kenney’s election victory, benchmark oil prices were bumping along around US$64 a barrel and Alberta natural gas markets were deeply depressed, averaging less than $1 per gigajoule.

Due to a chronic lack of pipeline capacity, the province was forced to curtail oil production.

As part of his fight-back strategy, Kenney pledged to oppose the federal carbon tax and Bill C-69, create an energy war room, call a public inquiry into anti-Alberta energy campaigns and battle for increased transportation capacity.

“He listened. He was good for the oil and gas business . . . fighting for Alberta and Canada,” said Bob Geddes, president of Ensign Energy Services, one of the country’s largest drillers.

“He did everything he could in a tough environment.”

In April 2019, the unemployment rate sat at 6.7 per cent, but by the summer of 2020 it topped 15 per cent as the pandemic took hold.

The COVID-19 crisis “threw a wrench” into the province’s economy for the better part of two years, said Alberta Central chief economist Charles St-Arnaud.

Today, the jobless rate has fallen to 5.9 per cent and the economy is growing. However, the rate of employment — the share of working-aged Albertans who are employed — has dropped, he noted.

“Generally, we are probably in better shape than (in 2019) but a big part of that is a big recovery in oil prices,” St-Arnaud said.

For the oil sector, the past three years have been a stomach-churning ride. U.S. crude prices crumpled briefly into negative territory in April 2020.

This year, they’ve surged above $110 a barrel with Russia’s invasion of Ukraine and concerns about global energy security. Natural gas prices have also taken off.

No new greenfield oilsands projects are in the works and industry spending hasn’t returned to previous levels. However, the sector is advancing plans to potentially invest billions of dollars in hydrogen production, petrochemical developments and carbon capture, utilization and storage (CCUS) projects.

“A lot of steps in the right direction were made during Jason Kenney’s time that could yield a sea change in the way our economy operates,” said Gary Mar, president of the Canada West Foundation and a former PC cabinet minister.

Along the way, Kenney backed incentives for the petrochemical sector and cut the corporate tax rate by a third.

The key for the next premier will be to attract more investment to the province, and position the economy for a long-term future.

“This is a super complicated and gigantic industry,” said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission (APMC), a provincial Crown corporation.

“Someone has to make sure they really understand it and they recognize decisions have a huge impact on investment in both the short and long term — and so does rhetoric.”

Part of any shift should begin with the decarbonization file. Six of the largest oilsands producers have already adopted a net-zero policy by 2050, putting them in step with the federal target.

Masson, an executive fellow at the University of Calgary’s School of Public Policy, believes carbon tax battles with Ottawa must end because the industry needs long-term certainty on carbon policy and pricing to invest in projects like CCUS.

Kevin Krausert, CEO of Avatar Innovations, which operates a clean energy accelerator and training initiative in Calgary, believes the next premier must promote energy production while overseeing dramatic progress in cutting emissions through biofuels, hydrogen and carbon capture technology.

“If you want to get big projects built, you have to bring everyone along with you,” said Krausert, former president of Beaver Drilling.

With a lower corporate tax rate, the province has changed the investment climate in the province, said Calgary Chamber of Commerce CEO Deborah Yedlin.

But the next premier needs to ensure the province offers additional support to proposed CCUS projects to build on the federal investment tax credit, she said.

With the oilpatch, a change in tone from the province would be welcomed in some quarters.

“They simply do not consult, they unveil,” said one oilpatch executive.

Whitecap Resources CEO Grant Fagerheim said Kenney rightly stood up to the federal government over its oil and gas policies.

However, Kenney wasn’t a “big-tent leader” involving all of the industry, he said.

“Jason was dealt a very difficult hand,” Fagerheim added.

“Jason was supportive of our sector, but his execution around supporting the sector was not inclusive . . . it was not a collaborative effort. It was more of, this is where we’re going — and come along.”

Chris Varcoe is a Calgary Herald columnist.


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