Alberta oil and gas industry is warming to Notley government as energy, climate policies bear fruit
In Jan. of 2016 I wrote a column entitled, “Is Notley NDP the most pro-Big Oil government in Alberta history?” Well, the verdict is in. The PCs may have spent 44 years giving the oil and gas sector what it wanted, but the NDP is now giving industry what it needs.
Let’s start this column by dispensing with the notion that the Notley government is anti-oil, a favourite talking point of the Wildrose.
“[T]he whole attitude of this NDP government is the opposite of what Wildrose’s attitude is – we are proud of our energy sector, and think our resources are a unique blessing that we need to take maximum advantage of,” energy critic Drew Barnes wrote in an email.
“Many in the NDP have been protesting the industry for years; for them the energy sector is an embarrassing problem to be managed. This attitude affects everything for business, and Wildrose would improve things immediately simply by being proud advocates, eager to grow our energy sector because we do it right and its products improve lives around the world.”
This is the Alex Epstein “fossil fuels are moral” worldview, the one that argues rising global carbon dioxide levels are great because they stimulate plant growth.
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And while Barnes is correct about some NDP MLAs and staffers not being oil and gas and pipeline friendly in the past, what counts is the view of the Premier and her relevant ministers, like Marg McCuaig-Boyd in energy and Shannon Phillips in environment and climate.
Their views on energy are very dissimilar to the NDP in BC, for example, where leader John Horgan is staunchly opposed to the Trans Mountain Expansion pipeline, approved last Nov. by the Canadian government. The Notley approach to resource development feels more like the pragmatic centrist NDP government of Roy Romanow in Saskatchewan from 1991 to 2001.
I interviewed Phillips in Feb. for a Markham On Energy webinar and the former economic policy analyst for the Alberta Federation of Labour spent the half hour explaining the Alberta government’s two-pronged approach to energy policy: lower costs for industry and lower greenhouse gas emissions.
“The push is towards lower cost of extraction, whether it’s on the labour side or on the exploration and production side, etc.,” she said. “Carbon [emissions result from fuels that are an] input cost and so what [the government is] trying to do is ensure that we have regulations that will push towards those lower cost areas where carbon is priced.”
In her interview, McCuaig-Boyd told me the Notley government stands behind the whole industry, not just the oil sands.
“We were just down in Houston [for CERAWeek 2017] and we heard that a lot of the refineries down there like our heavy crude, and they like the fact that we’re a stable country,” she said. “We know the world is going to need more oil so why not make it from Alberta?”
Another message that came through loud and clear at the Texas energy conference is that the world is decarbonizing its energy systems.
“Many countries are looking at carbon pricing of sort or different policies. Oil and gas are not going away in the near future, but we do need to think about what clean tech can help us get there,” she said. “We can figure it out how to take carbon out of the barrel and still develop our renewables at the same time.”
The message is slowly getting through to the Alberta industry, the minister claims. Recovering oil prices have helped reduce the tension that was clearly in the air after the NDP’s surprise win in May of 2015.
“I was just at EPAC [Explorers and Producers Association of Canada], bringing greetings from the government two weeks ago and I sat with a couple of the executives. They’re very complimentary about how approachable our government is,” McCuaig-Boyd said. “We’re slowly getting through a bad situation together.”
Industry apparently thinks the strategy is working.
Cenovus and CNRL bought a total of $32 billion in oil sands assets from Shell, Marathon, and ConocoPhillips last month – a huge coming out party for the domestic oil sands sector. The oil patch is slowly getting back to work, even if the Statscan jobs report showed 20,000 new jobs for Alberta in March, but still more losses in oil and gas extraction, which may not be surprising as companies shed workers heading into the annual spring break up.
In late March, the Canadian Energy Research Institute released a study showing that new SAGD production technologies could not only reduce the carbon intensity of in situ oil sands crude to the same levels as conventional crude, but reduce production costs by 34 to 40 per cent.
And the Alberta government’s Petrochemical Diversification Program provided $500 million in royalty credits to two petrochemical plants. The Alberta Energy Diversification Advisory Committee reports in a few weeks and a fair bet would be that it recommends more support for petrochemical manufacturing, as well as partial upgrading, which a University of Calgary study showed can eliminate the need for diluting oil sands bitumen and save producers $10 to $15 a barrel in costs.
Notley’s energy policies are working.
More is coming, according to Phillips and McCuaig-Boyd, and perhaps more could be done, but it’s thus far it’s a damn sight better than simply being “proud advocates” for industry, which appears to be the Wildrose strategy.
Frankly, the Alberta oil and gas industry has all the advocates – and boosters – it needs. What Alberta could use is an opposition party with some energy policy ideas.
Last Dec. the Wildrose issued a press release setting out a “five-step plan” for the energy industry. The entire plan consisted of reversing NDP policies. Not a word about what Brian Jean and company would do instead.
I interviewed economist Trevor Tombe at the time about the Wildrose plan and he also noted that it appears to be all about politics, not policy: “The plan lacks a lot of novelty in that it merely says what they’ve said before – call a referendum for the carbon tax, for example, end the litigation related to the PPAs [power purchase agreements], stop renewable energies, that sort of thing…those are more of a political decision than something I can comment on for objective [policy] grounds.”
It’s time for the conservative parties – may as well include the PC party and Jason Kenney – to put forward market-based policies as an alternative to the NDP approach.
If their alternative is a hands-off, laissez faire strategy, then they should say so. If they have another approach in mind – like Texas, say – then they should explain how it will be better than the NDP.
Simply being the anti-NDP parties isn’t enough. Especially since the NDP is actually pretty successful, despite Jean and Kenney claiming otherwise.