“A product (oil sands bitumen) that is produced in the least GHG-intensive way is a product that can compete in the 21st century.” – Shannon Phillips

Regular readers know I’m writing a book about Rachel Notley’s energy policies that I hope to publish this fall. As part of my research I came across an extraordinary speech the Alberta Premier delivered just two months after her party’s unexpected election win in May, 2015. In it, she positioned the oil sands as the crown jewel of the Alberta energy sector and served notice her government would help expand existing projects, establish new ones, and pioneer advanced technologies.

To conservative Albertans, Notley is a raving socialist hellbent on killing the oil and gas industry. But her July 7 remarks to the Stampede Investment Forum put the lie to that partisan canard.

We know there is only one way to succeed. And that’s by supporting a free, open, sustainable and increasingly diversified economy. However, we can’t accomplish this on our own. Job creators create jobs in the private sector, not government. And we will be honest, thoughtful partners to them. We will maintain a warm welcome for investors and uphold their right to earn fair returns. 

Alberta has an insatiable appetite for capital, thanks to the oil sands. In 2014, the last year of the boom before Saudi Arabia drove West Texas Intermediate from over $100 to under $30 a barrel, capital investment in the Canadian oil and gas sector was $81 billion, according to the Canadian Association of Petroleum Producers.

By 2017, it had fallen to $45 billion.

Prices were simply too low to sustain investment in new (“greenfield”) oil sands mines or SAGD (steam-assisted gravity drainage) facilities, so companies pivoted and focused on expanding production from existing (“brownfield”) plant and optimizing efficiency, according to Kevin Birn, director of the Oil Sands Dialogue for IHS MarkIt.

Brownfield development requires far less capital and is “quicker oil to market,” says Birn.

But even during a period of brownfield growth, the oil sands still requires a lot of capital and Notley was determined to assure investors her government was fully behind the industry:

…it’s the oil sands that have really emerged as our international showpiece. It’s a tremendous asset which has transformed Alberta into one of the world’s leading oil producers. And I’m here today to emphasize that the province has a government determined to defend this advantage, by being constructive at home, and by building relationships around the world.

For the Premier, “innovation has always been at the heart of the oil sands” and, in fact, was the real “Alberta Advantage.” She pledged to industry and investors that her government would continue the support for new technologies to help producers remain competitive.

For more than half a century, Albertans have been coming up with unconventional solutions for an unconventional resources so we can extract, handle and ship it responsibly, to the very best of our abilities. This attitude of pushing the limits of what’s possible influences every aspect of the oil sands, from research and development to environmental management to the service and support fields…Expanding existing oil sands projects, establishing new ones and pioneering advanced technologies — all this requires spending on a large scale. Under our leadership, Alberta’s abundant oil and gas reserves will remain wide open to investment. We will maintain one of the most competitive tax systems in Canada. Our government will boost exports by seeking out new relationships, strengthening old ones and enhancing Alberta’s environmental record.

An example of that approach is the Carbon Competitiveness Incentives Regulations, intended to help oil sands producers lower greenhouse gas emissions and the carbon-intensity of their crude oil, and the accompanying $1.4 billion innovation fund.

Shannon Phillips, Alberta environment and climate change minister.

As Environment and Climate Change Minister Shannon Phillips told Energi News in a recent interview, both industry and the Notley government view carbon as a cost. That is, the natural gas needed to extract bitumen is expensive, and reducing or eliminating it from oil sands processes is a big part of how producers intend to drive their operating costs even lower over the next five to 10 years.

According to Phillips, the Premier was onboard from the outset with the strategy of big producers like Suncor and Cenovus to be both “cost and carbon-competitive” going forward.

“We know that we are moving into a carbon-constrained future. From our perspective, we need to secure the future for oil and gas for the people who get up every morning who work in those industries to put food on the table,” she said. 

“A product that is produced in the least GHG-intensive way is a product that can compete in the 21st century.”

Notley also served notice that policy making would be done differently with her at the helm, an aspect of her government that has received little attention but is praised by the many sources I’ve interviewed about the policy process.

“…we will be consultative and prudent in how we take the province in a different direction. When it comes to potential shifts, such as greenhouse gas emissions and royalties, no one will be surprised by how our decisions unfold,” she told the assembled investors attending the annual event, which is put on by government agencies and regional economic development groups.

“Change will come after consultations led by some of Alberta’s best minds, with all those who stand to be affected.”

The NDP didn’t have industry veterans or energy academics or really any experts in the new caucus that it could rely upon to oversee energy policy formulation. And the new energy minister, Marg McCuaig-Boyd, was a cattle rancher and community college administrator from the Peace River region, with no energy industry experience.

Notley hit upon a model, outlined in her speech, that has served her well over the past three years: appoint an advisory committe comprised of “Alberta’s best minds, give them enough reign to do excellent work that included extensive consultations with affected stakeholders (particularly industry), accept and implement all – or in some cases, most – of their recommendations.

“There is so much riding on those decisions: the jobs that families depend on, the natural beauty surrounding us, and the inheritance we leave to our kids that government must get them right,” she told investors, adding:

A confident industry, secure in the value of its investments, is vital to this process. After all, the energy sector needs stability to keep Albertans employed and to innovate as it confronts climate change. And I will not forget it.

The three years since Notley delivered that speech in Calgary have been anything but stable, considering the price downturn lasting longer than expected, a new wave of technologies eliminating professional jobs (e.g. oil and gas engineers, geoscientists) that had always been secure during previous busts, and the fractious national fight over pipelines.

But one thing has remained constant: Rachel Notley still believes the oil sands are the crown jewel of the Alberta energy sector. Her energy and climate policies arguably favour the oil sands over other sources of production (e.g. dry natural gas, small conventional players) and her positions on new pipelines and emissions reductions are designed to facilitate the expected rise in oil sands production of 1.7 million to 2 million b/d between now and the mid-2030s.

This approach has caused considerable consternation within industry – including behind the scenes conflict between supportive oil sands companies and unhappy producers hit harder by provincial carbon policies – and allowed opposition politicians to mischaracterize the Notley government as anti-energy zealots.

This is simply not the case. She set out a vision for the oil sands in 2015 and has consistently followed through on the promises made in that speech ever since.

But, in typical Rachel Notley fashion, has done a poor job telling that story to Albertans.

Too bad, it’s a helluva story, one I hope to tell in detail in my book.