What ‘Notley-nomics’ Would Mean to Alberta

Rightly so, there has been considerable concern expressed from many leading figures in business and government when it comes to Rachel Notley’s Alberta NDP energy industry policy. From Federal senators, to academics, to industry leading oil and gas chief executives, apprehension has been voiced over the suitability of raising corporate income taxes, changing Alberta’s royalty rate regime, the prospect of newly added crude processing capacity and an overall distaste for new pipeline infrastructure shipping crude to foreign markets.

Over the phone, Senator Doug Black was clear when he said “the surest way to lose the Alberta Advantage would be to elect an NDP government.” Regarding the importance of pipelines, Senator Black was quick to point out that “market access for our energy via pipelines is critical for the continued prosperity of Alberta’s economy.”

The national media has also been a platform for Calgary based oil and gas executives to voice concern over Ms. Notley’s energy industry policies. Cenovus Energy Inc. boss Brian Ferguson, told Bloomberg news “I don’t think there’s any room for any increase in royalties,” adding, “if there are changes that make the structure uncompetitive, that will be negative for investment in Alberta.”

Incumbent premier Jim Prentice recently compared Ms. Notley’s pipeline policy to that of the polarizing Federal NDP leader Thomas Mulcair. Time and again, Mr. Mulcair has maintained that pipelines must be based on more than business need, and that environmental and social concerns must be better recognized and acted upon. Like Ms. Notley, Mr. Mulcair has favoured and continues to favour new incentives for upgrading and refining crude within Canadian borders.

Although at first glance, the prospect of increasing refining and upgrading capacity within Alberta seems attractive to off-set the risks of a volatile commodity price cycle; that was the same mentality the Stelmach led government used to justify the headache that is the North West Upgrading (NWU) project.

Former PC finance minister, Ted Morton, recently authored a paper published by the University of Calgary’s School of Public Policy, arguing that the NWU initiative was essentially an answer to the “siren song of economic diversification” and devoid of common sense financial planning and thinking. In his paper, Mr., Morton stated the “project illustrates the risks of government-led efforts to diversify Alberta’s economy. What began as a low-risk, low-cost project to encourage domestic bitumen upgrading has morphed into a multi-billion dollar boondoggle with high risks for Alberta taxpayers.”

Furthermore, University of Alberta energy policy professor, Andrew Leach, commented in a recent Maclean’s article, “Finally on this point [the viability of refining in Alberta], if we want to diversify the economy away from oil, why would we do so by building oil refineries? I’d be curious to ask most NDP supporters, if they had $30 billion to spend, would they rather build a large refinery or see the equivalent spent building and operating schools, hospitals and daycares? I think the latter would win in a landslide. Refining seems like an easy win, when you can imagine you can force someone else to build and operate it at no cost to you and simply reap the benefits, but that’s simply not the case in Alberta.”

And so ultimately, when considering the prospect of a royalty rate review and desire for increased Alberta processing capacity, the question worth pondering over is whether the political sirens once again are singing an attractive yet unrealistic tune of economic diversification.

Senator Black perhaps best expressed the point of view shared by many concerned with Alberta’s continued prosperity by noting “if the Alberta NDP Party gets elected, there will be an economic disaster for Alberta’s energy industry.”