Projects are being scaled down, with obvious implications for future employment. A cross-section of players – and their methods – attests to this:
- Encana Corporation – delayed completion of Duvernay gas plant pending final royalty review decision. Deferral substantially hinders the continued development of the Duvernay;
- Birchcliff Energy – declined to announce capital budget for 2016 due in large part to vagaries surrounding government policy;
- Bonavista Energy – reduced its dividend, committed itself to focusing on capital and operating efficiencies as well as a “flexible” capital budget to account for royalty review and climate change policy decisions. Significantly, it has emphasized a conservative capital expenditure budget of around $210 – 240 million with a payout around 85 – 95%. This is a substantial reduction from its ~$639 million and ~$443 million capital budgets for 2014 and 2013;
- Pengrowth Energy – reduced by 10 – 15% its 2015 capital expenditure budget and deferred future capital spending due to business uncertainty; and
- Canadian Natural Resources – simply declined to detail its capital allocation strategy, again due to business uncertainty.
All these companies’ own statements finger a combination of low commodity prices and uncertainty surrounding royalty review and climate change policy as the culprit behind their painful decisions to cut projects and ultimately jobs. Anyone who has followed the headlines would certainly not be fooled into thinking these are the only companies to be impacted. Thousands have already been laid off in companies of all sizes, including oilfield services providers, E&P operators, and midstreamers.
Recall I said “told you so”? This is why it is intended to be a lament. Before the provincial election, business leaders, investors, concerned professionals, and practically anyone who relied on the industry for their bread and butter warned that this would happen. Recall also that I said the aforementioned companies blamed a combination of low commodity prices and questionable government policy. Fair play demands that we spare the NDP the blame for low commodity prices; the current supply glut is much bigger than any one decision-maker, with perhaps the notable exception of King Salman of Saudi Arabia.
Of course, while the government was forced to accept low prices, it was not forced to exacerbate the problem. Before the provincial election, Premier Notley accused then-Premier Prentice of “fear-mongering” when the latter’s warnings to the electorate regarding royalty review proved prescient. More recently, Premier Notley accused Wildrose Leader Brian Jean of the same when the latter called her to account for her government’s handling of the economic crisis. Quite the pattern.
Fear-mongering implies stoking irrational fears for gain. There was nothing irrational about NDP critics’ warnings. And so we come full circle. Mr. Jean can very well say “told you so” and so can anyone who was skeptical of the NDP’s plans from the start. But there is no joy in being proved right in this situation. It would have been much more preferable to be on the receiving end of that “told you so.” Better a bruised ego than a battered economy. But just because we are forced to accept this situation does not mean we have no choice as to how to accept it. We certainly should not take this lying down.
By this point, there is a litany of government actions that have spelled doom to our province’s once stellar reputation for business friendliness. This is well-tread ground, so there is no point going into too much detail. A brief partial summary will do: royalty review, climate change review, increased corporate and personal taxes, refusal to support pipeline projects, questionable appointments running the gamut from relatively benign neophytes to outright hostiles anti-industry carpetbaggers, and general tone deafness to ever increasing criticisms of the government’s economic policies.
We need to repeat again. This is more than an issue of taxes raised a few percentage points. In aggregate, the aforementioned criticisms touch directly upon the Alberta Advantage. As it stands, it is eroded. Alberta is no longer the stable, business friendly jurisdiction that investor presentations once boasted. Instead, it is just another high cost, lukewarm jurisdiction where the Premier of Alberta is either making arguments for foreign and domestic opponents of Alberta’s economic interests or simply echoing them domestically without reflection. Given the inherently cautious, fence-sitting nature of the Obama Administration, Keystone XL’s current demise was certainly not always a foregone conclusion. Our government’s repeated attacks on the project simply made President Obama’s rejection that much easier. And looking at it from the president’s perspective, why should he make a politically risky pipeline approval and expend substantial political capital while alienating political allies if Alberta’s own premier refuses to champion the province’s interests?
This is not a matter of partisan mudslinging. This is simply a statement of facts. The government’s plans to address this crisis should be greeted with skepticism at the very least. “Investing in green energy and renewables” is a slogan, not a concrete plan. Infrastructure-related job creation is vulnerable to the exact same criticisms that Keystone XL’s leftist critics relied on, i.e. that the jobs created would be transitory. And domestic refining simply will not happen, partly because if it were viable, it would have happened long ago and partly because it would depend on multi-billion dollar investments from the exact same companies and investors that the government has alienated.
Defenders of the current government would do well to avoid knee-jerk reactions to these unpleasant truths and rather try to understand that the criticism does not simply stem from blind partisan hatred. The province already gave the NDP its chance when it granted them a majority. But to ask for blind acquiescence for the next four years is simply outrageous. Not when so much harm has been done to Alberta and not when so many jobs have been lost and lives have been disrupted. Certainly not when there is still time to reverse course and stave off complete disaster.