Notley’s not the problem, 50 years of unfettered growth left an almighty mess

There is a lot of discontent with the government’s policies these days, pretty much all of them, but particularly anything pro-environment which is interpreted as anti-business by default. The frustration is somewhat understandable given the economic situation the province is in – the energy business is taking a kicking like it hasn’t in a good long while. That is fundamentally due to the price of oil, which has nothing to do with any government (it’s hard to call Saudi Arabia’s arrangement a government), but the mood is such that almost any legislation emanating from the NDP government is viewed as horrible.

A lot of the criticism is unfair. The current duly-elected government is taking actions to deal with issues that should have been addressed decades ago, or if not addressed, at least understood. Some of these relate to the environment; pressure has been building globally for decades to change ways of doing business, and the fact that someone is now in power that agrees is not something we’re accustomed to. But there are other major issues on Premier Notley’s plate that have been building for some time.

Before talking about those, it’s important to first frame the issues Notley is dealing with. Fundamentally, her government is managing two very different problems. First, and most basically, she is dealing with the economic downturn caused by low oil prices, which has been exacerbated by previous government handiwork (of which more in a minute). Second, Notley ran on a specific policy that she is trying to enact, but which also runs counter to her federal NDP counterparts. The difficulty of the latter task is not to be underestimated.

Now back to the mess that Alberta is in, and why it is the way it is. The province is suffering a major hangover these days largely because of the heights it has crashed from. The pace of development went from flat out madness to zero in less than two years. It is most pertinent to ask then why governments of the past few decades did nothing to control the pace of development; an economic free for all might feel good from an ideological perspective but it is hardly sensible. The world has seen enough booms and busts to know that, going back to gold rush days. This isn’t to say the government should purposely stifle growth for the sake of it, but rather why, for example, wasn’t infrastructure being developed concurrently, with growth happening as the province was able to handle it? Why did Fort McMurray almost go bankrupt at the very same time it was the epicentre of the largest, fastest-growing industrial development in Canada’s history? How on earth did successive governments sanction hundreds of billions in oil sands investments without even twinning the main highway to the oilsands region?

Speaking of infrastructure, why would governments have encouraged massive oil sands developments without considering access to markets? Any free market fan with even a glimmer of intellect, no matter how smitten by Atlas Shrugged, would have to know that international infrastructure such as federally regulated pipelines, require a concerted, long term effort, and preferably as part of a bigger plan. Western Canada’s refineries obviously would not be able to handle millions of barrels per day, that would have been obvious long ago; did the question never arise as to where it might go and how? Cities develop 20 and 50 year plans for transportation infrastructure; why wouldn’t a province do the same for its single most valuable resource? Yes, oilsands development did happen rapidly and overwhelm transportation systems, but that’s the point exactly – why allow that to happen?

Another black hole of governance is the shockingly bad abandonment liability problem that was left to sort itself out for decades and is now in Notley’s lap. Like an eight year old whose parents left him alone for two weeks – he ate all the ice cream and the place is so disgusting it will take forever to clean. The proverbial eight year old in this instance is the stream of hands-off ideologically-driven governments who oversaw a problem that was spiraling out of control but did nothing for fear of hindering development. Where were governments and legislators 50 years ago when the problem was nascent? Many oilfields developed in the 1950s are an environmental disaster now because companies kicked the can down the road for years and no one in power cared. Landowners require responsible stewardship of the oil and gas developments that were permitted on their land, with or without their consent.

For decades, the government has thrown open the doors to development, to foreign ownership, to unfettered growth, while ignoring a fast-growing liability problem, yet devouring all the royalties the booming industry threw off. Did anyone think we’d never have to pay the piper?

Speaking of paying…where the hell did all that money go? There is the Alberta Heritage Fund with an $18 billion balance, which doesn’t sound too bad, until compared with Alaska’s ($54 billion) and Norway’s ($850 billion). Eighteen billion is better than nothing but proper stewardship of a nonrenewable resource would have made the fund a priority. There is precious little else to show for the tens of billions that flowed through government coffers; Alberta is without a sales tax but the province now finds itself with substantially higher income taxes in order to make ends meet rather than a consumption tax – a recipe not known for helping economic development, although it does wonders for TV sales.

So Notley has a burden of history to deal with. To make things worse, some issues are coming to a head at the worst possible time for the oil patch, like the vast collection of surface junk and subsurface nightmares that constitute the nonproducing well problem.

On the other side of the fence, Notley has her own party to deal with, and frankly, that may be a bigger battle for her than against conservative businessmen. Consider that the national NDP party has endorsed the unconditionally and comprehensively screwball LEAP manifesto (which may have been inspirational at 20 percent strength and without the communist goop – we do need a major reset but the LEAP thing an equally ideological recipe for disaster). To her great credit Notley did not endorse it, and furthermore expressed support for a pipeline to tidewater, somewhere. Arch enemies of Notley may think those positions are insignificant, but they are not – taking a stand that runs so counter to the federal party takes some courage. If some of her policies seem extreme and upsetting, consider what might have come our way under an NDP umbrella (which could happen nationally also).

Some criticism of an NDP government is inevitable, of course, because the province is incredibly free enterprise and rightly so – that’s why many of us came here. On the other hand, some criticism is just downright irritating, such as when a ConocoPhillips spokesman recently blamed Canadian layoffs in part on taxes, increased regulatory compliance costs, and lack of access to oil markets. Funny then that ConocoPhillips last year sold off more than 30,000 boe/d of mostly gas (which has no problem reaching markets), sold off tens of thousands of crappy old wells (neatly skirting regulatory compliance cost problems), and kept its oil assets (which are the ones having trouble reaching markets). Furthermore, ConocoPhillips’ complaints about the political scene in Canada are interesting given the company’s significant presence in Libya, Angola and Colombia, all shining beacons of corporate governance, I might add. Is it not incredible that a company would accept those political freak shows and single out Canada as being difficult to deal with?

In Alberta, decades of sloppy and lazy government were brought to an end in a shocking election, and the reins were handed to someone completely different, who campaigned on change. She is delivering pretty much exactly what she said she would. And in fact it could be much worse. For example, Notley’s handling of the royalty review showed great sensitivity to the state of the industry, creating virtually no problems, which is an interesting contrast with Ed Stelmach’s disastrous foray into statesmanship a decade ago, under the bright blue PC banner.

At any rate, defense of Notley or her government isn’t a good way to make friends these days. But looking at the forest and not the trees, over the years Alberta has dug a deep hole for itself and jumped right in through successive and reflexive elections of self-entitled and often useless conservatives. (Despite being a federal politician, I offer the legendary Rob Anders as proof; he continually was re-elected to the whole nation’s astonishment.) When that trend was broken in a pique of voter anger, it coincided with the worst downturn in decades.

Some NDP policies may indeed suck, but it’s worthwhile keeping the overall context in mind. Some NDP cabinet members may seem dubious, but ask yourself if we’d been better off with the PC leader who pouted and disappeared after losing the election, his motives pathetically clear, and who would most likely be digging us further into the hole that his ilk got us into. And it is a very deep hole; not only is the province now in debt but pipeline access is a major issue, and the abandonment liability problem is massive and growing with each new corporate death.

It’s also worth remembering that the votes that get noticed most are votes of the wallet; at the end of the day businesses can have a very loud voice by voting with dollars. If investment in the province dries up, the government will pay far more attention than to name calling or rude pictures of Notley circulated on the internet. The government notices when hundreds of people get laid off; they don’t when people gather around the water cooler or Pokemon gym to complain.