Alberta’s Golden Goose

This week the oil industry’s advocacy organization, the Canadian Association of Petroleum Producers (CAPP) cried “Uncle” over the Alberta’s oil and gas competitiveness.

They produced a report that describes a stark reality for Alberta’s energy sector:

  • The glut of energy production across the globe has led to a decline in price for oil and gas that has led to a recession in Alberta. growth in shale oil and gas production in the USA has led to a shrinking market for Canada.

  • The USA has removed the oil export ban and become an exporter of oil and gas into central Canada. About 300,000 barrels per day flow from the US into Canada in 2017.

  • The USA has six LNG plants completed or under construction while Canada struggles to find a way to permit any.

  • The renegotiation of NAFTA and a potential border adjustment tax along with the USA’s plans for energy dominance are risks that could see Alberta industry further decline.

  • The report describes the blood letting in Alberta:

    • Job losses in the energy patch of 210,000 people compared to 2014. Job losses continue to grow and many workers have been unemployed for lengthy periods of time.

    • Capital spending in conventional oil and gas in Alberta fell from about $25 billion annually to $10 billion in 2016.

    • Oil sands capital investment was cut in half – between 2014 to 2017 investment declined from $33 billion to $15 billion

A modest increase in conventional oil and gas investment is expected in 2017 to $12 billion. But oilsands capital investment will decline from $15 billion to $12 billion this year.

In a 2014 study Worley Parsons ranked Alberta’s regulatory system the best in the world. Yet with all these external pressures the Alberta government is adding more complexities and anxiety to the mix. The report describes 16 regulatory initiatives that could have an unfavourable impact on Alberta competitiveness. Among them:

    • lease tenure reform

    • The climate change leadership plan

    • Caribou recovery strategy

    • A new Aboriginal consultation processes

    • Oil well closure and liability policies

And the federal government is also choosing this moment to review the Canadian Environmental Assessment Agency and the National Energy Board

Regulatory approval timelines are lengthy. Well approval times in Alberta is on average 90 to 130 days slower than BC. Alberta has longer average approval times than Saskatchewan and USA jurisdictions.

CAPP proposes a plan with 18 recommendations aimed at engaging government in policy and process improvements. The report suggests that implementing their recommendations will competitiveness and result improved energy production, (180,000 barrels per day) more jobs (8,700) resulting from increased capital spending.

Severely Normal Albertans should listen for government response to CAPP’s proposal. We should also listen more carefully for what government has to say about competitiveness in the energy sector. The energy sector represents between a quarter to a third of the economic activity of the province. The resource rent the province gets is about $2.8 billion and a further $750 million in corporate taxes. So the size of the prize is very significant.