ALTA. CRISIS AFFECTS ALL
With a sombre speech that sounded more like wartime address than policy announcement, Alberta Premier Rachel Notley announced Sunday that Alberta is ordering the oil sector to cut production.
For a province that prides itself on its adherence to free enterprise — even when the NDP happen to be in power — it’s an astonishing turn of events. Perhaps no less remarkable is the move was preceded by a plea for that very intervention by major players in an industry known for its distaste of political interference in its affairs. Indeed, other companies remain at odds with the intrusion and believe the market should deal with the glut of Alberta oil itself.
Probably most extraordinary is that aside from quibbles about the timing and extent of the intervention, Notley has the support of United Conservative Party Leader Jason Kenney, a fierce political foe, and Alberta Party Leader Stephen Mandel. Let’s not forget that this mandated year-long production cut of 8.7 per cent that starts in January closely follows another unusual action in its own right by the Alberta government — a plan to purchase as many as 80 locomotives and 7,000 rail cars to move oil.
The phrases, a necessary evil, or even, desperate times call for desperate measures, appear to have been coined for situations just like this.
By adding rail capacity and slowing production, Alberta is doing what it has to in order to clear the supply glut, and close the yawning price differential of around US$40 between its crude and U.S. benchmarks that threatens Alberta’s economic well-being and costs Canada an estimated $80 million a day.
Even this last-ditch intervention is expected to have a limited effect on the situation, reducing the differential by only about US$4 relative to where it would have been otherwise.
The real solution to the crisis remains in the hands of the federal government, which through either incompetence or a deliberate plan to suppress the oil industry helped cause the crisis by mishandling three pipelines.
The Liberals cancelled Northern Gateway. The Energy East project was cancelled after the regulatory goalposts were suddenly moved, and a federal court halted the Trans Mountain expansion in August, blaming botched federal consultation with First Nations. The federal government did buy the Trans Mountain pipeline, but that provides no short-term fix.
Alberta has exhausted all it can do on its own. When will the federal government, and the rest of Canada, wake up and realize that Alberta’s economic crisis is also theirs?