Panda: Energy policies undercutting Alberta's resource and revenues
In the 2015 election, Albertans clearly voted for change. But after nearly two and a half years of this new government, how would voters grade the NDP’s energy strategy?
With the price of oil at a three-year high, Albertans may not realize that we’re not reaping all the benefits of the recent uptick. In fact, the opposite is happening: the price differential between what the market price is and what Canadian oil and gas producers get for their product is increasing.
Why is there a price differential? Well, because Canada lacks the necessary energy infrastructure to get its oil products to new markets we’re left selling our product to one customer: the United States. As a result, American buyers of Canadian oil receive a steep discount. The difference in the price of Western Texas Intermediate (WTI) and Western Canadian Select (WCS) is known as the price differential.
According to the Economics Dashboard at the Government of Alberta, “[t]he differential of WTI over WCS was US$11.02 in November 2017.” An $11 differential on already-low oil prices means lost revenue (in the form of taxes and royalties) for an NDP government that is already drowning in debt. This week that differential grew to roughly $30.
Under the NDP, Alberta appears no closer to closing the price differential gap. We are now saddled with a costly carbon tax, while other jurisdictions continuously try to kill approved pipeline projects worth billions in investment and employment for Albertans.
The NDP never campaigned on the carbon tax yet announced it just months after assuming office. With no mandate to impose a carbon tax, the NDP needed to justify this astronomical tax increase through other means. They told Albertans that a multibillion dollar tax on virtually everything was necessary to secure the so-called ‘social licence’ for pipelines — the same pipelines needed to close the gap on the oil price differential!
After two and a half years of ‘social licence,’ it’s clear the NDP didn’t do their homework. During that time, we’ve seen the federal and provincial government pile on additional job-killing regulations and taxes, like the NDP’s new industrial carbon regulations and the combined provincial-federal carbon tax increases.
Unswayed by the supposed benefits of carbon taxes, the National Energy Board added up-and-downstream emissions tests to its assessment of future energy projects. In addition to being a clear violation of provincial jurisdiction, the federal government’s overreach will kill future investment in Alberta’s oil and gas sector. TransCanada blamed the new federal emissions tests when they killed their own $16-billion Energy East project, politely citing a review of “changed circumstances.” Sadly, Alberta’s NDP remains muted in the face of these changes implemented by the Trudeau Liberals.
Meanwhile, our biggest customer, the United States, is now our biggest competitor: they’ve become a net exporter of gas; they’re also enjoying record oil production numbers while building liquid natural gas export terminals. And they did all of this within the same low-price environment that we currently find ourselves in. Canada’s oil and gas sector is flat while the U.S. is prospering because of policy not price.
Regardless of what your opinion of the petroleum industry is, Alberta’s oil and gas sector is critical to everyone in this province. The resource belongs to us, the people of Alberta. And we deserve to get fair market value for our resource precisely because this is how we pay for our valuable public services. Right now we’re losing billions in revenue while borrowing to pay for schools, hospitals, and other critical infrastructure.
Of course, we want Alberta’s industry to succeed, and a United Conservative government would enact grassroots-approved policies that send a clear message to job-creators: Alberta is once again open for business. And we think those signals will propel Alberta to the head of the class.
In the meantime, I’m giving the NDP a failing grade.