In Alberta, a debate about everything except the only thing that counts - Macleans.ca
 

In Alberta, a debate about everything except the only thing that counts

Not a single question about the oil sands or natural gas


 

Jason Franson/CP

Nothing matters more to the Alberta economy than oil and gas. Nothing matters more to the Alberta environment than oil and gas, either. You could argue, really, that nothing matters more to Alberta writ large, to its people or its future, than oil and gas and how those resources are developed. These are not particularly right wing or left wing things to say. They’re just facts. But you wouldn’t know anything about oil and gas from having watched Thursday’s leaders’ debate in Edmonton.

By the standards of an Alberta election, Thursday’s event was a lively one. The main candidates, Premier Alison Redford and Wildrose challenger Danielle Smith, sparred gamely, and the also-rans were by turns punchy (Liberal Raj Sherman) and serious (NDP Leader Brian Mason). The four leaders fought over health care, deficits and low-level corruption. They touched on no-meet committees, seniors’ issues and education. They debated everything, really, except the one thing that really matters in Alberta, energy and energy policy.

Over 90 minutes of back and forth, the four all but ignored climate change, upgrading, the local environment, resource royalties or what exactly would happen to their plans if oil prices were to tumble again. They were helped in this by the media panel running the event, which asked, all of no questions that directly pertained to the oil sands or natural gas. (They ignored cities, too, which must have had Calgary Mayor Naheed Nenshi in a tither).

“I don’t get it,” University of Alberta economist (and Macleans.ca contributor) Andrew Leach said Friday. “I wish I had an answer for (why energy gets ignored). When you look at all of the statistics, you would think that would be as big as a focus (as anything else).”

Some of those statistics, according to Leach: Oil sands royalties represent 10 per cent of the Alberta budget right now. They’re forecast to hit 20 per cent over the next three years. As long as oil prices continue to climb, that’s not a problem. But if they were to fall for any reason, it could be a very big one. According to the government’s own projections, a $1 drop in the price of crude next year would mean $223 million less in projected provincial revenues that year.

Natural gas has already taken a tumble. “We had a budget that went through with a projection of $3.60 for natural gas. Natural gas is at two bucks,” Leach says. “Every ten cents off the natural gas price is $28 million out of the Alberta budget. We’re down a buck sixty, so that’s roughly a half-billion hole in the budget just because of a decrease in the natural gas prices. Nobody’s talking about that.”

Nor were they talking about the bigger overarching issue here, which is whether selling non-renewable resources to pay for annual expenses like health care and education is really such a good idea in the first place. (You could make a pretty good argument, in any case, that it’s a monumentally un-conservative one.)

This is just scratching the surface. Pipelines, the environment, global image, sustainable growth: Almost every major issue in Alberta over the next, say, two plus decades, will be wrapped up in oil and gas. So why was energy management so absent from Thursday’s debate? Kevin Taft, a former provincial Liberal leader, blamed the format itself: “I was surprised the panelists never raised those issues.” And if the panelists don’t raise them, he noted, it’s hard for the candidates to freelance.

In any case, it was pretty jarring. When you read about Alberta anywhere other than Alberta, the only thing you ever read about is oil. You wouldn’t expect the same to be true inside the province. But it shouldn’t be the opposite either.


 

In Alberta, a debate about everything except the only thing that counts

  1. I didn’t feel it was missing from the debate IMO.

    But I must say the moderators weren’t my favorites, some of the panelists were ok, some didn’t belong there.

    • “I didn’t feel it was missing from the debate IMO”
      No offense but I’m having a hard time trying to parse this. Are you saying that you think it was brought up in the debate and discussed or are you saying it wasn’t necessary to bring it up?

      Either way, I don’t see how a rational mind could come to those conclusions unless out of per partisanship or ignorance. For one, it was not discussed in the debate, it just wasn’t. 

      Secondly, decisions based around energy policy are the most important the next government will have to make and those decisions will have a major effect on everything to do with this province.

      To deny Albertan’s the right to here each leaders thoughts on the future of Alberta’s energy policy is monumentally arrogant, fascist and slap to the face of every Albertan.

      I for one would have liked to hear each leaders thoughts on what they would do if Oil did drop to around $30-$40/barrel. Or are we suppose to live in imagination land where oil will hover around $100 for eternity?

      • Oh puh-lease spare me the insults.

        Average voter is more interested in Health Care, Education and infrastructure.

        I appreciatte Mr. Leach passion and advocacy for the Oil and Energy industry but most Albertans have other concerns.

        I, for one, have done my homework and know where each Party stands.

        • So just because Claudia Lemire has done her ‘homework’ on the energy policies of every party, it should not be brought up and debated during the only Debate of this election.

          Well with logic like that how can i argue.

          But back to my point, i guess that you just don’t think energy policy was necessary to discuss… i still stand by my belief that that kind of thinking is Un-Albertan and in general, destructive to the province and Canada at large.

  2. Tar sands development and natural gas fracking are good things and Alberta politicians know they’re good.  There is a consensus on this in Alberta.  A question about either would have been a waste of air time.

    • If the tar sands & fracking are so good why is there so much conflicting information?

  3. Dr. Sherman tried, advocated increasing taxes to corporations and the wealthy so we arent tied to the price of oil so badly. I think that makes good sense.

    • Unless, of course, the business profits that generate corporate taxes are tied to the price of oil.

      • We have more businesses in Alberta than just O&G. Also, lower O&G does not necessarily mean lower profits for O&G companies.. just slower development of the resources. Shrinking both revenue and expense gives the same amount of profit.

  4. Maybe there is no debate about royalties in Alberta, because the royalty structure is pretty good.

    Alberta will collect a minimum of 25% royalty on bitumen after a given project pays back its capital investment, up to I believe 40% royalty when bitumen pricing rises above something like $120.  The royalty system is backloaded.   It is collecting relatively little now, but private companies are paying to develop long lived royalties streams for Alberta which will slowly and progressively kick in.  (Look at the Silver Wheaton, a silver streaming company, business model.  This is an extremely shrewd way of maximizing the value of an asset.)

    Alberta if it so chooses can collect this royalty in bitumen, so it will be able to have all the upgrading in Alberta it desires, when the economics of upgrading make sense.  Upgrading, like refining, is in general an undesirable business, because it s a spread business, rarely profitable.  One only does enough upgrading and refining to insure that one is getting a good price for bitumen, which is the highly profitable, high margin business.  i.e. Upgrading and refining in general don’t add a lot of economic value.  But it is important to retain some ability to upgrade and refine to maintain strong bitumen pricing.

    The thing that many politicians, economists, and people don’t understand is that there often is not a lot of real economic value in resource processing.  The economic value of resource processing is to maintain the price of the raw resource.  So the best economic value is optimized by doing only enough resource processing to maintain the pricing of the raw resource, and spend the profits on more worthwhile economic and societal endeavours.

    The high wage jobs in resources are now more on the extraction side.  As resources become more scarce it takes really smart scientists and engineers to figure out how to extract them economically and in an environmentally sound manner.  Mass manufacturing provides mostly low wage jobs.  The high wage jobs in manufacturing are now in niche manufacturing which tends to be highly automated and requires fewer but highly skilled people.  Upgrading and refining falls here.  The jobs are high wage and desirable, but unlike niche manufacturing, which adds a lot of economic value in general, upgrading and refining do not add a lot of economic value.  Doing too much or more than the minimum required does not add economic value.  The economic value is in the raw resource, and one upgrades, refines, and processes the raw resource only to maintain and enhance the economic value of the raw resource.

    The natural gas pricing problem will eventually solve itself once LNG starts getting exported from North America.  It would be an issue in Alberta, but the new technologies means that everyone can drill for light oil in places they couldn’t before in Alberta, so the oil service industry is still humming even though natural gas is in a great depression.

    i.e. Debating oil and gas in Alberta would sort of be like debating whether the government of Quebec should sell off Hydro Quebec in a Quebec election.

    The only people who talk about oil and gas, or who are obsessed about talking about oil and gas, are those who don’t have it.  As they plot devious ways to steal and tax the economic value of oil and gas away from those who do possess it, or to deny it to the rapidly developing world who are moving millions of people out of subsistence poverty every year, and are becoming competitors for the oil and gas.

    Dutch disease is now a fallacy.  It was true when finding oil was easy and all one did was drop a few straws into the ground.  The finding part did not create a lot of jobs, or related economic activity.  There was no inherent velocity associated with the oil wealth.  

    Finding oil and resources is no longer easy.  Unlike in the past, it provides huge associated economic drivers and economic activity, far away from the oil.  Unconventional oil and gas and the wealth now have inherent velocity.  They drive the much broader economy because the process of extraction is much more difficult, requiring much more engineering and design, much more tools and equipment, and much more end processing.

    People weren’t commuting from the Maritimes to work in Alberta and Saskatchewan during the seventies.  They are now.  i.e. That is why there is no Dutch disease.  

    The high dollar means Ontario manufacturing can buy the capital equipment to sustain the highly automated niche manufacturing they are going to do.  The era of highly paid low skilled manufacturing is over.  Manufacturing is increasingly highly smiled and highly automated.  i.e.  That is why there is no Dutch disease, and a resource industry supporting a strong currency actually helps these manufacturers by increasing the purchasing power of their capital.

    Where the economic value is, where the cheese is, moves, when one moves from a resource surplus world to a resource constrained world.  With millions of people moving out of subsistence poverty in the world every year, the world will be in a resource constrained phase for the next generation.   Dutch disease is NOT applicable at the moment.  It was true 50 years ago.  It is not true in the current world economic environment.

  5. It was left out on purpose. Let’s not kid ourselves. The Oil & Gas industry still runs Alberta and the media takes their marching orders from them.

    And that ‘person’ from Global was an embarrassment to journalism and common sense. A grade seven student would have asked better questions. Again to my point about who really runs Alberta.

    • Danielle Smith is Sarah Palin light.  Her plans for Alberta will not survive a single decline in the price of crude oil.  She thinks the chance of geography that put oil under her feet somehow implies superior economic management.  Sort of like Sarah Palin thinking her view of a bit of Russia from her home implied superior diplomatic capabilities.  Her party is bought and paid for by the oil and gas industry as will be any government she leads. 

      • Sort of like the chance of geography that is about to cause us to ram a pipeline up your ____.  This being the case, my advice is that you tone down the angry rhetoric.  We are a forgiving folk, though and, a few years hence, if we see you relaxing out on your front porch, we’ll be sure to waive at you from the supertankers.

        • Thats a great way to convince British Columbians to accept most of the risks associated with shipping crude to China while getting very little benefit.  First Nations and British Columbians are just dying for this arrangment.  You must work for the PMO to acquire such divisive language. 

          Smith’s campaign promises would not survive a single decline in crude oil prices, which you might have noticed occur every five to ten years.  At which time the oil industry stops funding politicians and pack up and go elsewhere.  I know, because i worked for them for 40 years, in four different countries. 

          • Likewise, trotting out the tired old “lucky to be sitting on oil” slam against the province whose primary industry would seem to employed you throughout your career.

            As for your comments about the pipeline not generating sufficient benefits for BC/First Nations, you appear to pay little regard to the tens of billions Alberta currently sends to your “have not” province through Ottawa because of our historically prudent management of our natural resources.  Choking off future markets for those resources because there’s not enough in it for you and your fellow wet coasters would not be, I submit, prudent.  Besides, if the thought of a pipeline gives you the vapours, there’s always the option of hundreds of tanker trucks weekly racing down the Yellowhead to Prince Rupert – no BC/First Nations approvals needed to do it that way.

          • Alberta’s “prudent” resource development policy for the past three decades has been to sell as much oil and gas as possible, at as low a price as possible, before the price goes up.  The Alberta royalty deal on offer to oil companies is the most generous one on the planet, meaning the most for companies and the least for Alberta citizens. Harper tops this up with tax credits that are unmatched in any other countyr.  How else to explain the “prudent” policies that result in deficits for the past several years in spite of the highest level of revenue in the country. 

            By the way over half my career was overseas, so I am fully aware of how Alberta compares to other oil regions. 

            Alberta has bungled, rather than managed its resrouces and you cna expect even more of this from Smith.  Expect the equivalent of the F-35 fiasco of lies and mismanagement to come to an oilfield near you courtesy of the political tag team of Flanagan, Harper and their puppet Smith. 

          • We may not have done as outstanding a job managing oilsands development as you fine BC folk have done with your forestry industry …

            http://garthlenz.com/#/industrial-landscape/industrial-forestry/web-industrial-forestry-ground-3 

             …but I still think it’s been pretty good.

            As for the royalty regime, when it costs two or three or four times as much to produce a barrel as it does in Saudi Arabia or Venezuela, adding a hefty royalty payment on top of that would tend to cause the producers to look elsewhere, doncha’ think? I recommend a review of capital investment in production in Alberta before and after Stelmach changed the rates.

            I am curious about Harper’s tax credits, since while you’ve been toiling away for forty years in resources, I’ve spent a near equal amount of time studying tax and finance and I know nothing about them.  I must have been out walking the dog when Harper snuck them in.

      • What a bunch of nonsense!

    • Well, the panelist from the Journal is no fan of the oil and gas industry, having recently returned from a sabbatical during which he investigated “carbon capture” (big oil’s favourite solution for the emissions problem) and concluded it’s bogus.  Seems odd that he didn’t raise it – perhaps it was out of fear such a question would allow Smith would further outperform Redford, his personal favourite.

      As for the CBC panelist, one could sense she almost wet herself waiting to zing Smith with her gay abortion question.  Upon hearing the question, most viewers got up to get themselves a snack.

      In defense of the Global panelist, her first question concerned the issue that has dominated this election – the PC culture of entitlement, as most vividly reflected in the “money for nothing” committee.  Redford’s response probably has sealed her and her government’s fate, making it an issue of even greater significance, at least during this election, than oil and gas.  

  6. double post

  7. Raj moving away from that monstrosity the Health Authority is an exciting concept and very
    meaningful!

    Did you know this health authority can sell any hospital without checking with the legislature or
    getting further approval? Probably not. however, they told me while it is true they simply would not do that!

    I maintain we pay this monstrosity more in severance packages that we paid to all the regional health authorities.

    As a one time member of a hospital board I have seen a lot of strange things!

    The point is the Health Authorities own outright the hospitals. They were owned by the hospital
    boards prior to this.

    The door is open, the stage is set to sell off our hospitals to private industry for any price
    they choose. They answer to no one!

    If you vote in either the WRP or the Cons you are putting yourself on a very slippery slope!

    Add to this the WRP ongoing support for the Alberta Firewall and the existing legislation which is all written with the condition the Government cannot be held responsible for anything and you have a real mess!

    I continue to support the Liberal party; for very good reason!

  8. Typical Election Trash. Talk about anything but the important issues because they are the difficult issues to deal with and because they are the issues the incumbents know nothing about. Alberta is in a difficult position this election. We have a collection of baboons with a sense of entitlement running against three party members with no experience in leadership all lobbying to run a province that has lost it’s way. Good luck voters!

  9. The reason why it wasn’t brought up is because Alberta doesn’t have a resource issue. What we have is a spending problem and discussing the fluctuating prices of hydrocarbons isn’t going to solve the root issue of over spending.

    The last thing we need is 3.5 billion dollars in bribes to big unions (mainly the ATA) and Liberals from Redford and the PC’s above and beyond an already bloated budget.

    Thankfully, Albertans will be voting out the main problem on election day.

  10. They are all into themselves..

  11. My God, where is your mind set? 85% of British Columbians are opposed to the Enbridge Northern Gateway Pipeline and Oil Tanker traffic off our coastal waters. This proposed Alberta Tar Sands pipeline would traverse the entire Northern portion of BC through to the Kitimat on the BC coast. We , your neighbouring province, oppose this pipeline. Time to start thinking of a country’s best interests rather than Corporate BIG OIL’s interests!!!

  12. No amount of royalty revenue, corporate taxes, fee increases, name your game, will ever catch up to a government’s (of any stripe) ability to spend it.  Without rational politicians ( more correctly, rational voters) this will not be solved.  Here’s a reason it wasn’t discussed – spending is what matters to these folks, not revenue.

  13. Yes of course, Central Canada needs to have issues from the ‘colonies’ explained in terms they have been accustomed to. Steretypical propoganda, grandstanding and the like. Little did we know that we must have the real issues edited for us by Mcleans. Isn’t it time to start ranking Universities again or predicting the inevitable housing crisis.