Fraser Forum

Two bright spots in Premier Notley's recent activity in Alberta's oilpatch

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Alberta Premier Rachel Notley (pictured above) has once again been talking about oil, and both of her recent pronouncements are positive.

On Jan. 12, Ms. Notley took to the podium to discuss Alberta’s comment submission with regard to the approval of the Kinder Morgan Trans Mountain pipeline expansion. Christy Clark, premier of British Columbia, has refused to greenlight the pipeline, claiming that the proposal did not offer enough environmental safeguards nor benefits to British Columbians. Ms. Notley struck a cooperative tone, saying that B.C., project proponent Kinder Morgan, and the federal government must work together to resolve those concerns, but she will work with Premier Clark to seek common ground. “I am going to keep talking until the door is closed," she said.

Notley noted that a lack of pipelines to provide access to international markets results in a “significant discount” in the value of Alberta’s energy products, which hurts all Canadians. “It doesn’t just impact people in Calgary and Edmonton and in between. It impacts people in downtown Toronto. It impacts people in B.C.,” Notley said.

She added that pipeline opponents must realize Canada has a significant economic resource in Alberta.“You can’t just turn off the tap and walk away from it.”

Also on Jan. 12, Ms. Notley took to the podium to announce that the Royalty Review, which she instituted upon taking office, will release its findings at the end of the month. Again, the tone was re-assuring. “No one is going to see a royalty review that increases anyone’s costs in the near future,” she told reporters in Edmonton.

Asked about the potential of providing incentives to spur oilpatch activity, Notley provided no details but said the government is aware of the industry’s struggles. “Certainly, disincentives to growth will hopefully be minimized to some extent in the new process that we look at bringing forward,” she told reporters in Edmonton.

“We’re very, very conscious of the situation that we are in here in Alberta," said said, "both in the oilsands as well as in more conventional and tight oil situations here in the province... What we’re going to do is bring forward a process that is predictable, more transparent and that will give developers a good understanding of what they can expect.”

As we at the Fraser Institute have observed, investor confidence in the Province of Alberta has dropped sharply, as it did after the 2007 Royalty Review of the Ed Stelmach government. It is good that the premier is trying to strengthen confidence, but as we and others have observed, the best way to stabilize confidence levels is to get the entire process behind us quickly, and transparently.

Two things that the premier might want to fold into her oil-talk. The first is that the current slump in oil prices should not affect thinking about pipelines. The World Bank’s commodity price forecasts from October 2015 still predict an oil price rebound to $88/bbl by 2025. And, not only can pipelines operate safety and with environmental safeguards, the ongoing decisions not to build them are driving more oil onto railways than would otherwise be driven by market factors (pipelines are a less-expensive way to move oil). While moving oil by rail is generally quite safe, there is a somewhat higher risk of an incident or accident when moving by rail than by pipeline. In fact, moving a given quantity of oil by pipeline is about 4.5 times safer than moving that same quantity by rail.

Of course, only time will tell if Premier Notley’s words turn into deeds. Anyone relying on an oil comeback will have to hope they will.


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