Premier Notley’s Annus Horribilis
Call me “The Grinch.”
The Notley government — and Alberta — has had a horrible year, much of it due to misguided policies, poor judgement, political expediency, and a lack of business acumen. Albertans should remember all that over the Christmas season and into the New Year.
The Alberta government continued to spend our money like a drunken sailor over the past year. In March, Finance Minister Joe Ceci tabled his fourth budget, forecasting a massive annual deficit for the fourth year running.
The New Democrats’ massive deficits have been based on the Keynesian principle of adjusting government spending to balance against the business cycle, as supposedly recommended by former Bank of Canada Governor David Dodge. A great idea if you saved for the rainy day, not so good if you didn't.
We didn’t. The Progressive Conservatives generally ran fiscal deficits during their 44-years in power, with the governments of premiers Peter Lougheed and Ralph Klein the notable exceptions. As a result, the province had gross debt of $11.9 billion when the New Democrats gained power in May 2015, not a huge nest egg. Alberta’s gross debt will peak at $96 billion by 2024, when the Notley government finally plans to balance the province’s budget, with an estimated annual debt servicing cost of $3.7 billion.
The Alberta economy has been hit hard since the 2014-16 global oil price crash, especially our oil industry and anyone associated with it. We’ve suffered massive layoffs and pay cuts.
In contrast, the public sector — including teachers and health workers — has shared none of the burden. Public sector workers benefited greatly when the Alberta economy was booming, obtaining large wage increases and a standard of living unparalleled in any other province. Public sector cuts could have helped get government spending under control, but oh yeah, they are Premier Rachel Notley’s natural political base.
Global oil prices have rebounded since early 2017, and we could have benefited from them if the Notley government hadn’t joined with Prime Minister Justin Trudeau and the environmentalists and totally screwed up the crude pipeline file.
Until August 30, the day the Federal Court of Appeal quashed the federal government’s November 2016 approval of the Trans Mountain expansion (TMX) project, Notley and Trudeau marched in lockstep to garner social license for TMX — the remaining crude pipeline project to tidewater.
The feds gave the environmentalists and their allies a national climate change plan, a $1.5 billion Oceans Protection Plan, a soon-to-be-passed Oil Tanker Moratorium Act, banning crude exports off northern B.C. waters, and killed two crude pipeline projects — Enbridge’s Northern Gateway and TransCanada’s Energy East — for nothing in return. The Notley government gave away the Climate Leadership Plan, including a provincial carbon tax and an 100 megatonne per year cap on oilsands emissions.
Making matters worse, Premier Notley’s love affair with the Trudeau government contributed to no more than lukewarm criticism of Bill C-69 — until their recent divorce — despite the feds regulatory reform bill widely viewed as an industry killer, and not just for oil and gas but natural resources as a whole (see Bill C-69 — An Economy And Energy Security Killer).
As recently as mid-August, at the annual Energy and Mines Ministers’ Conference, held in Iqaluit, Nunavut, the Ontario and Saskatchewan governments refused to sign the meeting’s communique because of the feds’ soon-to-be passed Bill C-69. The communique said, among other things, that federal and provincial governments would work to "ensure an effective regulatory review process that enhances economic competitiveness and maintains a sustainable environment."
In contrast, the Notley government signed the communique. During a press conference following the conference, Alberta Energy Minister Marg McCuaig-Boyd said: “We had a lot of opportunities as ministers to raise our concerns and cautions on the bill going forward. Absolutely I feel we were heard and we’ve got a lot of work to do yet.”
Since the TMX debacle, Premier Notley has done all in her power to distance her government from the feds, blaming the Trudeau government for the lack of pipeline capacity to move western Canadian crude to markets outside the region.
Don’t fall for it folks. Interprovincial pipelines may be under federal jurisdiction, but the Notley government has been complicit every step of the way. Stated bluntly, Notley’s recent fed bashing appears no more than a pathetic attempt to bolster her party’s chances in next year’s provincial election.
Finally, Alberta has been hammered by the regional crude price crisis this autumn, until Premier Notley announced mandatory crude production cuts with much political grandstanding on December 2 — the drum roll for her big announcement began the day before.
But why did Premier Notley take so long to adopt mandatory production cuts? At a closed-door meeting in Calgary on October 22 with high-level executives from many of our most important oil companies, she was informed there were only two relatively timely options to restore western Canadian crude prices to reasonable levels, voluntary and mandatory production cuts, with the latter much faster acting than the former.
On November 5, after catching wind of the closed-door meeting, I had Civil War In The Oilpatch And A Lougheed Solution published here in DOB, arguing strongly in favour of mandatory cuts. In a follow up article on November 23 (The Sole Silver Bullet For Western Canada’s Crude Crisis), after further dithering by Premier Notley, I wrote: “Folks, this ain’t no rocket science. All the options are already in clear sight on the table. The most effective of them, albeit not necessarily a fair one, only requires political will on the part of the Notley government to pull the trigger.”
Despite the best option being obvious, it took Premier Notley 41 days to announce mandatory output cuts. Her delay cost the Canadian economy $3.44 billion and the Alberta Treasury $738 million, based on the province’s own daily loss estimates. Maybe chump change for Premier Notley, but a significant loss to this average Albertan.
On the other hand, if I’d thought the price impact of mandatory output cuts were going to be as small as the Notley government, I wouldn’t have argued in favour of them in the first place — given their inherent unfairness to our more integrated oil companies. The provincial government said it hoped the cut would “narrow the differential by at least $4 per barrel relative to where it otherwise would have been” at the time of the announcement.
In fact, the WTI-WCS differential collapsed to a normal — based on quality and pipeline transport, amazingly not crude-by-rail — US$12 per barrel on Dec. 14 for January delivery, compared to US$29/bbl prior to the announcement and a high of more than US$52/bbl in October.
It’s going to be another tough Christmas for many Albertans, especially for those working or associated with the oilpatch. For that, Premier Notley deserves a lump of coal in her stocking, and a massive loss in the provincial election on or before May 31 of next year.