Cabinet Appointment A Positive Sign For Natural Gas Industry In Alberta?

As is usual for any new cabinet, the choice for Alberta’s energy minister captures the oil and gas industry’s attention.

But this time, the incoming government included a new wrinkle: the appointment of an Associate Minister of Natural Gas. Dale Nally, the MLA for Morinville-St. Albert, will take on this role. It’s a positive sign the province intends to focus on an important sector of the industry that has been largely neglected by governments of the recent past.

For example, in its annual budget tabled in April 2016, the former NDP government listed a range of “priority areas” for climate change funding, but natural gas was not on this list, and was missing from budget documents outlining the NDP’s environmental plan at the time.

 “It is troubling that the major role natural gas can play in the phase out of coal seems to be missing from the government’s lexicon when talking about their climate leadership agenda,” Gary Leach, former president of the Explorers and Producers Association of Canada (EPAC), said at the time. “Natural gas is clean, abundant and cheap, and using more of it here in Alberta is an important demand driver for our producers, especially when we are being shut out of other markets by cheap gas and high transportation costs.”

The previous Progressive Conservative government was no better at focusing its attention on an ailing natural gas industry, as it predicted a “gusher” of revenue from the oilsands.

 “It’s now about half of the gaming revenue. It’s sad," former PC Finance Minister Ron Liepert said in 2012, when discussing the drop in natural gas revenue. “I don’t think there’s anything that we as a province can do.

 “We’ve been working with industry on a natural gas strategy. I think clearly, though, if we can get a number of these projects that are proposed to get LNG to the West Coast, it's going to bring up the bar.

"If we can start to get international prices to show that there's other demand for our product out there, I think the North American prices are going to float up, but we're not seeing any real significant gain in the next three years."

Over three years into its mandate, the NDP finally focused on the beleaguered natural gas industry, which is also receiving heavily discounted prices when compared to the U.S. industry.

Although Alberta’s abundant, world-class natural gas resources can provide economic opportunities for generations of Albertans and Canadians into the future, “urgent action is required now to ensure Alberta capitalizes on this legacy,” the province’s natural gas advisory panel warned in a report, noting several opportunities to reverse the decline.

One of the most effective actions to “grow the pie” is securing a second world-class West Coast LNG project that achieves its final investment decision by December 2020, said the panel. To expedite large-scale, long-term LNG projects, it recommended strong co-operation and alignment between the Alberta and British Columbia governments.

Whether Alberta's new UCP government can set differences aside with B.C. to work on an integrated LNG strategy remains to be seen, given the strife on the Trans Mountain file which heated up this week.

As Vince Lauerman recently noted, the UCP as much as admitted that its natural gas strategy is a work in progress in its official election campaign document where the party stated “plans to develop a strong natural gas strategy,” and that is a good thing. This leaves lots of room for new ideas and creative policymaking, especially as the little that is there is of dubious value for opening markets, he noted.

Two areas the government should focus on in Alberta in the short term, as noted by the natgas advisory panel, include the need to address pipeline constraints and regulatory delays.

Alberta’s existing gas transmission infrastructure “is stressed to capacity as a result of a massive shift in production from mature southeast Alberta plays to the Montney and Deep Basin plays of northwest Alberta and northeast British Columbia,” the natgas panel, appointed by the NDP, noted.

In addition, lengthy federal and provincial regulatory and bureaucratic processes are a major impediment to the future success of Alberta’s natural gas industry — addressing this should be a clear priority for the new Alberta government.

Given the foregoing, the appointment of a specific portfolio for natural gas is a positive sign the new government intends to make this industry a focus from the opening bell of its mandate. Time — and specific policy — will dictate whether this is the case.