Province has spotty record of corporate investment
Some decisions have paid off, while others have been unmitigated failures
As Kinder Morgan’s confidence in the $7.4-billion Trans Mountain pipeline expansion appears shaken, Premier Rachel Notley has said the provincial government is contemplating a “public investment” in the project.
The federal Liberal government is also contemplating an investment in Kinder Morgan.
Their options could include buying up a portion of the company’s shares, or potentially offering loan guarantees that would leave the company free from payments until construction is complete, said Trevor Tombe, associate professor of economics at the University of Calgary.
Either government could also offer to take on a share of the company’s losses, should the project collapse, Tombe said.
Alberta stands to gain substantially from resource revenues should the pipeline go ahead, he said. Any provincial commitment to Kinder Morgan would be “substantially smaller” than the revenue the government stands to gain.
It wouldn’t be the first time the Alberta government used taxpayers’ funds to stake out positions in the corporate arena.
Energy, forestry and agriculture have been among the key provincial industries that have drawn Alberta government investment, although there have also been dalliances with less traditional sectors, including telecommunications, golf courses and even an airline.
Though some investment decisions paid off — particularly in the energy sector — others turned into unmitigated boondoggles.
MagCan: In 1988, the province provided $103 million in provincial loan guarantees to help build a magnesium smelter in High River. The plant closed a year after it opened, never turning a profit and eventually costing the province $164 million.
NovaTel: What started as a promising joint venture between Nova Corp. and Alberta Government Telephones to be an early player in the manufacture of cellphones ended in spectacular failure. Nova’s decision to pull out in 1989 — followed by inaccurate profit projections — discouraged investors and left the government as the sole owner of a company sold for peanuts in 1992. The total loss was estimated at up to $614 million.
Pulp and paper projects: Don Getty’s government provided financial backing to a series of pulp mills in an attempt to bolster northern Alberta’s forestry sector. Years of struggle followed for at least a couple of the projects, eventually prompting the Klein government to write off a $272-million loan to Millar Western Pulp in Whitecourt, and another $150 million owed by companies behind the Alberta-Pacific mill in Athabasca.
Gainers: The province eventually lost $209 million from its 1986 decision to offer a guaranteed loan to Peter Pocklington in exchange for ending a lengthy strike at his meat-packing plant. The company defaulted on its loan payments just three years later, forcing the province to take over the money-losing operation.
Swan Hills treatment plant: This remote facility designed to process hazardous waste has proven to be a chronic financial headache since it started in 1987. By 2015, it was estimated the province had spent $440 million on the moneylosing project with little hope the plant would ever break even. The government could soon be on the hook for $175 million to clean up the site.
Sturgeon Refinery: The first phase of the complicated project partially opened late last year thanks to financial backing from the province. The cost escalation of the project to $9.7 billion (revealed Tuesday) from $5.7 billion has raised eyebrows, and concerns remain that billions in tax dollars could be at risk if the operation stumbles.
Syncrude: When the fledging oilsands company neared collapse in the mid-1970s, the government came to the rescue by bringing in other government partners to take ownership stakes. Alberta’s shares were eventually all sold off by 1995 — at a substantial profit — and the province has continued to rack up billions in royalties and taxes from Syncrude.