PIPELINE POLITICS

Kinder Morgan holds all the cards

A low debt burden and improving economic outlook are being credited by DBRS as the reason it’s keeping its hands off Alberta’s credit rating.

The global credit rating agency said Thursday that Alberta’s status remains AA.

However, the trend of that rating remains negative.

DBRS said that’s due to continued erosion of Alberta’s low-debt advantage through sustained deficit spending and a lack of meaningful action to address the fiscal imbalance.

While DBRS gave the government credit for articulating a path back to balance in 2023-24, it wasn’t overly impressed with the plan.

“Instead of outlining concrete and meaningful measures to tackle the structural deficit, the plan relies on a sustained economic recovery, rising oil prices and additional pipeline capacity to drive improvement in the bottom line,” it wrote.

“Given the high degree of uncertainty in the fiscal outlook, DBRS continues to question Alberta’s ability to stabilize its debt burden.”

If Alberta sticks to its fiscal targets, though, DBRS could well restore the “stable” label to the province’s credit trends.

Finance Minister Joe Ceci told Postmedia on Thursday that’s his intention.

“My focus is always on that path to balance and making sure we’re sticking to the program,” he said.

Ceci and finance officials met recently with DBRS to talk them through the budget that was delivered in March.

“(Now that) the recession is behind us, I was able to show them where we’re tightening our belts and doing the things we’re doing to make sure we protect programs and services in a cost-conscious way,” he said.

DBRS also took aim at Alberta’s reliance on non-renewable resource revenues.

Ceci said the agency is correct on the importance of diversification, but he doesn’t think it’s giving enough credit for his government’s work on petrochemicals, agribusiness and tax credit programs to boost other industries.

“Diversification is a longer term investment, so it’s not something that gets up and operating right away,” he said.

“We’re never going to forget what our bread and butter is, but we know we have to work to diversify in addition to supporting the energy industry.”

The DBRS assessment followed a Wednesday investor notice by Moody ’s warning the Trans Mountain pipeline expansion is deemed credit negative for Alberta, despite federal government indemnity for the project.

The project’s cancellation would mean a “potentially significant loss in revenue” that would hammer Alberta’s bottom line, Moody’s wrote.

Ceci said that’s exactly the message from his government — that the lack of market access for Alberta oil threatens the financial stability of the province and Canada.

“The risks are real if the proposed pipeline projects are not built,” he said.

The expansion received a small boost Thursday in B.C. Supreme Court, which dismissed legal challenges by the Squamish Nation and the City of Vancouver.

Premier Rachel Notley said in a statement the court record for Trans Mountain proponents is promising.

“This pipeline is unlike any other in that it has been rigorously reviewed, meaningful consultation has taken place and it is paired with an effective climate protection plan,” she said.

“The failures of the past will not be repeated. The Government of Alberta will not stop fighting until we get the job done.”