Oil cuts backed by all parties
Having the leaders of three political parties in Alberta agree on a government plan to limit oil production will have the effect of removing one potentially contentious issue from the 2019 provincial election campaign, says a local political science instructor.
It kind of works for the NDP because everybody is on the same side, said Jim Groom political science instructor Medicine Hat College.
“Jason Kenney, pretty capitalistic guy ... and I think if he is willing to say that this is what we need to do (Premier) Rachel Notley had no choice but to say ‘well let’s give this a shot’,” said Groom. “We know this won’t be debated during the next election. If she hadn’t done anything, of course, then it would have been an election issue.”
Free enterprise is always the preference and when government steps in it has to be done cautiously, said Drew Barnes UCP MLA for Cypress-Medicine Hat.
There are 35 million barrels of oil in storage, accumulated without free market controls, because the industry expected significant progress on a pipeline by now to move that product, said Barnes.
Because of the huge quantity in storage “commodity traders were stepping in and buying space on the pipeline and then buying our Western Canada select barrels for $7 to $10,” said Barnes.
“Every Albertan, every Canadian, needs to understand the damage of not being able to build this critical infrastructure is putting our national economy in jeopardy,” said Bob Wanner, NDP MLA for Medicine Hat.
Alberta developed one of the most progressive climate strategies in Canada and maybe even in the world but it needs pipelines, said Wanner. Building pipeline capacity is not only about Alberta, it is about the nation the global economy.
Wanner says he wants to believe that Canadians understand this but could not help noticing the news coverage on the closure of the GM plant in Oshawa affecting 2,500 workers.
“Man, we’ve got a lot more people than that. I hope the Canadian public agenda recognizes that,” said Wanner.He says while Alberta is committed to addressing climate change and is taking steps to do so, it is still a nation and indeed a world dependent on oil, and Alberta’s oil needs increased pipeline capacity to handle what is produced.
The feedback since Notley’s announcement on Sunday that output of raw crude oil and bitumen will be reduced by 325,000 barrels a day, effective Jan. 1, 2019, appears to be positive, said Wanner.
“I have a sense that the general consensus of the community and the city is that we needed to ... it was one way to move the pipeline issue forward,” said Wanner.
Limiting oil production is a short-term plan. Additional rail cars Alberta is buying to move oil is a midterm plan but pipelines are needed for a longterm solution, said Barnes.
Reducing oil production only from the start of next year allows oil producers time to work through their 30-day contracts that are already in place, said Barnes. The government-imposed limit also only applies to those companies producing fewer than 10,000 barrels a day.
“That allows the small guy to survive,” said Barnes.
Notley showed leadership in her government’s decision and as long as it is rolled out without massive error, it is hard to find a political downside, said Groom.
The announcement is already showing positive results with the differential narrowing slightly in less than 24 hours of the government’s announcement, said Barnes.
Whether that is sustainable is not clear, said Groom.
“There’s only balls in the air with this. It’s just enormously complex,” said Groom, noting some in the industry are on side and some are not.