ALBERTA SUFFERS, OTTAWA SHRUGS

Alberta is desperate. Its losses in oil sales have made it so much so that the provincial government has ordered oil companies to curtail production by 325,000 barrels per day — or 8.75 per cent of total volume — for up to one year beginning Jan. 1. Premier Rachel Notley’s controversial plan is to force producers to constrain supply to drive up prices, something she portrays as a regrettable last resort. Certainly the only people who would be happy with this imperfect solution are the radical environmentalists who want to stop oilsands production altogether. Curtailment was a first step.

So far Notley’s gamble is paying off. Alberta oil had been selling below US$15 a barrel while a comparable barrel of American oil sold for more than US$50. On Monday, the day after Notley announced her decision, prices for Alberta crude rose more than 40 per cent.

But prices depend on a host of factors and, in the longer run, there are no guarantees that Alberta will be able to maintain a better price. In November 2016, OPEC curtailed oil production by 1.2 million barrels a day and prices initially jumped, too, but then settled back to historic values for the next six months. With world oil prices plummeting these past two months, and the potential to fall further depending on production from OPEC and Russia, Alberta could soon be fetching lower prices again.

The main problem — a lack of pipeline infrastructure — won’t be solved by curtailment. Pipelines are at capacity and most producers can’t access any more rail capacity. Refiners can’t get more supply from Canada, so they turn to other sources. Even if Alberta’s plan manages to sop up its glut of oil inventory, capacity constraints remain.

Albertans blame the federal government for that. So they should. It is constitutionally responsible for inter-provincial transportation, whether its canals in the 1860s or pipelines, highways and trains today. Prime Minister Justin Trudeau gets called out most for badly fumbling the pipeline file, although some problems go back further than him. And the Trudeau government did approve Enbridge’s Line 3 expansion. It is also committed to expanding the Trans Mountain pipeline, but that’s been paralyzed by a court ruling that found the Trudeau government bungled the evaluation and approval process.

But Trudeau has also seemed ambivalent about Alberta’s oil business, even suggesting that the sector should disappear in the coming decades. He ultimately blocked the Northern Gateway pipeline proposal with a tanker ban applying only to Alberta oil. His government’s repeated moving of the regulatory goalposts saw Trans-Canada withdraw its application for Energy East to New Brunswick. And Trudeau rewarded the B.C. government’s attempts to block Trans Mountain by showering B.C. with infrastructure money. Most recently, his government has been pushing Bill C-69, adding gender, social and climate issues for project proponents to consider in regulatory processes, potentially discouraging any pipeline projects in the future.

No wonder the empty-handed prime minister and minister of finance were met with mass protests upon visiting Calgary recently. And still they offered no new ideas to help Alberta’s economy.

This is surprising. Energy is Canada’s largest export, providing high-wage jobs. Alberta has contributed $220 billion in net transfers to the rest of the country in the past decade, almost three times more than Ontario. If Alberta is in crisis mode, the federal government should be in crisis mode, too.

If it ever does decide to start taking this seriously, here are a few things Ottawa could do to actually help:

First, the government could repent for mishandling Energy East and provide regulatory and fiscal support for its construction. It’s of interest to several provinces and to the benefit of greater trade diversification;

Second, revamp Bill C-69 to model it after best practices found in other countries, such as Australia, that separate specific project approvals from social and political issues. Federal legislation should also define “duty to consult” with our First Nations consistent with constitutional requirements. The Trudeau government has put much effort into working with Indigenous communities and they can help facilitate this important step in reducing uncertainty for resource project developments;

Third, the government can make two regulatory changes that would quickly speed up the availability of railway cars to move greater volumes of oil. The first would enable rail companies to bring back oil tankers forced offline after the Lac-Mégantic disaster because they were ruled unsafe to transport light oils — the cars do not pose the same risk when transporting bitumen, with its low flammability. The second would be loosening rules that prevent U.S. rail companies from travelling deep into Canadian routes, so they can help transport oil to the Gulf Coast. Both of these federal regulatory changes are far better than Notley’s plan to buy more railway cars;

Fourth, the government should provide greater financial assistance to Alberta in two forms. It should revamp its stabilization payment program to provide greater funds to Alberta (the $200 million it has kicked in so far doesn’t cut it after Alberta’s provided billions of dollars in equalization payments). And Ottawa could implement one of the most interesting recommendations of the 2011 Jenkins report on innovation by introducing a pilot project providing upstart funding to scientists and professionals in Alberta who have lost jobs. Such funding, which could be an expansion of the popular Industrial Research Assistance Program, in an entrepreneurial centre like Alberta would make a lot of sense.

Alberta is right to criticize the absence of federal leadership. The Liberal government has options. It should have acted by now. Now, it should act.