Canada’s oil province to speed economic revamp

EDMONTON: Alberta Premier Jason Kenney is using the Covid-19 pandemic to accelerate efforts to diversify his oil-dependent economy, a change of emphasis for a leader who once pledged to return the Canadian province to fiscal discipline.

Kenney’s government announced an economic-recovery blueprint on Monday that includes moving up a cut in the province’s general business tax rate by 18 months.

The cut from 10% to 8% would come into effect July 1 instead of Jan 1, 2022. The province also is planning C$10bil (Us$7.3bil) in infrastructure projects to create construction jobs, investing C$175mil to expand startups’ access to venture capital and creating a new agency to persuade companies to open offices in Alberta.

A conservative elected in 2019, Kenney had promised that barring a global economic crisis he would balance the budget, and made promoting the oil and gas industry and building new pipelines the centerpiece of his economic strategy. But the Covid-19 crisis has forced a huge pivot. Even before Monday’s plan was unveiled, Kenney’s government had already announced C$14bil of measures to blunt the effects of the crisis.

While some components of the plan announced Monday are aimed at stimulating short-term demand, the programme also represents an acceleration of Kenney’s efforts to persuade companies to invest in Alberta or relocate their head offices to the province. The goal is to foster the growth of industries like technology and finance that can cushion the periodic blows suffered by the province’s energy sector.

Kenney said many business leaders are rethinking all aspects of their operations right now, and he wants Alberta to be an attractive destination for their future investments.

“We could have just stuck in the short-term lane and focused on classic, Keynesian, countercyclical, shovels-in-the-ground kind of projects, but we wanted to take a step back and really prepare for the years to come,” Kenney said Monday in an interview.

“As markets return to something like normal post-covid, we want to be at the top of the list for shifting operations and capital.”

Alberta’s energy-dependent economy has been hit particularly hard by the global pandemic, with lockdown measures and travel restrictions hammering demand for oil products like gasoline and jet fuel. Benchmark US oil prices plunged earlier this year and even briefly fell into negative territory, making all of the province’s production unprofitable.

Those low prices have prompted oil producers to cancel at least C$8.5bil in labour-intensive capital projects, like drilling new wells and building new facilities, in order to conserve cash. They’ve also caused companies including oil and gas producer Ovintiv Inc. and oilfield-services provider Mullen Group Ltd. to cut thousands of jobs. Alberta’s unemployment rate surged to 15.5% in May, topping Canada’s national rate of 13.7%.

The crash has dashed Kenney’s ambitions of returning Alberta’s budget to balance in his first term as he has spent heavily to cushion the economic blow of the crisis.