Drastic times in Alberta require drastic measures

If you’d suggested five years ago to one of your fellow Albertans that in the not-too-distant future we’d have both a government-owned pipeline project and government-mandated oil production cuts, they’d have looked at you as if you’d gone mad. Or they’d have looked at you in terror.

On paper it sounds like the sort of approach we’d expect from OPEC members, not a country like Canada where we respect the rule of the law and the free market. It’s bad enough that we have chosen to go this route but it’s even more depressing to think that in both cases it was the best option available.

As a result of our inability to add pipeline capacity (circumstances which necessitated a rescue of the Trans Mountain pipeline expansion through a federal government purchase of the project), the growing oil glut in Alberta and the deep price differential affecting Western Canadian Select, the Alberta government has made the difficult decision to mandate an across-the-board, 8.7-per-cent production cut.

The premier made the announcement Sunday night as calls for some sort of drastic intervention have continued to grow louder from both those in industry and those in Alberta politics. Desperate times call for desperate measures, as they say, and the phrase certainly applies here.

Waiting around for the situation to sort itself out really isn’t an option. This is an emergency response to an emergency situation.

The price differential has been punishing to the bottom lines of both government and industry and the very real prospect of significant job losses looms large heading into 2019. Waiting around for the situation to sort itself out really isn’t an option. This is an emergency response to an emergency situation. In a perfect world, none of this would be needed and certainly none of this would be championed.

But of course, this is no panacea. There will still be pain felt in the industry and pain directly inflicted by this policy on those industry players who have not been as exposed to the price differential. There are many questions as to how this will all play out.

It is ironic, though, that for an NDP government that came into office in 2015 thinking that the industry was too coddled, that the prosperity of previous years was problematic, and that pipelines were “job killers,” that their first (and last?) term comes to an end with a frantic push to find some ray of light on pipelines and the prosperity that might deliver.

Much of this depends on Ottawa and the very same federal government that Alberta’s NDP took such a big gamble on. Notley’s alliance with Trudeau could have indeed paid significant political dividends, but that was incumbent on Ottawa being able to deliver. Instead, Trans Mountain remains in limbo, and the federal government has shown little interest in adding more rail capacity or doing anything at all in trying to mitigate this crisis.

So Alberta on its own is trying to do what it can. In this regard, the premier’s efforts are to be applauded. But it also serves to underscore this country’s maddening status quo.

The industry is not seeking a bailout and this is not government intervention aimed at propping up a dying industry. The market has not failed here so much as government inaction has created obstacles to the market. The supply is there. The demand is there. All industry needs is for government to get out of the way.

That will happen eventually … hopefully. In the meantime, we need to ensure that there’s as much of an industry still standing as possible once we finally get over the hump of this price-differential crisis. That makes this production cut the least worst option available at the moment.

One day, perhaps, once Trans Mountain is complete and sold back to private interests, we’ll look back on this period and wonder how we ever let it get so bad. That day, unfortunately, seems very far away.