Notley’s NDP stakes middle ground
Appointments of Mowat, Leach encouraging moves for oilpatch
It’s a bit early for a parade, but at least we can exhale now. The new NDP government offered further evidence this week that it plans to track toward the middle ground, and not lean too far left.
If so, that’s a very good thing.
The appointment of ATB Financial chief Dave Mowatto head the province’s new energy royalty review is a smart, business-friendly move.
The Alberta-born Mowat, who previously ran British Columbia’s largest credit union, is a veteran banker who understands how the economy works and why the energy industry is so vital.
As chairman of the review panel, he’s not likely to recommend changes — especially in a period of low oil prices — that would severely damage the province’s economic engine or cripple ATB’s own customers, many of whom are directly tied to the energy sector.
Likewise, the Notley government showed admirable smarts by recruiting respected University of Alberta energy and environmental economist Andrew Leach to help steer the province’s new climate-change strategy.
The media-savvy Leach has a more detailed understanding of industry economics than many senior execs in the oilpatch, and knows how much additional cost the industry can bear to curb emissions without rendering it uncompetitive.
Leach is an environmental pragmatist, not an altruist. Unlike the noisy eco-activist crowd, he doesn’t demonize bitumen, per se. He’s agnostic about the source of emissions. He just wants a level playing field that discourages more emissions, no matter where they come from.
That said, Leachisa staunch believer that Alberta needs a credible emissions reduction plan if it wants to secure new markets for its crude oil, and that its biggest industry has to get its head out of the oilsands or pay the price for inaction.
“If we believe the economy we have only exists because we can pollute without paying for it, or without compensating for the damages that creates, that’s a real problem,” he told me in March, before addressing an Eco Fiscal Commission forum in Edmonton.
“I worry about this when I hear the prime minister say things like, ‘To impose environmental regulations on the oilsands sector would be crazy.’ That’s really not a message you want to send.”
On the flip side, Leach is no Pollyanna. He doesn’t exaggerate the impact a small province like Alberta can have on global emissions, or see carbon pricing as a panacea for the planet’s ills.
“You see a lot of discussion from the other side of the debate, that equates carbon pricing with magic, and that somehow just havinga carbon price or carbon tax magically solves all kinds of problems. It doesn’t,” he says.
“The economics of carbon pricing tells you that if you’re going to impose a policy, carbon pricing is probably the most cost effective way to achieve a particular outcome,” he explains.
“But it doesn’t necessarily say that you’re going to achieve a better outcome with carbon pricing versus regulation. And it doesn’t say that taxes are better than cap-and-trade, unconditionally. It doesn’t say the things you routinely hear.”
See what I mean? Leach is a data-driven realist, not dreamer. And like Mowat, he knows that the energy industry needs clarity — the sooner, the better — on how all the elements of the province’s new fiscal regime, from taxes to royalties to carbon levies, will ultimately fit together.
Otherwise, the industry’s big players will have a difficult time justifying further major investments in Alberta, once oil prices rebound.
At a press conference Friday announcing him as chair of the royalty review panel, Mowat stressed the need for a sense of “urgency” to get the review done, so the industry isn’t left in the dark for too long. He also talked about the need for an “artful optimization” of revenues from both royalties and the increased carbon emissions levy.
His message, like that of the energy minister, is that the government intends to take a holistic approach to resource revenues, and resist being dogmatic about a single issue, like royalty rates. That’s also a positive sign.
Like the recent naming of former Bank of Canada Governor David Dodge as the province’s capital spending guru, all of these moves bring much-needed financial, business — and yes, environmental—sophistication to a rookie-laden government that’s still learning the political ropes.
Since the Notley Crue shocked the country eight weeks ago by ending 44 years of Progressive Conservative rule, Alberta’s beleaguered energy sector has talked nice in public, while privately fearing the worst. Revelations that both the energy minister’s chief of staff and the new environment minister were once anti-oilsands activists have hardly reassured the province’s key industry.
Moves to increase corporate taxes to 12 per cent and double the carbon levy to $30-a-tonne by 2017 — while expected — aren’t exactly mood brighteners either. The hikes will cost energy producers $800 million over the next two years, the Canadian Association of Petroleum Producers estimates.
That’s not an insignificant amount of money for an industry that has already laid off tens of thousands of employees and shelved billions of dollars worth of projects.
With oil prices struggling to stay above $60 US a barrel — more than 40 per cent below the year-ago level — and Mowat’s review set to begin shortly, the mood at the upcoming Calgary Stampede is sure to be subdued.
And yet, there’s cause for some optimism. The government’s moves to date suggest that it plans to heed its own advice by moving carefully on both the climate change and royalty files. Yep, I’d say we can all exhale now.