Alberta’s oil price alliance a rare moment of political harmony
Christmas lights have been threaded through the trees around the legislature, ready to be turned on Tuesday evening.
Hanukkah festivities have already begun, kick-started with a celebration Sunday that had the grounds filled with Hebrew music.
And snow has finally arrived in abundance, giving everything a postcard perfect appearance.
Perhaps it was these familiar sights and sounds of the holiday season that helped provincial politicians, for one brief moment, come together in co-operation to rescue the Alberta economy.
The collaboration of which I write is the provincial government’s decision Sunday to proceed with mandatory oil production cuts.
To call the move extraordinary is an understatement, considering it is Alberta’s first legislated curtailment in four decades.
The last time the strategy was employed was the fall of 1980, when Peter Lougheed used it during the fractious days of the National Energy Program.
At almost any point since, it would have been anathema for any politician to order cuts to the commodity on which Alberta’s prosperity depends.
Clearly, we are living in unusual times when almost all provincial leaders now say Alberta has little choice but to do exactly that.
The consensus emerged because of a perfect storm that has Alberta oil selling at an enormous discount to benchmark U.S. prices.
In simplified terms, oil produced in Alberta can’t be moved out fast enough due to a lack of pipeline space.
Rail and truck are being used to ship some crude but these are expensive options which depress prices. At the same time, storage facilities have been filling up to the point that space has nearly run out.
Something had to give. From a political standpoint, Premier Rachel Notley couldn’t feasibly sit back and let the market sort itself out, not with jobs on the line and the provincial treasury facing a dearth of revenue.
So the premier took the only action really available.
Still, for a leftist government to directly intervene to influence prices took courage, especially since that government’s opponents are more conservative parties that generally oppose restraints on business.
That’s why it was gratifying to see the Alberta Party and United Conservative Party provide Notley a Christmas present by calling for curtailment ahead of the government’s decision. That gave Notley the gift of political cover for a move that would have otherwise seemed highly controversial.
And Notley gave a gift right back, offering what came across as genuine gratitude for the contributions by the two parties.
It was a rare coming together typically seen only during natural disasters, such as southern Alberta floods in 2013 and the Fort Mcmurray wildfire in 2016.
The price crash isn’t the same life-threatening catastrophe as those past calamities, yet the economic effects are more widespread. Though Calgary and Fort Mcmurray are again among the biggest victims, there’s hardly a community unscathed.
The political co-operation to fix the situation is a holiday story you’d hope could last awhile.
But the reality is that with an election months away, the harmony will last only as long as it serves the parties’ interests. At the first sign the plan isn’t working, that it isn’t reducing the price differential enough or stemming job losses, this is an alliance that will prove as brittle as a box of expired candy canes.
Already there are signs of fracture.
Minutes after Notley’s announcement Sunday, Alberta Party Leader Stephen Mandel charged that the government knew back in the spring that an oil price collapse lay on the horizon and didn’t prepare a curtailment program that could have been rolled out immediately.
(The government says it didn’t expect the slump would get this bad, and that companies weren’t asking for intervention until recently).
Post-announcement comments from UCP Leader Jason Kenney oscillated between commending the NDP and criticizing them for past opposition to specific pipelines.
That pattern continued into Monday’s question period when the first set of exchanges between Kenney and Notley on the curtailment program were positively cordial.
That is, until Kenney tried to get Notley to admit she and her party made a mistake by previously opposing the Northern Gateway and Keystone XL pipeline proposals.
Notley replied that some of the most egregious pipeline mistakes were made by the former Harper government in which Kenney was a cabinet minister.
Although the two leaders agree on the need for curtailment, it seems naive to expect they will stop blaming each other for creating that need in the first place.
Where events take us from here is anyone’s guess, but already on Monday there were positive developments. Western Canadian Select prices rose to a much healthier point, shrinking the differential to around US$23 a barrel.
We can only hope the progress holds, and that this rare moment of political cooperation — however brief and breakable it turns out to be — will propel Alberta’s economy to a happier new year.
The Alberta Legislature, in Edmonton Thursday July 19, 2018.