KXL failure has Kenney down, but not out

There is still some debate about whether Keystone XL is strictly necessary given lower demand for oil, but its cancellation is undoubtedly a blow to Alberta Premier Jason Kenney.

For years, Kenney seemed to glide through politics, first as former prime minister Stephen Harper's minister of everything, then by merging Alberta's two conservative parties through what appeared to be sheer force of will. But of late, Kenney no longer seems bulletproof.

After taking office in the spring of 2019, his government moved quickly to make good on a campaign promise to bring investment back to the province. This involved cutting corporate taxes by 40 per cent, a move that had wide approval among economists, and is exactly the kind of policy a market-oriented government hoping to attract capital would make.

In the year leading up to the pandemic, 25,000 oil-sector jobs evaporated, but we won't know if the tax cut would have helped reverse the trend because of the COVID-precipitated downturn. The tax cut's detractors, however, who dismissed it from the beginning as a gift to “wealthy corporations,” are off base.

Cuts to the corporate tax rate benefit all business and are preferable to targeted tax credits that distort the economy and, as Economist Trevor Tombe told the Calgary Herald in 2019 “incentives matter,” meaning businesses are more likely to invest where the tax rate is lower.

The arrival of the novel coronavirus and a price war between Russia and OPEC converged in early 2020 to send oil prices through the floor and Western Canadian Select futures briefly traded at below $0 in the spring. Layoffs in the oil sector were announced with frightening regularity throughout the year, with, for example, 800 jobs lost at Enbridge in June and 2,150 jobs expected to be cut after Husky Energy purchased Cenovus in the fall.

So Kenney's “job creation tax cut” turned out to be unfortunately named, given the timing.

Yet while the cut to the corporate tax rate was a good policy overshadowed by the times, the United Conservative Party's decision to invest $1.5 billion in the Keystone XL pipeline was a boneheaded move that was perhaps made palatable by the state of the economy, but boneheaded nonetheless. Alberta is littered with failed or underperforming projects that have been financed with public funds, from a cellphone maker to a meatpacking plant to a waste treatment facility, to name a few.

Just because a pipeline is part of Alberta's core industry and not some ill-fated attempt at diversification doesn't mean the case for subsidies is any stronger. And while the province made the decision to fund Keystone XL before Joe Biden's campaign announced it would oppose it, given former president Barack Obama's previous cancellation of the pipeline, the Alberta government should have been more skeptical.

For the newly sworn-in president, cancelling Keystone costs him almost nothing and provides a symbolic and emotional victory to the left wing of his party. There is not a lot of room to persuade here, because the decision does not appear to be based on logic.

What has become apparent is that Kenney has overpromised on jobs. He also seems to be struggling with his normally brusque approach to criticism (especially from the “left-wing anger machine”), which failed him when he downplayed MLAs and senior staffers vacationing out of the province over Christmas. Eventually he demoted a minister and booted a backbencher from caucus, but it was painfully obvious that anger came from all corners of the province.

And yet, it would be wrong to rule Kenney out, to say nothing of premature.

During the Harper years Kenney, along with John Baird, was frequently dispatched to cabinet portfolios of varying degrees of prestige but of importance nonetheless, often when a competent manager was needed.

Federal Conservative Leader Erin O'Toole would do well to find a lieutenant who can connect with minority groups the way Kenney did when he headed the department of multiculturalism and citizenship, reviving the Conservative party's image as an inclusive one.

Kenney is also wily. When he was running for leadership of the Alberta Progressive Conservatives in 2016, reporter Emma Graney asked him what his favourite snack was and Kenney replied, “Taber Corn,” referring to the southern Alberta town that's famous for its corn. He pointed out that you can it eat right off the cob. This should strike anyone as a plainly ridiculous answer, but it shows you just how politically savvy Kenney can be. The make of the pickup truck he drove around Alberta that summer, he pointed out, was the most popular in the province.

Kenney's survival will be tied more to his performance in the months and years to come and not the tumultuous year that has just passed. Eventually, the number 1 concern of Albertans will no longer be how the pandemic was managed. Although they can be unforgiving come election time, that is more than two years away.

IT WOULD BE WRONG TO RULE KENNEY OUT, TO SAY NOTHING OF PREMATURE.