Alberta’s oil woes are Canada’s problem, too
With a sombre speech that sounded more like wartime address than policy announcement, Alberta Premier Rachel Notley announced Sunday the province is ordering the oil sector to cut production.
For a province that prides itself on its adherence to free enterprise — even with the NDP in power — it’s an astonishing turn of events.
Perhaps no less remarkable is the move was preceded by a plea for such intervention by some major players in an oil industry known for its distaste for past political interference. Indeed, other energy firms remain at odds with the intrusion and believe the market should deal with the Alberta oil glut.
Probably most extraordinary is that, aside from quibbles about timing and scope, Notley has the support of United Conservative Party Leader Jason Kenney, a fierce political foe, and Alberta Party Leader Stephen Mandel.
Let’s not forget this mandated, year-long 8.7 per cent production cut, which starts in January, follows another unusual Alberta government plan: to buy as many as 80 locomotives and 7,000 rail cars to move oil.
The phrase, a necessary evil, or even, desperate times call for desperate measures, appear to have been coined for situations just like this.
By adding rail capacity and slowing production, Alberta is doing what it must to clear the supply glut, and close the yawning price differential of about US$40 between its crude and U.S. benchmarks that threatens Alberta’s economic well-being and costs Canada an estimated $80 million a day.
Even this last-ditch intervention is expected to have limited effect, reducing the differential by only about US$4 relative to where it would have been otherwise.
The real solution to the crisis remains in the hands of the federal government, which through either incompetence or a deliberate plan to suppress the oil industry, helped cause the crisis in the first place by mishandling three pipelines to tidewater.
The Liberals cancelled Northern Gateway, after it had been fumbled first by the Harper government. The Energy East project was cancelled after the regulatory goalposts were suddenly moved and a federal court halted the Trans Mountain expansion in August, blaming botched federal consultation with First Nations.
Ottawa did buy the Trans Mountain pipeline, but that provides no short-term fix.
Alberta has done all it can on its own. When will Ottawa, and the rest of Canada, realize our economic crisis is also theirs.