Sunday, January 17, 2016

Alberta needs a reality check

Cornell Van Ryk, Letter to the Editor

Everyone in Alberta is familiar with the issues facing the province and the oil/gas industry in particular. Unemployment is rising, Provincial Government finances are perilous, investment has all but dried up and there is no apparent plan to move us forward. Many individuals have jumped to solutions…let’s change our Government, let’s push through pipelines, let’s deny that burning hydrocarbons is causing climate change, let’s reduce corporate taxes/royalties and industry will come back. When one looks at these potential solutions in terms of probability and effectiveness, in reality, they just don’t stand up.

Let’s change out our Government

Like it or not, we elected a majority NDP government that has another 3 ½ years to go. The alternative parties have offered little anyway, in my opinion. The PCs got us here, the Wildrose are good at critiquing everyone else but fall short in delivering any viable go forward plans of their own, and the Liberals are in disarray.

Let’s push through pipelines

Pipelines are not going to happen. We can argue all we want that pipelines are safer than rail and so on, that they are in the best interest of the country. The reality is that we have to cross other peoples’ land and we need their permission. These same people do not believe that the industry can safely operate pipelines or clean-up effectively when a spill occurs.

Let’s walk away from the Green Movement

We can argue that Canada is not the big polluter, that our environmental standards are very high, that our oil is not “dirty”. The argument can even be made that the climate change science is suspect and greenhouse gasses are not a problem.

The reality is that the Green Movement has taken hold. The vast majority blame climate change on carbon combustion and see Alberta oil as particularly dirty. The majority is driving the agenda and we will slowly move away from burning carbon fuels to supply our energy needs.

Let’s reduce corporate taxes and royalties

This is a failed strategy. Low corporate taxes and royalties have not driven investment. We’ve reduced corporate taxes and the corporations took the savings and bought back their own shares, swallowed up smaller fish and moved significant capital offshore. Very little production or employment has been realized from significant corporate tax cuts. Industry is focused on short-term profit, their stock prices and the bonuses of the executives. They will drive investment and employment if there is profit to be made, but there is little profit to be made when our products are low priced and landlocked. We need business to drive the economy and create jobs but simply cutting their taxes won’t cause them to do that.

I think it is important to evaluate the real situation so that we can develop a plan to move us forward. We waste a lot of time and energy on lost causes; it does no good to beat a dead horse. There is no easy fix. So here we are:
  • We aren’t about to change the government any time soon and when we do, have no guarantee that the next version will be much of an improvement. 
  • No one outside our borders is about to let a pipeline through their land and our oil is destined to be low priced relative to the world price. 
  • The world is moving away from burning hydrocarbons and coal and the world price of oil is likely to stay low. 
  • Simply reducing corporate taxes and royalties will not generate a lot of economic activity or create much employment. 

Now, let’s take stock of what Alberta has going for it:
  • We have a highly trained workforce in the province. Many engineers, project managers, tradespeople, technologists etc. We have the skills on hand to readily build, operate and maintain any kind of plant you can imagine. 
  • The price of our oil is low compared to the world price and we have a lot of it. 
  • There is a multitude of products that can be made from hydrocarbon and many of these products are inert, so getting them to markets outside of the province should not see too much opposition. 
  • There is a very good relationship between our University research labs and industry. We are in a good position to find innovative uses for our resources. 
  • There are many evolving technologies that have the potential to reshape our industry. Imagine, for example, “cracking” hydrocarbon and selling pure carbon (for things like steel production) and burning hydrogen for the generation of electricity. 
  • The corporations are sitting on a lot of investment capital. 

I suggest a two-pronged approach. Our government and business leaders need to get together to determine what it will take to move Alberta to the oil industry of the future. We need to be willing to invest in research and development, to partner with industry, to develop markets for new products, to do what it takes to be the world leader in oil development in the post-carbon age. Let’s sell plastic and other products, not crude.

Moving to the new oil industry will not be quick. In the short term, we need to put people to work. Sure, this will create some debt but money is cheap, the Federal Government is onside and labour is available. We may as well twin Highway 3 as have a bunch of folks sitting around waiting for the next pipeline project.

The only we can justify leaving future generations with this debt is if we also leave them with a solid economic future enabling them to pay if off.

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