For 45 years, Albertans put up with the PC Party, which led among other things to extreme crony capitalism and mismanagement and looting of the Heritage Saving Trust Fund. In 2015, the NDP provincial party a globalist establishment entity formed government by many Albertans wanting to stop the corruption and bleed. Now, a rebranded PC Party led by establishment career politician Jason Kenney has been re-inserted along with the same crony capitalism of its former entity. Such is the deranged, manic state of Alberta, and then you have the separatists who are completely out of touch with reality, and will only make things worse for Albertans or better for globalists depending on your leaning.
A common phrase by mob conservative shills and conservative political puppets, “get the oil to the market” is a justification for major pipelines for international markets. On the surface this thinking makes sense, but under closer scrutiny it defies logic.
After implementing a draconian lockdown through Bill 12, the Kenney regime is now putting Albertans in more financial harms way by irresponsibly projecting market demand that does not exist.
Kenney will now do the following in line with a socialist, crony capitalist agenda (and he learned well from Harper):
“Under the plan, the Jason Kenney government will reduce the general business tax rate from 10 percent to 8 percent effective July 1 instead of January 1, 2022, when the tax cut was originally scheduled to go into effect. The government will also invest some $7.3 billion in infrastructure projects that will create jobs.
Some $1.1 billion (C$1.5 billion) will be spent on the Keystone XL pipeline the Alberta government said, which will support the province’s recovery and create 7,000 jobs. However, the completion of the pipeline is far from certain as opposition against the project in the U.S. continues to put hurdle after hurdle on its road to finalization.”
This socialist/communist approach may sound good on the surface, but crumbles when market realities are factored in.
First, there is a massive glut of global oil inventories, coupled with significantly reduced demand and very low oil prices. OPEC production has dropped to a three decade low; OPEC and Russia have agreed to extend production cuts; the U.S. shale industry is stalled with $300 billion in loses; U.S. has a record high of crude oil inventories; China has begun cutting back processing from major refineries due to the global fuel glut… Shell idles its refinery at Deer Park, Texas due to low demand for gasoline; Irving refinery is cutting 250 jobs due to low demand for gasoline as are major oil companies including BP, Chevron, Exxon and Haliburton… global investment in oil projects is expected to drop by at least 30%.
For the indefinite future, there is no international market for Alberta oil. In fact, the oil industry does not want Alberta oil because it will increase supply, driving down the price of oil even further. In addition, the break even for Alberta oil is around $60 a barrel (WTI oil is currently at $40 a barrel), and there are industry estimates that this break even will not be reached until 2023 or later.
Second, cutting the business tax rate means that the Alberta government will have less revenue in an already debt ridden economy ($74 billion plus Alberta government debt with around $2 billion in annual debt service payments) which means that taxation on the average person will increase, thus reducing consumption from an already tax-strapped public. Or it may mean piling on more debt, which will eventually have to be paid while interest on the debt compounds. In addition, because there is no international market for Alberta oil, this cut in business tax will have minimal impact. International oil companies have already left Alberta and Canada in mass, resulting in a $30 billion exodus from 2017-2019.
Third, the Keystone XL pipeline faces many hurdles before being implemented and activated. There are two American Aboriginal nations blocking it (in South Dakota: Crow Creek Sioux Tribe and Yankton Sioux Tribe), among other groups. Also, assuming President Trump gets in another four years, if the pipeline is not passed, then we know a Democratic government will quash it as Obama already did. Moreover, President Trump’s major oil focus is on reviving the U.S. shale industry in a global market already glutted with oil inventories.
So the Kenney regime approach of throwing $1.1 billion of Alberta tax dollars at Keystone and $7.3 billion at infrastructure projects to create temporary jobs (Justin Trudeauish and the Infrastructure Bank), while growing the debt, debt service payments, and taxation, is a bad move. Kenney’s approach is a form of communism. And the Keystone infrastructure on the Alberta side of the border will be static, and it may never be utilized. How much of the $8.4 billion of Albertan tax dollars will be squandered to crony capitalism? We must recall that the Harper Regime, in which Kenney was a minister, was notorious for crony capitalism via corporate subsidies/welfare:
Furthermore, Kenney’s plan includes “support investment in so-called blue hydrogen, utilizing its abundant reserves of natural gas to produce clean fuel. Carbon capture and storage is also an area of interest, as is the emerging technology of geothermal energy extraction.” Again this sounds good on the surface, but under closer scrutiny it is not the government’s place to be funding or engaging in the private sector. This is another form of socialism/communism likely in the form of crony capitalism by the Kenney so-called conservative government.
The reality of the Alberta oil industry is that it has been grossly mismanaged by so-called Conservatives for decades. Major refineries should have been built decades ago, and instead the unrefined oil is shipped to U.S. refineries at heavily discounted prices (in 2018 Alberta oil industry lost $80 million per day) due to its low quality compared to Brent and WTI crudes, and poor access to market. The Keystone pipeline would only improve access to market, but as mentioned there is no market.
Alberta needs to diversify its economy as does the rest of Canada. Pouring tax dollars Albertans do not have into so-called infrastructure, private sector development, and an unapproved pipeline that may never be reality are misguided and reckless.
The primary market for Alberta oil should be the Canadian economy. But this takes us back to the refinery issue and successive establishment governments that have failed in passing major internal pipelines especially the Energy East pipeline.
National Citizens Alliance’s approach is major refineries and domestic supply, and ultimately energy independence. We are concerned that the demand for oil in the short term, intermediate, and long term will be weak compared to the supply, and we oppose any government engaging directly in the private sector via crony capitalism.