EDMONTON – Everybody in the Alberta government calls the oilsands Canadaâ€™s greatest buried treasure or maybe the goose that laid the golden egg and certainly the economic engine of a nation.
Everybody except perhaps provincial cabinet minister Doug Griffiths.
In a moment of unguarded but refreshing candour Griffiths summed up his own conflicted feelings about Albertaâ€™s oilsands by suggesting theyâ€™re an economic and social vampire that â€œsucks the life out of every other aspect of Alberta.â€�
And he meant it in the nicest way possible.
Griffiths was speaking to an audience in Prince Edward Island on Oct. 4 about the challenges facing rural communities in an urbanized world. His point was that economies get into trouble when they rely too much on one industry.
Griffiths, who is minister of Service Alberta today but was Municipal Affairs minister at the time, didnâ€™t actually name the oilsands but he didnâ€™t have to. We all knew what he meant when he mentioned Albertaâ€™s dominant â€œresource.â€�
â€œThatâ€™s the definition of Alberta,â€� said Griffiths. â€œAnd Iâ€™ve very frankly said thatâ€™s our biggest challenge. Everyone says itâ€™s a benefit and a bonus because we have such a dominant commodity. But, you know, it sucks the life out of every other aspect of Alberta. Itâ€™s very difficult to hire people in hotels and restaurants or in arts and culture because they canâ€™t compete with the wages which damages the other parts of your economy.â€�
Griffiths solution: â€œItâ€™s better to have balance.â€�
But everything is a little off-kilter when it comes to the oilsands. It is a source of jobs and incredible wealth but it has unbalanced virtually all aspects of political life in Alberta from the environment to public policy to the governmentâ€™s budgetary process. And it has affected Albertaâ€™s relationship with other provinces as it pushes for more pipelines to sell more bitumen to world markets.
It is one reason why Albertaâ€™s Progressive Conservatives have been in power since 1971, and why some critics have called the province a one-party petro-state.
This isnâ€™t just about one industry dominance. Other regions of Canada have been dominated by forestry or mining or fishing. Albertaâ€™s economy, and by extension Canadaâ€™s, relies heavily on the most carbon intensive method of recovering fossil fuels in the world at a time when governments everywhere are looking for ways to reduce greenhouses gases. We are pushing in one direction when the world, and a significant number of other Canadians, are starting to push in another.
But the oilsandsâ€™ influence continues to grow. Forty years ago, Albertaâ€™s dominant resource was conventional oil. That dwindling resource was replaced by natural gas. A decade ago, natural gas was worth $5 billion a year to the provincial treasury while bitumen brought in a mere $187 million. Today, the two have exchanged places.
In last yearâ€™s provincial budget, bitumen royalties were worth $5.6 billion and, while they took a dip this year, are forecast to continue growing to almost $7 billion in 2015-16. That will be about 16 per cent of an anticipated $45-billion provincial budget.
Natural gas revenues, on the other hand, continue to drop â€” worth $1.2 billion last year and expected to be worth about $870 million in 2015.
Conventional oil continues to dwindle as well. Itâ€™s $2.1 billion worth of royalties last year is forecast to drop to $1.4 billion in 2015.
In Alberta, bitumen is king. In 2012 the oilsands sector accounted for approximately 11 per cent of Gross Domestic Product â€” or $30 billion.
Only a fool would try to pinpoint a date when everything changed in Alberta.
So, let me try.
Arguably, it came the first half of July in 2006. And it didnâ€™t happen in Alberta, but rather in Washington D.C. at the annual Smithsonian Folklife Festival.
For the first time since its inception in 1967, the festival invited a Canadian province â€” Alberta â€” to take part in the tented event that celebrates various American and foreign cultures on the National Mall. Despite torrential downpours that plagued the capital that month, Alberta gamely pushed ahead with tents that offered bison burgers, a ranching demonstration and a livestock pen. It even set up a cold-weather adaptation tent run by soldiers from Edmonton where Washingtonians could slip on a balaclava and winter boots for a truly stereotypical Canadian experience.
But the star of the show came from the oilsands: a dump truck the size of a house.
Visiting the site, Edmonton Journal writer Todd Babiak reported that â€œIn a city full of icons and lobbyists, the giant yellow dump truck â€” here to represent Albertaâ€™s most popular attraction, the oilsands â€” has a lot of competition.â€�
The dump truck proved to be an effective lobbyist, both good and bad.
More than 50 members of Congress attended an Alberta reception where the main topic was energy. But it wasnâ€™t only politicians who took note, as Babiak reported: â€œThere will be a protest July 8, on the National Mall, decrying the devastating environmental effects of oilsands development.â€�
Albertaâ€™s participation in the Smithsonian Folklife Festival signalled that the province, always happy to sell oil to the United States, was aggressively courting foreign investment in the oilsands.
Premier Ralph Klein had instituted incentives including a tax holiday for new oilsands projects that allowed companies to pay royalties worth one per cent of gross revenues until they recovered the cost of constructing their mega-projects.
Photo: Then-premier Ralph Klein and Alberta Craft Council curator Tom McFall admire a glass bowl designed by Alberta glass sculptor Martha Henry at the Smithsonian Institution in Washington, DC in 2006.
It was such a vacation the government should have thrown in pina coladas and a cabana. The holiday may have been necessary in the 1990s when oil prices were relatively low, but Klein continued the holiday years after oil prices had risen dramatically.
The result was a modern-day gold rush with mega-projects that never seemed to reach completion.
American investors and environmentalists were taking notice of the oilsands. Klein cared what investors thought. but ridiculed environmentalists and would joke that global warming was caused by â€œdinosaur farts.â€� Kleinâ€™s cavalier attitude toward environmental concerns haunts Alberta still.
One of the last things Klein did in office was admit he never had a plan to handle the provinceâ€™s superheated growth. That lack of planning wasnâ€™t just a problem for Albertans, it was a headache for other provinces that watched their workforce being sucked westward by the unfettered growth of the oilsands. It is a headache that has plagued Alberta ever since, too.
The good news for Alberta is economic growth and lots of good-paying jobs. But the other side of the coin includes environmental damage, wear and tear to our social fabric, stress to our seniors and missed opportunities for our youngsters.
We are spewing millions of tonnes of greenhouse gases into the atmosphere and creating lakes of chemical waste. Seniors on fixed incomes find it difficult to keep up with rising costs of living. High school students are dropping out at record rates, enticed by good-paying, but unskilled, jobs.
As a homeowner in Edmonton itâ€™s heartening to see your house increase in value year after year. Thatâ€™s great if youâ€™re selling in Edmonton and moving to Moncton, but not so great if youâ€™re selling in Moncton and moving to Edmonton.
We have a clash of money and priorities. Energy companies want their mega projects. Albertans want new schools and roads. Everybody is competing for labour and materials.
Kleinâ€™s solution: â€œDelay the projects. Put them on hold until theyâ€™re affordable.â€�
By projects, he meant roads and schools. He didnâ€™t mean the oilsands.
The late premier Peter Lougheed had a two-word description of what Klein had left for his successors: â€œa mess.â€�
â€œThe Alberta government has let the development get ahead of the infrastructure,â€� said Lougheed in a brutally frank interview with the Institute for Research on Public Policy in 2006. â€œWhen you have that happen, you are going to start to have to pay a price for it.â€�
Lougheedâ€™s solution was the opposite of Kleinâ€™s. â€œWhat is the hurry?â€� asked Lougheed. â€œWhy not build one (oilsands) plant at a time?â€�
Kleinâ€™s successor, Ed Stelmach, was in a hurry, too, refusing to put his foot â€œon the brakeâ€� to slow down oilsands expansion. Instead, he tried, unsuccessfully, to increase the amount of royalties paid to the provincial treasury to at least pay for the infrastructure projects Klein had ignored.
Photo: Then-premier Ed Stelmach speaks during the official opening of Athabasca Oil Sands Expansion at Shellâ€™s Scotford Upgrader near Fort Saskatchewan on June 2, 2011.
Stelmach incurred the wrath of the energy sector and faced a backlash from small â€œcâ€� conservatives who felt the Progressive Conservatives were turning into tax-and-spend Liberals. That in turn led to a new conservative political movement, the Wildrose Party, that has become a threat to the governing PCs.
With the Wildrose breathing down her neck, Premier Alison Redford has refused to entertain the idea of raising royalties and has rejected out of hand the almost universal suggestion from economists that the province should introduce a provincial sales tax or at least change the taxation system to make the wealthy pay more.
This at a time when the province is experiencing a population explosion as thousands of people arrive in the province weekly. Four million people now call Alberta home and the province is expected to hit the five million mark by 2027.
Realizing itâ€™s facing an infrastructure crunch caused by that massive immigration, Alberta is on a multi-year construction spree that will cost $12 billion or more.
The result is that the government is even more reliant now on revenue from non-renewable resources, particularly the oilsands. That revenue took a hit in the past year due to the so-called â€œbitumen bubbleâ€� â€” the amount of money Alberta receives for its bitumen compared to world prices. Because thereâ€™s a glut of oil in the U.S. market, Alberta receives less money for its heavy oil than the price of West Texas Intermediate. In total dollars, the government figures it lost $6 billion last year because of the price difference.
Thatâ€™s why the government is telling Albertans that debt is necessary despite promises from Premier Redford that she would balance the books.
Running a deficit would be an easier sell if the economy was falling over a cliff. But the governmentâ€™s own fiscal updates indicate the economy is doing great, thank you very much.
So the government is faced with a disconnect. Itâ€™s trying to convince Albertans, particularly those who rely on a government paycheque, that itâ€™s time for belt-tightening, even though, to quote the governmentâ€™s own reports, â€œAlbertaâ€™s economy continues to record impressive gains.â€�
And it is also trying to convince Albertans that despite a strong economy, high employment, optimistic consumers and rising oil production, the province is justified in exhausting its savings account and going back into debt.
The only solution â€” besides hoping the price of oil skyrockets â€” is for Alberta to sell more of its bitumen.
That brings us to the governmentâ€™s preoccupation with getting more pipelines built, whether itâ€™s the Northern Gateway to Kitimat, British Columbia, the Keystone XL to the American Gulf Coast or the Energy East pipeline to New Brunswick â€” or preferably all three.
Itâ€™s all about getting landlocked Albertaâ€™s products to â€œtidewaterâ€� so the oil companies â€” and the Alberta government â€” can get more money.
This is the driving force behind virtually everything in Alberta politics. It is the reason Premier Redford has lobbied tirelessly for an Canadian Energy Strategy, which is ostensibly about provinces working together to get their particular energy product to market, but as far as Alberta is concerned is all about getting more bitumen to market.
This is the issue that underpins Albertaâ€™s relationships with other provinces, whether itâ€™s the up and down partnership with B.C. over the proposed Northern Gateway pipeline, or the warm alliance with New Brunswick, a province that desperately wants the jobs and revenue that would flow with the Energy East pipeline.
It is the issue that drives Redfordâ€™s frequent visits to Washington DC and Asia. It is why Alberta opened six new international trade offices this year â€” in Chicago, Singapore, Brazil, India, California and southern China â€” in addition to 10 offices the province already had in London, Mexico City, Taipei, Shanghai, Beijing, Tokyo, Munich, Hong Kong, Seoul, and Washington, D.C.
Photo: Alberta Premier Alison Redford visits Washington, D.C., frequently to promote the Keystone pipeline.
Ultimately, the offices are not just about selling Alberta products overseas, theyâ€™re about selling Albertaâ€™s brand. Weâ€™re the good, clean, wholesome province with good, clean, wholesome products such as wheat, cattle, lumber and entrepreneurial spirit. Weâ€™re also willing to share our â€œenvironmental leadershipâ€� with the rest of the world.
Of course, lurking in the background in this scenario are the oilsands. Environmentally speaking, thatâ€™s our red-light district. Thereâ€™s nothing wholesome about it. At least thatâ€™s the reputation we have in more than a few corners of the world where, the Alberta government admits, â€œaudiencesâ€™ perception of our province is one-dimensional, equating Alberta with irresponsible energy development, specifically in the oilsands.â€�
If people have a â€œone-dimensionalâ€� perception of Albertaâ€™s environmental record, itâ€™s arguably because Alberta has taken a one-dimensional approach to environmental leadership. For years, the government argued the oilsands, the largest energy-extraction project in the world, had no impact on the environment. It was an approach that, if not so tragic, would have been laughable.
The Redford government does seem to be taking the issue more seriously than its predecessors even though the oilsands continue to be the fastest growing source of greenhouse gases in Canada.
And the government still doesnâ€™t know how it will significantly reduce its emissions of carbon dioxide other than through untested experiments involving Carbon Capture and Sequestration. The government was hoping to spend $2 billion on four test projects, but CCS is proving to be technologically difficult and economically unsustainable, even with massive government aid.
Alberta has scaled back its CCS ambitions to spending $1.3 billion on just two test projects.
Those experiments are headed not by the ministry of environment but by the ministry of energy. In Alberta, all roads eventually lead to the ministry of energy, whether itâ€™s the finance minister looking for more money for the treasury or the infrastructure minister wondering how many new oilsands mega-projects will be competing for material and skilled labour.
In any other province, the second most powerful person in cabinet next to the premier is the finance minister. In Alberta, itâ€™s the energy minister.
Ken Hughes, who was Energy Minister until a cabinet shuffle Dec. 6, gamely disputes this, saying heâ€™s just part of a team, but in politics money is power. And, in a province that refuses to raise taxes, the only significant source of new revenues is the selling of bitumen. Thatâ€™s the job of the energy minister.
While the opposition parties, as well as other ministers such as Doug Griffiths, talk about the need to diversify Albertaâ€™s economy, Hughes talks about a different kind of diversification.
â€œWe need more diversification in terms of where we ship this stuff because we donâ€™t want to oversupply a marketplace that has a more constrained appetite for heavy oil,â€� says Hughes, referring to the American market already saturated by oil. â€œAll of this argues for us getting access to global markets.â€�
That, says Hughes, is where Alberta future lies: â€œItâ€™s time to grow up, step up, and become part of the global marketplace. That is how Alberta will be well-served. That involves getting pipelines and train access to tidewater. Itâ€™s all about tide water.â€�
Ultimately, this is whatâ€™s driving Alberta politics not only today but into the future â€” getting fossil fuels from a landlocked province to the ocean, whether that ocean is on the east coast, west coast or, even in some of the more far-fetched scenarios, the Arctic coast.
It is the overweening ambition of Alberta to be not only a national player but a global player. And itâ€™s entree into the game is a sticky, tarry substance that in its natural state is more useful patching up your birchbark canoe than gassing up your SUV.
The province has no shortage of the stuff, almost 170-billion barrels of oil locked away in the sands of northern Alberta. The world might want to move away from fossil fuels but the Alberta government is hoping and betting that wonâ€™t happen for a long time to come.
For the government the oilsands sector is a benefit and a bonus even if, in the words of one Alberta cabinet minister, it tends to suck the life out of everything else.
It would indeed be a good idea to find balance when it comes to the oilsands but this is not about the province finding balance. Ultimately, this is about Canadaâ€™s longest-serving provincial government looking for a way to stay in power.