December 27, 2018 10:00 am
Updated: December 27, 2018 8:11 pm

Pipeline politics to affect economy, two elections in 2019: economists

WATCH: It is the issue that will define Alberta's election. And could swing the federal election, too. Will 2019 be the year Canadian oil reaches tide water?

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Economists predict Canada’s struggling oil sector will be a drag on the nation’s economy in 2019.

A number of the country’s leading banks are forecasting gross domestic product growth could be be slowed by as much as 0.2 percentage points, further proof that Alberta’s oil patch is vital to Canada’s economic prosperity.

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This year has been a roller coaster for the oil and gas sector in this country, with protesters taking to the streets of Alberta, demanding the federal government begin construction of the Trans Mountain pipeline as soon as possible.

READ MORE: UN agreement, delayed pipelines protested at yellow vest rallies across Alberta

Demonstrators want to remind Prime Minister Justin Trudeau that the mining and oil and gas extraction industries accounted for 6.1 per cent of total employment in Alberta in 2017, but a downturn in that sector, they say, is leading to job losses.

“A lot of people are laid off, not working. A lot of people going into foreclosure,” Cody Battershill of Canada Action told Global News. “We have to be thinking of them.”

In May, the Liberal government bought the Trans Mountain pipeline from Kinder Morgan for $4.5 billion, but the proposed expansion has stalled because a Federal Court of Appeals decision in August.

The panel of judges said the government didn’t properly consult with Indigenous people. Additionally, they said, the National Energy Board’s review of the proposal was so flawed that the federal government could not rely on it as a basis for its decision to approve the expansion.

WATCH: Struggling oil companies want pipeline, not more debt

Then, in December, the federal government announced $1.6 billion in aid.

The money is expected to be split among several programs, including those that help companies invest in clean growth, loans and other financial supports to help companies find new markets away from the United States.

That’s not the help Alberta’s premier wanted, though.

“We didn’t ask for the opportunity to go further into debt as a means of addressing this problem, what we asked for was for them to remove the handcuffs,” Premier Rachel Notley told reporters following the federal announcement.

Earlier in December, the Alberta government announced it is cutting production in the oil patch by 8.7 per cent, which works out to 325,000 barrels a day.

READ MORE: Alberta orders 8.7 per cent oil production cut to help deal with low prices

The province is also going to purchase rail cars to move 120,000 barrels of oil every day.

They’re extreme moves, but to Notley, they’re necessary.

“We are closer to getting a pipeline built to tidewater than we have been ever before, but it’s delayed and shovels are not in the ground,” Notley told Global News.

“Albertans are frustrated and I’m frustrated.”

That frustration may be felt at the ballot box, with both provincial and federal elections coming in 2019.

With that in mind, the federal government is considering joining Alberta in purchasing rail cars in order to get Canadian oil to markets quicker.

“We’re working with the Alberta government, and if rail cars end up being the right solution, then we’ll be happy to participate,” Prime Minister Trudeau told Global News.

READ MORE: Alberta to purchase rail cars to move oil without feds: Notley

There is a lot at stake.

If Premier Notley can’t prop up the oil and gas sector, some believe her political future will be on the line.

“The plan to balance the budget depends heavily on good employment numbers, profitability for our oil companies, all the investment that comes from these projects,” said Richard Masson, executive fellow of the University of Calgary’s School of Public Policy.

Meanwhile, senior government sources tell Global News that we should know if the Trans Mountain project can go forward by May or June of 2019.

Whatever the decision, it will send political shock waves across both Alberta and Canada.

WATCH: Alberta oil crisis: Province wants pipelines, not a bailout

— with files from The Canadian Press.

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