Diversifying Alberta’s energy sector top of mind on the campaign trail

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Diversifying Alberta’s energy sector top of mind on the campaign trail
WATCH: Alberta's struggling energy sector is top of mind for many voters ahead of the spring election and with a lack of pipeline capacity, Alberta's political parties are seeking other options. Adam MacVicar reports – Mar 28, 2019

It’s no secret Alberta’s energy sector has been struggling. Since the oil price drop in 2014, energy workers have faced layoffs, companies have folded while others have cut back on any future plans for growth.

It’s a reality all too common for employees at Treeline Well Services in downtown Calgary.

Treeline employs 225 people during peak season, and services thousands of operational and abandoned oil wells throughout Alberta.

“At the end of the day, we’re just not as profitable as we once were,” said Matthew Dagert, vice-president of operations at Treeline. “The money is not there.”

According to Dagert, the number of wells being drilled is changing drastically, from 22,000 wells per year in the mid-2000s to about 5,000 wells being drilled in a single year now — if companies are lucky.

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Dagert said Treeline has faced many challenges to its bottom line. The company has had to scale back their future growth plans.

“Over the last four years we’ve seen things like the carbon tax come into play, changes in our business tax structure, of course the increase in minimum wage puts pressure even on our guys’ wages,” he said. “When a carbon tax comes into play, our companies in B.C. say it’s an extra $100,000 a well; that changes the amount of wells they’re going to drill in a year.”

With any movement around pipelines in the province on hold due to the consultations for the Trans Mountain pipeline expansion, the issue of how to diversify Alberta’s energy sector has become a main campaign issue in the spring provincial election.

The NDP has been touting its “Made in Alberta” plan which subsidizes royalty credits for petrochemical companies that bring large-scale investments to the province. According to Premier Rachel Notley, the plan has already attracted $12 billion in investments.

Notley said, if elected, the plan would create 70,000 jobs and unlock $75 billion in investments by 2030.

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The United Conservative Party has been highly critical of the NDP’s plan to diversify the economy.

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According to a news release from the party on March 20, investment has fallen in the province by 54 per cent in the mining, quarrying and oil and gas extraction sector from the start of 2015 to the end of 2018.

The UCP has not released its plan to diversify the energy sector yet, but the party has released pieces of a plan it believes will help the sluggish energy sector.

The party said it plans to attract investment by reducing hurdles and regulations to get projects approved, as well as entice hiring through a job creation tax cut.

Meanwhile, the Alberta Party announced steps to diversify the economy at a news conference just outside of Edmonton earlier this week.

According to party leader Stephen Mandel, the Alberta Party would boost investment to Alberta Innovates by 30 per cent to $375 million by 2020-21 and direct any additional funds to research into new uses for Alberta’s resources.

Using a quick quip about Wayne Gretzky, Mandel pointed to technology that converts bitumen into a puck-like product that could be shipped by rail.

The party said it would also provide financial backing to the company developing the “CanaPux” to the tune of $16.7 million; one-third of the pilot project.

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Mandel also said he would better utilize the province’s natural gas resources and come up with an initiative that would “take the royalty out of natural gas” and support Phase 2 and Phase 3 of the North West Redwater Sturgeon Refinery near Edmonton.

The Alberta Liberals have not released their full platform on diversification but unveiled their plan for the contentious carbon tax.

If elected, the Liberals said they would repeal the NDP carbon tax and replace it with a revenue-neutral tax.

Liberal leader David Khan said the party would not cancel commitments currently paid for by the NDP carbon tax.

The party also said it would lower the corporate income tax from 12 per cent to 10 per cent, which they expect will stimulate the economy and grow the province’s GDP.

According to the University of Calgary’s School of Public Policy, investment in Alberta’s energy sector has fallen from $25 billion to around $10 billion and most of that investment is for upgrading and maintenance on existing facilities.

Richard Masson said one of the challenges is Alberta produces a lot of oil, and the answer to the problem in the industry may not be to refine product locally, without a pipeline in place.

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“Adding more capacity to process that oil in Alberta can be helpful, but it’s not the full answer because we have so much oil and so much growth in oil that we need to be able to get that oil to other markets through pipelines,” he said.

However, Masson said Alberta has a much better chance of success globally in the petrochemical sector because it’s easy to ship products, but the province would need to have an attractive fiscal system to bring that potential investment into Alberta.

Masson said he’s heard diversification plans from multiple political parties running to lead the province for the next four years, but the main focus should be on attracting stable, long-term investment.

“Diversification through more upgrading, partial upgrading, petrochemical plants — on the surface they’re attractive,” Masson said. “We need to make sure we’re bringing companies into town that are building projects that are long-term sustainable both economically and environmentally.”

Ultimately, construction of a pipeline would have the biggest impact on Alberta’s economy, Masson said, adding that if Trans Mountain is built, it would add 600,000 barrels per day to the province’s capacity, allowing for existing projects to expand.

“It’s going to take a while to get out of this hole, because the investment climate is very negative,” Masson said. “It’s going to take a while to rebuild confidence, so getting those pipelines done is really going to be a big part of that.”

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That sentiment is shared at Treeline Well Services, where staff said their business could potentially see significant growth if a pipeline is built.

“You see Trans Mountain, Keystone and Line 3 all go through, our business could grow by three, four, five times in a matter of a few years,” Dagert said.

Albertans head to the polls on April 16.

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