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Alberta will establish an office to promote the oil industry’s environmental, social and governance measures in the hope it can help stem the tide of divestment from the oil sands and the Canadian energy sector, as the province tries to climb out of the $18.2-billion deficit projected in its 2021 budget on Thursday.

The move is a significant about-face for Premier Jason Kenney, who in 2019 called investor concerns about climate risks in the sector the “flavour of the month.” The Office of the Premier will play a key role in the $1-million ESG initiative, which will be run by executive council and funded by the province’s carbon tax on large emitters.

In a departure from the norm, the budget devoted five pages to measures that oil companies have taken to improve their ESG scores, including reductions in greenhouse gas emissions, though it provided scant details about how the ESG secretariat will work.

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However, Finance Minister Travis Toews said the new office will play a critical role in promoting Alberta’s energy sector in North America and abroad.

“It’s important that we hold entities to account who unfairly view Alberta’s ESG story, relative to defensible, data-driven metrics,” he told media Thursday. “It’s important that we continue to tell that story.”

Opposition NDP Leader Rachel Notley said the initiative likely is too little, too late, and she doubts the government is coming to the table “with authenticity” around ESG goals.

The job of highlighting ESG initiatives in Alberta’s oil sector initially fell to the Canadian Energy Centre – dubbed the war room – which was established by Mr. Kenney’s United Conservative Party government in 2019 to fight back against what the Premier said was rampant disinformation about the oil industry.

“This is a government that has been spending millions and millions of dollars on a joke of a war room, that is spending money to buy junk science, that is changing environmental rules behind closed doors without consulting with people,” Ms. Notley told media.

“Each and every day they undermine the international picture that we need to present to the rest of the world.”

The oil sands have become a climate-change lighting rod in recent years, beginning when Royal Dutch Shell sold most of its oil sands investments in 2017. BlackRock, the world’s largest money manager, HSBC, Norway’s sovereign wealth fund, Deutsche Bank and French oil company Total have also either struck the oil sands from their books or significantly dialled back on investments.

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As it prepares to promote ESG initiatives, the government also earmarked $73-million in 2021-22 for programs to attract investment in carbon-capture projects – technology that can keep emissions from entering the atmosphere. That cumulative figure increases to $227-million by 2023-24. Officials said details of those programs are yet to be determined, but ruled out tax credits.

The Canadian Energy Centre’s chief executive officer, Tom Olsen, told The Globe and Mail in an e-mail that his office will continue with ESG work. However, Thursday’s budget slashed the war room’s budget to $12-million, from the $30-million earmarked in the 2020 budget.

While oil prices have ticked up in recent weeks as countries begin rolling out COVID-19 vaccinations, Alberta is treading cautiously in its own pricing forecasts. It’s assuming a West Texas Intermediate price of US$46 a barrel, well below the private-sector average forecast of US$51.

Alberta’s finances took a beating last year after a precipitous drop in demand for crude compounded a Russia-Saudi Arabia price war that hammered prices. Mr. Toews said while the 2020 WTI price forecast was “credible and defensible” at the time, it was important to acknowledge the volatility of the market – particularly as the world emerges from the shadow of the pandemic.

“I would love to be surprised with much higher energy prices than what we are predicting,” he said. “But I think that the prudent, responsible approach is to be conservative in our projections.”

That market uncertainty has also stymied Alberta’s attempts to offload a series of crude-by-rail, or CBR, contracts to the private sector.

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The government remains less than halfway through ridding the contracts from its books, a process it was planning to have done by the end of March last year.

The contracts were part of a $3.7-billion deal signed in February, 2019, under the then-NDP government. It would have seen the province lease thousands of railcars to help bolster consistently low prices for oil in Alberta by increasing export capacity, shipping 120,000 barrels a day by Canadian Pacific Railway and Canadian National Railway.

The expected cost of offloading those contracts ballooned to $2.29-billion in Thursday’s budget, up from $2.16-billion in August’s fiscal update and the $1.3-billion loss the province forecast a year ago.

The province says Alberta still stands to save $400-million by getting out of the contracts, but the NDP’s Ms. Notley said she doesn’t accept those numbers.

“I would argue that, even if revenue coming from CBR was cut in half, we’d still be pretty much breaking even,” she said.

“And frankly, right now, we’d have the opportunity to actually grow our incremental revenue streams if we had crude by rail in place. Instead we’re paying a penalty for getting out of the contracts.”

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The government is also slashing $15-million from the Energy Ministry’s operating expenses. It expects to find those savings via reduced supplies and travel expenses and other internal savings, but officials said the reductions are not being driven by staff reductions.

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