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Jim Carr, the Trudeau government’s special advisor for the Prairies, arrived in Calgary this week to a cold reception, freezing temperatures and unassuaged anger as the province’s battered energy industry descends into another slump. Mr. Carr spoke of getting pipelines built and hearing the demands of Alberta Premier Jason Kenney. “I want to make you happy,” Mr. Carr told the audience at a business luncheon.

It is not going to be easy.

Several months ago, 2020 was looking like the year when Alberta’s economic skies would brighten. Mr. Kenney’s October budget predicted GDP growth of 2.7 per cent, a rate that could have led all provinces.

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That was then, this is now. Alberta finished 2019 with difficult news on the jobs front, losing 4,200 jobs on the year, ahead of only Newfoundland and Labrador. Canada as a whole gained 320,300 jobs, led by Ontario. Predictions for Alberta’s growth have been dialed back. Scotiabank this week forecast 2020 growth of 1.6 per cent.

The weakening outlook for Alberta’s oil has a lot to do with that. The price of a barrel of Alberta’s heavy oil has again fallen well below the benchmark American price.

The discount has historically averaged less than US$15 a barrel, but in the past decade, the gap has often been wider. In the fall 2018, when the discount briefly exceeded US$50, Prime Minister Justin Trudeau called it a “crisis.” It was.

In 2019, the discount rebounded to normal and stayed there for most of the year. But with ample supplies of Alberta oil and too-little export capacity, the discount has once more widened to about US$25 a barrel. There is no obvious respite. Calgary investment bank Stifel FirstEnergy predicts a discount averaging US$19 this year.

Alberta’s former NDP government attempted several policy fixes. Oil production was capped, a program the Kenney government has continued. The NDP also moved to have the government lease oil-carrying rail cars. Mr. Kenney cancelled that plan, and is trying to sell the assets to the private sector.

Mr. Kenney also said he could boost the economy with corporate tax cuts, a move that so far has had mixed results. Canadian Natural Resources Ltd. in December said it would increase 2020 capital spending by $250-million to $4.05-billion because of loosened drilling limits and the tax cut. But CNRL has also booked a $1.6-billion gain from the tax cut, far more than it is putting back into the economy.

When the NDP instituted the production cap a year ago, it was set at 3.56-million barrels a day. The cap has been steadily raised – but the province’s oil production capacity is also rising.

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The Kenney government has upped the production cap to 3.81-million barrels a day, but that’s still less than a growing industry’s maximum capacity.

The government estimated last August that 150,000 barrels a day were being held back.

Yet even with the cap, 2019 saw record oil production in Western Canada, an estimate of some 4.40-million barrels a day, up from 4.35-million in 2018. Canadian crude oil exports to the United States set a new record of 3.82-million barrels a day in 2019, up from 3.71-million in 2018 and double the figure of a decade ago.

The last fact is key. Alberta produces a lot more oil than it did in the recent past, and growing output is slamming up against delays in additional pipeline infrastructure. Rail capacity can help but new pipes are the best way to end the squeeze.

Of the proposed pipelines, Enbridge’s Line 3 is the closest to reality. Some oil has started to flow on the long-delayed project but the full pipeline is not yet open. This week saw news of some early work on Keystone XL. And initial construction on Trans Mountain is underway. But even if all goes well, it will be several years before oil flows on Keystone XL or the new Trans Mountain.

Estimates suggest Line 3, if and when it opens, will be sufficient to meet the industry’s demands, but likely for only a few years.

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Trans Mountain and Keystone XL are needed to provide room well into the 2030s.

For now, however, Alberta is in the pinch. Again.

Mr. Kenney’s austerity budget will likely face more pressure. Barring a spike in global oil prices, a windfall from an improved Alberta oil business is still some ways off.

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