Alberta is entering a new era, one of greater oil wealth than the country’s richest province has ever seen. There are vast possibilities and major challenges. The month-long election campaign, set to begin Monday, comes at this critical juncture.
What’s changed is the oil sands. They have come of age from the building spree of the early 2000s. Companies for years paid low royalty rates in a system designed to allow them to first recover billions of dollars in costs. Most operators now pay higher royalty rates.
The difference for the Alberta treasury is astounding. In three fiscal years – 2022, 2023, 2024 – the total resource haul will be more than $60-billion. It’s as much as Alberta took in over the entire previous decade.
Expensive oil helps but what’s certain is Albertans will reliably gain more from their resources in the years on the immediate horizon. At the same time, emissions need to be slashed and the end of oil’s heyday is on the more distant horizon. Net zero – a promise Alberta made in April – doesn’t mean zero oil but in the reckoning of the International Energy Agency the world must reduce oil usage to a quarter of current levels by 2050. That’s 27 years away.
Amid these poles – a flood of oil money and oil’s inevitable decline – the crucial question during Alberta’s spring election campaign is how to harness its wealth to secure the province’s long-term prosperity. It will require strong, steady, and focused leadership.
The province has had leaders with foresight, Peter Lougheed chief among them. He served as a Progressive Conservative premier from 1971 to 1985. He led during the first truly big-time boom and later in a brutal bust. In the mid-1970s, he established the Heritage Savings Trust Fund. It was a wise idea – but over the decades badly managed. Its $19-billion value, adjusted for inflation, is the same as … 1979.
Alberta instead spent its oil money as it landed. In good times, like the mid-2000s, it helped the province effectively reach zero debt. But no clear plan followed, spending ballooned, and deficits and debt re-emerged.
Today, Alberta can chart its economic destiny. The 2020s should be a transformative decade. The province has a bounty of fossil fuel wealth. It rapidly got off coal power, a decision by Rachel Notley’s NDP in 2015, and has become Canada’s solar and wind power leader. Alberta has, in abundance, the know-how to succeed.
The world of energy changes fast. The outlook for oil as soon as the 2030s is uncertain. The good news is Alberta has the time and the money to gird and propel itself. A carefully considered plan is key – and strong leadership means not only keeping the focus on building such a plan but following it through with conviction.
The question of leadership will be at the fore of the May campaign.
The province in recent years has sought out political fights. These have been unnecessary distractions and achieved little. Former United Conservative Party premier Jason Kenney had a tumultuous tenure marked by such bouts. Premier Danielle Smith, narrowly elected last fall in a party vote, continues to scrap. Her sovereignty act, for one example among too many, was pantomime. But Ms. Notley also faces skepticism. She led during four difficult economic years but was roundly ousted from the premier’s office in 2019.
Most of all, Alberta has to stop spending all the money from every barrel as fast as possible. It’s called a non-renewable resource for a reason. The UCP and NDP both point in the direction of change.
The UCP’s budget in February promised a future of no deficits. It would also freeze real per capita spending at current levels and pay down debt. While perhaps overly strict, this should free up a lot of cash for the longer-term. Investments would be a smart focus, as returns will likely easily outpace the cost of debt, as they have in the past. The NDP’s long-term plan pledges to use only a portion of oil money for current spending. The party wants to set specific goals for Heritage savings and weigh the varying return on investment on savings, capital spending and debt repayment.
History moves slow and fast. What seems so solid can vanish: witness the rise and decline of Ontario’s auto sector. Alberta, from 1905 to midcentury, wasn’t rich. Then came oil. Today’s wealth is immense and decisions this decade will define Alberta’s future. Wise leadership is essential.