Albertans woke up to more bad news last week when they learned that a critical pipeline project, Enbridge’s Line 3 upgrade, has been delayed for a year by permitting issues in the United States. A few days later, Statistics Canada said unemployment rose in the province in February, while dropping in the rest of the country.
That’s life in Alberta these days. The province’s oil industry, upon which its economy is built and its governments addictively base their revenues, is in a deep funk that it cannot seem to shake.
First came the hit to global prices, caused by a worldwide surge in production. Then came Canada’s ongoing difficulties with getting our growing supply of Western crude to tidewater, or even across the border, which late last year led to Alberta oil selling at a record discount.
To try to soften the blow from the second of those problems, the industry had to accept temporary production cuts imposed on Jan. 1 by the provincial government, a lesser-of-two-evils solution aimed at stabilizing the market and raising prices. That effort, combined with an increase in global prices, seemed to be helping, allowing the government to raise production limits at the end of January and again at the end of February.
Any hope this aroused was fleeting, thanks to news of the Line 3 delay.
Had that pipeline come online as expected later this year, it would have carried 760,000 barrels of crude a day from the oil patch to Superior, WI., from where it would have then been shipped to the U.S. Gulf Coast.
Instead of being a light at the end of the tunnel, Line 3 is, for the moment, just another tunnel. It seems like Alberta can’t catch a break. Albertans are understandably frustrated, and much of their frustration has been directed at the Trudeau government.
The fact that Prime Minister Justin Trudeau is embroiled in a scandal that revolves around his government’s efforts to spare a Quebec engineering firm from prosecution on fraud and bribery charges is being trumpeted by his Western critics as proof that the Liberals will bend over backward for Quebec, but are indifferent to the struggles of Alberta.
That’s ridiculous, of course. In what other regional industry has the Trudeau government nationalized, on an emergency basis, a critical piece of infrastructure – the Trans Mountain pipeline that carries crude to the British Columbia coast – and vowed to carry through with a desperately needed expansion project in the face of stiff opposition?
At times it feels like Mr. Trudeau could personally drive Alberta oil to port in Vancouver and his commitment would still be suspect.
But telling exasperated voters that Alberta’s current shortage of pipeline capacity is proof that none will ever be built under an eastward-leaning Liberal government is an effective Conservative Party talking point. It’s a safe one, too, because it’s unlikely construction on the Trans Mountain expansion will start before the fall federal election.
Building pipelines to carry crude out of Alberta is a long game, requiring approvals, negotiations, court hearings, money and patience. Delays are hard to avoid, but they will always be felt more keenly during a hard slump in prices – especially one spilling over into an election year.
If the Trudeau government is making a mistake in its handling of the pipeline issue, it may be that it is trying to play a game whose running time extends beyond its four-year mandate, and it is failing to see how aggravating that is to voters in Alberta. They want help now, not in a few years.
To date, the only short-term solution on the table for fixing the oil industry’s long-term lack of pipeline is Alberta Premier Rachel Notley’s $3.7-billion plan to lease rail cars to ship more crude by rail.
The Trudeau government has been reluctant to take part in the scheme. It knows it would be a mistake to align itself with a last-ditch plan offered by a Premier who faces a tough re-election battle this spring; plus, the optics of shipping crude by rail are not good in the wake of the Lac-Mégantic disaster.
But after the provincial election, and before the federal one in the fall, the Trudeau government will have a window to make the case that it feels Albertans’ pain, and is acting to alleviate it. As the song says, don’t you know that tears are not enough?