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Economic Insight In year ahead, Alberta’s Notley must be convincing on economic policy

Alberta Premier Rachel Notley gives a year end update in Edmonton Alta, on Wednesday, December 14, 2016.

JASON FRANSON/THE CANADIAN PRESS

Rachel Notley and her New Democratic Party government can't seem to catch a break.

The Alberta Premier should be reflecting on the year with satisfaction, and garnering props, after a few big successes in the harshest of circumstances – from destructive inferno to devastating oil-price collapse. Chief among her wins are two major pipeline approvals. Yet, she and her colleagues look increasingly on their heels.

As 2017 begins, Ms. Notley will have to get back the mojo that attracted enough Albertans to vault her left-of-centre party into power in one of the most unlikely victories in politics (before 2016 yielded more unlikely ones). Indeed, if the economy stages the slow recovery that some forecasters expect, she will have to be able to show how her government's moves helped ease the province through one of its worst economic crises and gave it solid footing for better times.

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Otherwise, the Notley Crew will be a one-hit wonder, sidelined in the next provincial election by what could be a unified right.

To be fair, no party presiding in Alberta over such a severe downturn caused by outside forces – in this case the Organization of Petroleum Exporting Countries' oil-price war – would maintain popularity as the energy industry contracts and jettisons thousands of workers.

The NDP has taken a political risk, meanwhile, by sticking to its guns on a sweeping anti-climate-change plan with economic recovery still in its fragile early days. The plan includes a hard deadline on coal-fired power, cap on carbon emissions from the oil sands, and most controversially, a carbon tax that takes effect next week.

The NDP's foes have amped up protests against the tax, which is partly aimed at making the oil sands more palatable to other Canadians and potential trading partners. The victory in the U.S. presidential race of Donald Trump, who has scoffed at taking action on climate change, makes an even tougher sell.

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Ms. Notley and her party have been off-balance amid the criticism, despite having done extensive consultation and study. Adding to a picture of internal strife, onetime federal NDP leadership hopeful Brian Topp departed this month as Ms. Notley's chief of staff in an unexpected shakeup. There have been rumblings of a cabinet shuffle.

To deal with the downturn, the government has tried to avoid adding hardship for its citizens through deep cuts to education and health care. Instead, Ms. Notley and her trusty finance minister, Joe Ceci, have sought to cushion the blow by increasing debt during a time of historically low interest rates, to fund infrastructure spending and even some day-to-day operations.

The mounting debt, and no expectation of balanced books until well into the next decade, give some in the business community night sweats.

But the premier has shown that early fears about inexperience and an anti-business bent were off base.

The energy royalty review, which included input from numerous energy- and finance-industry officials, yielded an update to the system that at worst was close to the existing one. At best, it was more responsive to commodity price and technological changes.

Then came The Beast – the wildfire that destroyed parts of Fort McMurray, forced the evacuation of nearly 90,000 people and took more than a million barrels a day of oil sands production off line for weeks. The premier proved herself a decisive and engaged leader as well as an understanding listener for those affected by the crisis, which took another toll on Alberta's finances.

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Perhaps her biggest win came last month, when Prime Minister Justin Trudeau gave the green light to two oil pipelines, Enbridge's Line 3 replacement to the U.S. Midwest and Kinder Morgan's Trans Mountain expansion project, which will open up Pacific Rim markets. Of course, opponents have pledged to protest in the streets and in the courts, which promises to complicate matters.

Still, the prime minister was clear that he would have rejected the pipelines had Ms. Notley's government not developed the climate legislation.

If oil prices keep strengthening, some of the angst in the province will ease. But the NDP has to do a better job explaining why the carbon plan – perhaps the defining policy of Ms. Notley's tenure as premier – is still crucial to expanding markets for the oil industry, and how average Albertans won't face undue hardship.

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