Alberta will not fade away, and short-term setbacks could be eased by a return to, say, $5 (U.S.) per thousand cubic feet of natural gas and a lustily resurgent U.S. economy that soaks up oil gluts. The province has always ridden the cycles, and indeed there is a stubborn pride in the boom and bust culture of high public and private spending in good times and restraint during the inevitable pullbacks.
“If you look at per capita government expenditures, it is clear that revenues drive expenditures. That is an enduring feature [of Alberta],” says Mr. Percy, who is optimistic that the current provincial government has learned enough from past cycles to manage the current crisis.
To some extent, the sense of urgency is undercut because the economic signals are still contradictory. Out in the field, there is little evidence yet of a slowdown. In 2012, the CLAC represented more than 10,000 workers in the Wood Buffalo region where most of the oil sands is located. That was a new record, surpassing the previous peak of 8,600 in 2008. CLAC expects to add a further 15 per cent in 2013. Worker shortages are acute enough that Mr. Prins suggests a reporter “put down the pen and pick up a wrench.”
But elsewhere, the signs of a downturn have already appeared: Talisman Energy Inc. is slashing its office expenditures this year by some 20 per cent. At least some of that will come from cutting jobs, and rumours of impending work force cuts at other companies abound in Calgary. And now, the CLAC’s Mr. Prins acknowledges that the spectre of Voyageur is an ominous one. “It’s not altogether doom and gloom, but it’s certainly a warning that a slowdown in the industry in general isn’t out of the equation.”
What’s more, Alberta’s track record in managing its bouts of economic whiplash is not promising. In the past, when a boom would end, there would be a resolve that hard-headed realism would assert itself the next time around. It never did. Indeed, the classic Alberta bumper sticker of the 1980s was “Please God, let there be another oil boom. I promise not to piss it all away next time.” But the danger now is that there will be progressively less to piss away each time, as energy returns keep getting smaller and smaller.
The heritage of short-term thinking was never far from the minds of Mr. Emerson’s panel – with the likes of former Bank of Canada governor David Dodge, a duo of Oxford scholars and a Boston venture capitalist. But committee member James Gray, a veteran Calgary oilman and long-time policy observer, said the report faced an immediate hurdle because it was identified with former premier Ed Stelmach, who left office and was replaced by Ms. Redford.
Yet Mr. Gray insists there was much in the document to commend, including the concept of pushing the province’s policy emphasis from overspending current resource revenues to investing in ideas to enrich succeeding generations. “We’ve solved problems with money and not with ideas and vision,” he says. Alberta’s success so far has been the result of a fortunate inheritance. “We woke up one morning and, goddamn it, we were so smart because all these resources were in our control and we thought our brains put us in that position. I’m sorry, but that was not the case.”
That reality hit home in October, he says, when the normally flat differential between the price of West Texas intermediate crude and Western Canadian heavy oil suddenly soared, slashing the per barrel revenue of Alberta producers. “It crashed in the last 90 days and no one saw it coming.”
The result is a severe economic challenge, which, he says, might finally force Alberta to face facts. “I see this as an opportunity. We were getting soft and our entitlements were getting big. We were fat, saucy and arrogant and we had to have our chain yanked. ”
Mr. Emerson, who ran a Western Canadian bank in the storm-tossed 1980s, also hopes for a new realism, but he knows ingrained behaviours are hard to overcome. And this time, Alberta is facing a large structural adjustment as well as a cyclical downturn. There is still time to make the policy moves – and sacrifices – to build a post-hydrocarbon economy, he believes, but “we are a little late in the game, and we were not prepared for the changes taking place.”Report Typo/Error