During the past month Alison Redford has had, what she characterized as a conversation with Albertans, announced that there were budget shortfalls based on renewable resource royalties amounting to $6 billion. Currently the Alberta budget will have a deficit of $3 billion for the fiscal year 2012-13. After an Economic Summit, held in Calgary this weekend, which was intended as a brain storming session, a sales tax, reintroduction of health care premiums and taking on additional debt were all ideas floated to address the shortfall. One of the priorities of the government is to develop a new oil energy strategy.
Currently approvals for the XL Keystone pipeline to the United States and the Northern Gateway pipeline to the west coast are pending. The XL Keystone pipeline was rejected prior to the US election by President Obama and no guarantees have been given that it will be approved anytime soon. Obama's new push on carbon reduction and Secretary of State John Kerry's advocacy for climate change puts the approval in doubt.
John Kerry and Canada's Foreign Affairs Minister met in Washington
on February 9, but Kerry was non-committal. Baird said that he was encouraged by Kerry's statement during his nomination meeting where he said that he will base his decision on facts and science rather than ideology.
The Northern Gateway pipeline is in a review process by the National Energy board, with plenty of opposition by environmentalists, native groups and the British Columbia government.
Both the provincial and federal government have taken stock and it is clear that in an oil rich country a new strategy is required. Currently Canada is a net importer of oil, while oilsands crude sells well below world oil prices. The Alberta government claims there is a differential of $40 a barrel.
Alberta's new strategy encompasses three key initiatives
as set out in a letter to cabinet ministers by the premier in June 2013. These include:
Rebalanced Fiscal Framework: reduces the reliance on volatile non-renewable resource revenue in funding essential programs and services for Albertans.
Restore the Sustainability Fund and, with Albertans' input, renew the Alberta Heritage Savings Fund.
Review all government programs and services through Results-based Budgeting.
Integrated Resource System: sets and achieves the environmental, economic and social outcomes Albertans expect from resource development and maintains the social licence to develop resources.
Complete regional plans and the implementation of the Regulatory Enhancement Project, including the development of a single regulator for oil and gas.
Develop a world-class monitoring system to provide transparent, reliable information on achievement of outcomes.
Expanded Market Access: contributes to the sustainability of the province's export driven economy.
Develop new access (e.g. through pipelines and rail) to markets outside the United States
Alberta Energy Minister Ken Hughes was a little more specific with Alberta's new strategy. During the province's first economic summit on Saturday he stressed that there is a pressing need to get oilsands products to international markets. He said that he was working on an aggressive plan to upgrade oil in Canada to add value to the product and to get them to coastal ports.
This includes the east-west pipeline to the Irving
refinery in New Brunswick, a coastal port in Churchill, Manitoba, the use of a right of way for an existing pipeline to the North West Territories and use of an Alaskan port.
The starting premise of this strategy, according to Hughes is to move away from a continental market and diversify to a global market. Port Churchill, as an example, could be used to transport oil to Europe.
From Norman Wells, the line could connect with the right-of-way for the Second World War-era Canol pipeline, which runs to Whitehorse. From there, oil would ship from the port in Valdez, Alaska.
“We’re at the stage where all ideas are good ideas,” Hughes said. “As a result, we’re fully prepared to look at all of the options, options that even two years ago would have seemed completely speculative and would have never had a hope of being considered seriously.”
The province is also looking to ship oil by rail to ports on the U.S. West Coast, Hughes said.
“Churchill is also a real prospect,” he added, referring to Canada’s only Arctic seaport in northern Manitoba. The port has historically been used to ship western Canadian grain.
“We’ve been approached by the Manitoba government, which is interested in selling hydroelectricity to Alberta. ... Our interest in talking to Manitoba is a utility corridor that could contemplate having either pipeline or rail that would go from Alberta to Churchill.”
While these are all good options to consider and plan for, the present Alberta budget woes need to be addressed. Alison Redford is set to unveil her 2013 budget on March 7. The University of Alberta has already frozen all increases, Redford froze MLA pay and allowances and there should be a few extra surprises in the budget.