Can the NDP manage tar sands economics?
Photo Credit/Eric Kounce
Before the election, Jim Prentice cautioned that “we can’t move away from our fundamentals” in dealing with Alberta’s fiscal downturn, which was induced by a decline in the price of oil. Incoming Premier Rachel Notley took up the opposite position, promising extraordinary measures for extraordinary times.
As Notley settles into her role as NDP majority leader, we have a moment to glance back at her campaign platform. With this new clarity, we can see that her shiny campaign ambition will have to crystalize into something far more moderate for the oil sector to avoid calamity.
The NDP campaign had two big policy headliners: raising the corporate tax from 10-per cent to 12-per cent, and assembling a royalty review board to adjust — really, raise — the cost of oil extraction for foreign firms. Between the two, Notley seems far more committed to the corporate tax increase, as she has provided figures and checked her math.
Corporate taxes appeal to the (increasingly unemployed) labour vote, but clash with the bigger strategy that intends to do the same. As the broader narrative of her campaign, Notley pointed to a future of in-province oil refinement. This is contradictory. No economist looking to remake an entire sector from the ground up starts by taking money away from the people who can make that happen.
Basically, Notley’s electoral campaign for Alberta-based refinement was a Cirque de Soleil of yoga-style posturing.
First, Notley stood firm that she would not dedicate any time to lobbying the U.S. to move forward on the Keystone. This move was a show of confidence in the transition to in-province refinement, which would hypothetically not benefit from the easy export of bitumen. This stand was nothing but a show, however, because any meaningful lobbying on Keystone has to come from Ottawa. And even if it didn’t, by Notley’s own admission, the delay in Keystone’s development is entirely to do with internal U.S. politics.
Second, Notley further developed her position, arguing that the province should not fund any projects for pipelines to elsewhere in Canada. Again, Notley was sending a message: “refinement will happen in Alberta, thank you very much!” The crowds applauded her defiant pirouette.
The delusion of this position is what makes the prospect of Albertan oil refinement look like laughable pandering to the labour demographic. Simply put, the landlocked prairies cannot compete with the coastal refineries of the maritimes and Sarnia. As much as Albertan oil is in demand, the cost of shipping refined gasoline by land and not through ports is too prohibitive. The cost comparison is even more stark with Keystone’s efficiency possibly just around the corner.
But this is all fine, since candidates frequently scatter their campaign messages to appeal to voters; it only becomes a problem if it can’t be reeled in.
Notley campaigned as if growth was going to be rapid, and promised to increase the minimum wage. This move could not possibly be justified with the current job losses, so obviously we’re about to see a massive employment increase in the new refinement sector, right?
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Let’s hope Notley wakes from her slick campaign dreams before she crashes the economy in a pileup of gasoline tankers.