The surprise election of a left-leaning government in the heart of Canada’s oil sands is expected to have a limited immediate impact, but environmental campaigners said it invites long-term changes in the Great White North.
Alberta Premier-elect Rachel Notley’s New Democratic Party bested the Progressive Conservative Party that had led the province the past 43 years. While Notley is more centrist than her socialist-inclined national party, experts expect her to make good on campaign promises that could harm the oil sands industry: raising corporate income tax rates by 2 percent; exploring increasing royalty rates Canadian companies pay for extracting fossil fuels; relinquishing Alberta’s role as cheerleader for the Keystone XL pipeline; and killing a proposed alternative to it.
Still, there’s little evidence that Alberta, even with Notley in charge, is ready to dump the oil sands. Alberta has been called Canada’s Texas, where the liberals are less liberal than they are nationally and the oil sector is the economy’s backbone. The province says one of 16 jobs is directly related to energy.
“The oil and gas industry is so pivotal to the economy of Alberta that no political party could go out on a limb and bash the energy industry,” Charles Ebinger, senior fellow with the Energy Security and Climate Initiative at the Brookings Institution, told the Washington Examiner.
With the ouster of Jim Prentice, the outgoing premier who resigned his seat post-election, the $8 billion Keystone XL pipeline that would ship Alberta’s oil sands to Gulf Coast refineries lost a key Canadian booster in Washington. Like Alison Redford before him, Prentice wasn’t a stranger to Capitol Hill.
Notley, however, isn’t a crusading environmentalist. She won’t actively oppose Keystone XL. Climate change concerns were on her party’s national platform, but they weren’t central to her campaign.
“The [New Democratic Party] is against Keystone XL and sometimes they do allude to the environmental concerns, but it’s more of a jobs thing. They want the refining capacity to be in Canada,” said Andrew Finn, a program associate with the Wilson Center’s Canada Institute.
Analysts in Canada saw the election as a response to Prentice’s proposed budget, which included tax increases on people earning more than $100,000, a new healthcare premium for those making $50,000 or more, and bumps to tobacco, alcohol and gasoline fees.
But Alberta’s financial strain came about largely because oil prices have been cut in half from more than $100 per barrel in June, and Notley ran a campaign promising to diversify Canada’s economy. Immediately ditching the province’s lifeblood wouldn’t be wise, but Notley’s victory starts a conversation about the future of Alberta and the oil sands.
“No one is saying we need to shut down the tar sands tomorrow. That would be irresponsible. What we’re talking about is shifting the economy and particularly Alberta away from being so dependent on a fossil fuel economy,” McKinnon told the Examiner. “That’s the space that I think has been opened up here.”
Markets quickly frowned upon companies heavily invested in oil sands following the election.
Suncor Energy Inc., the top Canadian oil sands producer, saw its share price drop to a low of $30.30 on Wednesday, a 3.1 percent drop compared with the opening price. Cenovus Energy Inc., another major oil sands player, saw its shares drop 6.5 percent to $17.13. Both stocks were rebounding a bit toward close.
Environmental groups cheered the stock price drop.
“The election of progressives in Alberta has sent tar sands stock prices plummeting. Good sign!,” tweeted Jamie Henn, a spokesman with climate group 350.org. Henn’s group wants President Obama to kill Keystone XL because it fears the pipeline would lock in oil sands development that would exacerbate climate change.
Notley also endeared herself to green groups when she called Alberta’s carbon emissions policy “irresponsible” on the campaign trail. She wants Alberta to emulate Ontario, which in April signed a cap-and-trade deal with Quebec, and British Columbia, which has a carbon tax.
Environmental groups have pointed to Notley’s laissez-faire approach to Keystone XL and resistance to Northern Gateway, the Enbridge-proposed alternative to Keystone XL, as a sea change for Alberta. That Notley has advocated for accelerating closures of a handful of coal-fired power plants also has encouraged environmentalists.
Notley, though, still supports large proposed pipelines Energy East and TransMountain, and boosting refining in Alberta which would, ostensibly, require continued oil sands production.
“Their platform contains some aspirational targets, leadership they want to have on climate … [but] we don’t know yet,” said Ed Whittingham, executive director of Canadian environmental organization the Pembina Institute.
Pipelines would help reduce transportation costs for oil sand producers, which are under duress at current prices. The fuel, which is mined and then heated to thin out the viscous crude, is more expensive to extract than other varieties. Three Canadian oil sands projects were canceled last year partly because of low prices and a dearth of pipelines.
The Canadian Association of Petroleum Producers, a Canadian trade group, said it looked forward to working with Notley to address those issues.
“We believe we can best protect jobs and investment by working with government on priority issues such as market access — building new pipeline, rail and marine transportation capacity — as well as policies to keep Alberta competitive in the global market,” spokeswoman Chelsie Klassen told the Examiner in an email.
James Millar, a spokesman with TransCanada, also said it was too early to judge the new government.
“We look forward to working with Premier-elect Notley, her cabinet and the rest of the Alberta NDP government,” he said in an email. “The value of the energy industry to Canadians is unquestionable. It creates thousands of jobs, provides millions in tax revenue and is one of the key drivers of our national economy. We also recognize resource development must be done responsibly.”
