Mel Knight looks forward in Alberta’s new energy strategy

Energy prices have been worse, especially for natural gas in the early 1970s, Knight recalls in an Alberta Oil interview.

By Gordon Jaremko

April 01, 2009

Alberta’s energy minister is no novice at riding out rough patches. “This is about number five,” Mel Knight says when he looks back on an oil and gas career he began as a roughneck on a Grande Prairie drilling rig in 1964.

“On a good day it was two bits a thousand cubic feet – and that would be a really good day. We were paying 25 cents just to process gas. We had to shut in wells.”

The Bank of Canada’s inflation calculator shows the 1971 natural gas price was $1.33 in today’s money. Falling back that far would be a devastating plunge to 75 per cent below market lows that have been blamed for the 2008-09 erosion of profits, drilling, employment and provincial royalty revenues.

Knight calls the 2009 lean spell exceptional even by Alberta’s rough-’n’- tumble economic standards. “This is a particularly tough one,” he says. “This certainly is a trying time.”

He blames the simultaneous contractions by global banks, stock exchanges and energy markets. The multiple slumps gutted both production revenues and firms’ ability to raise money by selling shares or using credit. “It’s created a situation unprecedented in the time I’ve watched this business,” Knight says.

He has too much experience to echo optimists who forecast a quick recovery within a year. His immediate expectations are modest: “In 18 months or so we’ll probably see things turn around and stabilize a little bit.”

But he keeps his faith in long-range future prospects. “There’s lots of legs left in Alberta industry,” he says.

His conviction sustained his 30-year career as an oilfield technology contractor whose firm had up to 50 employees before he retired from industry and took up politics. His confidence stands out as an official prophecy at the core of a provincial strategy titled Launching Alberta’s Energy Future that his department labored over writing for months. The 51-page document was too complicated to make a publicity splash when Knight and Premier Ed Stelmach unveiled it last fall. The strategy takes a contrarian long-range view that urges “looking beyond today’s market lather,” while admitting that seeing past the worsening economic low is a stretch.

“For Alberta in the coming 30 years, no other activities will have the scale or impact of energy development,” the strategy document predicts. “Agriculture and other sectors are important to Alberta and diversification is good for us, but energy’s impact is pervasive. It is, and will be, our province’s dominant economic engine.”

Knight insists, “It’s just a realistic statement. That’s where Alberta’s strength is.” The strategy credits about half of all economic activity in the province to oil and gas, citing research done at the University of Calgary.

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