Energy Ink

Health, education stances key in Redford’s upset win

But will new Alberta premier squeeze the oil patch to pay for her campaign promises?

October 03, 2011

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On Friday during an email exchange with an Alberta scribe who covers provincial politics for a living, I signed off on my final message with the line, “Enjoy covering [Gary] Mar’s coronation.”

Whoops.

Alison Redford’s come-from-behind victory in the second ballot of this weekend’s Progressive Conservative Party’s leadership race shows that it is folly to call these contests too soon. I’ll leave the discussions about what Redford’s win over frontrunner Gary Mar means for the party’s future to other folks. What this blog is concerned about is what the premier designate’s victory means for the oil and gas industry.

We wrote two weeks ago that no matter who became party leader – Mar, Redford or third-place finisher Doug Horner – the oil patch had little to fret about. When it comes to its dealings with the Alberta government, the oil and gas industry cares about two key issues: it wants as much land as possible to be open for exploration and development and it doesn’t want the current royalty systems messed with. Based on what Redford said during this long leadership race, she doesn’t seem like she will rock the boat on the aforementioned issues.

However, political pundits are crediting Redford’s victory to the fact she won over teachers and health care workers by pledging to restore $107 million in education cuts and improve the health care system. That all sounds good, but these fixes won’t come cheap and Alberta has a deficit of $3.4 billion. That is $1.3 billion lower than the government originally estimated it would be, but it’s still a large number, and the reduction came about thanks to blind luck – high oil prices brought in larger than expected royalties. Oil prices were trading around US$77 Monday morning. The province can’t be sure it will get that lucky again.

So can Redford balance the budget and also keep her promises to improve the health care and education systems? This is where the oil patch will be watching Redford’s movements closely in the next few months. Increasing taxes on Albertans to pay for increased education and health care spending isn’t going to fly. Yet those wealthy oil and gas companies could always pay a little more couldn’t they? The thought of dickering with oil and gas royalties has already been broached by University of Calgary economics professor Kenneth McKenzie in a recent white paper. Will Redford be forced to squeeze more rent from the industry to pay for health and education improvements? That’s one of the questions oil and gas companies in Calgary are asking themselves today about Alberta’s new provincial leader.

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