Analysis: Ontario-Alberta relations could weigh on oil sands
Federal NDP position on oil sands could elicit 'a lot of sympathy' across country
Thomas Mulcair didn’t stay long, but Albertans and the oil and gas industry won’t soon forget his recent sojourn to Alberta. In June, Jack Layton’s successor as the boss of the federal New Democratic Party, and leader of the official Opposition, visited the heart of Alberta’s bitumen belt – Fort McMurray – and toured the oil sands during a trek to Wildrose Country.
The tour was much anticipated, as it came on the heels of the Quebec MP’s “Dutch disease” comments, where he blamed a high Canadian dollar – largely the result of a crude oil boom in Alberta – for killing jobs in Central Canada’s manufacturing sector.
Ontario Premier Dalton McGuinty made similar comments this winter, and both McGuinty and Mulcair were widely criticized in Alberta’s business and political circles for playing politics and trying to kill the goose that is currently laying a lot of golden eggs. “I find him quite unpredictable with respect to some of his comments,” Alberta Premier Alison Redford said of Mulcair on the eve of his visit.
Redford and Albertans better get used to the unpredictability. Energy-fueled dustups figure to become commonplace as Central Canada, and Ontario in particular, get increasingly testy watching Western Canada’s economic and political power grow while theirs wanes.
The strained relations are no small matter for Alberta and its oil and gas industry. If business and political leaders from a region with as much population (and votes) as Central Canada has aren’t onside with the sector’s growth plans, it could have a serious impact on the health of the petroleum industry and Alberta’s economic future.
Recent oil production forecasts show no angst over simmering regional tensions, however. In its 2012 crude oil forecast, the Canadian Association of Petroleum Producers (CAPP) sees Canada’s daily output of oil rising to 6.2 million barrels per day (bpd) by 2030 from the three million bpd produced in 2011. Oil sands production stands to make up the lion’s share of that total. CAPP projects bitumen production reaching five million bpd in 2030, up from 1.6 million bpd in 2011.
CIBC World Markets actually thinks CAPP’s bullish forecasts are conservative. In a report released this spring, CIBC analyst Andrew Potter says oil sands production will increase by some 2.5 million bpd between 2011 and 2020. CAPP projects oil sands production to grow by 1.4 million bpd during that time frame.
Of course, these are just forecasts. Whether they come to pass depends on many factors – oil prices, the availability of skilled labor, infrastructure, technological advancements and government policies, to name a few. The oil sands are an expensive resource to produce. They are also controversial because of the energy required to extract them, the carbon emissions they generate, the water used and the land that is disturbed getting this resource to market.
And as companies headquartered in Calgary look to accelerate production growth, the oil sands have made them, and Alberta, an easy target for Ontario and Quebec, whose economies have endured a prolonged malaise and whose leaders and residents feel Western Canada’s energy boom isn’t benefitting them.
The saber-rattling from the likes of Mulcair and McGuinty might be politically motivated, but it’s also something Alberta must watch carefully as it advocates for oil sands growth, for controversial pipeline projects like the Keystone XL and Northern Gateway that would transport oil sands product to new markets, and Redford’s yet-to-be-defined Canadian energy strategy.
Keith Brownsey, an associate professor of political science at Calgary’s Mount Royal University, says a province like Ontario, with 12.8 million people, can be a roadblock to Alberta and the oil patch’s prosperity. “It’s an interesting conundrum for Alberta,” Brownsey says. “I think there is going to be a lot sympathy for Thomas Mulcair’s position in the rest of the country.”
There is little Ontario and Quebec can do to prevent, say, a new oil sands project from being approved in Alberta. But their leaders can cause problems at federal-provincial meetings by aligning themselves against fossil fuel-producing provinces like Alberta and Saskatchewan. They can also influence the federal government, which does have the final say on approving pipelines that go through multiple jurisdictions and on oil sands mega-projects.
And while it seems laughable that a pro-oil and gas Conservative government – led by a prime minister, Stephen Harper, who hails from Calgary – would do anything to slow down the Alberta economic juggernaut, Harper is nothing if not pragmatic. The strained relations are no small matter for Alberta and its oil and gas industry.
As such, there are two numbers he is always aware of: 106 and 75 – the number of federal ridings in Ontario and Quebec, respectively. The Conservatives won a coveted majority in the 2011 federal election thanks in large part to taking 75 seats in Ontario (the party only won five in Quebec).
To keep those seats, and pick up more in the next election, Harper and the Conservatives must strike a balance between serving eastern and western interests. If they can’t do this, they could be voted out of office and replaced by Mulcair and the NDP or the Liberal Party, which Brownsey says presents risks to Alberta and the oil and gas industry. “If [Ontario] doesn’t vote Conservative in the next election, things will happen.”
What might those “things” be? Well, Albertans got a glimpse during Mulcair’s visit, when he said he supported “sustainable development of the oil sands”, called for stronger environmental regulations and noted that an NDP government would make oil and gas companies pay the environmental cost of production.
Redford, fresh off a convincing election victory of her own this spring, has already launched a counteroffensive. In May, the premier announced, with federal Natural Resources Minister Joe Oliver by her side, that the Alberta government would open an office in Ottawa to strengthen relations and communicate key positions to the federal government.
It’s a clear sign the Alberta government isn’t content to fight negative central Canadian perceptions about the oil sands and the oil and gas industry from Edmonton and Calgary. Opening the office (which will cost Alberta taxpayers $850,000 annually) also demonstrates that Redford isn’t assuming the Harper-led Conservative government will always side with the West when the region locks horns with Ontario and Quebec.
Meanwhile, out in the field, the business of producing oil and gas for petroleum-hungry markets across Canada grinds on. In 2011, the Canadian Energy Research Institute (CERI) released a report that outlined the potential impact the oil sands industry could have on the Canadian economy.
In the report, CERI determined that over the next 25 years, the oil sands sector is expected to purchase $63 billion worth of goods and services from companies in Ontario and by 2035, seven per cent of the total jobs related to the oil sands will be in Ontario.
Those big numbers have yet to impress the likes of Mulcair and McGuinty. The battle to convince Ontario, and to a lesser degree Quebec, that a growing Alberta oil and gas sector is good for all of Canada is just getting started.
But Tom Alford, president and CEO of Calgary-based IROC Energy Services Corp., isn’t paying the noise coming from Central Canada much mind. “Some of this is straight politics,” Alford says. “We employ a large number of people from Eastern Canada. I don’t know the percentages, but there is a large representation coming from Ontario with the job situation there. And we’re happy to have them.”