A Strong Alberta for a United Canada

Speaking at the Canadian Club of Ottawa on Dec 9, Alberta Premier Jason Kenney outlined a powerful case on Alberta’s economic situation and proposed a five-point agenda for talks with the federal government and Prime Minister Justin Trudeau, whom he met with the following day.

Jason Kenney

Dec. 9th, 2019


Thank-you to the Canadian Club for the chance to bring an urgent message to Ottawa on behalf of Albertans: There cannot be a strong Canada without a strong Alberta.

Alberta has been the great engine of prosperity, social mobility, and shared wealth in modern Canada. But our ability to play that role is at risk. That puts Canada’s prosperity is at risk, and weakens our country’s unity.

That is why I am here today with Team Alberta – an unprecedented mission of eight Ministers and eleven Deputy Ministers, to press for a Fair Deal for Alberta in the Canadian federation now.

On ne peut pas avoir un Canada fort sans un Alberta fort.

Alberta est un grand moteur de prosperité, mobilité social, et les richesses partagé dans l’histoire du Canada moteur.

Mais tout ça est à risque.

C’est la raison pour lequel je suis ici avec l’équipe Alberta, pour démander une entente juste pour l’Alberta dans la fédération.

To boil it right down, our idea of a fair deal is a federation that respects the original vision of our Constitution, and that allows us to develop our resources, getting them to global markets at a fair price, so we can continue to share jobs, wealth and opportunity with the rest of Canada.

On Alberta’s contribution to Canada: Let’s start with the numbers.

We have made a massive, oversized contribution to Canada’s prosperity.

Research by economists Robert Mansell, Mukesh Kanal, and Jack Mintz concludes that Alberta has made a net contribution of $630 billion to the rest of Canada since 1960.

In the last 11 years alone, the net transfer from Albertans to the rest of the country was $240 billion.That’s a personal contribution to Canada of $55,000 from each and every Albertan.

For perspective, that’s 600 per cent more than the net per capita contribution of British Columbians and Ontarians – combined – over the same time.

On an annual basis, Alberta taxpayers contribute about $23 billion more in federal taxes than they get back in services, or about $5,400 per person.

We are proud to have helped our fellow Canadians when times have been good in Alberta, and bad elsewhere, contributing to schools, hospitals, pensions, and health care from coast to coast.

But Alberta’s contribution to social progress and prosperity goes much deeper than just fiscal transfers. We punch above our weight in every economic category.

For example StatsCan data shows that in 2018, despite all the challenges to our energy sector, oil and gas were by far Canada’s biggest exports – nearly twice the value of our next largest export industry, autos and auto parts.

Alberta’s largest industry – oil and gas – is also Canada’s largest industry sub sector, larger than banking and financial services, 2.6 times larger than residential construction, and four times larger than telecommunications.

And while we have 12 per cent of Canada’s population, Alberta typically generates one third of the investment, and one quarter of the job creation in the Canadian economy.

Canadians depend disproportionately on Alberta’s energy sector for their financial security, with retirement savings and pensions invested heavily in energy stocks.

Our energy sector has been Canada’s greatest engine of social mobility, moving tens of thousands of people without formal post secondary education into good middle class careers.

This is demonstrated by the work of University of Ottawa economist Miles Corak.

He has spent years analyzing intergenerational income mobility and plotting it on the map of Canada.

Corak’s work finds Alberta is the best place in Canada to move from “rags to riches” – from the lowest income quintile to the highest.

Alberta’s dynamic economy enables people to overcome socio-economic hurdles that are insurmountable in other parts of Canada, which is why so many have moved to Alberta over the years.

It’s also why we enjoy by far the highest levels of indigenous employment and incomes in Canada, and better economic outcomes for immigrants as well.

Allan Freeman, the long-time economics reporter who is now a Senior Fellow at the University of Ottawa’s Graduate School of Public and International Affairs, wrote this:

“In the two decades between 1994 and 2014, Alberta’s GDP grew by an average of 3.5 per cent a year. The province, with something over 11 per cent of Canada’s population, accounted for 25 per cent of net new jobs for the entire country in the ten years to 2014… Resource [companies], led by the oilsands producers, invested $126 billion in their facilities, accounting for almost half of all non-residential capital investment in Canada.

“We all benefited. Revenues from Alberta flowed into federal coffers, boosting overall growth … allowing Canada to avoid the worst of the Great Recession of 2008-09. Alberta provided a huge safety valve for surplus labour from other parts of the country. Thousands of skilled and not-so-skilled workers from the Atlantic provinces, Quebec and Ontario flocked to Fort McMurray for the high wages, sending money home like immigrants providing remittances to their families abroad.” Unquote.

If not for Alberta’s huge tax contributions, even during tough recent years, Ottawa’s deficits would be far worse.

Federal finance department data shows that without Alberta’s net contributions in just the last five years, the federal debt would be almost $100 billion higher than it is.

State of Alberta economy today

In other words, Alberta has been the goose that laid the golden egg for the modern Canadian economy, and for our system of fiscal federalism.

But our ability to continue playing that nation-building role is in real jeopardy, as we live through our fourth year of economic stagnation and decline.

Our economy is still $3 billion smaller than it was back in 2014.

Between 2014 and 2018, business bankruptcies rose more than 50 per cent.

And oil and gas investment is forecast to contract for the fifth consecutive year in 2019, down almost 60 per cent from 2014 levels. There has been a $100 billion loss in market value of publicly listed Canadian oil and gas companies since 2014, making pensioners poorer.

Of 129 independent Canadian listed oil and gas companies in 2014, almost half have declined by 90 per cent, have been sold, delisted or gone through an insolvency event. This has been devastating for Canada’s financial industry.

Family incomes still haven’t recovered and our per capita GDP is down 13 per cent overall.

For years we have been running the biggest provincial deficits in Canada  For years our unemployment rate has been above than the national average, with Calgary and Edmonton having the 2nd and 4th highest unemployment rates for large cities in Canada.

The extent of the jobs crisis is obscured by tens of thousands leaving the labour force – especially young men – and many leaving the province.

It is estimated that we have lost 100,000 high paying energy sector jobs.

To put that in perspective, recall the attention that the media rightly paid to the tragic loss of 3,000 jobs with the GM layoffs in Oshawa.

Those are the stark statistics. But beneath them are the human costs, which are the ultimate source of the fear and anger roiling the prairies.

Everywhere I go I see the fear of people affected by this prolonged downturn:

  • business owners hanging on by the skin of their teeth with nowhere left to cut costs,
  • local councillors struggling to pay for public services as local tax revenues dried up,
  • CEOs with exhausted lines of credit grimly contemplating a third or fourth round of layoffs,
  • police officers, social workers and healthcare providers overwhelmed by the explosion of homelessness, crime, depression, and addiction.

This could not be more serious.

Some rural counties have experienced a 400 per cent increase in crime.

More families are breaking up.

Foodbanks and women’s shelters have never had more demand.

The per capita suicide rate in Alberta is 50 per cent higher than in Ontario.

And according to a paper from the University of Calgary School of Public Policy, for every 1 per cent uptick in the unemployment rate, we have seen 16 more suicides.

So why is all of this happening?

Here in Central Canada, there seems to be a widespread misunderstanding of what has caused this prolonged downturn in Alberta and Saskatchewan, and more generally in Canada’s energy sector.

Every day I read columns and commentary suggesting that we are just the hapless victims of low global commodity prices, or that we are witnessing the end of the oil and gas industry. Apparently we Albertans are just too dense to grasp this, and so we’re just lashing out in frustration at Ottawa.

So let me take on each of these misconceptions.

Oil Prices:

First off: oil prices aren’t low. They’re average.

It’s true that in 2014 there was a sudden drop from $100 to $50 per barrel oil.

But prices have stabilized, with the current benchmark West Texas Intermediate price around $60, which is well within the range of historical norms.

In fact it’s higher than the average price since the modern Alberta oil boom began in 1947, and higher than the average price since 1980.

Because of the price correction, Canadian producers have cut costs by as much as 30 per cent, becoming more efficient than ever. Most of our major oilsands producers will tell you that they can operate profitably at $35 WTI prices.

At the same time, and at the same prices, we have seen a huge oil and gas boom south of the border, and in other parts of the world.

Global production of oil is up 10 million barrels a day over the past decade. Much of that is being supplied by the United States, which has more than doubled output to become the world’s largest oil producer, and for the first time in history, an exporter.

Much of that production was fuelled by tens of billions of dollars of capital moving from Canada to the Permian, Eagleford and Bakken basins in the United States.

So while Alberta is in its fourth year of a jobs crisis, energy states like Texas, Oklahoma and North Dakota have full employment.

The difference is policy, not prices.

Policies that have made our industry less and less competitive, driving job-creating investment out of Canada.

And policies that have killed and delayed pipelines mean that we are captive to the US, and sell one of our country’s most valuable assets to them at firesale prices.

It’s like taking our family jewels to the pawn shop.

According to Scotiabank, this price differential costs the Canadian economy $16 billion a year.

A year ago it became so severe that we were selling Canadian oil to the US at ten dollars a barrel, and the US was selling their oil to the world at $60. This forced the Government of Alberta to impose production caps on our crude as a last resort, which in turn has driven away investment as producers cannot sell additional production.

So, yes, a decline in global prices five years ago hurt us.

But Alberta has been through that kind of downturn before, and bounced back.

We’re resilient and innovative. But this time something was different.
Government policies made a bad situation much worse.

Policies like:

  • the cancellation of the approved Northern Gateway Pipeline
  • abject surrender to a U.S. presidential veto on Keystone XL
  • killing Energy East by radically changing the regulatory requirements half way through the process
  • bungling the TransMountain Expansion to the point that Kinder Morgan left Canada
  • an endless and uncertain approval process, which contributed to the cancellation of projects like Petronas’ $40 billion West Coast LNG project
  • carbon taxes and regulations that are not imposed by any other major energy producer, accelerating carbon leakage and capital flight
  • and now, the infamous Bills C-48 and C-69. One is a first in Canadian history: a ban on the export of only one product – bitumen – produced in only one province – Alberta. While Saudi tankers can enter the Bay of Fundy unimpeded with their carbon tax free conflict oil; we are barred from sending Canadian energy out of Canadian ports, even if we have the support of First Nations. That’s why the Senate Transportation Committee voted to defeat the bill, a decision that was subsequently reversed.
  • C-69, the new Impact Assessment Act, is known in Alberta as the “No More Pipelines Law.” It creates massive new uncertainty, potentially endless reviews, was opposed by almost every major industry group in the country, nine of the ten provinces, many first nations, and all five political parties in Alberta. The majority of Senators, including those appointed by Prime Minister Trudeau, and a majority of the Liberal Senate Caucus, voted to adopt virtually all of the amendments to Bill C-69 proposed by the Government of Alberta, and the Canadian energy industry, but ultimately these were reversed.
  • C-69 not only creates huge new uncertainty for the future of Canada’s resource industries at the worst possible time, it also constitutes a blatant and obvious intrusion into the exclusive constitutional jurisdiction of provinces by asserting federal authority to regulate the production of natural resources, in clear violation of Section 92(A) of the Constitution. That is why we have filed a judicial reference to the Alberta Court of Appeal challenging its constitutionality.

On top of these policies, we heard the Leader of the national government speak about “phasing out” the oilsands, et pendant la récente campagne il a dit que “On a besoin d’un gouvernement qui va lutter … contre les pétrolières.”

He said “we need a government that will fight the big oil companies.”

Can you imagine a Prime Minister saying that “we need a government that will fight the big auto manufacturers?”

Or “we need a government that will fight the big aviation companies?”

It is unthinkable. And rightfully so.

Can you imagine a government during a prolonged downturn in Quebec, with tensions running high, bringing in legislation that imperils Quebec’s largest industry.

Again, unthinkable. And rightfully so.

Friends, this is why we have seen a disturbing rise in alienation on the Canadian prairies, and particularly in Alberta.

You will have seen polls indicating support running as high as 32 per cent for leaving the federation.

Let me be clear. I am and always will be a proud Canadian. I believe that despite our flaws, Canada is the best place in the world. And my patriotism will never be conditional. Nor do I understand how the solution to a campaign to landlock Alberta is for Alberta legally to landlock itself.

Having said that, what concerns me most is the polling indicating that 80 per cent of my fellow Albertans say that they “understand” or “sympathize” with the separatist sentiment.

These are good people, the vast majority of whom I do not believe would ever opt to leave our country.  They have not given up on Canada, but more and more they believe that Canada has given up on them.

Let me take on the second common fallacy about why Canada’s huge energy sector is in a trough. It goes something like this: “the world is transitioning away from oil, it is a dying legacy industry, and the quicker Albertans figured this out, the better.”

But as I’ve already pointed out, global consumption and production of oil increased by 10 per cent, or 10 million barrels per day, over the past decade.

And according to the International Energy Agency, global demand for oil is likely to increase from the current 100 million barrels per day to approximately 110 million barrels per day by 2040.

Even the agency’s most aggressively conservative projection, based on full international compliance with the Paris Climate Agreement, anticipates 70 million barrels per day of consumption by 2040.

The same agency projects that global consumption of natural gas will increase by more than a third over the same two decades.

But the statistics I just quoted are clear: any “transition” will be a matter of decades.

To quote Microsoft founder Bill Gates when asked about the energy transition earlier this year:

“Let’s stop joking around… This term ‘clean energy’ I think (has) screwed up people’s minds. How are you going to run Tokyo on 22 gigawatts of electricity during a three day cyclone on a battery? No one is close to solving the problem of reliability. How are you going to make steel? Where is the fertilizer? The cement? The plastic? Where is it going to come from? Do planes fly through the sky because you put numbers on a spreadsheet? There is no substitute for how the industrial economy runs today.”

So the question facing us, and the world, is this:

Who will supply the demand for hydrocarbon based energy over the decades to come?

Alberta has the third largest oil reserves on earth, with a current notional market value of over $10 trillion.

We also have one of the world’s largest proven and probable reserves of natural gas.

But if we persist in the course we’re on, it won’t be us – a democratic, free market country that adheres to the highest environmental, social and governance standards on earth.

Instead, it will be countries, and regimes, that don’t give a damn about the environment and human rights and freedoms, countries who lie about their emissions record and use profits from energy to oppress their own people and foment economic and political instability and violence around the world.

If Canada persists in the course we’re on, the developing world will go on burning coal to satisfy their energy needs, poisoning their own environments and imperilling the planet, instead of switching to much cleaner fuels produced and shipped from Canada.

If you ever wonder why we get frustrated about Ottawa’s foot-dragging on approving and supporting LNG projects and pipelines, here is one reason:

If India and China replaced their coal-fired power with BC and Alberta natural gas, the CO2 offset would be greater than the GHG emissions of the entire Canadian economy.

This is where the irony of Canadian energy policy becomes tragedy.

We are abdicating our moral duty to do everything we can to produce and export as much of the greenest, cleanest, most socially responsible energy as we possibly can.

Albertans are literally begging Ottawa and our fellow Canadians to hear and heed this message.

We have been working hard, over many years, and investing billions of public and private dollars, to lower emissions from Canadian oil and gas production.

We have developed and are continuing to pioneer new world-leading emission-reduction technologies and processes.

Oilsands emissions are down 30 percent since 2000 and on track to fall another 20 percent by 2030.

We’re scaling up carbon capture, utilization and storage, and rapidly replacing coal power with gas, to reduce Canadian emissions by millions more tonnes.

In fact, through projects like the Alberta Carbon Trunk Line, which takes CO2 from Alberta’s industrial heartland near Edmonton and injects it into depleted oilfields in central Alberta, it is now possible to produce oil that saves more CO2 than it will emit even after the oil is combusted as gasoline or other products.

This is why some of Alberta’s leading oilsands companies like CNRL and MEG energy are setting a goal of net zero carbon emissions, and we are supporting them in this effort.

This is exciting stuff! It’s a story we should be proud of, that we should be trumpeting to the world!

Nor should we be shy about reminding others – and ourselves – that we already have some of the toughest emissions standards in the world.

If all other oil and gas producers followed Alberta and Canada’s current rules for venting and flaring of methane, global emissions from oil and gas production would instantly fall 23 per cent.

Our new Technology Innovation and Emissions Reduction program, or TIER, sends a clear market signal to reduce carbon and the revenue generated will help to finance new technologies to achieve even more reductions.

The federal government last week recognized that this system was equivalent in effect to the federal Output Based Pricing System – as well they should – because our system will not only reduce emissions in oil and gas as much as the federal system would, but it is even more rigorous than the federal rules when it comes to reducing emissions from electricity.

In Madrid this week the world is trying yet again to reach consensus to prevent global warming.

We believe a key part of the solution lies in Article 6 of the Paris Agreement, which would incent consumers of high-emitting carbon energy sources to switch to low emission fuels like Canadian natural gas, and to adopt new technology like CCUS.

Ottawa needs to make sure Canada gets credit for our LNG exports and make technology transfer a priority objective for Canada’s negotiators.

If we do, and if we actively encourage and support cleaner oil production and LNG export, we will blow through our Paris targets and make a difference in global emissions reduction that far exceeds anything we can achieve by focussing exclusively and myopically on domestic emissions.

This is one of the things I’ll be pressing for in my discussions with the Prime Minister tomorrow.

I sincerely hope he will listen, as he said he would on election night, and as he has indicated in various ways since then.

I must say, however, that there was not a lot of celebrating in Alberta after last week’s Speech from the Throne.

There was little or no mention of the economic challenges facing the West, and the oil and gas industry, and the TMX pipeline, or really any of the concerns or opportunities I’ve outlined here today.

As one wag commented, it seemed the West was not wanted on the spaceship.

This does not auger well for national unity, or the future of national prosperity.

My duty to the people of Alberta is to do everything I can to get the Prime Minister understand that these issues go to the heart of his first responsibility, the preservation of Canadian unity.

I will present him with five reasonable, practical and necessary actions the federal government can undertake immediately to fulfill that responsibility.

First, I am asking him to set a firm, fixed, and fast deadline to complete TMX to get Canadian oil moving to new markets, so we can bring investment and jobs back to Canada.

I am specifically asking him to commit to upholding and enforcing the rule of law to ensure this happens, and to make it a priority to bring First Nations into the project as equity partners as quickly as possible.

I truly believe it is a moral obligation of this generation of Canadians to ensure that our Indigenous people benefit materially from responsible development of the resources that lie below the lands that their ancestors first inhabited.

Equity partnerships are the logical next step for Alberta after decades of pioneering Indigenous employment and entrepreneurship in the oil patch.

I was saying earlier how Alberta’s economy, and particularly the energy sector, has been a great engine of socio-economic mobility.

But among the greatest beneficiaries are the Indigenous people in Alberta, who have by far the highest levels of employment and incomes of any indigenous people in Canada, thanks in large part to the progressive and visionary leadership from their leaders and from Alberta’s resource companies.

Full partnership in energy and resource development will be essential to achieving meaningful reconciliation, and it is poised to begin in the West, with the TMX pipeline.

The second thing: I will be asking the Prime Minister for payments that we should have received between 2015 and 2017 under the Fiscal Stabilization Program, a kind of “equalization rebate” designed to soften the recent blows to our economy.

Alberta suffered a $7 billion revenue drop in 2015 due mainly to the world energy price collapse.

But because a per capita ceiling was imposed on FSP payouts in 1987 – which by the way was a year after Alberta collected its one and only payout – our compensation was limited to $250 million.

We were likewise shortchanged the following year, so we are asking for a total of $2.4 billion – the amount we would have received had the program not been arbitrarily capped.

There are no caps on transfers out of Alberta when times are good, so we don’t accept that there should be a cap on the one program designed to help us when times are tough.

I can tell you I felt very proud to be a Canadian at last week’s Council of the Federation, when all 13 provincial and territorial leaders signed a communique supporting this request.

It was a heartening expression of national solidarity with Albertans, one that showed a real understanding and appreciation of the sacrifices we have made for confederation.

I expect the federal government to listen to the unanimous provincial consensus and act quickly so we can use those funds to ease our economic burden and get Albertans back to work.

Our third request is for repeal of C-48 and substantial amendment of Bill C-69, which I have discussed at length already.

My fourth request of the Prime Minister, which I’m sure will be echoed by our Finance Minister Travis Toews in his meeting with Minister Morneau, will be expansion of flow through shares to stimulate job creating investment in resource-related activities.

Flow through shares are a proven tool to accelerate job-creating investment, and we are asking the federal government to expand them to include activities that will improve the environmental performance of our energy sector, such as carbon capture projects and decommissioning of spent oil and gas wells. These are good green jobs that will have a major impact on the hardest hit communities in our province.

My fifth request to the Prime Minister is equivalency recognition for Alberta’s methane reduction regulations.

An independent study co-funded by the federal government concluded that our regulations are at least as effective at reducing methane as the proposed federal rules, at – get this – half the cost to industry.

The last thing the Alberta economy needs right now is to be saddled with more unnecessary regulation, so we are asking the federal government to listen to the science, to follow the evidence, and signal that they will grant us equivalency before the federal rules kick in in three weeks, on January 1st.

We have a precedent for this action in last week’s equivalency agreement between Alberta and Ottawa regarding carbon taxation of large industrial emitters.

We appreciate the federal government recognizing that our TIER program will accomplish national emission reduction objectives and view it is a good first step towards harmonizing other climate policies in ways that are fair and effective and supported by the evidence.

Let me conclude with a final appeal to those who persist in seeing our insistence on a Fair Deal as selfish or parochial: I’m telling you that you completely misunderstand the Alberta spirit.

In our hearts, Albertans are patriotic and generous Canadians.

So if a growing number of Albertans see themselves as not fully at home in their country – a country that they have dutifully served and to which they have contributed disproportionately – then it is the responsibility of all Canadians, but above all of the Prime Minister, to make the effort to understand why this is.

Let me leave you with the words of a man who spoke at last week’s first town hall meeting conducted by our Fair Deal Panel – this is a panel we have tasked with travelling the province to gather ideas from Albertans about how we can have a stronger voice and play a bigger part in the federation.

One man talked about how he fought for Canada in Afghanistan.

After leaving the forces he found good-paying work in the oil patch.

The job took him to Chad, in Africa, where he proudly reported that his Canadian company followed exemplary environmental, social and governance standards.

“I built roads, I built power, I built a future for those people,” he said. “I saw a country coming alive because they had industry and hope.”

Upon returning to Alberta, he lost his job, and has been out of work for the last two years.

Here’s how he feels today:

“Just because we’re right, just because we have the right to demand to be treated fairly, does not mean that they will automatically treat us fairly. If you want something, you have to be able to stand up and say, ‘I deserve this and I’m going to fight for this.’”

I can’t say it any better.

It’s what I hear everywhere I go in my province.

I hear that we’ve have been working for Ottawa for too long; and it’s about time Ottawa started working for us.

I hear that Ottawa needs to meet us half way.

That Ottawa needs to stop making it harder for us to jump-start our economy.

So here I am – in Ottawa – to deliver that message on behalf of Albertans.

And, if the Prime Minister is serious when he says he wants to support us, then I look forward to bringing back a message of hope from Ottawa to Alberta.

Look, Albertans are practical people, we’re not unreasonable people. Nothing we are asking for is unreasonable.

Everything we are asking for is within the federal government’s power and none of it would hurt any other province.

We are simply asking for a fair deal now for Alberta within Canada.

One that respects the constitution and lets us do what we do best, what Alberta has always done: grow our economy, get back to work, and generate an outsized share of Canada’s wealth.

That’s what Albertans want; that’s what Albertans need; and I don’t think it is too much to ask for.

Thank you very much.