It’s politically advantageous to set the narrative but the reality is not so forgiving.
After Moody’s Investor Services downgraded Alberta’s credit rating for the seventh time in five years, and this recent downgrade under a Conservative government no less, Premier Jason Kenney came out swinging.
“The bigger challenge we have is, increasingly, financial institutions — and this apparently includes Moody’s — are buying into the political agenda emanating from Europe, which is trying to stigmatize development of hydrocarbon energy,” the Premier said yesterday.
“And I just think they are completely factually wrong,” stated a man who undeniably knows politics but lacks credibility in any other field.
Without even counting how many times Mr. Kenney chided the former government for being at the helm while six credit downgrades were bestowed upon Alberta (but it’s more than six), this isn’t a political pissing contest. Just as he and many, many others demanded the former government change course, the calls for this government to do the same should be louder. Albertans declared they wanted fiscal responsibility and the UCP government has responded many, many, many times, that Albertans “fired the NDP” to “get our province back on track”.
This is a wake up call.
Since the last downturn in oil prices, in 2014, the market has been making adjustments. Oil and gas producers are looking for lower capital costs and quicker turnaround time between investment and profit.
While the exodus of investment from Alberta’s oil sands may have been attributed to capital costs and turnaround, the reclamation clock has also been ticking. Unfortunately, some companies have used this as a Ponzi-type pyramid.
When wells became less profitable, they were sold to smaller players who could still make a profit with their smaller overhead. The next buyer didn’t just assume profit; they also assumed responsibility for reclamation.
Some of these wells would still produce for years, so the middle-man was able to acquire a producing well without having to wait for income through the construction phase. They also didn’t have the up-front costs of exploration. For many small producers in Alberta, the downturn in oil prices made it impossible to stay afloat; that left Alberta taxpayers on the hook for clean up.
In 2017, the federal government sent $35 million to the Alberta government to help with reclamation of newly abandoned wells as companies became insolvent. Insolvency doesn’t pay the banks what they’re owed in the first place but at least they could count on something.
Then 2019 brought the Redwater decision that legally prioritized the environmental responsibility over repayment in case of insolvency.
The Redwater decision ensured financial institutions would be left on the bottom of the pyramid, with taxpayers no less. Because financial institutions have a choice in taking on politically motivated liability, they tightened up their lending practices.
It’s a fairly straight-forward risk assessment and the banks said “not us”.
This leads us to the current economic climate where technological advances are disrupting the status quo of the energy markets. This new age of technological disruption is particularly difficult for economies that are overly reliant on one (disrupted) industry.
That this is not the first major technological disruption our society has seen should be considered a benefit – we have history to guide us. We should be getting out of the way of markets and looking outside the box to what is coming; not what we want to see but what we can actually see.
And while it is, and can be, effectively argued that the green economy is also politically motivated, think of it as if Alberta is the equivalent of the Bloc Quebecois; it has a lot of support at home but isn’t even trying to win anywhere else – that’s us, Alberta, we’re the Bloc Alberta against the world – and the leader isn’t even trying to get any other candidates.
This post is an opinion.
Deirdre is a reporter, pundit, podcaster, and political sociologist living in rural Southern Alberta.
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