Alberta Politics
Alberta Premier Rachel Notley is braver than your average politician (Photo: David J. Climenhaga).

If Rachel Notley caps Alberta oil production tonight, how quickly will Jason Kenney change his tune?

Posted on December 02, 2018, 12:57 am
9 mins

If Rachel Notley uses the Alberta Government’s power to put a cap on oil production tonight, as she hinted she would do in a newspaper op-ed Friday, how long will it take Opposition Leader Jason Kenney to change his tune?

Not long, one imagines.

Of course, if Mr. Kenney does turn on the proverbial dime and say the opposite of what he was saying before, it will be a reversion to form. But the logical pretzel he will have to twist himself into either way – whether he changes back to his old course or sticks with a new one – promises some light entertainment in what otherwise is likely to be a grim spectacle.

Alberta United Conservative Party Leader Jason Kenney (Photo: David J. Climenhaga).

Mr. Kenney, as readers of this blog are surely aware, has lately been trying to out-Notley Ms. Notley by demanding more and deeper production cuts sooner than later. He justifies this change from the uncritical market-fundamentalist boosterism typical of his breed of right-wing politician by claiming there has been a “market failure” in Alberta’s oilpatch, as if there was anything unusual about such a phenomenon.

For her part, a case could be made Ms. Notley, a lifelong social democrat, has been trying to out-Kenney Mr. Kenney in the way she lectures Ottawa about how the Trans Mountain Pipeline Expansion must swiftly be completed.

Still, at least when it comes to using state power to impose production cuts, if that is indeed what has been decided, Premier Notley will be acting consistently with her long-held social democratic beliefs, to wit, that there is an important role for government in directing the economy.

In addition, Ms. Notley will be in accord with well-understood economic laws, specifically, the famous one that says when the supply of a commodity declines, its price rises, and when supplies fall, the opposite happens. Viz., the Law of Supply and Demand.

As an aside, if only from the perspective of pure propaganda, it seems to me both Ms. Notley’s NDP Government and Mr. Kenney’s United Conservative Party Opposition would benefit from ceasing and desisting all talk about how we need to increase the supply of Alberta heavy oil via a pipeline to tidewater so that we can see higher prices, a nonsensical proposition in economic terms. Instead, they would get farther arguing the market is already there and the problem is merely the bottleneck.

In other words, that the solution to the Bitumen Bubble, as premier Alison Redford called it once upon a time in an Alberta that no longer exists, is to end the Bitumen Bottleneck, a term that Ms. Notley has my permission to use tonight as her own.

Regardless, while the premier is bound to face some criticism for her decision, whatever it turns out this evening to be, at least she won’t have to twist herself into a pretzel to justify it.

For Mr. Kenney, this will be harder. He will be required – ex officio, as it were, as the leader of a rather-far-right Opposition party – to insist that the market is always right. Except, of course, when it isn’t.

From his perspective in this case, that appears to mean when it isn’t acting in the interests of giant oil companies. Alas for Mr. Kenney and his UCP, this situation is complicated in more ways than that, because not only are some giant oil companies demanding production cuts immediately to save them from the cruel logic of the Almighty Market they normally laud, but others are demanding there be no cuts, because they’re making out like bandits the way things are.

The dividing line between these two groups of oil companies is whether or not they have their own in-house refining capacity. If they do, the current situation works for them, because they can buy feedstock cheap, upgrade it, and sell it dear. If they don’t, the current situation doesn’t work for them, because their only options are to sell low and pray prices rise soon, or shut down their operations immediately.

In a way, this puts Mr. Kenney in a more difficult position than Ms. Notley – although, granted, without much responsibility.

There is a sense Mr. Kenney may find himself hoist with his own petard, since it seems likely he demanded a production cut reasonably confident in the belief Ms. Notley would not have the intestinal fortitude to actually do it.

But this would be a case of judging Ms. Notley’s political daring as if it were his own. If there is one thing to know about Ms. Notley, it’s that she’s bold, and actually willing to make a decision, even if that means rolling the dice, metaphorically speaking, on her political future.

Alberta Party Leader Stephen Mandel (Photo: David J. Climenhaga).

People sense this about her, and her toughness as well, which is undoubtedly among the reasons she outpolls Mr. Kenney on personal qualities, even as the two politicians’ parties are in the opposite position relative to one another in popularity. In other words, Mr. Kenney projects bluster; Ms. Notley projects the real thing.

I expect Mr. Kenney knows this, which is why I think that if things unfold on the morrow as expected he’ll retreat pretty quickly to his comfort zone, whence he’ll excoriate Ms. Notley’s NDP for daring to “pick winners and losers” in the oilpatch and tout the magical benefits of the market.

The fact three of the biggest oil companies in the Alberta oilsands – Husky Energy Inc., Suncor Energy Inc. and Imperial Oil Ltd. – want things to stay the way they are will doubtless speed his return to the neoliberal ideological mothership.

Embarrassing, but I don’t think politicians like Mr. Kenney experience embarrassment the way ordinary people do.

Premier Notley took note of Mr. Kenney’s support for a production cap in her op-ed in the Calgary Herald, as she did of Alberta Party Leader Stephen Mandel’s. She also acknowledged the lack of agreement in the oilpatch.

“While a consensus appears to be forming among some political leaders, no such consensus exists within industry,” she wrote. “At this point, no industry consensus is expected. So, Alberta, it comes down to what is best for us, all 4.3 million of us, the owners of our oil resources. As owners, we have an obligation to get the most value possible.”

Premier Notley will set out her plan to journalists at 6 p.m. Fasten your seatbelts. She’s braver than your average politician. She will make history.

Whatever the plan is, she told us Friday, “I promise you this: your jobs, your kids and your futures will remain our absolute focus. No matter what, I won’t stop fighting for you.”

13 Comments to: If Rachel Notley caps Alberta oil production tonight, how quickly will Jason Kenney change his tune?

  1. David

    December 2nd, 2018

    Yes, I suspect Kenney will find some way to weasel out of his support for oil production cuts. However, each time he does shift positions it diminishes his credibility, which isn’t his strong point anyways and it could start to corrode the default/generic default support many Albertans have for parties named conservative. He started out with a big shiny new blue truck and a commitment to the grassroots, now his party seems to become a thoroughly establishment Conservative party and there is spending tons of money from generous corporate supporters on ads well in advance of the next election. The truck is no longer new and shiny and he will be in big trouble if the “Used Car Party” label sticks too much. In any event, I did find it quite incongruous for such an advocate of free enterprise like Kenney to be supporting mandated government production cuts. However, given the Alberta Party is also supporting this, I suspect the government probably now sees little down side political risk to trying it at this point.

    I suspect the caution and hesitation in pursuing this was in part due to initial shock and disbelief the UCP was actually supporting this and uncertainty if it would actually work. Government intervention certainly aligns better with the NDP’s philosophy, so there are not strong ideological reasons not to proceed. The best case scenario for the government is this actually works well or to some extent and they get most of the credit, with Kenney on the sideline trying to jump in and share the credit. If it doesn’t go so well, I suspect the government will be reminding everyone of Mr. Kenney’s unequivocal support for the idea, which the longer this debate has gone on has become more entrenched in the public’s mind. Yes, there is a downside, but more so for Kenney who is being inconsistent in his positions.

    I like the term bitumen bottleneck, I think it accurately and concisely describes the current problem. The supply is already there and the demand also, but the problem right now is getting the supply to the customers. I also understand that unfortunately there is not consensus in the energy industry, which if there were might have made it possible to proceed sooner, but I don’t think this is an insurmountable issue. The larger integrated companies may be sad to see their windfall of low prices end, but they will still be able to move on from this in a strong financial position. The companies that were hurting most from the low prices will have great relief and this may help forestall a round of a layoffs and bankruptcies, which could be quite damaging to our economy at the current stage of recovery it is in. Like most Albertans, I would have preferred industry could have resolved this situation on their own, but I suppose this situation is exactly a good argument for government having a role in managing the economy at times.

    Reply
  2. Geoffrey Pounder

    December 2nd, 2018

    On pipelines, oilsands expansion, boosting AB’s emissions, and ignoring science, Notley and Kenney are Tweedledum and Tweedledee.

    Notley will leave a province locked deeper into a fossil-fuel future.
    A province mired deeper in climate change denial.
    With degraded life-support systems.
    A province more eager to seek short-term gain, illusory wealth, at long-term loss.
    A province further out of step with 21st century realities.
    A province more dependent on the oil industry.
    An industry more dependent on billion-dollar subsidies.
    A province more vulnerable to global oil price crashes.
    A province deeper in the grip of petro-politics.
    A province ever ebbing in democratic vigor.
    A province that takes pride in bullying its neighbours.
    A province hell-bent on being the problem, not the solution.
    Not the future this Albertan is voting for.

    Vote for the sustainable future you believe in. Which Notley’s NDP will NEVER deliver. There is NO path from massive oilsands development to lower emissions or Canada’s (inadequate) climate targets.

    Reply
    • Jerrymacgp

      December 2nd, 2018

      “… Vote for the sustainable future you believe in. Which Notley’s NDP will NEVER deliver… “ So, Mr Pounder: for whom, or for which party, would you suggest to Alberta voters is the right one to vote for next Spring, to get the outcome you so verbosely advocate?

      Reply
      • Geoffrey Pounder

        December 3rd, 2018

        Verbosely? Eloquently? Passionately?

        Vote Green or stay home.
        The more votes for the AB Green Party, the stronger the message that sends to other parties.

        I know many AB NDP supporters reject my views. (In supporting Notley, they also reject federal / traditional NDP values.) They will vote for Notley no matter what. Why? Because the “other guy” is worse. “Don’t throw the baby out with the bathwater.” “Don’t make the perfect the enemy of the good.”
        Their unqualified support for Notley enables the AB NDP’s petro-agenda and puts solutions further out of reach.

        If progressives vote for a nominally progressive NDP that promises to lead them over the climate cliff, the NDP has no reason to change their policies. Supporters of NDP oilsands policy are enabling disaster, economic as well as environmental.
        If you want change, you have to vote for it.

        In 2019, AB progressives can either endorse Notley’s rewrite of progressive values or repudiate it. If we endorse it, we should not expect better in future.
        Even if the 2019 election is a foregone conclusion, progressive Albertans can still send a strong message to the political class: Failure on climate change is not an option.
        In 2023 or beyond, Albertans weary of the UCP yoke may rise up and vote for a truly progressive NDP that charts a new course based on the best available science under new leadership.

        I’m not sure why we should accept abysmal failure from “progressive” leaders — just because the guys across the aisle would be even worse.
        My father would be a better goaltender than my sister — but that doesn’t mean the Maple Leafs should put him in net.
        Progressives should not support any party or politician who promises to take us over the climate cliff.
        Reject Notley’s/Big Oil’s agenda, send Notley packing — and demand true progressive, scientifically literate policies from an environmentally enlightened leadership.

        Reply
  3. J.E. Molnar

    December 2nd, 2018

    Whatever the outcome decided by the premier, there will likely be unintended consequences.

    One consequence would include a precipitous drop in royalty revenues garnered by the government, leading to an appreciable increase in the province’s debt and deficit, if the government opts for a production cap that lasts for any extended period. This move would be the kind of election campaign mantra Jason Kenney and the UCP can latch onto and spin with incendiary aplomb. Further, if the unthinkable happens, and the UCP forms the next government, they will use the increase in the debt and deficit to lament, “Things are worse than we financially thought” and launch into draconian cuts to justify their brutal attacks on health care, education and infrastructure funding (although one can assume that was the UCP plan all along).

    Hopefully the premier will land on a magical plan that dampens government revenue losses and provides a sensible and practical solution to solving the conundrum of shrinking oil prices and over supply. Pulling a rabbit out of a hat is no easy feat. I’ll definitely be one of those antsy Albertans tuned in tonight for the Notley wizardry—hoping she has a Harry Potter moment in her to vanquish the villainous oil glut.

    Reply
  4. Geoffrey Pounder

    December 2nd, 2018

    Climenhaga: “Kenney justifies this change from the uncritical market-fundamentalist boosterism typical of his breed of right-wing politician by claiming there has been a “market failure” in Alberta’s oilpatch, as if there was anything unusual about such a phenomenon.”

    Climate change is the biggest market failure in history.
    Allowing fossil fuel producers and consumers to externalize environmental and health costs — use the sky as a free dump — distorts the price mechanism and subverts the free market. A massive invisible subsidy.
    The most efficient remedy is carbon pricing.

    But the price on carbon has to be high enough to change govt, industry, and consumer behavior. Carbon taxes set too low merely annoy and give credence to claims that it’s simply a revenue grab.
    Premier Notley, meanwhile, has been granting all sorts of exemptions and tax holidays to the oil & gas industry. Notley cynically deployed AB’s small carbon tax as a quid pro quo for pipelines, further undermining NDP credibility on climate:

    Notley: “We will not move forward on the federal govt’s proposals until we see that construction is fully underway and that approval is given meaning. There is no question that the two were always connected, and they will stay connected.”
    “Government house leader Brian Mason said the carbon tax was always intended as a tool to force the federal government to support building a pipeline to tidewater.”

    Notley then pulled her support for a national “floor price” on carbon after the Federal Court ruling on TMX pipeline project.
    “Climate leader” Rachel Notley: “Until the federal government gets its act together, Alberta is pulling out of the federal climate plan. And let’s be clear, without Alberta, that plan isn’t worth the paper it’s written on.”
    As Notley and other premiers previously pointed out, Ottawa DOESN’T NEED the provinces’ permission to enact a national price on carbon.
    • w w w [dot] nationalobserver [dot] com/2018/06/18/news/albertas-rachel-notley-expects-have-some-interesting-conversations-ontarios-doug

    Notley’s contradictory carbon policies signal to the world that AB still doesn’t take climate change seriously.

    Reply
    • David Climenhaga

      December 2nd, 2018

      Good line: “Climate change is the biggest market failure in history.” Be prepared … I’m going to steal it. DJC

      Reply
      • Geoffrey Pounder

        December 2nd, 2018

        Well, you won’t be stealing it from me 🙂
        The phrase goes back to at least to a 2007 Guardian article:

        “Stern: Climate change a ‘market failure'”
        “Climate change is a result of the greatest market failure that the world has seen, Sir Nicholas Stern, whose review last year warned of the economic and social costs of climate change, said tonight.
        “‘The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay,’ said Sir Nicholas.”
        https://www.theguardian.com/environment/2007/nov/29/climatechange.carbonemissions

        Reply
  5. Geoffrey Pounder

    December 2nd, 2018

    Climenhaga: “Still, at least when it comes to using state power to impose production cuts, if that is indeed what has been decided, Premier Notley will be acting consistently with her long-held social democratic beliefs, to wit, that there is an important role for government in directing the economy.”

    Let’s not kid ourselves. The AB Govt is IN the oil business.
    The list of govt subsidies to and supports for the oil & gas industry is decades long. Spending north of $1 billion on rail cars is only the latest example. Notley has been throwing billions of dollars at the industry.

    The AB Govt collects some of its energy royalties as production through its Bitumen Royalty-in-Kind (BRIK) program. The AB Govt supplies barrels to the Sturgeon Refinery, and pays a processing toll to have it refined into diesel and other products.
    • w w w [dot] energy [dot] alberta [dot] ca/AU/Royalties/Pages/BRIK [dot] aspx

    Last January, Notley committed 50,000 barrels of oil a day to be shipped on the under-subscribed Keystone XL for 20 years through the Alberta Petroleum Marketing Commission (APMC), a provincial Crown corporation. Notley TransCanada CEO Russ Girling thanked Notley and said the AB govt’s commitment “was instrumental to achieving the commercial support needed to proceed.” Before the 2015 election, Notley campaigned against Keystone.
    • calgaryherald [dot] com/news/politics/alberta-government-guarantees-20-years-of-oil-for-keystone-xl-pipeline

    And you wonder why AB is called a petro-state.
    The more entwined the AB govt is with the oil industry, the harder it will be to extricate itself.
    Progressive Albertans might have hoped Notley would start to dig us out of this mess. Instead, she’s just doubled down, like her predecessors.

    Reply
  6. Geoffrey Pounder

    December 2nd, 2018

    Climenhaga: “In addition, Ms. Notley will be in accord with well-understood economic laws, specifically, the famous one that says when the supply of a commodity declines, its price rises, and when supplies fall, the opposite happens. Viz., the Law of Supply and Demand.”

    Which explains why Notley is pushing pipelines in all directions — and in the interim spending north of $1 billion of our hard-earned tax dollars to boost rail capacity.

    Reply
    • Kang

      December 2nd, 2018

      Alberta is spending around $1 billion to buy oil cars and locomotives. LG Chem is spending half that amount (US$500 million) to double battery production at the plant it established in Poland that it got up and running just two years ago. LG is doing so to keep up with demand from VW, GM and the like for electric car batteries. Tesla is completing its huge battery factory in Arizona and is building a larger one in China. And Alberta is building for the future by buying diesel locomotives and oil tank cars. If they were truly independent they would have forgotten about the oil trains and just implemented the production cuts on a permanent basis. After all royalties are based on the value of what comes out of the ground, so less production means more Royalty income. Ask any dairy farmer.

      Reply
  7. Geoffrey Pounder

    December 2nd, 2018

    Notley: “I promise you this: your jobs, your kids and your futures will remain our absolute focus. No matter what, I won’t stop fighting for you.”

    Oh, please.
    Our industry-captured Premier is fighting for her false friends in the fossil fuel industry who definitely won’t return the favor by voting NDP in 2019.

    If Rachel Notley were concerned about “our futures”, she would heed the dictates of science, which gives us mere decades to halt emissions in order to slow climate disaster.
    And she’d stop fuelling hysteria and misleading the public by grossly exaggerating revenue losses due to discounts on AB oil.
    • w w w [dot] nationalobserver [dot] com/2018/11/26/analysis/false-oil-price-narrative-used-scare-canadians-accepting-trans-mountain-pipeline
    ————————–
    If Rachel Notley were concerned about “our jobs”, she would prepare the province for a carbon-constrained 21st century, start work on a just transition for workers, and stop throwing billions of our hard-earned tax-dollars at the fossil fuel industry.

    Tens of thousands of Albertans lost their jobs in recent years BECAUSE of the latest global oil price crash.
    Overdependence on one cyclical industry blasts holes in govt budgets and forces services cuts and job losses. Time to get off the fossil fuel rollercoaster.
    Automation is eliminating oil & gas jobs. Oil companies were happy to lay off Canadians and replace them with Temporary Foreign Workers.

    Time to get off the fossil fuel roller-coaster and start building a sustainable diversified economy not subject to the whim of global markets — in industries that don’t cost our children their future.
    ————————-
    If Rachel Notley were concerned about “our kids”, she wouldn’t ally herself with a fossil fuel industry that has been obstructing progress and opposing climate action for decades.
    Big Oil just spent millions of dollars on a campaign to defeat a carbon tax plan in Washington State.
    Fossil fuel and utility companies spend millions of dollars on lobbyists to prevent renewables from entering the market.
    Millions more on climate-change-denial campaigns.
    Millions more on lobbyists to delay or weaken regulations.

    Needless to say, we’d be a lot further ahead if not for the fossil fuel industry’s desperate attempts to protect its profits.

    Reply
  8. Political Ranger

    December 2nd, 2018

    It’s not a bottleneck, rather it is a stopper. A bottleneck occur somewhere down the line between beginning and end; a stopper is at the end. And it is the end of the pipeline/railway/delivery system that the problem lies. Nobody wants to buy another barrel of the stuff.
    If the 36 million barrels in storage locally where available in Cushing or the Gulf or even the Port of Shanghai the current price for WCS would only change by the amount of shipping charged. There is no demand. Hence no bottleneck.

    As to Notley’s “what’s best for us”, 4.3 million Albertans is a complete repudiation of the Klien market ideology. What’s best is a heavy hand in the industry through regulation, enforcement and ownership. Showing up once a generation to save the day is a complete farce. A large equity stake so the gov’t knows the facts and a high royalty rate with strong operational regulations and the aggressive enforcement to make it happen would, in fact, be best for all of us.

    Finally, ain’t it strange! Ironical, as they like to say in these here parts.
    Progressives, indeed, even the Alberta NDP, have for decades been trying to reduce the petro-production in the patch. Now we have the most petro-friendy NDP Premier proposing to reduce production all in the name of saving the industry. Just can’t make this stuff up.

    Reply

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