Confidence is everything in the business world. A stable business environment is critical for investment in any industry. Energy projects measure their plans in years and decades rather than months. Careful long term planning and engineering is required if investment is to be committed to any major project and this sort of planning is nearly impossible when the government in power is erratic and not generally supportive of the industry. Alberta has not held investor confidence in four years now.
The collapse of energy prices certainly impacted energy development in Alberta. This is far from the first downturn however and energy companies tend to plan for the ups and downs of commodity pricing. This is why other energy jurisdictions such as Texas or even Kazakhstan are enjoying energy booms today while Alberta still languishes in a recession. Investors felt confident in those other jurisdictions while they shied away from Alberta’s sudden lurch into socialism. Who would invest developing energy in a province that just elected a governing party which traditionally opposes energy development?
I remember well when I began surveying in the oil exploration field how we would literally model projects right up to the BC border in the Chinchaga field in Northern Alberta in the 1990s. Work camps were jammed on the Alberta side and traffic was high. Meanwhile meager development happened on the West side of the border cutline as expenses were simply too high in the NDP managed British Columbia and they were mired in a union push for pipeline contractors.
Meanwhile to the East, Lloydminster excellently demonstrated the damage that NDP management can do to an energy economy. While the main street of Lloydminster is literally the border with Saskatchewan, the majority of new housing and industrial development was on the West side of town. On the eastern half were some government buildings, a few old motels and some houses that predated the NDP. Otherwise development (particularly commercial) stuck to the Alberta side where a more favorable business regime existed.
As can be seen in the picture below, the lopsided development of Lloydminster still exists today as 3/4 of the city resides West of the main street. The impact of local government on development is real and visible.
Rachel Notley had a tough task ahead of her when she formed government four years ago. She had a cabinet to fill and had a caucus with utterly no experience in the energy field. Economically the energy file is far and away the most important file in Alberta and Notley handed the ministry to Margaret McCuaig-Boyd. McCuaig-Boyd held an education degree and had utterly no energy experience. Notley chose her as energy minister simply because she was from Northern Alberta and had a better chance of being able to tell a pump jack from a radio tower than any other member of her caucus. No wonder the industry confidence was so shaken.
With the election of Jason Kenney and the United Conservative Party, the energy industry finally can have some optimism. No longer is there a government dominated by anti-energy activists and we can look forward to a mandate of economic development again rather than ideological moves towards a new economy that simply doesn’t exist yet.
It will take action rather than intent to turn Alberta’s ailing energy around. It looks very much like Kenney is ready to do so.
The passive approach to dealing with the pipeline embargo against Alberta is over. Kenney has openly stated that it is time to go to battle on this file through the courts and whatever other means he has at his disposal. While some are pooh-poohing the adversarial approach to the issue, one has to ask what the hell the appeasement approach got us? Did appointing anti-energy activists to positions within government help? Did playing footsie with Trudeau and Horgan get us :”social license”? It is time for a new approach.
It will be interesting to see Kenney’s “war room” as it develops. We desperately need to get to work in countering the misinformation about our key industry which has been spread by foreign funded activist groups which in turn supported the Notley government. It will take a lot of work to undo that damage. Striking back with legal challenges will show that we aren’t laying down any longer as well. The best defense is a good offense.
When it comes to developing investor confidence in our energy sector, the most important move will be to bring competence and experience back to the energy ministry. This is where the nuts and bolts of our industry will truly be managed and where government can make or break future development.
Kenney has a deep pool to draw from for ministers but Prasad Panda clearly stands out as the best candidate for the energy portfolio.
With nearly 30 years of direct experience as an engineer in the oilfield, Panda is more than familiar with the ins and outs of the industry. He will be able to sit down with energy leaders and talk to them one on one. Margaret McCuaig-Boyd pretty much needed a translator when speaking on energy issues. Energy leaders will find it refreshing to say the least to be able to speak to a minister in technical terms without having to try and break down what it all means to them.
Notley’s time in office has also fostered an ugly sub-industry of crony capitalism. This pretty much happens under every socialist regime. While some companies remain true to principles of free enterprise, others eagerly latch on to the party in power and become subsidy whores. They will utter whatever weasel words the Premier likes as long as they can get some state mandated protection or subsidies. It is rather sad to watch and we saw a number of companies playing in that role in the last few years.
While Panda spent decades working for Suncor, it became quite crystal clear that he is not beholden to them when he publicly called Steve Williams (CEO of Suncor) when Williams began shamelessly spewing out Rachel Notley’s talking points on the carbon tax. Prasad’s loyalty clearly lands in Alberta’s interests rather than those of his former employers and this is important. He will stand up to the special interests who are doubtless already hammering the door down on Kenney in hopes of special treatment from the state.
As with any industry, the energy industry has its share of con artists and bullshitters. Those sorts will be lobbying the ministry for all they are worth as the new government finds its legs. It will be important to have a level headed and experienced energy minister in office during this critical period in order to ensure that no bad deals get cut in the rush of setting up. It will be tough to fool Panda on energy issues and with his resume in the industry he will be immune to being baffled by bullshit.
I have some first hand experience on how Prasad doesn’t take crap. I helped out in past campaigns for him and while we got along for the vast majority of the campaigns, we inevitably butted heads on some issues. In those cases Prasad quite diplomatically but sternly took me aside and made it clear who the boss was. While I certainly didn’t enjoy the dressing downs, I can’t help but respect it. I have no use for pushovers and pushovers have no place in cabinet.
Kenney only gets one shot at building his maiden cabinet and he has many tough choices. In some senses it is almost an embarrassment of riches in that he has so much caucus talent to draw from that it is tough to choose. In energy the choice is pretty clear though. With a lifetime of direct energy experience along with legislative experience as the energy critic, Prasad Panda is the ideal choice for the energy ministry. For four years cabinet picks have been based on notions such as gender balance or political favors rather than ability. Right now and with the critical portfolio of energy, ability and experience must be the only criteria and Prasad has both in spades. I look forward to seeing him guiding the recovery of our energy industry.