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PostPosted: Thu Dec 20, 2012 2:02 pm
 


$1:
Kelly McParland: Alberta gets a jolt as money tap starts slowing

Kelly McParland
Thursday, Dec. 20, 2012


Alberta Finance Minister Doug Horner . THE CANADIAN PRESS/Adrian Wyld

Alberta’s Liberal leader had some obvious advice for the provincial government on Wednesday, not that the government is likely to listen: “We’ve always said we shouldn’t tie our children’s education and our health care to the price of a barrel of oil,” Raj Sherman [external] lectured Premier Alison Redford.

He was commenting on the latest gloomy numbers related to oil and the Alberta economy. Seriously, if you didn’t know better, you’d think Redford and her finance minister, Doug Horner, were running some third-rate backwoods economy – Ontario or Quebec maybe – when you listen to them talk about the dire straits Alberta is facing.

Mr. Horner started it when he told reporters he ‘d warned his cabinet colleagues he might not be able to balance the budget next year as promised, that pledges made in the most recent budget might not be met, that “tough choices” (political code for spending cuts) would have to be made and that things could get worse before they get better.

“I was asked whether or not I would make a commitment right there that we would be able to guarantee everything that was in the budget, or that we would take it off the table,” Horner [external] told reporters in Edmonton. “I can’t do that right now.”

Redford tried to be more upbeat when she met reporters later on, suggesting the government should at least be able to keep commitments related to educated and healthcare funding.

“We’re going to have to do some tough stuff, we’re going to have to make some tough decisions,” Redford told the Calgary Herald in a year-end interview. “I think we can still continue to provide the services that Albertans have told us are their priorities, which are education and health care, and of course we’ll continue to invest in infrastructure.”

She thinks she can meet her promises? When politicians acknowledge they’re not absolutely certain pledges will be kept, and combine that with references to “tough decisions,” you know the dam is leaking and a flood is imminent. The rest of Canada may be busy beefing about how Alberta has all the money and should be sharing more of it, but in Oilpatch World they’re worried about their revenue stream and the speed at which provincial income is drying up. “I’m very very concerned about where these numbers are headed,” Horner said. “We have a situation here that is growing faster than anyone predicted in terms of the market access is causing us back up even faster than we thought because of the new production numbers in the United States.”

The problem is two-fold: price and access. Landlocked Alberta is having trouble getting oilsands oil to markets, thanks to lack of pipeline capacity and opposition to building new ones. That in turn pushes down the price it gets – on Wednesday it was close to $40 below the benchmark price of West Texas Intermediate oil. U.S. demand is also weakening due to the a boom in domestic supplies. With its own oil to burn, the U.S. doesn’t need Canada’s so much.

The sound you hear is environmentalists cheering, but the risk represented by deteriorating conditions in Alberta is one that will eventually affect all Canadians. It may be fashionable to denounce the energy industry in eastern coffee bars, but Ontario and Quebec earn billions in energy-related business, and thousands of jobs are linked to the health of the oilsands. Governments in Quebec and Ontario have both developed a new affection for the crucial nature of Canada’s oil industry as their own economies sink deeper in the mire.

But Alberta can also thank its own political leaders for once again putting it in on a fincnaial roller-coaster that rises and falls with the uncertainties of the oil market. Every premier since Peter Lougheed has struggled to find an alternative, and each has failed. About a quarter of the provincial budget comes from non-renewable resources – increasingly from the oilsands – and despite Redford’s pledge to introduce stable, predictable budgeting, her government, like its predecessors, has been throwing out big spending promises, unable to resist the urge to spend faster than it earns. It was already anticipating a $3 billion deficit, which it would cover by siphoning cash from the “Sustainability Fund”, and Redford recently conceded the province would soon return to debt markets again to pay for infrastructure projects.

Public employees haven’t helped by demanding ever-increasing improvements in contracts. United Nurses of Alberta president Heather Smith [external] delivered a little lecture on Wednesday about the “boom and bust” approach to government spending, ignoring the fact that demands from doctors, teachers and nurses are behind much of the pressure on Redford and her ministers (especially since Redgford is beholden to teachers for helping her become party leader).

It’s something for Canadians to think about when they offer high-minded pronouncements about the evils of oil pipelines or declare oneness with celebrities denouncing the oilsands. The U.S. doesn’t have to buy Canadian oil, and if we won’t allow pipelines to be built across B.C. then we won’t sell much to Asia, either. If it can’t sell the oil, Alberta can’t support the jobs or equalization payments it provides the rest of the country. You want to shut off the money tap? You just might get your wish.

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PostPosted: Thu Dec 20, 2012 3:56 pm
 


Funny.... The heads of Calfrac, one of the worlds largest well servicing companies, told their employees at their annual state of the world meetings that all is well for at least the next 6-7 years. Oil, full speed ahead, natural gas that is required for the oil sands, full speed ahead. We're selling oil now and the US does need our oil. If BC doesn't want to build pipelines and make money from the oils sands in Alberta and now Saskatchewan, the pipeline will go east. They are already testing pipelines in eastern Canada to see how well they will work if they reverse the flow. Save on building son stretches of the link going that direction.


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PostPosted: Thu Dec 20, 2012 5:26 pm
 


That extra $40 a barrel would be nice. Both for Alberta and for Canada.


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