It seems like this might be the year for the NDP, both provincially in Alberta and federally, although that is yet to be determined. With Trudeau’s recent – and shocking – decision to throw his hat in with the Conservatives over the highly controversial Bill C-51, it won’t be too surprising if the NDP won out in the federal election because of it. However, until the bill is passed, everything else, including the election, is up in the air. What’s of real interest now is how Rachel Notley and her crew will fare amongst the oil barons of Alberta.
It seems almost incongruous that a political party based on greener policies and renewable energy promises has made its home amongst a province built on natural gas and oil revenues. However, considering the recent and ongoing difficulties Alberta has been experiencing with oil, and the hit they took as a result, it shouldn’t come as much surprise that Albertans are ready for a change. Renewable energy might prove to be the solution to the problem of being a slave to changing oil prices. Rather than conflicting policies, the NDP’s party actually opens up the possibility of economic diversity.
On the one hand, there remains the possibility that while the oil sector will continue to lead the charge, new niches might be opened up for renewable energy. Unfortunately, there are a few difficulties that might hamper these efforts initially. First, there’s the current royalty system that relies on the value of bitumen and the share the provincial government gets. The province currently gets a smaller cut of the royalties because in exchange the oil sector is given more freedom to develop faster. This in turn produces greater royalty returns, which the government can then reinvest.
With renewable resources, however, this sort of structure would be incompatible because how can you get a return on something like solar power and wind energy? If I were to speculate – and this would only apply if the NDP could hold power for more than a couple terms – they could help private developers with the initial investment (for things like wind mills and solar panels) through tax breaks and/or subsidization. Even in the long run, however, that would only be a start in shifting to renewable resources because the only benefit it could provide would be a fallback in times of dropping oil prices. There would be no revenue returns from renewable energy while in a system that runs on royalties.
That said, let’s revisit the current status of royalty rates. To assess the value of the rates the provincial government is currently receiving, they’ll be relying on a third party review to analyze not only if the current royalty rates are fair, but to also provide transparency for the public. If, as a result of the third-party review, the NDP decides to change that royalty structure, some say that could affect an investment in oil production. Until other energy sources are in place as viable alternatives, this could hurt the economy worse before helping it. Alternatively, the opposing thought is that unless there is a significant change to the royalties (which is unlikely), oil investment would be unaffected as it would be minimal compared to changing oil prices. Then there’s always the possibility that the third-party review might conclude that no changes are necessary.
On that same topic, there is a part of the NDP’s policy that inspires confidence of a sort in maintaining – at least for the time being -- the current oil dominance, and that’s increased investment in oil refining. Basically, the NDP is saying they want more refining in the province so as to create long-term sustainable jobs by bringing the process home to the province. The only concern about this is that extraction and refinery don’t seem to be all that different in the jobs they generate. That said, oil-sands plants are already competitive labour markets; adding more refineries into the mix would further increase that competition, possibly causing more unemployment.
The flip side to all this of course is the weird paradoxical nature of that entire point in their policy. If they’re looking to diversify energy resources, why invest further in oil? If they’re looking to reduce green house gas emissions, wouldn’t further investment in the natural gas industry be like shooting themselves in the foot? The only answer I can think of is that they’ll be forced to play both sides and give out of both hands until such a time when their renewable energy policies and resources can catch up, at which time they can reduce investment into the oil industry. Until such time, their only option seems to be using increased revenues from oil to then invest in renewable energy projects (that’s all purely speculation, of course).
In terms of renewable energy goals, the NDP has already committed $5 million to retrofitting homes and businesses interest-free. It is in fact the only specific pledge the NDP subscribed to– the rest being vague assurances such as the aforementioned reduced greenhouse gas emissions, which was lacking much discussion as to how. The other possibilities rest with solar and wind projects, which some developers have already begun preparing for in anticipation. Only time will tell which direction they’ll be leaning into first.
Overall, the NDP has left a wide margin between the means and the end. This can mean that people can either take comfort or fear the worst, depending on what they expect from this shift in the political and economic landscape.
