Alberta Chamber Comments on Energy Diversification Announcement


Province will support full-scale commercialization of partial-upgrading technologies with up to $1 billion

February 26, 2018 - the Alberta government has made a major announcement to support further development of petroleum diversification in the province. The announcement was made on the basis of recommendations by the Energy Diversification Advisory Committee and is intended to support commercialization of partial-upgrading technologies.

This announcement includes $1 billion for partial upgrading over eight years beginning in 2019-20, which will include a variety of fiscal tools including loan guarantees and grants. At least some of these monies are intended to build on the model of the Alberta Petrochemical Diversification program, which the ACC has supported.

The full mechanics and economic modelling for the announced funding are not fully understood at this time. We do not know which recommendations made by the advisory committee to the Alberta government have been adopted. Without complete information and understanding of the implications of this announcement for Alberta business and the provincial economy, the ACC cannot comment in full at this time.

We are working to get a clear picture and the perspective of business on this announcement. In the meantime, we have highlighted key issues business should be concerned about and the alignment of current ACC policies with recommendations made in the advisory committee's report.  

At this point in time, the ACC has a number of concerns with this announcement:

The economic analysis and presumption of benefits to Albertans. At this time, the ACC is not aware of any economic analysis that conclusively demonstrates that there is a greater economic benefit to Alberta as a result of refining here, versus removing the discount on our bitumen products and refining where it makes most sense according to the market. That includes the United States.

"We would definitely encourage the provincial government to dedicate significantly more of non-renewable resource royalties into the Alberta Heritage Savings Fund. After that, we would need much deeper understanding of the full range of opportunities available for investing increasing new savings before we could effectively evaluate the benefits of this investment.," say's Ken Kobly, President and CEO of the Alberta Chambers of Commerce.

The cost environment is the primary reason private investment has not invested in upgrading and refining capacity here in Alberta. The cost environment in this province continues to become less competitive as a result of layering costs arising at all levels of government, the provincial government included. These costs take form in regulatory complexity and regulatory delays, cost of labour and labour regulation, and taxes.

Creating a competitive cost environment by reducing regulatory burdens and ensuring tax competitiveness ought to be core to any government strategy to attract investment. It is difficult to square the alignment between rising costs as a result of new provincial policy and a willingness to spend Albertans' money to attract private investment.

“The lunch Louisiana is eating in our refining capabilities is like the olive on a sandwich compared to what we are losing on discounted bitumen. Producers are losing $40-50 million a day right now. Should we spend money to chase money when we know that restricted pipeline capacity is estimated to cost Albertans $9 billion in royalty revenues over the next five years? We're not sure it makes sense and we still have a significant deficit to overcome."

"Furthermore, the recent Alberta Auditor General's Report flagged the provincial government's transparency in the communication of costs to Albertans to support increased refining capacity in recent years. Accountability and transparency are significant concerns that would need to be addressed."

Limited pipeline capacity is the number one barrier to securing full value for Alberta and Canada’s natural resources. That means securing Albertan’s future is best achieved by building transportation infrastructure. Furthermore, for taxpayers, building pipeline infrastructure is the most effective and fiscally prudent approach to energy economic development because business takes all the risk.

It is in Alberta’s interest, indeed Canada’s and the world’s, to get our natural resources to market. This interest includes environmental and economic considerations. Expanding pipeline infrastructure is the safest, most reliable and effective way to achieve that end.

“The benefits of simplicity cannot be overstated, and growing pipeline capacity is the shortest and most direct line between our natural resources and delivering on Albertans’ prosperity. We need to ensure that growing pipeline access remains the top priority until we no longer pay a discount to sell our non-renewable resources.”

"What we are pleased to see with this announcement is a focus on growing our energy industry through collaboration with B.C., the federal government and First Nations communities. We also know there were other project proposals under the Petrochemical Diversification Program that may have merit in supporting, based on the outcomes of that program's pilot initiatives. But that's as far as we can comment about the specifics of this announcement and it's strategic merits at this time."

The ACC will continue to engage a full range of stakeholders – including government – to learn more about this announcement on energy diversification and what it means for Alberta business and the provincial economy. 

Posted on:
Thursday, March 01, 2018