Alberta being pummelled by events beyond its control

Alberta has had a long history of economic development plans having the rug pulled out from underneath it. Think back to the National Energy Program of 1980.

More recently, the collapse in energy prices in 2008/09 brought an abrupt halt to all sorts of activity in the province, evidenced by the many construction projects that suddenly turned into eerily quiet, abandoned pits.

Who Moved My Cheese? hit the bestseller list. It talks about how companies and individuals react when things don’t go as planned. This week, Alberta is dealing with no fewer than three events in which someone has moved the cheese. Some of them are more serious than others, and some have the potential to be major game changers. All three involve politics trumping economics.

The first is the sudden and unexpected loss of $92 million from the federal government for the planned Royal Alberta Museum, which was to be built in Edmonton. The announcement was met with predictable (and justified) anger throughout the province, and conjured up recent memories of Ottawa pulling support for Edmonton’s 2020 World Expo bid. The provincial government has placed the entire project on hold. This is a clear interruption to a major cultural project that was expected to boost the economic vitality of downtown Edmonton.

The second development is more troubling, at least in terms of potential long-term economic impact. The Europeans – as if they don’t have enough to worry about with the collapse of Greece and the possibility of the whole EU flying apart – is pushing a ban on ‘dirty oil,’ which would exclude oil or fuel from Alberta’s oil sands. The ban, which is expected to be approved, sends a clear message to the world that Europe is putting environmental concerns well ahead of economic ones.

Alberta exports virtually no oil, fuel or bitumen to Europe, so it won’t be affected – at least not in the short term. But for all of the arguments Alberta and Canada can make about the work we’re doing to improve our environmental record, the world is apparently not buying it. Longer term, if Europe’s ban sets a precedent for other countries the fallout will be very real.

Third – and potentially the most damaging of all – is the drama unfolding in the United States around the Keystone XL pipeline. This whole project is not going to script, and the surge of opposition against it has caught many people on this side of the border by surprise. Alberta’s energy sector was built on a lot of risk taking, hard work, and clearing some pretty impressive hurdles along the way.

But transporting the product to markets thirsty for oil was never a big problem: just build a pipeline. Now, however, that’s changed.

The opposition against Keystone has a few aspects to it. One heard quite loudly is the anti-oil sands angle (similar to Europe’s gripe). On this one, Canada and Alberta have every right – indeed, an obligation – to make our case and stand up for our own environmental record.

But there is another opposition stemming from the exact location of the proposed pipeline, which runs through a sensitive water aquifer in Nebraska. True, there are already dozens of pipelines running through the region, and TransCanada is correct in promoting the fact its pipeline will be a state-of-the-art safety design.

Nonetheless, Canada needs to stay out of that debate. This is Nebraska’s water, not ours, and it have every right to decide what projects run through it. Imagine if the roles were reversed. Could you imagine if the U.S. government pressured us to accept a project on Canadian soil that had some environmental questions?

Without the Keystone XL pipeline – or even the Gateway pipeline planned for the west coast – Alberta will find itself in a different economic reality. The game will change entirely. And what is most frustrating about all three of these examples is that all of them are politically motivated by forces beyond our own provincial boundaries. In other words, aside from making its case as loudly and forcefully as possible, there is very little Alberta can do about any of them.

The book Who Moved My Cheese? described how unexpected events happen all the time, and when they do, corporations need to be flexible, adapt, and revise their programs. The same can be applied to Alberta. It’s one thing to lose federal funding for a museum. But what happens when the world doesn’t want our oil? Or if we can’t move it out of the province?

The cheese is moving, and it’s moving fast. What’s Plan B?

Todd Hirsch

Senior economist with ATB Financial