Alberta's would-be leader vows to drop gloves in fight over oil

CALGARY and OTTAWA (Bloomberg) -- Canada’s oil sector may soon get a more combative advocate in the Alberta premier’s office. 

Voters in Canada’s top oil-producing province head to the polls in the next few months and are poised to elect Jason Kenney, one of the country’s foremost conservative figures, as the new premier. Kenney would inherit a budget deficit, a struggling energy industry and a volatile electorate, with high hopes resting squarely on his shoulders.

The 50-year-old longtime politician is pledging to use more stick than carrot in solving Alberta’s problems -- saying he’d kill a carbon tax, cut off oil shipments to provinces that balk at pipelines, boycott banks that shun fossil fuels and pressure Justin Trudeau’s federal government to end billions in transfers to other regions if new pipelines don’t get built.

“People feel like they’ve worked hard, played by the rules and been very good neighbors in the federation -- and in response, in return, we seem to be getting blockaded and pinned down everywhere,” Kenney said in an interview in Calgary. “How do we move from a defensive to an assertive posture in the fight for our resources and our way of life?”

UCP Juggernaut

Kenney, a former senior federal cabinet minister, leads Alberta’s United Conservative Party, a combination of two right-leaning parties that split the vote in the province’s last election in 2015. That allowed the left-of-center New Democrats, led by Premier Rachel Notley, to win government there for the first time. Polls show Kenney’s UCP is a juggernaut, widely expected to form the next government when Notley calls an election in the next few weeks.

His rise, though, isn’t inevitable. Kenney has spent the last two years driving around conservative Alberta in a blue pickup truck to burnish his western credentials, but he still casts a more wonkish tone than some of his predecessors. His approval ratings are lower than his party’s, while Notley is more popular than hers, according to a Mainstreet Research poll published last month. And Alberta elections have been full of surprises over the past decade, offering Notley hope yet.

Many Albertans have long harbored resentments toward the rest of Canada, particularly over federal transfer payments to poorer provinces. Alberta doesn’t receive so-called equalization payments, and Kenney is threatening a referendum on the system to try to force changes.

And while Alberta remains Canada’s richest province by almost any measure, the end of the $100/bbl-oil boom times, stalled pipeline projects and a drumbeat of layoffs have inflamed those longstanding frustrations. The annual deficit stands at C$7.5 billion ($6.6 billion) in a province of just over 4 million people that once prided itself on being debt-free.

If elected, Kenney pledges to balance the budget during his first term by freezing spending and making what he called “tough choices” -- a goal that would need steady growth to pan out. He demurs when asked what those would be or whether he’d reduce wages among the province’s civil servants. He pledges business-friendly measures related to “general economic policy,” though hasn’t yet revealed them.

On pipelines, he wants more options than Trans Mountain, the expansion project now owned by the federal government. He wants to explore multiple conduits, including reviving some version of the route from Alberta to New Brunswick, formerly proposed by TransCanada as Energy East, and said he’d consider subsidies to ease the way. Another idea would be a pipeline that runs through northern Alberta and Saskatchewan en route to a port on Hudson Bay in Churchill, Manitoba, he said.

Kenney’s plan for Alberta’s energy industry: Abolish carbon tax and join other provinces suing federal government; Fight to kill Bill C-69; Establish a war room to combat misinformation about the oil sands; Fund lawsuits by pro-development indigenous groups; Explore every new method of moving oil to ocean ports; Re-evaluate some of Notley government’s efforts like rail car purchases; and a C$440 million loan guarantee for a partial-upgrading project. 

“I have a new definition of social license that if they want to develop the resources that belong to Albertans, they’d better fight for those resources,” he said, referring to oil companies he feels have been too silent in the face of opposition. 

Kenney hinted he may reverse some moves Notley has taken to spur the energy sector, wondering whether the cost of buying new trains for shipping crude might be higher than estimated.

“We’re not going to honor a blank check,” he said. “I’m skeptical about risking C$3 billion to do something that the private sector was already doing, particularly when the economics on rail make less sense with a narrower price differential.”

He said he’d approach a C$440 million loan guarantee for an upgrader near Edmonton with “a great deal of skepticism.” 

But he’s not ruling out interventions in the free-market province’s economy. Kenney agreed with Notley’s production-curtailment program and said he generally supports the notion of royalty tax credits. He is also calling on the federal government to scrap Bill C-69, a controversial pipeline and environment measure. 

To be sure, Notley also has has opposed Bill C-69, fought for new pipelines and extolled Alberta’s energy industry across the country. For Kenney, though, she hasn’t done enough.

“The next election here will be about two primary things,” he said. “How do we reignite Alberta’s economy and how do we fight."