OIL GAINS OR PAINS?: Report says Alberta independence could cut Ottawa’s red tape but raise pipeline barriers

CALGARY — An independent Alberta could attract more oil and gas investment by escaping Ottawa’s climate change regulations, but the new sovereign country could become severely dependent on the United States to get its energy to international markets.In the long-awaited University of Calgary report commissioned by the Government of Alberta and entitled The Economic and Fiscal Implications of Alberta Separation, the university’s School of Public Policy concluded that the future of Alberta’s energy sector would largely depend on whether the new country could maintain pipeline access through Canada or secure new export capacity through the US.“A separate Alberta would no longer be subject to federal environmental laws, including climate legislation, which have impeded the development of Alberta’s natural resources in the past,” the report states.“With only one decision-maker, there could be more certainty for investors about approvals for projects, which could translate into more investment. Alberta would no longer be subject to federal constraint on carbon pricing, nor would the Alberta government be obliged to go forward with the Pathways Carbon Capture and Storage project. This could reduce costs in the oil and gas sector, and in other parts of the economy that are carbon-intensive.”Energy revenues already play a prominent role in Alberta’s finances. The report states that while economic uncertainty and higher interest rates following independence would initially leave Alberta’s economy 2.2% smaller, an expanded oil and gas sector could make it 3.4% larger over the long term..KAPLAN: Reports must show the true costs and benefits of Alberta independence.However, that outcome would depend heavily on Alberta maintaining sufficient access to export markets.The report’s difficult scenario assumes a sovereign Alberta fails to secure sufficient pipeline capacity, receives lower prices for its oil and faces higher trade and borrowing costs.Under those circumstances, Alberta’s economy could eventually shrink by 16.2%, with government revenue falling to $114.3 billion and the annual deficit reaching $31.3 billion.The report also warns that independence from Ottawa’s red tape would not change Alberta’s geography.“A strong energy sector after independence would also hinge on Alberta’s ability to send oil and natural gas to market through pipelines,” the report reads.“Unless Canada was still interested in expanding pipeline capacity to the West Coast, this would require US administrations that were sympathetic to pipeline development. How sympathetic the US government would be depends not only on the political complexion of the administration and Congress, but also on US energy security needs and its own energy export ambitions.”.MORGAN: The Canada West Foundation report fails to disprove Alberta independence.The report goes on to state that high gas prices are a “political liability” and that, if domestic prices remain high at the pumps, “any administration is likely to value a secure source of supply from a geographical neighbour.”Also of note is Venezuelan oil, which competes directly with Alberta crude.Continued weakness in Venezuelan oil production could increase US demand for Alberta crude. However, a recovery in that country, combined with lower global oil prices, could reduce US interest in new Alberta pipelines.“If production in Venezuela remains at very low levels, then this could shore up demand for Alberta crude. Even if production improves, the US may not view it as a reliable long-term supplier, given its history,” the report says.Due to its current status as a province, Alberta benefits from constitutional provisions governing infrastructure that crosses interprovincial boundaries.As an independent country, Alberta would have to negotiate directly with British Columbia, Canada and the US over pipeline access to coastal export facilities.In another scenario, the authors believe it is unlikely the US would facilitate the shipment of Alberta crude to Asia via the US West Coast..UPDATED: Report says Alberta independence could cost up to $170B in first five years.“West Coast states would remain opposed, and US energy companies would be unlikely to give their support unless they had the first option for access, or they might even oppose such access for competing oil and gas from Alberta,” it reads.Again, the level of American support would depend on the government in power, US energy security concerns, domestic fuel prices and competition from other producers.Furthermore, even small reductions in export capacity could widen the price gap between the US benchmark West Texas Intermediate (WTI) and Western Canadian Select (WCS). That would allow American refiners to purchase Alberta oil at cheaper rates while reducing revenues for both Alberta producers and the government.The federal government could also demand additional pipeline tolls in exchange for allowing Alberta oil and gas to cross Canadian territory, according to the report.The authors say Ottawa could conclude there was no longer any value in Canada supporting new pipelines and other energy infrastructure in an independent Alberta, including Premier Danielle Smith’s proposed BC coast pipeline project.

OIL PAINS OR GAINS?: Report says Alberta independence could cut Ottawa’s red tape but raise pipeline barriers

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