While we are still a long way from a boom-year economy, the signals are starting to add up and it may finally be time for central Albertans to be at least a little more optimistic as we head into 2020.
Come the new year, it will have been over four years since oil prices collapsed and the economic downturn began. The problems were exacerbated by a number of policies that increased the cost and difficulty of doing business following the surprising election of the Alberta NDP in 2015.
Then perhaps even more surprising, Donald Trump was elected president of the United States and immediately set to work lowering taxes and cutting regulations, leading the U.S. to become the largest producer of oil and gas in the world.
Meanwhile, in Canada, government interference made new pipelines all but impossible and effectively capped Canadian oil and gas production and kneecapped our energy sector with a massive price differential.
The boom-bust nature of central Alberta’s economy is inextricably linked to the success of the conventional oil and gas sector. Fortunately over the past few weeks, we’ve received news of several rays of economic light in this troubling and frustrating time with businesses still closing and the unemployment rate far too high.
Finally, after countless delays, billions in costs, and the federal government having to purchase the Trans Mountain pipeline from Kinder Morgan, construction of the expansion is officially underway.
Scheduled to add 590,000 barrels per day of export capacity by mid 2022, the pipeline expansion will significantly alleviate the supply glut and reduce the price differential. It will once again give Canadian oil and gas producers reason to drill.
Additionally, the capacity to export crude by rail was increased by 100,000 barrels per day this month and new efficiencies for pipeline optimization are expected to add 150,000 barrels per day by early January.
The Line 3 project coming on line in 2021 will add 370,000 barrels per day. Logically, with the additional capacity coming on line, the Alberta government has exempted conventional wells from its curtailment program.
We’ve already seen major announcements from major producers CNRL and Suncor about plans to grow their capital expenditures through 2020. CNRL, fresh off their purchase of Devon Energy, announced they would be spending $4.05 billion, a $250 million increase from the year prior, adding 60 drilling locations across Alberta and putting three additional rigs to work.
Suncor announced they would keep spending in the range of between $5.4 billion and $6 billion and are projected to grow their production by five per cent.
Politically, momentum continues to shift in favour of growth and development. The United Conservative Party has been relentless in their pursuit of business-friendly, job-creating legislation, having cut corporate taxes, streamlining employment standards, eliminating interprovincial trade barriers and cutting red-tape.
Following his meeting with Justin Trudeau, Premier Jason Kenney shared that the prime minister showed openness in regards to Bill C69, by “agreeing to work with us on its application, on the regulations and on the project list,” giving a shred of hope that major projects do stand a chance of being approved in the future.
The economists at the Conference Board of Canada are predicting Alberta will see 2.4 per cent growth in GDP through 2020, while ATB Financial is predicting 0.9 per cent GDP growth, but as it’s said, “an economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”
Looking around, it’s easy to see we have a long way to go before it truly feels like our economy has recovered.
Fortunately, we do have very good reason to believe the worst is behind us and better times lie ahead.
Reg Warkentin is policy and advocacy manager for the Red Deer & District Chamber of Commerce.