Sweeping changes to Alberta's political leadership, the result of a historic provincial election, could bring about a sea change to the province's laggard approach to clean energy, climate policy, and tar sands development. Canada's left-leaning New Democratic Party (NDP) gained a majority government in the Alberta election sweeping out the Progressive Conservative party that has been in power for over 40 years. The election was a landslide creating a complete political shift to what is known as Canada's most conservative province. While it is too early to tell what the election means for the future of Canada's oil sector, the NDP and its premier-elect Rachel Notley is regarded as having a strong stance on environmental standards and climate policy. This opens a real possibility that Alberta will join other provinces like British Columbia and Ontario to help Canada meet international climate commitments. On tar sands, Canada's Globe and Mail observed that the "Alberta oil patch is in uncharted political territory" and they lost a strong advocate for the proposed Keystone XL tar sands pipeline. While more details are likely to roll out on all of these energy issues, the province will likely reassess its financial dependence on the oil sector as the Premier Elect declared, "We need finally to end the boom and bust rollercoaster we have been riding on." And while the oil patch might not receive the same political attention they have enjoyed for many decades, the clean energy industry in Alberta - which has the power to offer significant economic and job growth potential - might be the new winner in the province's energy race.
The provincial election decided the outcome of 84 seats in the Alberta legislature. The NDP walked away with a solid majority of 53 seats - up from 4 seats - while the Progressive Conservative party lost 70 seats. The Wildrose party won the second largest number of seats in 21 constituencies.
U.S. decision-makers should take note of this election given imports of tar sands to the United States as well as Canada's role in international climate talks. Canada is almost certain failure to honor its international climate commitments primarily the result of rapidly growing carbon emissions from Alberta. Improvements to Alberta's currently weak climate policy could enable Canada to align with the U.S. on climate policy strengthening North America's position in Paris. This would be especially true if leadership changes at the federal level after the federal election in October 2015. The U.S. might also find a more willing partner on clean energy in a province that is currently focused on exports of fossil fuels.
On the proposed Keystone XL tar sands pipeline
While the future of Keystone XL will remain dependent on a decision from the U.S. State Department, it is clear that TransCanada has lost one of its key allies in the lobby efforts for the pipeline in Washington DC. The Premier elect has publicly committed to stop spending taxpayer dollars to promote Keystone XL.
On the tar sands sector
Alberta's NDP has certainly been the harshest critic on issues surrounding tarsands development including royalties, taxes, and environmental policy. One of the major promises the New Democrats made in the election was to review royalty payments made to the provincial government.
The royalty regime in Alberta is a source of funding for the provincial budget. Currently, according to Alberta economist Andrew Leach, the province only collects 4 percent of the value of bitumen. An increase in the royalty rate giving Albertans a greater share of the benefits of development could bring about a slower pace of development. According to NDP environment critic Brian Mason, "Not only does Alberta have amongst the lowest royalties in the world, but our own government is unable to correctly estimate what our resource revenue is worth."
Not surprisingly, even without more specific details from NDP on its policy proposals, industry players are already calling the election troubling for the oil and gas sector. Markets reacted to the election with Canadian oil and gas stock tumbling given the NDP's pledge to raise corporate taxes and revisit the province's royalty review. While an NDP win could have major ramifications on the sector, it is important to note the sector is already in serious trouble given extremely low oil prices, high construction and labor costs, and the lack of pipeline infrastructure.
The NDP has also been critical of how the Alberta government has failed to protect local and indigenous communities. There is a wide range of issues including toxic tailings, wildlife protection, water use, and human health impacts that may become a focus for the province. Because of this, we may see new or updated policies on the impacts from the tar sands sector.
On climate policy
Of all of the issues, strengthening Alberta's climate policies may be the place where the NDP makes a stronger mark. The province's reputation on climate change is weak and even more so as other provinces such as British Columbia and Ontario step out with strong programs. The NDP made some commitments to a phase out coal but remained silent on how they would approach the oil sector. Groups like the Pembina Institute, a Calgary based environmental think tank, expressed hope the future Premier would end a perception of Alberta as "a laggard on climate policies."
On Clean Energy
The Premier elect has already noted the province's economy is too heavily dependent and focused on fossil fuels and the future economy would be more based on clean energy. "The future health of our energy based economy, and the health of our environment both depend upon our ability to adopt and promote newer renewable forms of energy." Another time, she said, "It's breathtaking for me that we are so far behind on [the clean energy] issue." There is enormous renewable energy potential in the province (see also analysis by KMPG and the Pembina Institute).
The party has specifically called for clean energy policies such as a "revolving loan fund for home and small-business energy retrofits, a commitment for broad energy-efficiency policies and for a renewable-energy strategy," and a re-allocation of unspent funds from the carbon capture and sequestration program to transit. But the broader platform is not yet decided.
What is the next step?
There is still a lot of discussion still yet to happen before the public where the province may be headed. The Premier elect has already committed to an open dialogue with the energy sector. She said, "To Alberta's job creators great and small in the energy sector and every other sector, our government will be a good partner and we will work with you to grow our economy and to secure a more prosperous future for every Albertan in every community."
But the sweeping change in Alberta is likely going to mean there will be some changes to the powerful role of the tar sands sector and likely ones that puts Albertans, climate, and clean energy more at the center. Could this mean the government slows down its aggressive push to expand its dirty tar sands development for export mostly to the United States? Or will we see more focus on the stronger economic opportunities that come with clean energy? Only time will tell.