Tech companies may leave Alberta over Kenney's devotion to oilpatch
Alberta government has cut tax credits for innovation, while committing billions to Keystone XL
The Alberta government's decision to commit billions of dollars to support the Keystone XL oil pipeline came as a surprise when it was announced last week, despite the government working with TC Energy for about six months, according to officials.
What was unsurprising about the announcement was the continued unabashed support by the government for the province's oilpatch, which some tech sector companies say is driving them to consider leaving Alberta.
Premier Jason Kenney's campaign promises during last year's election included setting up a $30-million "war room" to attack those who criticize the industry on social media or elsewhere, urging oil companies to sue environmental groups like Greenpeace for defamation and, like U.S. President Donald Trump, pulling back regulations on oil and gas companies.
What is Alberta doing to become a successful player in the 21st century?- Trent Johnsen
Once in power, the UCP quickly made good on those promises, while also cutting property taxes for natural gas producers, providing a loan to clean up oil and gas wells and sending Kenney himself to London and New York to try and attract investment back into Alberta's energy industry.
In recent weeks, with the oilpatch on its knees because of plummeting fuel demand during the pandemic and OPEC countries flooding the globe with oil, the Alberta government announced it's granting extensions for oil and gas leases for one year and paying the industry's regulatory levies.
The Globe and Mail recently stated "A single talisman has defined Jason Kenney's time as premier of Alberta: oil."
The deep devotion to the oil and gas sector is why some technology companies in the province are now looking to relocate elsewhere.
"It's frustrating as hell," said Trent Johnsen, who has been involved in Alberta's tech sector for about 30 years, including as the founder of Hookflash Inc. and president of Shift Networks Inc. He has also been involved with Innovate Calgary and the Creative Destruction Lab, and currently, he's the founder and chief executive of Liveweb.io, which provides live video messaging services for companies to interact on their web sites with customers.
"We're betting exclusively on oil and gas," he said. "What is Alberta doing to become a successful player in the 21st century of the new economy?"
The billions of dollars of support for the Keystone XL project seems to be the last straw for Johnsen, who now wants to leave the province. In general, he said the majority of Albertans believe the quality of life and future of the province is predicated on fossil fuels.
"Not only am I actively looking to relocate my family and business, I am also going to publicly work with other technology companies in Alberta to help them move to more technology ecosystem, future-friendly cities," he said. "My customers are in the U.S. and Europe. It doesn't matter where we live and work. We can go anywhere."
Johnsen said Alberta is moving backwards by cutting funding to organizations like Alberta Innovates and eliminating important tax credits.
The UCP faced criticism by some in the tech sector last fall for its decision to eliminate the Alberta Investor Tax Credit, which was introduced by the previous NDP government and provided a 30 per cent tax credit to investors who put money into specific industries such as clean technology and digital animation. The Interactive Digital Media Tax Credit and the Capital Investment Tax Credit were also wiped out, among other programs.
Those tax credits made a difference, he said, and are a better approach than choosing to support a single company, like a profitable pipeline developer.
"They shouldn't be investing a billion dollars directly in anything. They should be making policy, where there is a billion dollars for the market to find its highest way to return. That's the structure of an investor tax credit, where the government says 'we're not picking any winners,'" he said.
'Like swimming upstream'
Trying to grow a tech company in Alberta can feel like swimming upstream because of the lack of provincial support, according to Anthea Sargeaunt, founder and chief executive of 2S Water, an Edmonton company developing technology that detects metals in water in real-time.
"We expect the Alberta government to support oil and gas. That's what they have done up until now," she said. "But, there is a lot of new industry coming up that could really make a massive difference to Alberta's economy. We don't have to be tied to this perpetual oil and gas chain."
Growth of her business has slowed because of the elimination of the tax credits, she said.
"It's been a difficult slog. Those tax credits were a really important part of our offering for investors. Knowing the government was supporting them coming in, was helping them take the risk," she said.
So far, Sargeaunt said she has received more financial support from the federal government than the provincial government. Relocating her startup elsewhere is a possibility.
"It's a conversation we've had and will continue to have. It's a tough decision to make and we don't want to necessarily make, but we want our business to succeed more than we want to stay in Alberta at this point. That is something we are pretty seriously looking at."
The provincial government did form a working group to develop ways to support tech companies in the province. Economic Development Minister Tanya Fir is currently reviewing the group's report and recommendations.
Fir was unavailable for an interview, but in an email, her spokesperson said the tech sector will be a key part of diversifying Alberta's economy.
Ninety-two per cent of Albertans think the province should do more to encourage the development of the technology sector, according to a recent poll by CBC News.
The survey of 1,200 Albertans was conducted between March 2 and March 18, 2020, with a margin of error of +/-2.8 percentage points, 19 times out of 20.
The government has often pointed to its decision to cut the corporate tax rate as a move that will help reduce costs for all industries in the province and compensates for the loss of some tax credits.
Some in the tech sector dispute that argument since many startups don't turn a profit for several years.
There are differing viewpoints in the tech sector right now between those who want to relocate and those who want to keep the faith and stay in the province, according to Johnsen.
"There's a lot of smart people who are trying to remain believers [in Alberta], but when you have provincial political leadership, with a singular focus, on a legacy industry — I honestly feel like we're trying to keep coal mines," he said.
He wants to see the oil and gas industry be successful, but said other industries in the province should receive the same support.
"We should be all-in on diversification and we'd be wildly successful," he said.