OPINION | The fiasco that is Alberta's energy 'war room'
It's time to ask some hard questions about the Canadian Energy Centre
This column is an opinion from Andrew Leach, an energy and environmental economist at the University of Alberta.
In the 2019 election, Albertans were promised an energy "war room" that would "fight fake news and share the truth about Alberta's resource sector and energy issues."
With a $30-million-per-year budget, Albertans should have expected a lot from the Canadian Energy Centre, which is the war room's official name. The outcome is a ripoff at any price, and should raise some big questions.
It's hard to overstate the fiasco the war room has been.
Adding to the general air of incompetence about the place, we learned that the advertising agency hired to design the logo seemed to have also plagiarized its office dog.
The launch featured a series of good news stories about Alberta's energy sector, but before long, it was the war room that had become the story, as its staff were conducting interviews masquerading as reporters without informing their subjects of the centre's role as a government propaganda agency.
These stories alone would have made for an eventful first three weeks, but there were a few more unforced errors.
There were and remain unanswered questions about why the war room was not housed within government but structured as an external corporation, exempt from Freedom of Information and Privacy (FOIP) rules.
By February — the early logo fiasco and other misrepresentations a distant memory — war room general Tom Olsen again found himself apologizing for the centre's activities.
A member of Olsen's staff had accused the New York Times of bias and anti-Semitism and otherwise impugned the reputation of the 150-year-old publication in a Twitter tirade. This, it turns out, was not a great idea for a three-month-old, government-funded outfit, with bias as a mission statement.
By March, you'd have been forgiven for wondering if the sole mission of the thing was to make every other government expenditure seem like a bargain.
It's true that the war room has corrected a few falsehoods about our energy industry, although on too many occasions it's also been the source of those falsehoods in the first place.
An episode this month is emblematic of both the amateurish approach it's taken to the file, and the perils of confirmation bias.
Armed with a third (yes, third) logo, the war room launched its new "When we work, Canada works" campaign to make the case that Alberta's energy industry should play a role in Canada's economic recovery.
It's an important objective, as Alberta's oil and gas industry has been hit hard by the combined effects of the pandemic and the oil price crash.
So, how did the war room make this pitch to Canada? It repackaged information posted on a new federal government energy facts website and, in doing so, introduced not only many of the same old, tired tropes, but a few new falsehoods for good measure.
What caught my eye first was a graphic claiming that oil and gas accounted for 10.6 per cent of Canada's GDP, and was the largest sub-sector of Canada's economy. Neither of these is true.
Oil and gas extraction made up 6.6 per cent of real GDP in April 2020, and several sub-sectors (finance, manufacturing, real estate, public administration, health care and professional services, for example) all accounted for larger shares of Canada's economy. The same was true pre-COVID, although you'd have to add construction to that long list of larger sectors in most years.
A Statistics Canada report from July 8, 2020, explains that for most of the past 20 years, the oil and gas industry has averaged about five per cent of Canadian GDP, and has comprised a much smaller (0.4 per cent) share of employment.
A claim that oil and gas is Canada's largest sub-sector, or that it is 10.6 per cent of GDP, is simply not supported by the relevant data. Thankfully, the war room has since corrected its own fake news.
Comedy of errors
So, how did this happen?
It seems to have been another war room comedy of errors.
If you check the Natural Resources Canada site, cited by the war room, you'll find the 10.6 per cent of GDP claim part way down the page, but the war room took the number out of context.
The 10.6 per cent refers to the share of GDP from oil and gas, electricity and energy sector supply chains combined. The irony that the construction costs of new solar and wind farms were used by the war room to goose the economic impact of the oil and gas sector is lost on no one.
You might be tempted to give the war room the benefit of the doubt if its source didn't have the graphic shown below, which, in large letters, confirmed that oil and gas comprised 5.6 per cent of Canada's nominal GDP in 2018. Hardly the work of a well-oiled, $30-million machine.
The point of the war room's new campaign is to promote investment in oil and gas, and to that end the war room wants to create the impression that doing so would create jobs, and lots of them.
Now, don't get me wrong: oil and gas employs a lot of people in Canada, and recent Statistics Canada analysis projects that as many as 200,000 jobs may be lost in Canada due to the oil price crash.
But oil and gas employs relatively few people per unit output or per dollar invested, because the industry is very capital intensive. For much of the past two decades, we've had a lot of oil and gas output and a lot of investment and so a lot of people have been employed.
To make its case, the war room relies on an old crutch: the economic multiplier. Interest groups often abuse economic multipliers to argue that investments in one sector create jobs across the economy, while failing to account for all the caveats to those numbers.
Those caveats didn't matter to the war room when it found out that Statistics Canada multipliers could be torqued to argue that five indirect and induced jobs are created for every one direct job created in the oil and gas sector. This comes from accounting for assumed impacts through supply chains and from employees spending their paycheques.
The war room's analysis ended right there, presumably because six is better than one and the staff really like oil and gas. If you ask, they'll likely show you that they've even got a T-shirt that says so.
What this statistic doesn't do is make the case to the rest of the country to invest or to encourage investment in oil and gas as opposed to some other sector of the economy.
Why? Because if people start asking about the jobs ripple effect in other sectors, the war room is going to need to create another scandal just to distract from the answer.
Using the war room's metric, investment in just about any other sector of the economy will generate more jobs than an investment in oil and gas, as shown on the graphic below (remember, it's a terrible metric for any number of reasons).
Had the war room taken a moment to wonder why oil and gas accounts for only 0.9 per cent of national employment while making up 5.6 per cent of GDP, it might have picked a different fight. That information, by the way, is about half way down the Natural Resources Canada page of facts the war room used to build its campaign.
Maybe this is all nit-picking, but it's part of a broader trend.
There is no sign the war room has done anything to convince opponents of Canada's oil and gas industry to change their minds, nor to attract investment to Alberta.
Zurich Insurance recently decided not to renew its insurance on the TMX pipeline. Would another attack on columnists in the Medicine Hat News have changed that decision?
If Teck Resources, which is facing substantial pressure to lower its emissions, ever decides to reconsider the decision to abandon its Frontier oilsands mine proposal, will a woe-is-me article on how Canada can't possibly meet its Paris targets provide the reassurance investors need that Alberta takes climate change seriously?
No. But that's not the point.
Where is the money going?
Asking whether the war room messaging is working misses the real question. We should be asking what the money is really being spent on.
In late March, the government, in response to the COVID crisis, slashed the war room's budget for three months to the annualized equivalent of $2.8 million. We still don't know when (or if) full funding will be reinstated. And while it's true that, in the grand scheme of government, the war room's original $30 million per year budget might not seem like a lot, you can do a lot with that much money when it comes to energy information.
It is more than six times what the Canada Energy Regulator spends on that objective.
The war room budget is 2½ times more dollars per month than the UCP spent in the 2019 election campaign. I bet you remember hearing from them, certainly much more than you've heard from the barely visible war room.
The paltry amount of war room work we've seen to date, even accounting for substantial mismanagement, seems unlikely to have added up to more than a small fraction of this budget. Where's the rest going, and why?
- An earlier version of this story failed to mention that in March, the government, in response to the COVID crisis, slashed the War Room's budget for three months to the annualized equivalent of $2.8 million.Jul 30, 2020 8:48 AM MT