Calgary·Analysis

Ottawa and its Alberta problem: Federal government keeps a close eye on province's economy

As the Alberta economy sinks, the federal government has been trying to gauge the risk to the rest of Canada.

Briefing notes offer look into Ottawa's concerns over province's economy

Oil companies drilled furiously when oil prices were strong, but the plunge in prices has led to a wave of bankruptcies and the number of orphan wells needing cleanup in Alberta has risen. (Larry MacDougal/The Canadian Press)

Originally published August 29. 

Naturally, Albertans are preoccupied with the province's stumbling economy. It turns out they are in good company.

According to briefing notes acquired through access to information requests, the federal government is just as worried about the state of affairs in Alberta.

Over the past year, the federal Department of Finance Canada, Natural Resources Canada and the Prime Minister's Office — spanning two governments — have received at least a dozen briefings, some marked confidential or secret, on the health of Alberta's housing market (it's holding on), the direction of oil prices (who knows?), the health of individual energy companies (redacted), the strength of the job market (so-so) and whether pipelines will help (probably).

CBC News has written about some of these briefing notes here:

Individually, each report is interesting. Collectively they show a federal government that is well aware of Alberta's position as a significant economic engine in Canada and is worried that as that engine stalls, it will cause the national economy to sputter.

So what have the feds learned over the past year or so?

Dependency on fossil fuels

In January 2016, a memo was prepared for Prime Minister Justin Trudeau by the clerk of the Privy Council that offered an update on the state of the economy in Alberta. It pointed out that Alberta represented nearly 20 per cent of Canada's GDP in 2014, with just 12 per cent of the population. 

The economy is somewhat more diversified than it was in the 1980s, but still too dependent on fossil fuels, the memo says. Salaries were so high in Alberta that other (non-oil) industries had a tough time competing for workers. 

Those same high wages created a high oil price dependency for finance and insurance companies, as well as retailers and the real estate business.

None of this is news to anyone living in Alberta, but it's still a depressing roundup.

CBC News accessed two briefing notes on pipelines, one that suggested Canada's economy had taken a $21-billion hit because of a lack of pipeline infrastructure. (CBC)

The pipeline question

In terms of the political implication, the most interesting note had to do with the importance of pipelines. The federal government has played the field on pipeline approval in its nearly 11 months in office as it tries to balance Alberta's need for pipelines against strong opposition in B.C., Quebec and among First Nations. 

A briefing prepared for the minister of natural resources made the case that a lack of pipeline infrastructure to access global markets cost Canadian producers $7 billion a year between 2011 and 2013, a total of $21 billion over three years. That amounted to one per cent of Canada's GDP.

In a section titled "Building support for Pipelines," the briefing note said that "to facilitate development, the federal government has committed to reviewing federal environmental assessment processes and modernizing the National Energy Board to build public confidence."

This briefing note was prepared on Feb. 15, two months before a National Post column argued that Trudeau had been convinced that pipelines needed to be a top priority for the federal government.

This briefing note on the health of Canadian energy companies was almost entirely redacted. (Tracy Johnson/CBC)

What about weak oil prices?

There are four briefing notes on the direction of oil prices and the impact that low prices are having on the economy.

Three are dated December 2015, followed by another in January. The later briefings build on the earlier versions, but all try to divine just what might happen to the Alberta economy with the persistent weakness in oil prices.

The notes expected oil to be trading around the $55 US mark by the second half of 2016, which hasn't happened, at least yet. 

It is an indication that the price of oil still looms large in Canada.

Also in January, an assistant deputy minister in Finance Canada prepared what appears to be a comprehensive look a the credit risks of a variety of energy companies, the banks that lend to them and the Crown corporations Export Development Canada and Business Development Bank of Canada. 

The report was surely interesting, but only a few hundred words of the 27-page report could be read — the rest were redacted. The pressures on the oil patch credit worthiness have been widely reported on, as has the ripple effect on the banking community

What does this all mean?

The federal government does not deny that it is interested in Alberta.

In a statement to CBC, Annie Donolo, press secretary for Finance Canada, said it's about understanding the situation.

"The minister and this government are watching the situation in Alberta closely and have been monitoring developments in the region. This will continue to help our government better understand the realities facing Albertans in order to support them effectively."

It is not particularly surprising that the federal government is keeping a close watch, given the dominant role Alberta's economy played in Canada over the past several years.

"They are concerned for good reason," said Michal Moore, a senior fellow with the University of Calgary's school of public policy.

"The Alberta economy is so big, it has connections to every other piece of the Canadian economy."

Moore said that with so much spending originating in Alberta and reverberating through the Canadian economy, Alberta has an outsized impact on the country as a whole.

"I'm sure that Ottawa is taking note, if not on a daily basis, at least weekly basis."

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