Notley is riding a wave of goodwill and can capitalize on that leading into the next election
The response to the oil-price crisis illustrates the importance of decisive political leadership
In Alberta everyone is a "free-market person" until they're not.
For the last two weeks, Alberta's oil executives fell all over themselves trying to reconcile their belief in the free market with their desire that the Notley government impose mandatory production cuts to boost oil prices.
Premier Rachel Notley responded to the "do it, don't do it!" chorus cautiously, keenly aware of the political blowback that results when a government substitutes its judgment for the wisdom of the market. She appointed three envoys to meet with industry executives and financial specialists in the hope of finding a consensus solution.
She learned two things. Firstly, there was no consensus solution. And secondly, that Alberta had run out of time.
The province was in crisis.
So, on Dec. 2, Notley announced a plan to curtail oilsands and conventional oil production by 8.7 per cent starting in January. Overnight, the discount narrowed, share prices went up, and everyone was happy.
Well, maybe not Jason Kenney.
This crisis pushed us into uncharted political territory in Alberta. An NDP leader has become the darling of much of the oil patch. And deservedly so. She made a courageous decision and it worked out. But Notley is facing a hotly contested election next year. Her challenger, Kenney and the UCP, are the latest iteration of old-time Alberta conservatism.
While Notley remains personally popular across party lines, and seen as the champion of Alberta on the national stage, she only has a few short months to capitalize on the good press and communicate her vision as widely as possible if she hopes to win next spring.
And contend with the UCP.
The dangers of ideology
Kenney said he supported the government's action and wouldn't quibble with the details and then proceeded to quibble with the details and berate Notley for not acting sooner.
Oh really, when should she have acted?
Cenovus issued its desperate cry for government intervention in mid-November, Notley unveiled her solution on Dec. 2. During this time, Kenney was adrift. At first, he said the free market should sort itself out, then he floated the idea producers should consider voluntary cuts (something they were clearly not prepared to do) and eventually he came around to the idea of mandatory curtailment.
Notley moved with lightning speed to get industry input while Kenney struggled with ideology: Could he find it in his conservative heart to abandon his "free-market coalition" principles and bail out the industry?
Yes he could, but his plan missed the mark.
It required deeper production cuts, bigger exemptions for small producers and a trip to the legislature to amend the Mines and Minerals Act "to define crude bitumen as petroleum."
Notley's plan was simple and efficient. It imposed mandatory cuts that would be administered by the Alberta Energy Regulator under the existing Responsible Energy Development Act. It didn't require additional laws or regulations. It was what the industry calls "turn-key ready."
This crisis illustrates the importance of decisive political leadership and the dangers of slavish adherence to ideology in turbulent times.
The industry won't forget Notley threw them a lifeline to ensure they'd still be in business when the government's oil-by-rail plan started up and was eventually replaced by the Trans Mountain pipeline (it's really a matter of when, not if).
Nor will it forget that Jason Kenney clung like a barnacle to his "free-market conservative" ideology before finally landing on government-mandated production cuts.
That was then — this is now.
Capitalize on the goodwill
Notley is riding a crest of goodwill in the industry and in the media.
Industry praised her government for listening and responding quickly to a difficult situation. The stodgy Globe and Mail said she showed a "solid grasp of the gravity of the situation" (by the way, it's the Globe, not the Sun, that's delivered to energy executives' offices every morning).
Notley needs to capitalize on this goodwill by staying close to industry leaders because, let's face it, there's nothing like a crisis to create bonds of friendship and trust.
Many energy executives will admit in private that Notley is doing a good job and they don't think Kenney could do any better. This crisis gives them a chance to voice their support for Notley loud and proud at the Petroleum Club. It may not be enough to put her over the top in the next election, but it certainly won't hurt.
Notley should use this crisis to reinforce her reputation as a visionary leader guiding Alberta into the 21st century.
When she described her plan to impose mandatory production cuts, she embedded it in her long-term agenda for the industry: mandatory cuts to address the discount in the immediate future, oil by rail to ease transportation bottlenecks in the medium term and pipelines to handle crude transportation in the long term.
She needs to remind Albertans that her timeline also includes a plan to increase upgrading in Alberta and push diversification in non-energy sectors like agriculture and health care.
This will resonate with Albertans who are tired of the boom-bust resource revenue cycle and are convinced now more than ever that Alberta's energy sector is more fragile than it appears.
Opportunity and risk
Notley can also use the crisis to bring in voters from the Alberta Party and Liberals who until now thought the NDP was too left of centre for their liking.
It is important to remember Notley's decision was not without risk.
The market is an unruly beast. If it zigged instead of zagged (for example, if OPEC's intention to reduce international production fell apart) Notley would have been crucified. Her opponents would have blamed her for botching the implementation of the plan without acknowledging she was simply a victim of unfortunate timing.
Her decision exposed her to political risk within her own party as well.
Some of her supporters think she's been too generous to the industry and see this as selling out. They should cut her some slack.
It took more than 40 years for the provincial government to become entangled with the energy industry and it will take more than one term in office to change that. Notley can rest assured that, given the alternative, those who bristle at her decision to help the industry will stick by her in 2019.
And then there's Kenney.
In a bind
Notley's successful handling of this crisis puts Kenney in a bind.
He can't attack her plan because he supported it and she made sure Albertans knew he supported it by publicly thanking him for his support. He can't quibble over the details because the industry and investors endorse it and quibbling makes him look petty.
So, what's left?
Well, he could continue tarring Notley and Trudeau with the same brush, arguing that in their heart of hearts neither of them want to see pipelines built, but that tactic is losing steam.
Notley has gone to great lengths to distance herself from Trudeau. This crisis gave her yet another opportunity to slam the Trudeau government and past federal governments for failing to recognize the importance of pipelines to tidewater.
She's joined with Saskatchewan Premier Scott Moe in demanding Trudeau address oil pricing at the first ministers meeting and shows no signs of letting Trudeau off the hook for language in Bills C-69 and C-48 that she says will detrimentally impact investment in Alberta's energy sector.
Notley and Trudeau may be many things, but one thing they're not is the "allies" Kenney makes them out to be.
Kenney can continue to ridicule Notley's Climate Leadership Plan as a failed attempt to buy "social licence," but he has yet to propose a strategy demonstrating how he would succeed where Notley failed. Frankly, creating a "war room" to tweet memes at American NGOs and suing the David Suzuki Foundation doesn't cut it.
Kenney would be well advised to put this behind him as quickly as possible in the hope that people, particularly the energy industry, won't notice he missed an opportunity to leap out ahead of Notley with a solid solution to the crisis.
Perhaps he can fall back on high-octane outrage (to borrow a term from Tom Nichols) to divert attention from his lack of courage and decisiveness.
The significance of the events of last week cannot be overstated.
I've worked in the energy sector for more than 26 years. Never have I seen executives beg the government to intervene in their business; usually they're barricading the doors to keep the government out.
This is an unsettling precedent for industry and the government: should the government backstop businesses that fail? If so, how will governments decide which ones to save and which ones to let slip away?
These are difficult questions that can't be answered overnight, but one thing we've learned from the events of the last two weeks is when a crisis reaches Category 5 hurricane status and threatens to bring down Alberta's economy, the government must take decisive action.
The Notley government demonstrated it had the wisdom and courage to do so.
The leader of Alberta's "free-market coalition" had to free himself from the trappings of his ideology before he could follow suit.
Calgary: The Road Ahead is CBC Calgary's special focus on our city as it passes through the crucible of the downturn: the challenges we face, and the possible solutions as we explore what kind of Calgary we want to create. Have an idea? Email us at firstname.lastname@example.org
More from the series:
- ANALYSIS | Why Alberta's economic 'recovery' feels so different this time
- OPINION | Why it's hypocritical for oil companies to ask Alberta government to manipulate market prices
- OPINION | If Albertans want to avoid fiscal disaster, the only choices left are difficult ones
- OPINION | Notley has done the right thing — her mistake was to trust Trudeau