Betting on Bitumen

When Alberta’s first New Democratic Party (NDP) government swept to power in 2015, it inherited over four decades of Progressive Conservative (PC) energy policies. Key to these policies was development of the Alberta oil sands, which by 2015 had become the key driver of the province’s economy. But the oil sands had also become a target for environmentalists who saw it as “dirty oil” and campaigned hard against further development. At the same time, the market price for oil was sinking, investment in the oil sands had slowed, and government royalty revenues were declining. The new government forecast budget deficits for several years to come even though past Alberta governments had amassed budget surpluses of billions of dollars.

How did those PC energy policies get Alberta to where it is today? And how different or similar are the energy policies of Rachel Notley’s NDP government?

This report examines the history of Alberta energy policies as they apply to development of the oil sands. The petroleum industry has long had a strong influence on the pace and scale of that development but its influence was tempered by the policies of Peter Lougheed, who was Alberta’s premier from 1971 until 1985. Lougheed saw government as a counterweight to the economic power and influence of the petroleum industry. He believed that since government managed natural resources on behalf of Albertans it had a responsibility to obtain as much revenue and other benefits as possible from those resources.

Lougheed also believed the oil sands were key to Alberta’s long-term prosperity, so his government used all the power and money it had at its disposal in the 1970s to kick-start oil sands development. It assumed that if the Alberta government didn’t do this it would take far too long and most of the financial benefits would flow into corporate and government coffers outside the province rather than accrue to the Alberta government and individual Albertans. Lougheed’s interventionist approach alarmed many captains of the oil industry who would have rather seen the government play a much more hands-off role. But most Albertans concurred with Lougheed and the PCs, as they were re-elected three times between 1971 and 1982 with landslide majorities.

Ralph Klein became premier in 1992, only seven years after Lougheed’s departure. He wanted government to step aside so the oil sands industry could promote development on its terms. His government gave almost full rein to the industry while sidelining other stakeholders.

Klein believed that freeing up the industry would increase private investment in the oil sands and generate well-paying work for Albertans. The policies adopted by Klein and his cabinet were a bold departure from the way Lougheed had envisioned oil sands development. They were both PC premiers, but their ideas of how the oil sands should be developed and who should have the upper hand were completely different.

Klein’s strategy was developed almost entirely under the aegis of the Alberta Chamber of Resources (ACR), an industry association comprising oil producers, pipeline operators, oil well servicing companies, and other businesses providing goods and services to the oil and gas industry. It organized the National Task Force on Oil Sands Strategies in order to make recommendations to government on oil sands policy. At the time, Eric Newell was the president of both the ACR and Syncrude Canada, a consortium of multinational oil companies and by the 1990s the largest bitumen producer in North America. Of the 57 committee chairs and members named in the task force report, 45 came from industry ranks; six were from the federal government; and six from the Alberta government. The six committee chairs were all industry representatives, including two from Syncrude.

The final report of the National Task Force on Oil Sands Strategies—which was brought to fruition without public hearings or written submissions from individual Albertans and other stakeholders—contained several recommendations that were quickly adopted by both the federal and Alberta governments. The new fiscal regime meant oil sands developers would pay lower income taxes and pay almost no royalties on bitumen until all construction costs for new projects had been recovered—exactly what the task force had recommended. At the behest of the industry, the Klein government also agreed to fast track project approval processes and environmental reviews. The industry would be “market driven” with government acting as a facilitator.

The oil sands industry paid for almost all the publicity and lobbying following the release of the task force report. Most news coverage of the report neglected to mention that the task force was heavily weighted in industry’s favour. This gave the task force a certain legitimacy that was at odds with its origins and purpose. It may have also served to convince readers that the task force was more concerned about the public interest than its own interests.

The switch in the roles of government and industry when it came to oil sands development—the industry in the driver’s seat and the government in the passenger seat—resulted in a significant change in direction. No longer would governments be overseers and financial partners—they would be mere facilitators, removing obstacles on the road to development so the industry could forge ahead on its own terms.

This report focuses on the contrasting oil sands policies of Premiers Lougheed and Klein, two of Alberta’s most popular premiers and key to oil sands development in the province. Even though they were both Progressive Conservatives, each premier had very different ideas of how much control the petroleum industry should have when it came to development of Alberta’s bitumen reserves. By examining the distinct policies of these two PC premiers it also becomes clear that Rachel Notley’s NDP government leans more to the Lougheed model than the Klein model.

This report is part of the Corporate Mapping Project, a research and public engagement initiative investigating the power of the fossil fuel industry in Western Canada. The CMP is jointly led by the University of Victoria, the Canadian Centre for Policy Alternatives, and Parkland Institute. This research was supported by the Social Science and Humanities Research Council of Canada (SSHRC).

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