Forty years ago, the government of former Alberta premier Peter Lougheed invested revenues from oil and gas development into a fund to support diversification of the industry into the future.
This week an advisory panel to premier Rachel Notley said should happen again in order for the province to successfully navigate and thrive through the dual challenges of energy abundance and transition.
It’s one of several recommendations from the Energy Diversification Advisory Committee (EDAC), which focus on development of petrochemical projects to add value to natural gas production and partial upgrading technologies to add value to oilsands production.
“[These] are two opportunities that – if seized quickly and in a significant way – can buffer the Alberta oil and gas sector from increased volatility and uncertainty, while at the same time providing a tremendous opportunity for growth and expansion,” the EDAC report said.
Notley took the first step in acting on the committee’s recommendations by announcing up to $1 billion in funding to support commercialization of partial upgrading technologies over eight years starting in 2019.
Alberta Premier Peter Lougheed in 1985. Image: CP Images
“We are blessed with a greater variety of natural resources than anywhere in the world, but right now we’re not getting full value for them. As we fight for new pipelines and a better price for our oil, we must also create the right conditions for investment and jobs in oil and gas processing and manufacturing. This is the same vision Premier Lougheed had for Alberta, and I’m proud to move that vision closer to reality,” Notley said in a statement.
Specifically, the EDAC report recommends the Government of Alberta return to the Lougheed-era practice of setting aside 30 per cent of royalty revenue and investing it in the diversification of Alberta’s downstream energy sector.
“Thirty per cent of the non-renewable resource revenue received by the Government of Alberta from April 1, 1976 to March 31, 1977 was deposited into the Heritage Fund. In 1987, the transfer of natural resource royalty revenues to the Heritage Fund was stopped entirely. EDAC believes that at least 30 per cent of non-renewable resource royalty revenue should start to be dedicated to building a bridge to a more environmentally and economically sustainable future as provincial finances improve. This revenue should start to be placed in a new Diversification Fund that supports downstream expansion,” the report said.
EDAC also lauded the Lougheed-era use of fiscal tools to support key oil and gas projects that have since proven successful.
“An early indirect approach was the set up of a private corporation by legislation to create the Alberta Gas Trunk Line. It had seven directors, all of whom had to be from Alberta, and two appointed by the Government of Alberta. This system developed a large natural gas gathering system across the province, allowing the development of natural gas where individual company investments may not have been economic without the common infrastructure. This is now the Alberta system part of the TransCanada gas pipeline system.
“A more direct approach was the purchase of a share of Syncrude when some of the original private investors decided not to make a positive final investment decision, and the complementary setup of the Alberta Energy Company [now parts of Encana and Cenovus Energy].”
While not mentioned in the EDAC report, Lougheed also presided over creation of the Alberta Oil Sands Technology and Research Authority, a crown corporation that tested and proved the commercial viability of SAGD oilsands technology in the 1980s — a system that has been transformative for the industry and will be its primary opportunity for growth in the future.
The province said that funding for the $1 billion partial upgrading investment will come via fiscal tools including loan guarantees and grants.