British Columbia is hoping to avoid the economic fate of Alberta, despite following a similar strategy.
“It has never been more important to stay vigilant,” B.C. Lieutenant-Governor Judith Guichon said Tuesday evening in the speech from the throne intended to lay out the government’s priorities for the coming legislative session. British Columbians must “resist the temptation to spend our way into trouble.”
Those words clearly imply B.C. – should it fail to heed that warning – could end up just like Alberta.
“Over the decades, Alberta lost its focus,” the speech declares in its most direct swipe. “They expected their resource boom never to end, failed to diversify the economy and lost control of government spending.”
The unprompted criticism was every bit as unnecessary (relations between Canada’s two westernmost provinces have rarely been better) as it was inaccurate, at least on the diversification side. Energy accounted for roughly 25.5 percent of Alberta’s gross domestic product in 2014; a substantial chunk to be sure, but down significantly from the 36.1 percent of Alberta GDP that the energy sector commanded in 1985.
Earlier this month, the Alberta government unveiled a $500-million program to kick-start a petrochemical industry in the province to further accelerate that diversification. The province did not respond to BNN’s request for a reaction to the B.C. throne speech.
Jack Mintz, president’s fellow at the University of Calgary’s School of Public Policy and the school’s former chair, conceded B.C. does have a point about government overspending.
“Their criticism of Alberta is justified for spending too much in the good times, making downturns harder to deal with,” Mintz told BNN via email. “Now the Alberta government is facing a difficult time.”
Avoiding overreliance on volatile commodity prices is an important lesson that Alberta is now learning. The National Energy Board said last month growth from Alberta’s oil sands is unlikely to continue beyond 2020.
As BNN has extensively reported, the implications of the oil sands no longer being able to create nearly 100,000 new jobs over the next decade are immense. However, B.C. is continuing to make a similar bet on liquefied natural gas exports as the bet Alberta just lost on oil sands growth.
While acknowledging “new challenges” facing the nascent sector, specifically that “low global prices” will have an impact on “initial timelines,” the B.C. throne speech steadfastly maintains “success is not for quitters” and the province “must begin to export” as “demand for LNG will increase, and with it, the price.”
Analysts almost unanimously disagree, with aggressive global competition and the collapsed price premium between North American and Asian LNG making any significant development in B.C. at best, unlikely. Yet the province continues to boast of 100,000 new jobs and $100-billion in government revenue expected from LNG over three decades.
The province had initially expected that one LNG export plant would already be operational with two more online by 2020. So far none of the more than two dozen proposed projects in B.C. have made final investment decisions and just last week Royal Dutch Shell, leader of the only proposal with full regulatory approval to proceed – LNG Canada – delayed its own deadline to make a final call on the $40-billion project until the end of this year.
British Columbia may want to heed its own advice and “stay vigilant” on the realities of the global LNG business. Otherwise the province may end up with the same problem Alberta is facing with the oil sands: sky-high expectations crashing back to ground-level
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