Should Alberta Control Production

abarrelfull wrote on 18 Jan 2010 07:58
Tags: alberta oil politics sands

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Last week, the energy minister for Alberta made a controversial statement in an interview.

"I believe we have an opportunity to sit down as a cabinet and have that discussion and say, 'As this thing starts to crank up again, are we going to change our policy of come one, come all into the development of the oil sands?"

This created a huge amount of discussion. Alberta has gained massively from oil sands development recently and stands to continue to do so in the future.

The problem that the minister wishes to address however is the volatility of activity. In the last couple of years, the oil sands patch has gone from boom to bust. This was primarily due to oil prices. However, it is also due to the massive inflation in costs that went together with the boom, costs that could not be borne as oil prices fell.

The idea seems to be that by controlling investment, this volatility can be decreased. The suggestion is generating a lot of criticism. This is a very relevant one.

That gets into a very tricky situation for government, if that is the case, just simply because they'll be put into a position to determine why some projects should proceed ahead of others

The idea is not without its merits, but in practise it is just not going to work.

The problems that were created by the boom, were primarily shortages of things like labour, and lack of infrastructure capacity. When looking at how royalties are paid, and what is done with the income, perhaps the provincial government could do more to tackle these problems, rather than try to slow development. In fact the current slow down gives a great opportunity to reassess what could be done better.

It would be a shame if the current opportunity were to be missed, as better management of the next boom would ensure that the benefits better extend to everyone in the province.

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