The Jason Kenney era in Alberta officially begins on Tuesday, when the United Conservative Party Leader is sworn in as the province’s 18th premier.
The long-time federal politician is taking the helm of a high-spending, low-tax province. Mr. Kenney has promised austerity, at least relatively speaking, in a province where the money flows even when the price of oil isn’t sky high.
Mr. Kenney plans to move the province’s low taxes even lower – slashing the corporate tax rate by a third, to the lowest in Canada, and repealing the previous government’s carbon tax. Once fully in place, those measures will cut provincial revenues by about $3-billion annually, thereby growing the deficit. Mr. Kenney, however, has pledged to eliminate the deficit by 2022-23, by freezing program spending. Factor in a growing population and inflation, and that effectively means significant cuts, which Albertans will feel.
But Mr. Kenney, and the province, may get lucky.
There is the warm prospect of a chinook of good fortune on two related fronts: oil prices, and the long-awaited Trans Mountain pipeline.
Mr. Kenney is being welcomed into government by a situation in many ways opposite to that which greeted his predecessor, Rachel Notley. Global oil prices were collapsing as she came into office and they remained low through most of her tenure. Those same prices have been marching sharply upward since late 2018. And the gap between a barrel of American and Alberta oil has narrowed considerably since last fall.
Mr. Kenney’s UCP platform projected a 24-per-cent revenue gain over his party’s four years in office to $62-billion from $50-billion. And that was on a modest forecast for oil prices. Higher prices promise a big upside: each time West Texas Intermediate climbs US$4 a barrel, it adds $1-billion to the Alberta treasury.
On pipelines, Mr. Kenney amplified the feelings of many Albertans, who are frustrated that the province’s resources have been boxed in. Yet Mr. Kenney will have barely warmed the chair in his new Edmonton office when Ottawa in June renders its verdict on the Trans Mountain expansion project. Given that the feds own the pipeline, they badly want to give it a green light.
Mr. Kenney is right that Trans Mountain must be built. If and when it gets the go ahead, he’ll have had very little to do with it – but he’ll be perfectly positioned to declare victory.
Then, a year or so from now, Enbridge’s delayed Line 3 expansion – another long-gestating project – is expected to finally start moving additional oil to the United States.
If all that happens, today’s dire shortage of pipeline capacity – a situation that Mr. Kenney expertly exploited on the campaign trail – could be largely addressed. In politics, timing is everything.
Meanwhile, Alberta’s unemployment rate, which topped 9 per cent in 2016, is expected to continue slowly improving. The Royal Bank of Canada estimates that it will stay around the current rate of seven per cent this year and fall to 6.5 per cent next year. And after another year of middling GDP growth in 2019, RBC predicts Alberta’s economy will lead the country in 2020.
On the campaign trail, Mr. Kenney pledged to drop the gloves against all-comers – British Columbia, Quebec, and especially Ottawa. But in government, will he really be so eager for all of those fights? Likely not.
His promises of cross-border battles were hedged with caveats. A referendum on equalization – which would be mostly for show – was pinned on a lack of progress on pipelines. The threat to turn off the taps to B.C. looks to be symbolic as well, not to mention unconstitutional, even as Mr. Kenney enacts legislation passed by the NDP that he will have every reason to leave unused if Trans Mountain construction begins.
Mr. Kenney is a politician who knows the value of symbols. Albertans, feeling beaten down, wanted a fighter; Mr. Kenney presented them a fighter. Now that he’s in office, the actual need for boxing gloves is less apparent, and could become ever less so, if Mr. Kenney’s arrival in Edmonton is buoyed by the fortune of good timing. The question for the next four years is not just whether the province’s oil economy will improve, but whether Mr. Kenney and the UCP can deliver more for Albertans than simply being along for the ride.