Home January 2017 Lessons Learned in 2016

Lessons Learned in 2016

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Josh Bilyk

Alberta businesses needed a win, and they finally got one. The federal government’s approval of the Trans Mountain Expansion (TMX) Project gave a much-needed reason to celebrate.

In fact, as we rounded out 2016 there were a few bright spots. During a December cold snap the Alberta government announced approval of two petrochemical projects in the Capital Region.

A joint venture between Pembina Pipeline Corporation and Petrochemical Industries Company (PIC), was approved to receive up to $300 million in royalty credits to build an integrated propylene and polypropylene facility in Sturgeon County. The project is expected to cost from $3.8 billion to $4.2 billion to build.

Inter Pipeline was approved to receive up to $200 million in royalty credits to build a $1.85 billion facility in Strathcona County. At the peak of the three-year construction phase, 2,000 full-time equivalent jobs could be created. According to Inter Pipeline, About 1,600 of those would be at the site and the rest would be in fabrication or module shops and engineering firms.

Throughout all of this, oil prices slowly percolated upward.

In the span of a few weeks we saw a critical pipeline come closer to reality, a glimmer of hope for two significant petrochemical projects, and slowly rising oil prices. Not bad.

The approval of Kinder Morgan’s TMX was a hard-fought win for Alberta’s energy industry. It took years of community consultation and First Nations outreach. Kinder Morgan CEO Ian Anderson personally met with countless community members up and down the length of the proposed line. My organization – Alberta Enterprise Group – spent years holding events, meeting with political leaders, hosting oil sands tours and planning missions across the country, emphasizing the enormous economic benefits that will come from the project.

We now know that all of that and more will be required to gain the necessary approvals for resource development infrastructure in the future. Five years ago, TMX seemed like a slam dunk. In hindsight it’s clear how much the policy environment has changed – not just in Canada but throughout North America. Projects aren’t to be taken for granted and all business leaders need to stand up and be heard.

The approval of the proposed petrochemical projects were the result of a royalty credit program that will offset project costs by $500 million in foregone royalties. This is a reminder that cost competitiveness matters. Companies will invest in Alberta if the economics work. In this case, a royalty credit may be the difference between a project proceeding or not proceeding, but if Alberta’s overall tax and royalty system was truly competitive, these credit programs might not be needed in the first place.

In 2017 we must keep our eye on the business fundamentals in Alberta. Corporate taxes are up, the carbon tax imposes significant cost increases and a variety of other policies are making it tougher to invest. This trend must end in 2017.

The Alberta economy is seeing one of the toughest stretches in history, but there were some positive signals as we closed out 2016. As we move out of this downturn, we need to continue to focus on having the right mix of policies to encourage investment in our province.

Alberta Enterprise Group is a member-based, non-profit business advocacy organization. AEG members employ more than 150,000 Canadians in all sectors of the economy.

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