“The new normal” is becoming part of the common vernacular used to describe the ongoing and relatively tepid economic growth facing our region. This is in stark contrast to a few years ago when our economy was “booming,” rig counts were high, and low unemployment figures drove wages higher. In just the past two years alone, it is estimated Alberta has nearly $40 billion in major project investment.
In a recent Chamber survey, just 15 percent of respondents projected their businesses to grow over the next 12 months while 66 percent estimated their business would “stay about the same.” In 2019 TD Bank estimates Alberta’s economy will grow by just two percent, meaning our economy will still be less productive than it was five years earlier. While there are many reasons for this lacklustre growth, the time and cost of regulations are among the worst offenders.
The scale of projects affected vary from the extremely large projects worth billions to those worth thousands.
Recently making headlines was Imperial Oil’s announcement their growth is on hold due to a ‘long, costly, uncertain regulatory environment.’ Imperial Oil has been waiting four and a half years for Alberta Energy Regulator (AER) to approve a SAGD project worth an estimated $2 billion. A project of this scale would make for thousands of high-paying jobs, millions in additional royalties to the province, and provide a meaningful economic boost.
Last year the federal government made changes to the already cumbersome and costly National Energy Board process, requiring applications to consider the impact of upstream and downstream emissions as well as ‘the intersection of sex and gender with other identity factors.’ The emissions test sets a ridiculous double standard to other major projects while nobody seems to know what the sex and gender thing even means.
These changes to the NEB were made in the midst of Kinder Morgan’s struggling attempt to see the TransMountain project get built and effectively ended TransCanada’s $15 billion Energy East. Now central and eastern Canada will continue to import oil from theocratic dictatorships with horrifying human rights abuses and many doubt Canada will ever see another major energy product get built.
In 2016 the Fraser Institute studied residential land-use regulation throughout the Calgary-Edmonton corridor. Red Deer was worse than average on timeline uncertainty, higher than average on costs and fees and support of council and the community. Overall Red Deer ranked 10th out of the 13 municipalities compared. Suffice to say, a developer considering Red Deer may think twice after seeing those results.
Government at all three levels has to look at their regulatory regimes with a lens that recognizes the need for investor certainty and confidence. For many years investors were willing to put up with the status quo simply because there was tremendous upside. High prices for oil combined with abundant resources and geopolitical risk created a perfect storm for wealth creation in Alberta. Now things in the Middle East of relatively stabilized, energy prices are lower and our biggest customer for energy products has become our biggest competitor.
In this ‘new normal’ of subdued economic growth we’re seeing in real-time, capital investment and equipment move across borders where the turnaround time and cost of compliance is a fraction of what it is here. Red-tape is not as obvious as other obstacles such as wage costs and tax burden, but can have just as big of an impact.
U.S. President Trump campaigned on cutting two regulations for every one introduced. In a December update he announced they have succeeded in cutting 22 regulations for every new one introduced. This ‘slashing’ of red-tape combined with the tax cuts has lead the United States to the lowest unemployment and highest performing economy in recent history.
As we continue to emphasize the need for increased economic growth and diversification, an attractive and consistent regulatory regime will be paramount in attracting investment. There will always be a need to ensure a reasonable balance between stakeholders in projects, but they must be done so in a timely manner that is sensitive to economic and competitive pressures that businesses use to weigh investment decisions.