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Wednesday, July 18, 2007

Industry Warns Alberta About Managing Growth

At a recent meeting of the Alberta Chamber of Resources industry leaders articulated some sobering realities. Alberta may be the youngest, healthiest, richest, hardest working, best educated, urbanized and most resource endowed place in the county and perhaps the planet, we are not without problems and challenges…and most of them are of our own making.

Managing the growth pressures are one of the key policy priorities of the Stelmach government and that resonates with Albertans. Given the comments by ACR President Roger Thomas at the recent Annual General Meeting it looks the “marketplace” is creating ample opportunity but a correction to the hyper growth concerns in the province is on the horizon.

Here are some of Mr. Thomas’ insights around the issues of managing growth in Alberta:

“There is a strong public perception that current pace of economic growth will
continue unabated, and a growing sentiment that big industry alone should
pay the costs associated with this growth.”

“When it comes to regulation of industrial growth, there is a sentiment out there that we are
moving too fast, and there are lots of people who thing it’s time to slow
things down. We need to find the balance between growth and
sustainability….”

“There is also an element of stakeholder fatigue in activities relating to resource development these days. Everyone is extremely busy, and we don’t always have the ability to connect all the
dots when it comes to achieving balance.”

Other dose-of-reality facts stated by Mr. Thomas that are worth reflecting on, like:

  • There is expected to be a $6.5 billion decrease in spending in the traditional oil and gas sector in 2007 as compared to 2006.
  • The cost of bringing new gas to market is approaching $5/GJ, putting price pressure on the marketplace.
  • Drilling rig utilization is at an all-time low of 18 per cent and the growth curve for the service industry in this sector is flat.
  • Oil sands, land sales are down significantly in the first quarter of 2007.
  • Climate change rules already in place will mean virtually every major producer in Alberta will have to pay into the Province’s technology fund – and this still does not factor in federal measures on climate change.
  • Power demand for Alberta is expected to rise by 3,800 MW by 2016, but only 690 MW of new power development is currently approved and under construction. Power prices are expected to rise and the marginal cost nature of Alberta’s power pool structure is not set up for the flow through of these costs.
  • The tradition frame housing market in the United States has collapsed, reducing the demand for lumber. In addition, the mountain pine beetle threatens to decimate Alberta forests at a time when forestry companies can least afford it.

Mr. Thomas was being a realist but his concluding message was encouraging when he said.

“Even in the face of these warning signs, however, the prospects for resource development in Alberta are far from doom and gloom. World energy demand will continue to increase and our long-term resource fundamentals remain sound. We need to make sure we don’t stumble on the way to prosperity. A lot will depend on what various levels of government will do in the future in terms of policy on resource development.”

So much of the future responsible stewardship and prosperity of Alberta resource development is dependent on the federal and provincial governments. As we move into the red zone of election time provincially and the perpetual red zone inherent in the federal minority government who knows what is going to happen.