All options on the table to battle oil price collapse, Kenney says
Alberta Premier Jason Kenney says his government will do whatever it takes to rescue the province from an oil price collapse and he wants the federal government to step up as well.
“This is not just about Alberta. As Alberta goes, so goes the national economy,” Kenney told Canadian Press in Calgary on Monday, after markets closed with cratering oil prices threatening to drain billions of dollars from the province’s bottom line. “Albertans, even in our times of economic trial, have been contributing $20 billion net to the rest of the federation through our federal taxes. Our ability to continue doing so is now at risk.
“Albertans have been good to the rest of Canada. It’s time to see the rest of Canada return the favour.”
Kenney is to meet with Prime Minister Justin Trudeau on Friday at the first ministers meeting in Ottawa.
He said he’ll be asking for a range of relief measures, including financial incentives to help create jobs in reclaiming orphan wells, changes to payroll taxes and removal of a cap on fiscal stabilization transfers that would return about $2.6 billion to Alberta.
Kenney said his own United Conservative government will look at a range of choices that include borrowing money for more capital spending to boost jobs, a return to tax incentives to lure high-tech startups and directly subsidizing a barrel of oil.
The premier is also striking an emergency panel to be headed up by economist Jack Mintz with the School of Public Policy at the University of Calgary.
“All options will be on the table. I repeat: all options will be on the table to do everything that we can within our capacity to help protect jobs and Albertans,” said Kenney.
Alberta’s energy industry, already suffering from reduced demand due to the novel coronavirus, is taking a gut punch due to an all-out price war between Saudi Arabia and Russia.
The price for West Texas Intermediate crude fell to US$30 a barrel on Monday. Alberta has budgeted its oil revenue based on US$58 a barrel. Each $1 drop in price represents a cut of about $200 million from Alberta’s bottom line.
Kenney, saying now is not the time for partisan politics, told Canadian Press he’ll be reaching out to rival politicians, including Opposition NDP Leader Rachel Notley, for advice.
Notley, speaking at a news conference in Edmonton, said Kenney needs to withdraw his recently tabled budget and submit a new one that recognizes how free-falling oil prices are decimating revenues.
Notley told Canadian Press the low prices will conservatively send the projected deficit for 2020-21 to almost $11 billion from $6.8 billion.
She said Kenney has left Alberta vulnerable by slashing corporate income taxes last year and using wildly optimistic oil revenue projections in the budget.
She also said Kenney was wrong when his government dismantled tax incentives last fall designed to lure more diversified businesses, including high-tech companies, to Alberta.
“Premier Kenney’s belief in his corporate (tax) handout has always been magical thinking, but today it has been exposed as pure fantasy,” said Notley. “It would be profoundly irresponsible for the premier to press forward with this budget when the assumptions it is built on have been proven to be false.”
Kenney said he will not be withdrawing his budget. He noted it’s three weeks until the end of the fiscal year and the province needs a budget in place. He said the government will revisit projections in the summer when the fiscal situation becomes clearer.
Kenney also resisted Notley’s call to revisit an almost three per cent cut to operational spending. He said it remains a realistic goal given that Alberta spends more per capita than comparable jurisdictions.
Albertans pay the lowest overall taxes in Canada and there is no provincial sales tax. Both Kenney and Notley, saying it would be catastrophic to an already hurting economy, dismissed any increases.
Kenney’s UCP won last April’s election on a promise to focus on revitalizing oil and gas while eradicating a string of multibillion-dollar deficits and getting the rising debt under control.
At the time, Kenney criticized the NDP for what he characterized as mismanaging the economy by borrowing billions of dollars, thereby running up debt interest payments that would cripple future generations.
Kenney said last week that his government’s goal of balancing the books by 2023 might not happen.