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The Energy Sector: Will 2017 be carbon's year?


December 4, 2016  


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Carbon taxes are likely to be one of, if not the biggest, story of 2017 — largely driven by the federal government, but also here in Alberta.

We are told “not to worry.” If the new tax causes hardship, it will be rebated to those individuals, invested in green energy or revenue neutral. Sounds like spin to me. And what about changes to the provincial share of subsidies required to encourage private investment in renewable energy?

We talk about changing the rules for existing power producers that will have to ‘pick up the slack’ when renewables are not available, but then we wonder why there might not be so many takers joining the Alberta electrical supply. Their rules might change when convenient. Is it really surprising that the level of faith in government continues to decline?

British Columbia has a similar saga with its planned NGL industry, along with minimum requirements such as suitable compensation that would allow pipelines to port as opposed to the spirit of the Western Accord or the New West Partnership Trade Agreement. The federal government seems to be reading from the same menu, especially when it comes to spending. Not only is the Alberta government spending at record pace, the new federal government is happy to follow suit.

The recent Liberal fall economic statement recognizes the government’s fiscal position has worsened considerably since the Conservative’s last budget in 2015. The Conservatives predicted a surplus of $21 billion by 2019/20. The new government informs us we now need to ‘invest in our future’ to the tune of $99 billion, or a shift of roughly $120 billion. Roughly one-third ($42 billion) is the result of lower revenues due to weak commodity prices that are outside its control.

What is within its control, however, is spending. Forecast “investments in the future” are predicted to increase roughly five per cent per year over the remainder of the mandate. Unfortunately, if you look at the actual investment in “real” infrastructure, such as transportation and other ways to improve trade, only $1.1 billion of the $99 billion has any chance of increasing our country’s global competitiveness.

That means most of this deficit will end up going toward salaries, benefits and photo-ops. The only real legacy of this spending will be the debt itself. Another example of government largesse is how Alberta’s environment minister was in Morocco for UN environmental conference Nov. 7 to 18 as part of a 225-person Canadian delegation.

What is that telling everyone when it comes to how “progressive” Canada is with its escalating carbon tax? For most of us, 225 people is a conference in and of itself. Canada was also well represented at the Paris climate change summit, where we had one of the largest teams with more than 300 politicians, government staff and bureaucrats in attendance. That was more than double the U.S. team, which had fewer than 150 officials, and about three times that of the U.K.’s team of about 100 attendees — both economies that are significantly larger than ours. One can only assume that all the attendees paid the carbon emissions fee, to assuage their guilt at having to use hydrocarbons for the airlines they took to get to Morocco and Paris.

Only governments seem to believe they can spend their way to prosperity using money they do not have. When we consider the many workers in Alberta who have been seeking employment for a year or more, it hardly seems appropriate that government continues to spend the money we do not have. And for what? Climate change photo opportunities.

If governments continue to play “Calvin ball” by changing the rules — whether it is election promises, power contract agreements or anything else they find inconvenient as they go along — we better hope there are lots of Hobbes’ ready to invest. Maybe all the other delegates attending conferences like the ones in Morocco and Paris will put their money where their ideology leads them.

I certainly hope so or we could well remember 2017 as the year of change in a less than positive light.

About the author: Ian Verhappen is a professional engineer, ISA Fellow, certified automation professional and a recognized authority on industrial communications and process analyzer technologies with 25-plus years’ experience in the hydrocarbon industry. Verhappen provides global consulting services specializing in industrial communications, SCADA, process analytics and heavy oil/oilsands automation. Reader feedback is always welcome. Email iverhappen@gmail.com.