On March 31, while reeling from low oil prices, an economic downturn, and the COVID-19 pandemic, Jason Kenney announced a handout of $7.5 billion for the Keystone XL pipeline. This announcement came only three days after the UCP laid off 26,000 education workers—the largest layoff by a single organization in Canada’s history. Jason Kenney has demonstrated exactly what his function is: saving the oil companies at any cost.
Even before oil prices hit rock-bottom, Alberta’s economy was in crisis. 2019 was the lowest year for investment in the province in the past decade. The Alberta Advantage is now a long-lost dream. Despite a global effort to implement the largest crude oil production cut in history, oil prices have stayed at historic lows. More layoffs are expected as oil giants have slashed their capital spending budgets by hundreds of millions or more. Suncor cut $1.5 billion of its capital budget, which amounts to more than 2.5 percent of all investment in Alberta. Before March, unemployment in Edmonton was higher than in any other city in Canada, and Alberta led all provinces in the same department. Even though the UCP named their corporate tax giveaway the “Job Creation Tax Cut,” it has not lived up to its name. Now on the brink of a global slump, Alberta faces a staggering 25 percent projected unemployment rate.
It was in this context that the UCP decided to dole out an effective $7.5 billion; not for unemployment relief, not for health care, but rather for a pipeline. The premier described the handout as “a solid bet” for a number of reasons. However, the fact that the oil barons were unwilling to fund Keystone XL on their own is a confirmation that it is not in fact “a solid bet.” Kenney himself remarked that he has “always been skeptical about government intervention in the market,” and yet no degree of skepticism stopped him from gambling an enormous sum of public money on a project that billionaires were not willing to go “all in” on.
Keystone XL: A “safe bet”?
The United States Gulf Coast (USGC), the terminus of Keystone XL is the world’s largest market for heavy, sour crude. While Alberta’s oil sells at a deep discount to Texan oil at most major crude hubs, in the USGC, it sells at a premium. When the price for a barrel of Alberta’s oil fell below the cost of a pint of beer, in the Gulf Coast, it was selling for as much as two cold ones at US$16!
The idea that this pipeline could end Alberta’s economic woes is laughable. The fact is that there is no guarantee that it will be built at all. The demand for heavy oil in the USGC is only high because of suppressed production from it’s traditional suppliers, Venezuela and Mexico. All over the world there is a glut of crude oil, and world capitalism is facing the prospect of a prolonged slump. Lower demand resulting from the COVID-19 slowdown has meant low prices for oil, which in turn means the profitability of the oil patch has dried up. In addition to this, Keystone XL has faced challenges in American courts in the many states where it is planned to be constructed, and was even rejected by the Whitehouse under Obama. There is also the certainty that the project will face fierce opposition from environmentalists and Indigenous people, like the Dakota Access pipeline did. For these reasons, capitalists and oil barons did not invest in Keystone. They did not have enough confidence to put their money on the line because they did not think the returns would be worth the risk. By backing Keystone with effectively $7.5 billion in public money, Kenney is passing those costs, risks, and losses on to Alberta’s working class, while still passing the profits on to billionaire oil bosses.
Who pays for the crisis? Who pays for the pipeline?
When the question of funding for education, healthcare, or childcare comes up, right wing governments like the UCP are fond of saying that there is no such thing as a free lunch. But when a multinational oil and gas corporation approaches the government with its hands out, it is given a full buffet, to the tune of billions of dollars. That money will have to be made up somewhere. Jason Kenney plans on continuing to take it from the working class, through cuts to social programs, as has been the case for the past year. Post secondary tuition has risen seven percent, tens of thousands of people have lost provincial drug coverage, and 26,000 education workers are out of a job. Now, workers will have to pay billions to build an unprofitable pipeline—and that sticker price could very well increase. After the federal government bought the Trans Mountain expansion, the cost of building that pipeline rose from $7.4 billion to $12.6 billion.
The cost to workers of constantly funneling money into the oil corporation’s pockets is deadly. Before COVID-19, Kenney’s original plan for 2020 was to pay for corporate tax cuts by laying off 750 nurses, while the province’s population ages and 69,000 people await surgery. Although those layoffs have been temporarily postponed, reports from Alberta hospitals attest to just how stretched the healthcare system is, and ill-equipped to deal with the pandemic. One Alberta Health Services (AHS) worker said of the situation, “Equipment, bed, and staff shortages were a crisis even before COVID-19. Nurses are crying every day in the break rooms praying for relief.” The pandemic is going to get worse. It is expected to peak in mid-May, and the Alberta government’s own modelling data suggests the worst-case scenario would result in 6,600 deaths. Even while people were dying from COVID-19, the UCP continued to ram through austerity measures, severing contracts and cutting compensation to doctors on April 1. This has already led to some physicians closing their practices and leaving the province. These cuts will result in more needless deaths. Jason Kenney and the UCP have blood on their hands.
In addition to cutting public spending in order to fund tax breaks and cheap loans to the oil corporations, there is one more way that the UCP hopes to make the oil patch more attractive to investment. It is perhaps the most dangerous attempt to save Alberta’s oil industry: Kenney’s proposal for a North America crude import tariff. The logic is that because North America is now a net energy exporter, the NAFTA countries should shield domestic production from world market convulsions with protectionist measures, forcing other crude producing countries to pay for access to North American markets. What Kenney doesn’t seem to understand is that he is playing with fire.
At the end of the day, protectionism means buying a more expensive, lower-quality product from home rather than a cheaper, better product from abroad. If it was more economical for North America to exclusively consume its own supply of crude, private companies would pursue that goal. But it’s not. That is why the Energy East pipeline was quashed. For Montreal to refine Alberta oil would require the construction of complex heavy oil refineries, cross-continental pipelines, and a mammoth amount of environmental risk. All of these things come with a price, while importing oil from countries like Algeria is extremely cheap.
Even more important is the fact that every action has an equal and opposite reaction. A tariff of the magnitude that Kenney proposes would mean a breakdown in world trade, as other countries would retaliate with tariffs of their own. That means an increased cost of other imported goods, reducing the efficiency of the entire economy. Protectionist measures like this were used by countries in the 1930s in an attempt to export unemployment, to no avail. In fact they had the opposite effect, worsening and prolonging the slump.
The crisis has eliminated the middle ground
While the UCP has been busy using the pandemic as an excuse to tear up labor laws and give public money to oil giants, the NDP and the labour leadership have been noticeably quiet. On the topic of Keystone XL, Rachel Notley said, “We support this project.” Her only criticism of the government was that it needed to be more “transparent” about the details of the $6.5 billion dollar loan. After the UCP laid off 26,000 education workers, CUPE Alberta President Rory Gill only argued that it was a poor decision, saying, “You can’t just fire thousands of Educational Assistants and expect them to all run back to the system in the fall,” and, “This is a recipe for a massive brain drain.” He promised to review the legality of the lay-offs. Although he may have a point, no amount of rational argument or appeal to legality will convince the UCP to reverse course. Nor will platitudes from ATA president Jason Schilling who said, “I appreciate we are in extraordinary times, but laying off tens of thousands of workers at this time is the wrong direction.” Unfortunately, while the heads of the largest trade unions in Alberta voiced “concerns” over the cuts—tempered, of course, with an “appreciation” of the government’s position—their words were not backed up by any threat of labour action. They seem to accept the cuts as if they are set in stone.
In fact, these cuts can be defeated, and this government can be brought down. When Jason Kenney was sworn-in as premier, he had an approval rating of 61 percent. By the beginning of March 2020, it had fallen to 47 percent. Since COVID-19 began spreading in Canada, almost every single premier has enjoyed increased approval ratings as they appear to be acting quickly to curb the virus. Alberta is the only major province where the government’s approval rating is falling. And this is only going to continue.
The downturn in oil prices has blown an enormous hole in Alberta’s provincial revenue. When presenting their budget for 2020, the UCP admitted that almost all projections hinged on oil prices averaging US$58 a barrel (WTI) or higher. Kenney himself said that every dollar decrease from US$58 (WTI) means $200 million less in provincial revenue. Even if crude is sold at a generous US$16, that’s $8.4 billion the UCP will try to cut from healthcare, education, childcare, etc. On a capitalist basis, there is no future for working people in Alberta.
While hospitals fill up, the UCP is only interested in handouts for oil and gas, attacking workers, and planning more austerity. There is no appetite for this among the workers, and there is a desire to fight. COVID-19 has exposed the UCP government and shown what their priorities are: attacking workers to benefit the oil barons. When AHS tried to pinch pennies and claimed that nurses did not need N95 masks to conduct testing swabs, some Edmonton nurses refused to work until they had them. This is the way forward. We do not need platitudes, we need to fight.
On April 18, join us for an online public discussion on this topic. Click here for details.