Coal, Conservatives, Consultation and COVID – David Yager

By David Yager

February 17, 2021

Had they not been locked in their homes, to read the news you’d think Albertans would have been celebrating in the streets.

On February 8 Energy Minister Sonya Savage announced the province’s decision to withdraw changes to a 1976 policy protecting large areas of the eastern flank of the Rocky Mountains from coal development.

The announcement was seen as a victory of ordinary citizens over a tone-deaf government plowing ahead without consultation with resource extraction that would surely be damaging to the environment.

CBC News reported, “The shift in strategy comes after growing pressure from municipal councils, First Nations, environmentalists, country music stars and everyday Albertans upset by the coal-policy change the government initially announced nine months ago. The cancellation of the 1976 Coal Development Policy for Alberta was revealed via media release on the Friday afternoon before the May long weekend in 2020. It came with no publication.”

This tactic is used when governments want to issue public announcements in a way that attracts the least media attention. When Savage announced the changes she admitted as much saying, “What we’re doing today – keeping the 1976 policy in place and committing to consult on a modernized policy – is what we should have done in the beginning. We didn’t do it then, but we’re going to do it now.”

Media reported that some 100,000 Albertans had signed a petition requesting the decision be reversed. While that seems like a big number, it is only about 2% of Alberta’s 4.4 million inhabitants. Alberta’s unemployment rate is nearly 11% and the deficit for the current fiscal year ended March 31, 2021 is estimated to be $24 billion.  According to Statistics Canada, in January 262,700 Albertans that could work were unemployed.

However, this story was more about a test of political wills than Albertans’ tolerance for economic misery.

Other concerns surrounded drinking water. Surface strip mining of coal in the mountains or foothills would contaminate the drinking water of communities downstream. Fundamental to this conclusion was that there had been no advancements in mining practices or environmental protection. Selenium from coal mining that leached into streams 100 years ago could continue today.

Almost totally lost in the politics, public backlash and media coverage were the economic benefits. International companies wanted to develop Alberta’s massive and high-quality metallurgical coal to help Asia make steel.

Economic recovery was key to Premier Kenney and the UCP’s campaign pledges in the 2019 election. Wasn’t this massive public opinion poll on where to take Alberta’s economy consultation? Kenney pledged to get Albertans back to work and reverse the flow of capital leaving the province. This would include extracting Alberta’s carbon resources and sell them to someone besides the US, ideally Asia. That’s what the west coast pipeline wars and fights for oil sands and LNG exports have been all about for the past ten years.

This coal development was said to be really bad because it was going to be strip mined. Just like the oil sands. You know, Alberta oil. The most environmentally advanced and morally pure petroleum available. At least, that’s what we’ve been told. And that’s what we’re telling the world.

Musicians Corb Lund and Paul Brandt publicly questioned strip mining for coal. But when Canadian musician Neil Young showed up in Fort McMurray years ago and compared oil sands mining to Hiroshima after the A-bomb, we all told him to get back to Los Angles and mind his own business.

Is this about the environment or politics? Are Albertans really that opposed to coal development? Or has the pandemic, lockdowns and tough times made everyone so cranky that showing the government who is boss is more important than putting people back to work?

 

 

Coal is why Alberta and Canada exist in their current form. When I researched and wrote From Miracle to Menace – Alberta, A Carbon Story two years ago, I concluded it was fossil fuels – including coal – that transformed Alberta from a sparsely populated, land-locked and remote section of North America into a global economic force. I wrote how without coal, oil and natural gas, Alberta was merely “Manitoba with mountains”. Except its agricultural land was at higher altitudes and of lower quality.

Chapter three is titled, “Coal Fuels The National Dream”. European explorers knew what coal looked like and why it was valuable. It was first identified near Drumheller in 1793 and near Rocky Mountain House a year later. It turns out that in central, southern and western Alberta, coal was everywhere and clearly visible in the riverbanks. Travelling on rivers by canoe, coal outcroppings were impossible to miss.

After Canada became a country in 1867, the long-range plan was to settle the vast western regions and ultimately build a coast-to-coast rail link from the Atlantic to the Pacific. The “national dream” was achievable because the government knew that there were huge supplies of coal at the other end of the vast prairies. The last trees to cut down to make steam for the locomotives was at the end of the Canadian Shield, today’s Manitoba/Ontario border.

Hauling coal all the way from Nova Scotia to Vancouver to keep the trains moving was, as the old saying goes, “no way to build a railroad”. There were no transportation links to bring coal north from the US to western Canada. Alexander Galt, an enterprising father of Confederation from Upper Canada, bought a coal mine in Lethbridge and had coal waiting in Medicine Hat when the tracks and trains arrived in 1883. It was carried by barge down the South Saskatchewan River.

Alberta’s first fossil fuel resource boom was coal. Soon there were thousands of mines of various sizes opened across the province. The larger deposits that were the easiest to mine for the Canadian Pacific Railroad were right by the tracks in the foothills, places like Canmore and Banff. A southern rail link from the CPR main line opened up the big coal mines west of Lethbridge in Coleman and Blairmore.

When the Canadian National Railroad took the northern route west along the Athabasca River, the coal was mined in an area called the “Coal Branch” region, southwest of Edson and southeast of Hinton. Towns that would not have otherwise existed sprung up nearby to support development across the province.

Coal as a transportation fuel would soon be replaced by oil because it was more powerful and easier to handle. Naval ships were the first to convert. Locomotives were close behind. This precipitated three major changes in the coal business.

The first was moving from tunnels to strip mines. Powerful, diesel-powered mining equipment helped replace coal mining via shafts and tunnels with high-volume strip mining operations close to surface.  Safer and less labor intensive, this cut costs and increased volumes.

The second was using strip mined coal for electricity generation, a wonderful development at the time that gave Alberta really cheap and reliable electricity. Enormous amounts of coal lay close to the surface in central Alberta.  It was provincial policy for years to use coal instead of natural gas to generate electricity because natural gas cost more and supplies were thought to be limited.

The third was increasing global demand for metallurgical coal to make steel. This market remains very strong as Asia expands and modernizes. There is currently no large scale economically viable substitute for high energy metallurgical coal. Alberta has enormous resources of this important mineral.

Western society has chosen to reduce the use of thermal coal for electricity generation for environmental reasons. Good idea. This was easy in Alberta because of natural gas. It is not so easy in places like India, China and Africa not blessed with huge quantities of natural gas. So coal fired power generation continues to expand.

World coal demand is not anticipated to decline in the near future.

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Alberta has proven to be very kind to its premiers when times are good and unforgiving when they are not. Often a premier’s popularity – or unpopularity – is because of external events, not necessarily their communication ability, managerial skills or policies.

The legendary PC leader Peter Lougheed became premier in 1971, just in time to catch the OPEC-driven oil price boom in 1973. By the time oil peaked in 1980, it had risen by a factor of ten; $3 to $30.

Although Alberta was denied the full world price through federal price controls, Lougheed increased the size and scope of government, funded a myriad of new programs, loaned money across Canada, fought with Ottawa over resource control, and still couldn’t spend it all. So he started the Heritage Savings and Trust Fund.

History reads that Lougheed “modernized” Alberta after decades of steady but dull Social Credit governments. But when oil prices began to fall in the early 1980s ending the province’s remarkable economic boom, Lougheed’s popularity also declined.

Lougheed was replaced by his longtime friend, football colleague and PC sidekick, Don Getty. In the legislature with Lougheed since 1971, Getty became premier when he won the leadership race in 1985. Getty didn’t seem able to do anything right although he tried desperately to diversify the economy with a variety of investments, many of which were unsuccessful. The Getty government also borrowed heavily to fund diversification projects and avoid raising taxes.

Oil and gas prices were terrible compared to earlier years. Nevertheless, Getty plowed forward with significant foundational policies that would set the stage for future growth. One of his more important achievements – rarely mentioned – was deregulation of gas prices and federal export controls. This led to the immediate construction of new domestic and export gas pipeline capacity. When Getty’s terms as premier ended in 1992 Alberta’s gas production had risen 50%. By 2000 it had doubled. Thanks to gas, Alberta was back in the chips in a big way.

Ralph Klein enjoyed the fruits of Getty’s labors. Klein further reduced the size of a big Alberta government (Getty had already started), paid off the provincial debt, and stuffed $17 billion into a new Sustainability Fund. This was all financed by the high price of natural gas, the rising price of oil and a one-time leasing boom for oil sands. This all took place between 2001 and 2007.

In seven fiscal years and in current dollars, natural gas royalties totalled $43 billion or an average of $6 billion a year. Leasing of mineral rights came to $11 billion, an average of $1.5 billion annually. The same figures for the fiscal year ended March 31, 2020 were $371 million and $120 million, respectively.

In 2006 “King Ralph” was shown to the door by his own party because he didn’t score high in a leadership review at the PC party’s annual convention.

The following four premiers were plagued with challenges that shortened their time in office, increased Alberta’s deficits and debt, and deprived them of the elevated status of Lougheed and Klein. PC premiers Ed Stelmach and Alison Redford were pushed out by their own party. Jim Prentice was premier for only eight months. He lost the 2019 election to the NDP so badly he resigned on election night.

From 2015 to 2019 NDP premier Rachel Notley endured the first four years of the oil price collapse and multiple pipeline cancellations and delays. Everything was made worse by the lowest natural gas prices in real terms in history. Both of these commodity price slumps were driven by the shale gas and light tight oil revolution in the US.

Which brings us to Jason Kenney. After four years of the NDP, Albertans were looking for a fresh face with fiscal conservative credentials. Kenney fit the bill. He promised to reverse the outflow of foreign capital and put Albertans back to work in the province’s core resource industries.

This included coal. International inquiries about Alberta’s interest in developing more metallurgical coal have continued for years. According to a Calgary Herald article by former Wildrose leader Brian Jean on February 8, the NDP pushed along and encouraged coal developments while in office west of Rocky Mountain House and near Coleman. One project north of Blairmore would take place on a previously mined and abandoned coal lease.

Kenney was premier for less than a year when the global coronavirus pandemic fell into his lap. Since last March, almost every problem Alberta’s economy has faced since oil prices collapsed over six years ago seemed to get worse. The UCP’s big picture economic strategies of corporate tax cuts, red tape reductions, defending its resource industries, controlling spending and declaring Alberta to be once again open for business were overwhelmed by global events.

Alberta’s government has also joined the rest of Canada and much of the world by introducing lockdowns and travel restrictions. This is much less popular in rural Alberta. There are way fewer “work from home” continued employment opportunities in smaller communities than big cities.

So Albertans are really cranky. Many voters are choosing to take it out on Premier Kenney and his UCP government.

When it was discovered that UCP MLAs and senior official travelled outside Alberta over the Christmas holiday, the province roared. Being locked the house with nothing but a TV and an internet connection gave folks lot of times to express their displeasure. Heads rolled, accompanied by profuse apologies.

Last spring the province stepped up with an equity investment and loan guarantees for Keystone XL to ensure work on the pipeline continued last year. Which it did with the completion of the critical section crossing the Canada/US border, an investment thought to protect the project from further American interference. It is easier to withhold a permit than a declare an existing pipeline illegal.

But when Biden won the US election and promptly cancelled Keystone XL on the day of his inauguration, the second dumbest guy in North America was Jason Kenney who should have known this would happen. He was pilloried for wasting precious tax dollars.

Then along came the coal policy change. When the public learned that the premier was secretly planning to attract investment and create jobs without consulting the same people who had given him a strong mandate to do just that, the controversy grew.

But it wasn’t about the coal itself. Many of the people opposed to the policy change were most upset because they weren’t consulted.

It was about COVID, Kenney and Alberta’s love/hate relationship with its premiers.

Because when things are good, Alberta premiers get way too much credit. When things are bad, they get all the blame

Tough racket, Alberta politics.

David Yager is an oil service executive, energy policy analyst, oil writer and author of From Miracle to Menace – Alberta, A Carbon Story. More at www.miracletomenace.ca

 

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