Remarks to Senate Transport and Communications Committee
Delivered by Adam Sweet, Senior Advisor to the President
Check Against Delivery
Good morning, Mr. Chair,
To you, and through you to the Honourable Senators of this committee, thank you for the invitation to present to you today. I look forward to the discussion that I am hopeful will follow my presentation.
My name is Adam Sweet, and on behalf of Edmonton Economic Development Corporation, or EEDC for short, we are pleased to provide our commentary on the development of a strategy to facilitate the transport of crude oil to eastern Canadian refineries and to ports on the East and West coasts of Canada.
As our CEO, Brad Ferguson has pointed out, if Mark Twain was an Albertan, he would say, “The demise of the fossil fuel industry has been greatly exaggerated.” This province has been blessed with an abundance of energy products like no other. Conventional Oil, Oil Sands, Natural Gas, Coal and Coal Bed Methane – their extraction and production have created billions of dollars in wealth, billions of dollars in government programs, and billions of dollars in research and development. And there are trillions of dollars and trillions of barrels more available, if we take the right approach.
As background for your committee, Mr. Chair, EEDC is the City of Edmonton’s agency tasked with cultivating the energy, innovation and investment needed to build a prosperous and resilient Edmonton economy. We lead and manage Edmonton Tourism, the Shaw Conference Centre, Startup Edmonton, Make Something Edmonton, the Edmonton Research Park, a joint-venture between ourselves and the University of Alberta called TEC Edmonton, an Urban Economy team focused on activating the 31 football fields of office space and $5.5 billion in downtown real estate coming online shortly, and a Trade and Investment Team focused on opening up new markets for the countless health, agriculture, ICT and advanced manufacturing products that call the Edmonton Metro Region home. We are a unique model in Canada, as we are intimately connected to the drivers of local economic growth. Unfortunately, while there is great deal we can, and do, on the local level, there is an overarching economic driver that sets the context under which we operate.
While our economy is technically one of the most diversified in the country (i.e. in terms of sector makeup of our GDP), it is the 2nd most volatile, in terms of economic resiliency, due to these sector’s overdependence on revenue stemming from the energy industry, and more specifically, the capital investment that fuels its growth. In short, Mr. Chair, the Edmonton Metro Region is the manufacturing and servicing hub of the Alberta Energy Industry and the Oilsands, and it is where the tens of billions of dollars spent annually on capital expenditures come to life. To be clear, without capital investment, there is no job growth and no increase in government revenue – provincially, or federally. And we must always remember that capital is mobile – without the right environment to generate healthy returns, it has no reason to stay here.
As context for your committee, Mr. Chair, here are some current numbers on CAPEX in Alberta, from the Alberta Energy Regulator:
- Capital expenditures decreased 38.4% to an estimated $37.3 billion in 2015, down from $60.5 billion in 2014.
- Capital expenditures are forecast to decline by a further 30% in 2016, to $26 billion.
- This marks the first time in Alberta’s history that capital spending has declined for two consecutive years.
- The rate and size of decline in capital expenditures in 2016 are on track to be significantly larger than the 2009 slowdown; as a result, the quick recovery that occurred in 2010 is not expected.
To make matters worse, investor confidence is at a low point, based on a lack of confidence and trust in the decision making processes that govern their activities.
Confidence that the system will not change half way through, and that increased expenditures will generate the necessary revenues and return on investment.
Trust that the government will do what it says – that there is alignment between words and actions – and that we are all on the same page.
It is not a complex concept. Would it be wise to invest in a Quebec cheese shop if one was not confident the government would let you transport your cheese to market? Or buy a section of forest in BC, if you did not know if the government would impose new regulations on your license to cut? Or a fish plant in Nova Scotia, my family’s home province, if you thought the cans could not leave the peninsula?
We can’t build pipelines at EEDC, even though we wish we could. While the task falls to the private sector, there is a key role for our federal leaders in this endeavour.
- Set the context. The solution is not an energy strategy. It’s a stronger level of leadership at the federal level. Our federal leaders set the context through which others operate, and it is vital that they recognize their role is answering the question of ‘why’ something is in the national interest. When our national economy needs help, the task falls to our federal leaders to be its champion.
- Apply fairness in government decisions, across the country. For example, when the government decides whether or not to support an industry, based on the impact on upstream greenhouse gas emissions. What is the upstream impact on greenhouse gas emissions of bailing out an airline company or the Auto Industry? Why has this only been applied to the NEB hearings and pipelines?
- Fight for our economy – at home and abroad. We need double our advocacy efforts and resources at our Embassy in the U.S. We need to recognize that it’s going to be a fight, and have the intestinal fortitude to take on the challenge.
I have not spoken to the great strides the industry has made on improving its environmental record, or the work the provincial government has done on trying to improve the environmental image of the Oil Sands. We know that in order to become more competitive, we need to be cleaner, greener, cheaper, faster and safer, and telling you all the things our business community is doing would take up all my time.
In our discussion, I would be pleased to elaborate further on what some benefits of taking this approach might be. However, with a consideration to the time left, please allow me a final comment.
A man who I call mentor once taught me that “we are much more likely to act our way into a new way of thinking than think our way into a new way of acting.” When it comes to developing our natural resources, it not about coming up with a strategy. It’s about stepping up to the plate and doing what needs to be done.