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WHAT ABOUT ALBERTA?
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Albertans have been grappling with hard questions about their traditional industries, the environment and their place in Confederation - but parties have largely written off the province in this election campaign. The West's trust will have to be won no matter who is elected
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By JAMES KELLER, DAVID PARKINSON
  
  

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Saturday, October 12, 2019 – Page A16

TORONTO -- The signs on the edge of Medicine Hat welcome visitors to "The Gas City," a reference to the natural gas that has built and sustained this southeastern Alberta community for more than 100 years.

There are thousands of cityowned natural gas wells popping up out of the ground in local parks, boulevards and farmers' fields stretching into Saskatchewan, which have given Medicine Hat an outsized wealth for a community of about 63,000.

Generations of natural gas revenues have helped build schools, parks, roads and community centres, while keeping local taxes low. But years of rock-bottom gas prices recently prompted the city to announce that most of those wells will soon be shut down, a painful decision that has only deepened the wounds from an economic downturn that has dragged on for the past five years.

Mayor Ted Clugston says thousands of people in the region who work in the oil-and-gas sector have already lost their jobs.

The city's decision will put dozens more out of work, as Medicine Hat comes to terms with the collapse of what was once its main industry. "We are a microcosm of Calgary and a microcosm of the entire province of Alberta," Mr. Clugston said. "It's been a double hit for us."

The prolonged slump in the province's oil-and-gas sector has left tens of thousands of Albertans unemployed, wreaked havoc with the province's finances and inflamed a sense of anger and resentment in a region that has a long history as seeing itself as ignored by the rest of the country. Calls for separation, while still on the political fringes, have become louder as polls show an increasing number of Albertans questioning their place in the country.

Yet, the province's economic challenges have mostly failed to break into the national conversation ahead of the Oct. 21 federal election.

Alberta's place in the campaign has largely been limited to the future of the Trans Mountain oil pipeline expansion, which the Liberals and Conservatives are both pledging to build. But its completion is still years away, and many Albertans have become skeptical the expansion will ever happen.

Economists have warned that even an expanded pipeline won't return the province's economy to what it was before oil and gas prices plunged in 2014 and 2015.

There have also been promises to eventually move Canada permanently off fossil fuels, with varying degrees of urgency, but few concrete ideas about what life in Alberta and other resource-dependent regions will look like when that happens.

And none of the national campaigns have taken seriously complaints in Alberta that federal equalization payments transfer too much of the province's wealth to provinces like Quebec, which opposes pipelines and oil infrastructure.

While Medicine Hat's problems are largely owing to a glut of cheap natural gas in the United States, rather than too few oil pipelines out of the province, Mr.

Clugston draws a direct line between what's happening in the community to Liberal Leader Justin Trudeau. His name still evokes memories of his father Pierre Trudeau's hated National Energy Program of the 1980s.

"You can vote Conservative, but there is a sense of just almost giving up," Mr. Clugston said.

"What does he have to do to get voted out?" Medicine Hat-Cardston-Warner is not in a swing riding - not even close. The Conservative candidate typically wins with as much as 70 per cent of the vote, and the main competitors are largely seen as sacrificial candidates with no real hope of success.

There is a similar lack of suspense in most of Alberta's 34 federal ridings, with pollsters predicting a possible Conservative sweep later this month. That has meant no party has an incentive to spend much time campaigning in Alberta, much less tackle the very real long-term problems facing the province, said Martha Hall Findlay, president of the Canada West Foundation.

"One of the things that makes it so much worse is that you go outside of the West and nobody in any other part of the country has a clue of just how bad it is - and that speaks volumes," said Ms. Hall Findlay, a former Liberal MP.

The main party leaders have barely visited Alberta. Mr. Trudeau was in Edmonton on the second day of the campaign, but hasn't been back. Mr. Scheer has been twice - once each in Calgary and Edmonton.

NDP Leader Jagmeet Singh has yet to campaign in the province and his party hasn't said whether he intends to before election day.

Green Leader Elizabeth May attended a climate protest in Calgary last month, while Maxime Bernier of the People's Party has also been to Calgary.

Ms. Hall Findlay said the sentiment in Alberta is different from the "West wants in" slogans of the eighties and nineties. Many in the province now see the federal focus on climate change as an existential threat that ignores the economic realities of life in Alberta, she said.

"People here are saying, 'We get that, we're working really hard toward finding those solutions,' " Ms. Hall Findlay said.

"To hear that the environment is the issue in this election misses half of the conversation, because it also has to be about the economy ... and that's the frustration."

From 2000 through 2014, Alberta's economy grew by an average of 4.8 per cent a year - more than double the pace of the rest of the country. The province was responsible for 27 per cent of Canada's economic growth in that time, despite having only about 10 per cent of the national population.

Alberta's population was also growing fast, as its booming economy became a magnet for workers from other parts of the country. The province's labour force swelled by almost 750,000, or nearly 50 per cent, in that period. Average weekly wages increased by better than 5 per cent a year. The average price for a detached home rose by nearly 13 per cent a year.

But a lot has changed since the oil market began to collapse in the summer of 2014.

The Alberta economy sank into a two-year recession in the fall of that year, and still hasn't entirely recovered. The province's GDP at the end of last year was 1-per-cent less than where it was at the end of 2014. Alberta's unemployment rate, which was below 5 per cent in 2014, was 6.6 per cent last month - the highest west of Atlantic Canada. Average wages have been essentially flat over the past five years.

Estimates about how many jobs in the oil patch were lost as a direct result of the price crash have varied. A report released earlier this year pegged the number at about 40,000 oil-and-gas jobs gone since 2014.

There were 166,200 Albertans out of work last month, up from 111,400 in September, 2014, when oil prices started to collapse, according to Statistics Canada.

That's still better than the peak in November, 2016, when that figure had ballooned to 225,000.

Some groups continue to hurt more than others. Women actually saw a net gain in employment during the recession, but young men - who could once command lucrative wages in the oil industry with relatively little education - were hit especially hard.

The unemployment rate among men aged 15 to 24 swelled to 19.9 per cent last month, the highest in the country, and up dramatically from 11.3 per cent in September, 2014. But that number doesn't even count young men who have abandoned seeking work entirely or gone back to school, in light of the dismal prospects.

The employment rate - the percentage of the total male population in the age group who have a job, a more complete picture of the total hit taken by Alberta's young male work force - has fallen to 53.7 per cent, from 63.4 per cent in September, 2014.

Young men without a highschool education have fared the worst.

Consumer insolvencies also ramped up during the recession, and have continued climbing since it ended. In August, the number of insolvencies, including bankruptcies and proposals, was 13.4-per-cent higher than a year earlier.

Mortgage arrears are at their highest rate of the past five years, as well. The percentage of mortgages in Alberta with payments overdue by three or more months hit 0.5 per cent in June - the most recent data available for the Canadian Bankers Association - compared with 0.23 per cent across the country. Home prices in Alberta have seen yearover-year declines almost every month for the past two years.

Economists forecast that the Alberta economy will grow by less than 1 per cent in 2019. Some have even suggested the province may have already slipped into mild recession.

Things look a little brighter ahead, with forecasters projecting growth approaching a respectable 2 per cent in each of the next two years. But, as always, a lot depends on the price of oil; even in a weak oil market, the energy sector still accounted for 30 per cent of Alberta's GDP last year.

Despite the slowdown, Alberta's economy also still has a lot to envy.

Its employment rate - the percentage of people aged 15 and older who have a job - is still the highest of any province. So is Alberta's labour participation rate (the share of people who either have a job or are seeking one).

Albertans enjoy the highest incomes in the country - average wages are nearly 15-per-cent above the national average - and the lowest taxes per capita. (The absence of a provincial sales tax is the biggest factor.)

It has the youngest population among the provinces, with a median age four years younger than the national median. Alberta is also one of the country's best-educated provinces: It ranks near the top in percentage of workers with a postsecondary education, and in test scores among high-school students, based on the Programme for International Student Assessment (PISA), a global standard.

In other words, Alberta's labour supply is young, skilled and plentiful - all good traits for future prosperity. The trick, economists say, is figuring out how to put that high-quality labour force to work as the oil and gas industry no longer commands their services the way it once did.

University of Calgary economist Trevor Tombe said new pipeline access would clearly help the Alberta economy by

narrowing the price gap, or differential, between the prices oil producers in Alberta receive and the much higher ones in foreign markets.

Constrained pipeline access has depressed Canadian crude prices in recent years as production levels approached export capacity and the industry was left held captive by one market: the United States. The increased reliance on oil-by-rail has also added significantly to transportation costs, which has further weighed on prices. The Alberta government estimated the province was losing $80-million a day when the price differential hit US$50 a barrel last year.

"It's hard to overstate the importance of the pipeline. because that differential does have significant implications for all of the economy," Dr. Tombe said. "In terms of what else the federal government could do, it's not clear because the recession was not a policy-driven event. It was on oil price shock."

Last month, Dr. Tombe published research that attempted to measure how much Alberta's economic downturn has weighed down the national economy. He concluded that if Alberta had kept pace with other provinces, the Canadian economy would be $130-billion larger and the national unemployment rate would be 0.8 percentage points lower.

"We tend to think about provinces too much as isolated entities," he said. "But the economic interconnections between the different parts of Canada are very strong."

While oil prices, and Alberta's economy, have rebounded since the depths of the recession, that recovery has been modest and left many people out entirely.

News of bankruptcies and layoffs in the resource sector is still frequent.

Rory Hale is a recent casualty.

He lost his job as an IT manager at a Calgary-based oil-and-gas firm this past June. He had already been searching for work for much of the previous year, expecting that downsizing and layoffs were coming.

Mr. Hale, 50, assumed his experience in IT would insulate him from the boom-bust cycle of oil and gas, but so far it hasn't helped. "This go around, if I wanted to be insulated from it, I'd probably have to look outside of Alberta to get away from the downturn," he said. "I'm getting a little older with deep roots in Alberta, so that would be a pretty tough move."

Mr. Hale said he views the downturn as "100-per-cent politically driven," and he is deeply suspicious of the Trudeau government, despite its decision to purchase the Trans Mountain pipeline. He said voting Conservative is the only option he's considering.

"It started with the oil price collapse, for sure, but the federal government and the previous [NDP] provincial government are basically trying to kill this industry, in my opinion," he said.

"It's not good for Canada. It's not good for Alberta."

Alberta went through a provincial election this past spring in which Premier Jason Kenney brought his United Conservative Party to power with a campaign that seized on those economic frustrations - and held up Liberal Leader Justin Trudeau as the main cause. Mr. Kenney pointed not only to delays in pipeline construction, but federal environmental legislation he argues represents an attack on the province.

Mr. Kenney has made defeating Mr. Trudeau a key goal. He played host to Conservative Leader Andrew Scheer in Edmonton early in the campaign, and last weekend he visited Ontario's 905 region to campaign for the party. He has also promised to hold a provincial referendum on equalization if several conditions aren't met, including the repeal of recently passed environmental laws, such as Bill C-69, and meaningful reform to the equalization formula.

"I would say the frustration is enormous," Mr. Kenney said in an interview. "We have a sense that we played by the rules, that we've contributed massively to the federation ... And most Albertans, right across the political and demographic spectrum, just feel that that has not been recognized."

Mr. Kenney has accused the Liberal government of stoking a national unity crisis, pointing to several opinion polls, including an Environics Institute survey published earlier this year, that showed more than half of respondents in Alberta said the province would be better off on its own.

He said Mr. Trudeau would have an enormous challenge to confront the mistrust of Albertans if he wins re-election. If the Conservatives win, Mr. Kenney said he will also need to push hard for Alberta's interests, but he sees Mr. Scheer as a natural ally.

"I recall that when Stephen Harper was prime minister, no one was talking about separation in Alberta," said Mr. Kenney, who was a senior cabinet minister in the Harper government. "We didn't get everything we wanted, but fundamentally, we had to sense that the federal government was not working against our fundamental economic interests."

The Premier also warned of a worst-case scenario that has been echoed by other pro-pipeline voices in Alberta: a Liberal minority government that would require support from the NDP or Greens to survive.

"It would take a federal government that's already hostile to our energy industry and make it even more hostile," he said.

While Mr. Kenney has held up recent rumblings about Alberta separatism to sound the alarm about national unity, he's also suggested that many of the people who might tell a pollster they support separation may just be blowing off steam.

The Western separation movement, to the extent that it is a movement, appears to be relatively small.

A group calling itself Wexit -a Brexit-inspired name for Western separation - made waves in February when it put up billboards in Calgary and Edmonton that asked, "Should Alberta Ditch Canada?" The group has been making a similar pitch in Saskatchewan and Manitoba.

Wexit organizers registered as a third-party group in the provincial election under the banner of Alberta Fights Back and raised a little more than $8,000. The group has been holding small events and rallies in Calgary and Red Deer that have attracted a few dozen people.

The group plans to register as a federal political party and wants to run provincial candidates with the goal of eventually holding a referendum on separation. Former Conservative MP Jay Hill has publicly mused about the idea of Western independence, as has Allan Kerpan, a former Reform MP and Saskatchewan Party MLA.

The Alberta Independence Party, which is not formally associated with the Wexit group, received just 0.7 per cent of the vote in the spring election.

Wexit founder Peter Downing said his supporters feel as though the federal government is beholden to Eastern Canadian interests and that Alberta would be more prosperous on its own. He says Alberta is being ignored during the current campaign. "Our vote doesn't count," he said.

Mr. Downing predicted that a Liberal victory would cause the separatist sentiment to explode, and he insists calls for a referendum won't stop even if Mr.

Scheer becomes prime minister.

Liberal candidates in Alberta have been forced to push back against that anger and the perception the party isn't on the side of the oil and gas industry. The Liberals did not have a presence in the province before picking up four seats in 2015, and the party faces the prospect of being wiped off Alberta's electoral map again.

Randy Boissonnault, a Liberal incumbent in the riding of Edmonton-Centre, said there are "4.5-billion reasons" why Albertans should trust the party, a reference to the cost of purchasing the Trans Mountain pipeline. He notes that construction on the expansion project has started in Burnaby, B.C., and crews are mobilizing to get started elsewhere along the route.

When asked why that message isn't getting through, Mr. Boissonnault blames "misinformation from Andrew Scheer and Jason Kenney," and complains that Mr. Trudeau's government isn't getting the credit it deserves.

"There is no political calculus for Justin Trudeau to have bought the pipeline, and yet it's the right thing to do for our country," Mr. Boissonnault said.

The New Democrats face even greater challenges.

The party's lone MP in the province, Linda Duncan, isn't running again, turning her riding of Edmonton-Strathcona into a competitive three-way race with the Liberals and Conservatives.

Across Alberta, the party polls a distant third.

NDP Leader Jagmeet Singh opposes the Trans Mountain pipeline and drew criticism when he recently said he would not impose pipelines on provinces that don't want them running through their territory, such as British Columbia and Quebec, although he insisted that is not the same thing as a veto.

The NDP candidate in Edmonton-Strathcona, Heather McPherson, has instead attempted to align herself with former NDP premier Rachel Notley, whose support for the Trans Mountain expansion put her at odds with the federal party.

"We need to consult with Indigenous people along the line we're trying to build," Ms.McPherson said in an interview.

"We have to get consensus there.

We have to build it."

Back in Medicine Hat, Mayor Clugston says the city is not waiting for any level of government to save it.

The community has attracted several new companies recently, including an Aurora Cannabis facility that will create about 450 permanent jobs and a bitcoin mining operation, Hut 8, that opened last year. On top of the jobs, both operations need substantial amounts of electricity, purchased from the city-owned power utility (which, of course, burns natural gas).

Even Gas City is investing significant cash in renewable energy. There are three windmills towering over the north edge of town. A municipally-owned solar project is shutting down because it was losing money, but the city plans to keep experimenting with the technology.

The city has yet to replace all the jobs that have been lost in oil and gas, and Mr. Clugston acknowledges that in many cases the wages are not as high. But he says there's a cautious sense of optimism.

"The oil and gas [downturn], it's devastating, and those people are having to navigate a transformational shift in their lives," Mr.Clugston said.

"The irony is that this city was founded on cheap natural gas. It has been our history to burn it, from the clay and the brick manufacturing 120 years ago. Now we make electricity out of it, and bitcoin and marijuana."

With reports from Justin Giovannetti in Edmonton and Matt Lundy in Toronto

Associated Graphic

Medicine Hat, its city sign seen at top, is teeming with natural gas wells, but many of them will soon be closed as the city tries to come to terms with the collapse of what was once its main industry. Mayor Ted Clungston, above, says the city is a 'microcosm' of Alberta.

PHOTOS BY JEFF MCINTOSH/ THE GLOBE AND MAIL

Further job losses are expected in Medicine Hat as the city moves to close many of its natural gas wells, such as the one seen above.

The city of Medicine Hat, its landmark Saamis Tepee and a downtown mural seen above, was once able to build schools and parks with the natural gas revenue it produced, but now Gas City has begun to look at investing in renewable energy after a five-year economic slump.


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