Government of Alberta Response to Federal Budget 2021

Prepared by Monte Solberg, Principal, New West Public Affairs

April 19, 2021

Background

Canadian political forces have seldom been more complex and dynamic then they are today. The Covid-19 pandemic, reactions to Covid restrictions, economic recession and rebound, collapsing and reviving oil prices, the ESG movement, regional tensions, and base political calculation all heave and thrust to influence Canadian public opinion. That is the background for the Government of Canada’s Budget 2021.

In non-pandemic times government indebtedness would be a significant public issue, with many coffee shop strategists expressing alarm at deficit spending. Budget 2021 will post an eye-popping deficit of around $354 billion dollars. That will raise a sea of red flags among many seasoned political watchers, some economists, and in the business community, but it is less likely to alarm regular Canadians whose priorities right now are the health of their families, a return to normal routines, improving living standards, and jobs.

Vaccines are starting to arrive by the millions and jobs are beginning to rebound but millions of Canadians are still unvaccinated, unemployed, underemployed and/or underwater on their mortgages, business loans and credit card debt. Great swaths of the country are under strict Covid restrictions and third waves of the virus are mounting. Canadians are frustrated and taking it out on their political leaders. This is truer in Alberta than almost anywhere else.

Premier Kenney’s personal popularity is hitting new lows. 16 rural MLAs signed a public letter rejecting their own government’s province-wide Covid -19 restrictions in favour of a regional approach. One recent poll shows the New Democrats with enough support in Alberta to form a majority government.

It is ironic that the Government of Canada’s Budget 2021 may play an important role in providing Premier Kenney with a rare political victory and, perhaps, a path forward to better days.

The UCP Government has fought from the beginning for a prosperous oil and gas sector, which makes up 25% of Alberta’s economy and ensures Albertans the country’s highest living standards. Through the first two years of his mandate, he lost battles on the Keystone XL pipeline and the federal carbon tax and for a brief period last spring, oil prices went to below zero. Hundreds of thousands of oil and gas workers have lost their jobs in the last seven years. Large investment firms are divesting from the Alberta oil sands. All the while the ESG movement and the drive to Net Zero emissions by 2050 has gained steam. Belatedly the UCP Government has realized that they must meet higher environmental standards and embrace ESG rhetoric if Canada’s oil and gas sector has any chance of surviving and even thriving in a new lower emission economy. But they needed more than a change in approach, they also needed federal government support.


Budget 2021

It has been a badly kept secret for several months that the Alberta government wanted federal funding for Carbon Capture Utilization and Storage (CCUS). They publicly lobbied for $30 Billion over 10 years. Alberta has argued that the only way that Canada can meet its Net Zero 2050 commitments is for a major investment in CCUS. It received that today in the Budget. While details are yet to come the federal government announced a tax incentive for heavy emitters to store up to a total of 15 megatons of carbon dioxide a year by 2030. Alberta Government sources say that the tax incentive will be worth close to $3 billion a year, meaning many Alberta-based companies can benefit. This is on top of other funding for CCUS research. Alberta officials are claiming this as a victory for Alberta’s leadership on CCUS, for the energy sector, and for the environment. Importantly, it will give companies the certainty they need to invest in carbon reduction. Less welcome will be the announcement that the feds are passing over Alberta to give British Columbia’s Centre for Innovation and Clean Energy $35 million, part of which will go to CCUC research.

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