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Politics

Alberta’s History of Squandered Opportunities

Encana’s flight south only the latest example of Canada’s corrupt legacy of resource giveaways.

Mitchell Anderson 8 Nov 2019 | TheTyee.ca

Mitchell Anderson is a freelance writer based in Vancouver and a frequent contributor to The Tyee.

The exit of Encana to the U.S. seemed like another opportunity for Alberta to heap blame on Ottawa for the self-inflicted shambles of provincial finances. Premier Jason Kenney wasted no time in again playing the dog-eared victim card: “It’s not just about Encana. It’s about the broader decline of the Canadian energy industry, which I think is a deliberate policy of the Trudeau government.”

Other energy players further cranked up the crisis narrative. Cenovus Energy CEO Alex Pourbaix called the move “a tragedy for Canada.” Former Encana boss Gwyn Morgan, self-described most powerful man in the oil patch and Fraser Institute alumnus, lamented: “The destructive policies of the Trudeau Liberals have left the company with no choice but to shift its asset base and capital program south of the border. Now, its re-election strikes the final blow.”

Beyond the oil sector echo chamber lies the actual history of Encana; a story sadly emblematic of Canadian resource giveaways dating back long before Confederation.

In 1867, P.E.I. and British Columbia remained British colonies. The Hudson’s Bay Company controlled an area larger than India, stretching from northern Quebec to what would become Alberta and Saskatchewan in 1905. This vast monopoly domain was granted by Royal decree 200 years earlier, ignoring Indigenous occupation that pre-dated the trans-Atlantic pen stroke by many millennia.

In 1869, the Hudson’s Bay Company agreed to relinquish its vast gratis territory to the young Canadian government in exchange for $1.5 million and deeded ownership of all its settlements. The company also kept five per cent of the most fertile prairie farmland amounting to almost 200,000 square kilometres, an area larger than present day Syria.

Prime Minister John A. Macdonald and his Conservative party sought to bankroll a railway to the West Coast and reached out to friendly corporate interests eager to land the massive contract. An ensuing bribery scandal involved almost every member of the Tory caucus and caused Canada’s second elected government to resign in disgrace.

After Macdonald was returned to power in 1878, his government signed a deal with the newly incorporated Canadian Pacific Railway Company several years later to finish the project for $25 million plus track previously completed, worth at least that much. In addition, CPR was granted 25 million acres of Crown land on either side of the rail right of way — again ignoring Indigenous title — and excused from paying property taxes for 20 years. In all, CPR came away with lucrative land holdings larger than South Korea, which it gainfully sold to settlers riding its railway west.

What does this have to do with Encana? Around 1902, CPR bean counters realized that coal and petroleum rights were a profitable sideline, so they started to withhold subsurface mineral rights from the company’s land sales. By 1958, Canadian Pacific Oil and Gas was incorporated as a CPR subsidiary, which later became PanCanadian Petroleum. By 2000, PanCanadian was the most active driller in North America with operating income of $1.7 billion — more than double that of the railway division.

The company created to build the National Dream had morphed into a resource titan based on a titanic land giveaway 100 years earlier. In 2001, the parent corporation Canadian Pacific split into five separate companies, including Fording Coal, soon sold to Teck Cominco for a tidy US$14 billion. A year later, PanCanadian Petroleum merged with the Alberta Energy Company to create Encana headed by Gwyn Morgan, now lamenting the loss of Canadian energy institutions.

Former Alberta premier Peter Lougheed’s government had launched the Alberta Energy Company with public money and land in 1973 as a way to jumpstart development in the oil sands and increase benefits to Albertans from their natural bounty. Around the same time, Ottawa incorporated Petro-Canada as a Crown corporation to have a federal public player in energy sector. However, Alberta has proved oddly hostile to moving beyond the passive role of rent taker.

Petro-Canada was despised in the oil patch — its headquarters derided as Red Square before both Crown corporation and headquarters were swallowed by Suncor. One of the first actions of newly elected premier Ralph Klein was to sell off the public stake in Alberta Energy Company in 1993.

Losing the only provincial public player on the field back in 1993 meant that the Alberta government lost the capacity to ground-truth a highly complex industry it was allegedly regulating. The province has since seen 5.6 billion barrels of conventional crude production worth US$316 billion at current prices, and is somehow $66 billion in debt.

The crocodile tears now being shed in the oil patch about Canadian resource sovereignty are rather rich. After absorbing Alberta Energy Company, Encana embarked on a program of asset liquidation. Encana’s oil holdings — including oil sands expertise developed at public expense — were spun off to create Cenovus in 2009.

The oil patch fire sale continues. This year Kenney slashed provincial coffers to give corporations a four-per-cent tax break. Husky Energy responded by firing hundreds of workers while posting a $233 million one-time tax windfall. What was left of Encana had already decided to decamp to the U.S., where it need not witness the budgetary chaos its founding province created as an unrequited enticement.

Public pearl clutching from Kenney and other self-serving industry insiders do nothing to quell the dangerous separatist flames they themselves have stoked among unnerved oil workers facing global forces beyond their control. Not even the Globe and Mail could hold its nose in the face of such revisionist histrionics, stating in an editorial: “Blaming Encana’s failures on Ottawa is inaccurate and unfair. Its decline, and the decision to move its head office, stem from poor choices made in a Calgary boardroom a decade ago.”

More than that, the endgame of Encana is sadly consistent with Canada’s corrupt and cowardly history around resource management, or lack thereof. More than a century after Sir John A. carved up the country with the railway barons of the day, grotesque government giveaways seem still the norm, while respect for First Nations has moved little beyond land acknowledgement lip service.

Albertans, and all Canadians, have every right to be enraged about squandered opportunities and wasted resource wealth. Just make sure that history informs us about where to focus that anger.  [Tyee]

Read more: Energy, Politics

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