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Alberta’s Jason Kenney Bet the Political Farm on Keystone XL — and Lost

Jason Kenney’s government seems increasingly desperate, conjuring up dark conspiracies to explain its own failures. Beneath the lurid rhetoric, there’s a last-ditch effort to keep the fossil-fuel industry profitable and prop up a conservative “success story” that couldn’t endure.

Railcars loaded with pipe for the Keystone XL pipeline, which Joe Biden recently cancelled. (Eric Hylden / Canadian Press)

Alberta’s premier, Jason Kenney, bet big on the Keystone XL pipeline in the spring of 2020, and it didn’t pay off. The situation in Canada’s bitumen-rich province now seems to be descending into a paranoid farce.

Just as the price of oil was going negative, Kenney’s United Conservative Party (UCP) government invested C$1.5 billion in the pipeline and pledged $6 billion in loan guarantees. Within a month, US presidential hopeful Joseph Biden had pledged to cancel the pipeline.

Kenney, surrounded by fans of Donald Trump in his own cabinet, apparently assumed that Trump would win reelection, removing the threat to Keystone XL. He has now lost a colossal bet wagered with Alberta’s public funds. To protect himself from responsibility for his own failures, Kenney is now in search of a scapegoat.

The Paranoid Style in Alberta Politics

Kenney combines his second-rate business savvy and political acumen with a darkly conspiratorial worldview. His bid for power partly rested on a promise to “wage war” on a shadowy global cabal of green-left special interests that supposedly threatened to keep Alberta oil landlocked, preventing further pipeline exports.

The bogeyman of a foreign-funded green left, with its troubling echoes of similar conspiracy theories elsewhere, offers a useful scapegoat for the province’s economic woes. A state-sanctioned “public inquiry into anti-Alberta energy campaigns” has been in progress since July 2019.

The inquiry’s deadline for completion has been missed and extended several times, but it seems to be at no risk of losing its generous funding. So far, its only outputs have been grift and a series of reports panned by critics for climate denialism, conspiracy theories, and industry-friendly fluff.

What explains this paranoid and single-minded focus on fossil fuels? Does Kenney really believe what he’s saying, or has the industry captured his government so completely that this is the natural end point? Is the UCP so worried about a petro-populist backlash that Kenney feels compelled to fight a losing battle?

With public hostility towards fossil fuels growing — as evinced by widespread calls for divestment from oil and gas — the Kenney government may seem to be acting like a cornered dog, but there is a certain logic to its conduct. Private-sector players, always attuned to public sentiment and the wishes of their shareholders, are pulling out of petroleum projects and leaving governments holding the bag.

Not in Kansas Anymore

Large public subsidies for the fossil fuel industry aren’t new. Canada’s prime minister Justin Trudeau bought the Trans Mountain pipeline not long ago. Jason Kenney’s purchase is the same kind of public subvention.

Without the political will to articulate an alternative economic vision, the Alberta government may just step into the breach left by international oil companies and cause greater carbon emissions than private-sector actors.

In spite of the economic slump caused by COVID-19, there is still demand for oil and gas in the global market. Over the long run, in the absence of serious political change, governments like Alberta’s could end up stubbornly anchoring the province to a sunsetting industry.

In the short term, as the fossil fuel industry faces a problem of supply gluts, the state has to find ways for the corporate sector to maintain some semblance of profitability. That’s why Jason Kenney has sped up tax cuts for the corporate sector in the midst of the pandemic.

When Kenney took office in 2019, the corporate tax rate was 12 percent, and he pledged to lower it to 8 percent by 2022. Instead, with the province facing a growing budget shortfall, he slashed the tax ahead of schedule to 8 percent in July 2020. Kenney appears set on replicating the failed Kansas experiment of race-to-the-bottom tax rates.

Externalities

Kenney’s government has allowed the fossil fuel industry to shift its environmental liabilities off corporate balance sheets. The oil and gas industry casts an immense environmental shadow, priced at $260 billion dollars — roughly 77 percent of Alberta’s GDP — and numbering over 91,000 inactive wells.

The estimated cost of inactive well reclamation alone is pegged at $30.81 billion, with much of this price tag accounted for by the cost of cleaning up tailings ponds. Tailings ponds are toxic, lake-like receptacles of oil sands by-products and waste — residual bitumen, hydrocarbons, and other chemical compounds.

Alberta’s tailings ponds, as of 2016, accounted for 250 square kilometers, or roughly double the size of Vancouver. They contain 1.23 trillion liters of water, which would be enough drinking water to slake the thirst of a million people for 1,700 years.

We’ve known for some time that the ponds are leaking into the groundwater, but no one knows for sure how great the damage will be, or how to fix it. There’s one thing observers do agree on, however: the cost of cleanup will be mostly borne by taxpayers.

As smaller oil and gas companies go under, their investors have attempted to get ahead of the environmental regulator that may oblige companies to fund some portion of the cleanup costs. Kenney helped them out by suspending all environmental reporting and monitoring in the oil patch, and allowing oil and gas companies to stop paying the taxes they owe municipalities.

These tax breaks and attempts to offload environmental liabilities go hand in hand with the UCP’s sustained attack on workers. Alberta has blocked organized labor from spending money on “political causes,” rolled back workplace safety protections, drastically lowered the compensation workers can seek from work-related injuries, and invented new ways for employers to skirt overtime pay.

End of the Party

Put together, this may enable the corporate sector to remain in the black while the oil and gas sector reconsolidates. Kenney’s big pipeline bet should be understood as one item in a long list of public subsidies for an industry that was still immensely profitable before the pandemic. But the paranoid rhetoric is meant to cover up an inconvenient fact: the oil boom will not return, and the easy money that came with it is gone.

Alberta has been relying on an economic chimera for several decades, keeping taxes low — including a Hayekian flat tax from 2001 to 2015 — while offering relatively high levels of public services. This supplied the regional base for Canada’s conservative political project. Low taxes, a bonanza for the rich, and public services sustained by fossil fuel revenues all helped power a long boom and protect Alberta from the worst of the Great Recession.

Now Kenney must explain who or what is to blame for the end of the party. A man of his political bent is hardly going to point the finger at those who own and profit from Alberta’s fossil-fuel sector, or suggest some redistribution of wealth to address budget shortfalls. Instead, Kenney has conjured up a global conspiracy intent on stopping pipelines.

While Jason Kenney blames his failed gambles on imaginary foes, there’s now a real opportunity for his opponents to address the people of Alberta in honest and credible terms, identifying the real causes of their social and economic problems. Corporate profits benefited immensely from the extraction of fossil fuels, while Albertans were stuck with a boom-bust cycle and rounds of neoliberal austerity. Identifying who is truly to blame for this state of affairs could spark off a challenge to the basis of conservative political power right across this country.