Alberta's investment problem goes beyond one pipeline

A new pipeline proposal has seemingly renewed optimism about Alberta’s energy future. Yet private investment remains on the sidelines.

According to the proposal jointly submitted to Ottawa by the Smith and Carney governments, the new pipeline would run from Alberta to the southern coast of British Columbia. The Trans Mountain Corporation (which is now owned by the federal government) and the Alberta Petroleum Marketing Commission (a provincial Crown corporation) would develop and operate the pipeline while Pembina Pipeline, a private company headquartered in Calgary, would hold a 10 per cent stake during the construction phase. The project will cost between $35 billion and $44 billion, according to the proposal’s estimates, paid for primarily by taxpayers.

As Charles St-Arnaud, chief economist at Servus Credit Union, recently noted, industry shareholders currently lack the “appetite to commit that type of capital.”

But Alberta’s investment challenge extends far beyond one pipeline. From 2014 to 2024, investment in oil and gas extraction in Alberta declined from $64.6 billion to $25.3 billion (adjusted for inflation), a decrease of nearly 61 per cent.

And according to a recent survey of senior oil and gas executives, investors are particularly wary of environmental regulations in Alberta—50 per cent of survey respondents said “stability, consistency and timeliness of environmental regulatory processes” scare away investment compared to only 14 per cent in Wyoming and 11 per cent in Texas. Similarly, 43 per cent of respondents said the cost of regulatory compliance deters investment in Alberta compared to 9 per cent for Wyoming and 19 per cent for Texas.

And we know why. Canadian projects face persistent delays, rising project costs, increasing carbon taxes (the United States has no national carbon tax), costly methane emissions reduction requirements and continued regulatory uncertainty.

More broadly, between 2014 and 2024, across all industries (excluding residential construction), business investment per worker in Alberta fell by 51.6 per cent (from $56,401 to $27,294) compared to a 31 per cent increase (from $19,352 to $30,555) in the U.S (all numbers adjusted for inflation). In other words, businesses are investing roughly half the amount per worker in Alberta as they were a decade ago while businesses in the U.S. have ramped up investment.

Why should Albertans care?

Because when business investment declines, workers suffer. During the same 11-year period, per-person GDP (an indicator of incomes and living standards) plummeted from $83,797 to $74,907 (after adjusting for inflation).

More than a decade of weak business investment, including a sharp decline in investment in Alberta oil and gas, suggests Canada’s complicated and uncompetitive policy framework is making it harder, not easier, to attract private capital in Alberta.

Alberta’s energy sector has no shortage of opportunity, and federal support for major energy projects is seemingly growing. But political support is no substitute for private investment—taxpayers shouldn’t have to fund major energy projects. Governments must create a more competitive environment to address Canada’s investment crisis and improve living standards for all Canadians, in Alberta and beyond.