Alberta Premier Jason Kenney was triumphant when he addressed a Calgary business crowd earlier this month. “Alberta is back,” he said, as he laid out the rosiest economic projections the province had seen in years.
He had reason to be optimistic. A recent surge in oil prices has flooded provincial coffers with cash. Alberta’s real GDP growth is now forecast to reach 5.1 per cent in 2022, the highest since commodity markets collapsed in 2014. The provincial-deficit forecast, originally projected to hit $18.2 billion in 2021, has been whittled down to just $5.8 billion next year.
But the windfall arrives as Alberta’s United Conservative government is trying to reduce decades of failed attempts to reduce the province’s dependence on fossil fuels. It has positioned itself as a dedicated supporter of cleantech and the digital economy. Now, some in the province’s tech industry worry Alberta could lose sight of those diversification efforts.
As of the third quarter of this year, tech companies in Alberta have secured $480 million in venture capital, according to a report by the Canadian Venture Capital & Private Equity Association. Larger firms have also invested in the region, including Amazon Web Services’ decision to commit $4.3 billion to establish a cloud computing hub in Calgary.
The influx in investment came as Alberta’s government was heavily focused on innovation, with the global pandemic sapping oil demand. Now it will have to stay the course.
“We cannot lose sight this time,” said Ken Kobly, president and CEO of the Alberta Chambers of Commerce. “Oil and gas will be around for years to come; however, we need to make sure that we’re laying the groundwork for the next Alberta economy.”
Albertans’ livelihoods have traditionally risen and fallen alongside oil prices, and the province’s boom-or-bust nature is a topic of discussion in corporate boardrooms and around family dinner tables. A bumper sticker common in the province reads, “Please God let there be another oil boom. I promise to not piss it away the second time.”
For those who have been through past oil cycles, there is good reason to doubt the province’s commitment to economic diversification this time around. In the past, Kobly said, high oil prices have always caused a sharp increase in wages, which draws skilled workers away from more innovative sectors.
“I’ve seen this rodeo four times in my lifetime,” said Kobly. “When oil and gas rebounds, we tend to see a lot less push for diversification.”
Even so, the current upswing in oil markets is hardly a return to the boom times of the mid-2000s. Oil prices remain well below their pre-2014 levels, and most analysts see demand peaking within about a decade. Investors are increasingly questioning oil companies’ climate strategies, and pushing for clearer plans to reduce emissions.
Kevin Krausert, CEO and co-founder of Avatar Innovations, said oil companies have taken a cautious approach as oil prices rise, diverting much of their extra cash flows toward share buybacks, stable capital plans and emissions-reduction technologies, rather than new sources of production.
At the same time, investment in oil and gas overall is expected to flatline in coming years, bringing new urgency to the need for newer sources of income. While Alberta’s economy will be roaring next year, the five-year average is far less impressive: between 2019 and 2024, economic growth will average just 1.12 per cent.
“I do think this time is different,” said Krausert, the former CEO of an oil and gas drilling company.
Krausert, whose firm Avatar pairs innovative startups with major oil-sands backers like Suncor Energy and Canadian Natural Resources, says opinions have shifted on matters of innovation in the province. New technologies like hydrogen are now viewed as having real value, he said. Alberta is currently a leader in many emerging technologies like carbon capture, utilization and storage (CCUS), which could eventually offer a marked drop in upstream emissions.
“I’m doubtful that Calgary will ever become the next Silicon Valley, but I’m pretty confident Calgary can become the next Silicon Valley in carbon,” he said.
Most executives or private-sector representatives who spoke to The Logic believe the current UCP government does understand the importance of lessening its dependence on fossil fuels, but said government sclerosis has so far caused a lack of execution.
“The fact of the matter is that for years, all levels of government have been slow to develop and implement policies that meet the needs of our growing tech sector,” Bronté Valk, an Alberta representative at the Council of Canadian Innovators, said in an emailed statement. “To build a thriving ecosystem of scale-up companies, we need the government to not just keep pace with business, but regularly engage and listen to the concerns of local innovators and co-develop solutions that increase talent and job creation in the sector.”
Valk said the government had consulted with CCI and others about the introduction of new privacy legislation and modelling for data commercialization, but have yet to see any headway from policymakers. Alberta has also not yet introduced its own provincial nominee program , she said, which would go a long way in helping upstart companies secure talented workers from abroad.
Doug Schweitzer, the province’s innovation minister, said his government is “laser-focused” on bringing more innovative jobs to the province. He points out that Kenney was elected premier primarily on a promise to create jobs and usher in an era of economic growth.
Schweitzer said he understands as well as anyone the shift in momentum taking place in Alberta. He recalls coming to Alberta as a lawyer in the mid-2000s, at a time when China’s insatiable demand for oil helped drive prices to their highest levels in history.
At the time, his peers were racing to establish oilfield service companies and other energy companies in an attempt to take advantage of the boom. Today, there is a similar push—but in alternative sectors like cleantech and artificial intelligence.
“Alberta took great pride in those young startup companies,” he said. “What you’re seeing now is this next generation of entrepreneurs in Alberta equally hungry and wanting to take on the world. They’re just doing it in different industries.”
