There’s a lot of talk about these days about the importance of supply side expansion. But there’s a lot of ambiguity about what that means. It gets particularly tricky when we’re talking about expanding energy production, since many rich countries have stringent climate goals. This poses a dilemma particularly for liberal or left parties in the West. On this episode of the Odd Lots podcast, we speak to Rachel Notley, the former Premier of Alberta, and the head of the Alberta NDP about how her Democratic Socialist party competes in one of Canada’s most conservative provinces, by taking a different tack on the energy industry. This transcript has been lightly edited for clarity.
Key insights from the pod:
How the Alberta NDP thinks about energy production and climate change — 4:31
The importance of energy to Alberta and all of Canada — 7:16
The role of carbon pricing — 10:08
Canada’s LNG future — 15:51
Smoothing out boom/bust cycles — 20:09
The politics of pipelines — 28:23
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Joe: (00:10)
Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. Unfortunately my co-host Tracy Alloway is out today, so it'll just be me solo. But it's gonna build on some conversations that Tracy and I have been having lately on the show. So, as everyone knows, it's a theme that we've really been talking about for maybe two years now, or at least a year and a half.
And this idea of like: Okay, supply sided expansion. Everybody likes the idea in theory of expanding productive capacity in the economy. And it’s very hot right now. You have all kinds of people talk about it. We had Ezra Klein, for example, on the show, to talk about it recently. We also see it in DC. There's real action. The Inflation Reduction Act is specifically about building out capacity and investing in a new energy and so forth. We saw it with the CHIPS Act that was also passed about building up us domestic semiconductor capacity.
However, that being said, I still believe that there is this core tension, particularly among left or liberal parties, and you definitely see it with Democrats. Because clearly one aspect of building out supply side capacity is energy. Oil and gas and so forth. And obviously there's interest in renewables, but in the meantime, this is a real constraint. Inflation, high gas prices, high electricity prices, etc. And while on one hand there's an impulse to expand supply side capacity, there are also climate goals. And so I believe that there is this real tension among sort of left liberal parties in the West, at least specifically between yes, this idea of expanding supply side capacity versus meeting climate goals and not giving a boost to the fossil fuel industry.
And I don't think that parties have really resolved this tension. That being said, there is a party that has been thinking about this tension and finding a way to resolve it, both in terms of policy and politics for a long time. And that is the Alberta NDP. Energy is a huge part of the Alberta economy, and it's also seen as a conservative province. And yet the Alberta NDP has had a shocking amount of electoral success in the province having been in power from the years 2015 through 2019. It reminds me personally of the fact that Joe Manchin can win in West Virginia in some respect because that is such a red area. Maybe it would be characterized, I don't know what the color schemes are in Canada, but similar idea.
And so I want to learn more about the Alberta NDP, how they do it politically, and how they think about these potentially competing policy goals. So I'm very thrilled to welcome to the podcast, today I am going to be speaking with Rachel Notley. She is the leader of Alberta's official opposition, the leader of the Alberta NDP, and she was the provincial chief from the years 2015 through 2019. And election season is gearing up in Alberta once again So we're gonna talk about what are, what's gonna come up in this election season. Rachel, thank you so much for coming on the podcast.
Rachel: (03:41)
Well, it's a pleasure to be here. Sounds like you've been having some very interesting conversations as we go through a lot of economic growth and evolution.
Joe: (03:53)
I really do think this is like a really difficult challenge, you know, in the US for example, for the Democratic Party, and I suspect for the national NDP in Canada as well. You'll tell me more about that. But it seems like you've kind of cracked the code, to some extent, at least electorally. But from a policy standpoint, like, let's start big picture. Like how do you think about balancing the importance of the natural resource sector, the importance of energy, both from a sort of employment standpoint and an abundant energy perspective with also thinking about climate goals?
Rachel: (04:31)
I think probably from the very start, one of the things we've tried to do is avoid using terms like balance, because it implies the notion that they run against each other. And the reality is that, you know, one of the things we have to remember is that there are a lot of things that impact economic activity at any given time.
One of the things that's impacting the collective need to grapple with climate change. And so what you therefore need to do to continue to grow the economy and provide good paying jobs is to also address one of the pressures impacting your economic activity. In this case, climate change. And so addressing climate change is part of good economic policy. It is not a countervailing force to good economic policy.
If you start there you flow from that this notion that pitting one against the other means that you will fail on both. And so that's one thing that's sort of driven a lot of what we've had to say from the very beginning as you describe us as sort of a left leaning party, there is no question that we start our journey towards economic growth and and development from the perspective of wanting to ensure that there are good paying jobs for everyone who wants them, and that there is a high level of prosperity for all citizens, not just a few.
And so obviously we do that, that aligns very much with my history, which is long, 58 years old in the NDP. Because I was born into a very political family and have worked in the labor movement before getting into politics. And I don't see standing up for working people as being in any way, shape or form as being in contradiction to my values as a New Democrat. And I also believe very strongly that respecting and acting on science and reality is also a fundamental part of being New Democrat and someone who's left leaning. And that's why we must also work to address the issues of climate change.
Joe: (06:51)
Well, there are those who argue that ‘No, Canada can't simultaneously be a fossil fuel or energy powerhouse and also hit emissions goals or do what's necessary in order to defeat climate change or to reduce emissions enough to bring that into, into appropriate range.’ Why are they wrong?
Rachel: (07:16)
Well, first of all a big part of Canada's economy, not just Alberta's... I mean Alberta is essentially, from an economic point of view, it's Canada's Texas. And so it gives you a sense of how much of our economy is driven by the non-renewable sector. And of course, we in turn drive considerably more of the Canadian economy than our population or geographic size would suggest. And so the reality is that. But we are also a democracy.
Should we simply act solely on matters of climate change without doing the hard work to maintain strong employment and strong economic capacity while doing that, then quite honestly, the whole issue would fail because in the next election, those people who were doing that would get thrown out.
And there would be this swing back to the other direction. And to be clear, in both cases, not only would we not meet our climate change goals, we would also mess around with our economy because the uncertainty created by that stop and go created by that would of course undermine our economic growth.
So that being said, there's no question there is the capacity to create jobs outta the investments that are necessary to ensure that oil and gas producers and non-renewable resource producers significantly reduce their emissions both in the process of production as well in the application of the product once it's produced. So there is money to be made in that.
And that requires creativity in a number of different ways. And that's where you get into issues of, uh, carbon pricing, but doing so in a way that that still keeps the day to day experience of, of those folks who we owe our job to in mind front center.
Joe: (09:35)
Can you talk a little bit about your experience with carbon pricing and how you think it should be applied? Because in the US of course I mentioned we recently passed the Inflation Reduction Act, and it feels like the direction here is the sort of like all carrot to no sticks approach, and there's very little that would curtail carbon intensive energy. It's mostly about subsidies and accelerating the production of renewables. What is your view and experience with how carbon pricing can work?
Rachel: (10:08)
Well, I think first of all, what carbon pricing does is... I mean I suppose it is to a certain degree as a stick approach, it provides an incentive for producers of emissions to do their homework and find the easy wins to reduce their emissions. It just is what it is. And some of that's easier than others. I mean, you know, methane for instance is commonly referred to low hanging fruit. Other stuff is more complicated. So there is a bit of a stick there, but it is also a carrot because a good portion of the resources that come in from collecting that carbon tax or that carbon price are then redevoted to assisting and supporting efforts to reduce emissions. And it's not necessarily redevoted right in directly to the non-renewable resource producer, although in some cases it is for sure.
We actually support technology that is directly focused on extracting oil and gas. But in other cases, it also helped us to fund what we referred to as the REP program, which was the renewable energy program. And what we were able to do there, because even though Alberta is probably the sunniest place in Canada and it's got a lot of wind in certain parts of the province we had a very nascent renewable energy industry here.
And we used some of the funds from the climate leadership program, we referred to it as the CLP when we were in charge. And of course created funds as a result of the tax. And we used some of those funds to create a reverse auction where we invited renewable energy proponents from across the continent to bid down the cost of renewable energy products into Alberta.
And as a result of doing that, we ultimately were very excited because we ended up getting much less expensive renewable energy production than had previously been approved in other parts of the continent. We’ve started to become a real destination for renewable energy investment. We encouraged and succeeded in partnering with indigenous proponents. And in some cases they just were leading the whole thing. And we were able to really kickstart an industry that hadn't existed before. And more over some of the biggest proponents, some of the biggest people who bought into that were of course, non-renewable energy producers themselves setting up their own renewable energy production in order to help reduce the energy required for their extraction efforts.
Joe: (12:41)
You know, you mentioned sort of working with the indigenous people's interests. Can you talk a little bit more about how you think about that? Because of course, again, this is another area in which, at least in the US among liberals or the left, there's a increasing weight on this. And we do know that around the world. Even if you look at say the recent attempted a referendum in Chile, for example, this tension of extractive industries with the consideration of indigenous populations. How do you think about how that works in Alberta?
Rachel: (13:15)
I think the first thing to do is to understand that the desired paths of First Nations communities across the country are not homogenous. There is a difference between many of them. So that's the first thing. But with respect to where there is an interest in participating in economic development, in partnership with programs that are being considered by provincial and federal governments as well as municipal, then I think it's really important for provincial governments — in our case, we are a provincial government — to do everything we can to offer up opportunities to partner with indigenous groups. Honestly, this is one of the few things that we've agreed with our political opponents over when they created the Indigenous Opportunities Corporation, because they put aside funding to help provide financing that some indigenous groups wouldn't otherwise get access to help them partner in some of these projects.
Now, that being said, when even notwithstanding that we were successful in working with groups in Fort McKay, we got a community off of diesel. We’ve been able to do a number of different projects, but really in the spirit of reconciliation, it's all about offering up opportunities where they are desired, but certainly working with them where they, and we know there's not consistency across the board and there's a lot of work to be done.
It's very complex the relationship between indigenous people, different communities within those indigenous communities as well as the courts and the evolving constitutional law on it. So yeah, it's very complicated, but for sure where possible we absolutely want to work First Nations communities to give them the kind of economic agency and independence and opportunity that they're seeking.
Joe: (15:13)
Let's talk more about the Alberta energy industry. Would you like to see it, or the Canadian energy industry, depending on the framing. Would you like to see Canada become a natural gas export powerhouse? Cause obviously that's a major focus here in the US and the entire world is sort of clearly thirsty for any molecule of natural gas that can be produced, you know, in the US and Canada. And my understanding is that the LNG export capacity in Canada is not as big and not growing as fast as it is in the us. Would you like to see that grow?
Rachel: (15:51)
Well, I think absolutely LNG provides a lot of potential opportunities, not only for us as Albertans in terms of exporting a product, we have a heck of a lot of it in the larger picture because, you know, obviously there are energy security issues and we know that energy security continues to be a, a front of a front and center issue. And so LNG is is an answer to that. And we have a lot of good product, but there is no question that our regulatory schemes here in Canada have presented a bit of a challenge as well as some of the, you know, court determined processes that we're compelled to go through. But I think in the long term, it does provide an opportunity. It is, you know, obviously much lower emissions, it's cleaner, it's non-renewable, it's cleaner.
It may not be our long term permanent solution, but it is absolutely an improvement over a lot of different other forms of non-renewable energy. It also forms the basis for hydrogen, which has incredible opportunities. And our party is doing work with a lot of stakeholders about our opportunities in hydrogen here in Alberta. Again, trying to create and keep jobs here for skilled tradespeople in that industry or in the oil and gas industry as a whole. So yeah, it definitely provides opportunities. It's not the be all end all, it's not everything, but it is absolutely something that we need to be taking advantage of for sure.
Joe: (17:21)
So let's talk politics for a second because you characterized Alberta as Canada's Texas, and that seems apt to me. I've never been to Alberta, but you know, I've seen pictures of the Calgary Stamped and I'm like, Yep, that sounds right. I used to live in Texas myself. So, you know, when I've seen those photos, like yeah, that sounds like an apt analogy. And yet here you are, having been the premier of the province from 2015 through 2019.
Now you're in the opposition. You may regain power in the forthcoming elections. So how do you break through in the region? Is it just your perspective on energy? I mean the Democrats can't figure it out here outside of West Virginia. Like what do you think it is and are there lessons for the broader NDP that you think they could take from looking at the success of the Alberta NDP.
Rachel: (18:17)
Well, I mean it's interesting. I was listening to a different podcast a few days ago that was noting that, you know, Alberta is a lot more complicated and a lot more multicultural a lot more diverse than some of the more traditional characterizations of it.
Joe: (18:36)
So is Texas to be fair. People have some conception of Texas, but then, you know, go to the Houston suburbs or something like that. And it's probably not what many people have in mind...
Rachel: (18:52)
And that's absolutely, true. So cuz I was gonna say the number of people who have flocked to the prosperity historically provided by oil and gas, in Alberta we have the benefit of having now the youngest, best educated and I think second most diverse population in the country.
So that is a little bit about who we are, but we are also even in the industry itself there are groups like in oil and gas that are focused on, they understand what the international markets are looking to and they are focused on getting to significantly reducing their emissions. You know, the oil sands pathway groups has set 2050 as a zero emissions target. There are groups that are very genuinely working on it. And I think as well in Alberta, one of the things about our province is, there's a bumper sticker here that's very common among, and it's been around for generations. I'm, you know, I'm 58 and I think this bumper sticker's been around since I was in high school in one way or another. And it's like, “Please God, give me another boom and I promise not to throw it away.”
Joe: (20:01)
They had that in, they had that in Silicon Valley after the tech bubble, they had their own ventures. Like, “Please God, give us one more bubble,” or something like that.
Rachel: (20:09)
Exactly. So we are on boom number nine or something right now here, maybe not quite that much, but we've had some pretty profound busts which created real suffering for Alberta families. Since we sort of first took off in the late sixties which is when it really sort of took over our economy in a huge way. And over that time, more and more people are taking very seriously the need to diversify our economy, both within the oil and gas sector for sure within the energy sector as a whole.
And that's why I was talking so much about renewable and different forms of renewables and low emission energy or outside of energy altogether. And so Albertans are interested in a government that is prepared to talk about diversification, that understands that Alberta as a whole, even though we have a lot of capital in this province, we are relatively small player and an international market.
Rachel: (21:07)
And if we are going to establish a foothold in other industries, we're gonna have to work together strategically. And that's the kind of thing and the kind of thinking you get from governments that believe in the value of government while at the same time believing in the value of job creation, inflation protection, strong public services like healthcare, which is very important to people in this province. Very important like public education, like access to a good strong post-secondary system. These are all values that we also have come to care about and and to expect the delivery on from government in this province. And so it's those kinds of things that we've been able to connect with folks about when, when we're talking to them about what they wanna see from their provincial government.
Joe: (21:59)
What should be done on inflation. And I've seen you tweet about this and you were talking about food inflation in Alberta and so forth. What should be done about that?
Rachel: (22:10)
Well listen, I appreciate you are speaking to a broader group, and we do all understand that inflation is a very complicated problem to solve. But here's the thing within the world of things that Albertans and the Alberta government can do without contributing to the problem.
And I think there's a lot. You need to have a government that is going to start by not making the problem worse. In this province since the last election, we have seen a cap on utilities removed. We've seen a cap on car insurance removed, we've seen a cap on tuition removed, we've seen school fees go up, we've seen personal income taxes go up.
We've seen property taxes go up. We've seen a tremendous reach into the pockets of regular families. And so those kinds of things are all things that can be reversed. We can keep money in folks' pockets and we can do that without contributing to the overall inflationary challenges that we are experiencing. So there's just been a lot of extra costs piled onto Albertans even before we entered into the last few months and year or so of, of massive inflationary pressures.
Joe: (23:30)
You know, just speaking of Twitter, looking through your feed right now, right before you came on the show, you pointed out record electricity rates on the way, and you say the UCP government has done nothing. What would you do had you been empowered to address the surge in electricity prices?
Rachel: (23:44)
Well, to be clear, when we were in power, we did actually redesign the electricity process. And we were in the process of doing it. Alberta shares the Texas energy only market model, which means that we are highly subject to variations in the price. And so we had moved off of that to a different model where we were in the process of doing it. And when doing that, we also had put in place a cap on electricity prices to shelter consumers. During the transition that has been reversed and the cap was removed. If the cap were still in place, we'd be at about a third of the expected electricity prices that we expect families to be hit with in the month of October. So just last week we called on the government to put on a temporary electricity cap because they've put forward a minuscule little rebate.
But when your electricity goes from 500 to a thousand in a month, $50 is not gonna cut it. And it's that unpredictability, which is creating a huge amount of anxiety for Alberta families. And so we are saying that until we can get the price of electricity under control, the cap should come in place. And until we can get to other measures of inflation back under control. But as they say in Game of Thrones, you know, winter is coming. These folks need to pay attention to the experience of families.
Joe: (25:12)
You know, I wanna go back to something you said actually again the bumper sticker. And you mentioned that Alberta has probably had at least nine distinct booms in bust, which is of course to be expected.
Rachel: (25:23)
I exaggerate a bit. But I think I'd find about five or four...
Joe: (25:29)
Well, whatever the number is though, like that is part and parcel of having a resource dependent economy. Every country or every state that is heavily exposed to natural resources has these boom bus cycles. And so one answer is sure, diversification, but it's a difficult process. It's a long term process. How do you think about provisioning and funding public goods in a sustainable way such that they can survive and last through both parts of the cycle?
Rachel: (26:06)
Well I think it really does go to diversification because what we need is a stable source of revenue that comes from taxation that's built off of a more diverse economy. And so yes, right now the government is flush with royalties and that is great, but that really to a large degree cannot be built into our operating expenditures.
We need instead to be moving that money into the kind of investments that creates long term diversification to smooth out those peaks and valleys and, and to create a more consistent and stable revenue source. Alberta's economy is making progress in that diversification effort, even oil prices are are going way up right now. And our royalties are huge. You know, interestingly, folks are not getting hired back into the industry at the same rate that they once were. And so there is some, some diversification going on, and now when you have the resources to do it is the time to strategically invest to encourage it. One example is the very investment that goes along with getting to net zero by 2050 is estimated to be capable of creating 175,000 new jobs. And from that one finds a more stable income source.
Joe: (27:57)
Can you talk a little bit more about pipeline politics? And I know there was a dispute and challenges with the Trans Mountain Pipeline, I think going back several years. What is the status of that and how do you negotiate with leaders in other provinces who have different attitudes? And I, my understanding is that there was some tension with the British Columbia. Their leaders, they weren't as into it. What's happening with that now?
Rachel: (28:23)
There was tension, there's no question about it. I'd like to think about it in hindsight as a sort of expression of some, some respective democratic wills. But I mean, ultimately what we did was essentially as the government of Alberta instead of fighting with everybody and demonizing everybody and demonizing the federal government and demonizing environmentalists and all that kind of thing (which is certainly something that we see happening with our provincial government) we went across the country, including into British Columbia, where a lot of the opposition was based. And we talked to them about, first of all, what we were doing to actually protect the environment and to reduce emissions and, and to be part of a long term path to reasonable and attainable emissions targets, while at the same time also talking to them about the real life economic value that their communities experienced as a result of the oil and gas and non-renewable industry in Alberta.
And we went into rooms that weren't necessarily friendly to us, and we did that all across the country in order to build support and to build the kind of political support that would also help the federal government take the steps and make the decisions that they made in order to support the pipeline. And then of course even with that there we're still about, I don't know, and now I'm not exaggerating, at least nine different legal forums within which the debate was held. And it wasn't until after we lost government that the, that the courts finally came down once and for all on the fact that no, all the issues had been addressed and that it was appropriate for the pipeline to go ahead. So is it completed yet? No, it's it scheduled to be completed next fall. There is a tremendous amount of construction going on now.
Joe: (30:31)
So when it's completed. What will that enable? What will change when that's open?
Rachel: (30:35)
What it does is it enhances our market flexibility. So because it goes to Tidewater, it allows for our product to be not just beholden to going to the US but also potentially to look at eastern market destinations. So that's one thing. It increases our market flexibility. It also just increases our pipeline capacity.
Periodically what will happen is if we run out of pipeline capacity, because we're so far from many of our markets, it ends up going on rail or in some really horrible cases into trucks, that both of those, of course, are much more emissions,-creating methods of transportation. But also what it means is that the price that Albertans get for the product that we all own is severely discounted. And then if we lose out on that, then frankly, taxpayers all across the country lose out on that.
And so shipping our product in a cost effective way, we maximize the return for Albertans and for all Canadians. And so that's, that's the impact of it there. But, you know I like to sort of look at that whole campaign as a good example of grown up government working with multiple stakeholders, multiple levels of government in partnership, hearing their concerns, honoring to, to as much as possible those concerns and negotiating.
You know we currently have a government that has done nothing but pick fights with everybody for their own political gamesmanship with really no interest in a positive outcome. And quite frankly, the most likely next premier is going to take that and dial it up another a hundred percent, which will ultimately undermine the kind of investment stability that we need, not only for strong economic performance in oil and gas, but even more importantly for making real progress on emissions reductions and meeting our climate goals. Because, let me just go back to this as new Democrat, I do believe we must do everything we can to meet our climate goals.
Joe: (32:36)
I'm glad glad you went there cuz that's exactly what I was wanted to sort of wrap up on. But like, what does that look like to you when you say,
“Okay, meet climate goals while also building pipelines” What, what is your vision for getting there?
Rachel: (32:51)
Well, as I said, I mean like even the oil sounds themselves, the Pathways group has set 2050 as a net zero goal, whether that's ambitious enough, I mean, we'll keep an eye on it, but for sure we need to be reducing emissions. We have a policy target of reducing emissions in our electricity sector to zero by 2035.
And we know that there's a number of different things that can be done in the oil and gas sector to reduce emissions. And we know that we can actually create jobs in the course of doing it. So that's what it looks like. It's not just setting out carrots and then hoping that the market follows. It's a combination government does have to push, but we'll always do so with working folks front and center the interests that we're pursuing and ensuring that we maintain a viable oil and gas sector because the world is still going to need our oil and gas for some time to come.
And if we listen to what international markets are telling us in terms of the responsibility with which we need to produce it, then I think that we have a strong future ahead of us. But that requires strong leadership and a commitment to climate goals and that's what we wanna deliver.
Joe: (34:12)
Rachel Notley head of the Alberta NDP, thank you so much for coming on the podcast. Have wanted to speak for a long time and really appreciate you taking the time.
Rachel: (34:23)
All right. Well thank you. It's a pleasure to chat.
Joe: (34:38)
Well I really enjoyed getting the chance to speak to Rachel. You know, I do think this is one of the big tensions, and I don't know the way it's going to resolve, but clearly, look, there's a lot of political and economic interest in finding sort of ways to deal with inflation, ways to deal with high costs on the supply side. And I really think, look, energy is in literally everything and how governments do that, how the private sector does that is absolutely core. And so everyone likes the idea of supply side expansion except in energy. And then you get this like real tension, right? Or many people perceive there to be a tension between economic goals or sort of like supply side and climate. Although as our guest, Rachel Notley said, she doesn't view them in tension. So I was very excited about having that conversation.
And I think also it's very interesting politically because, look, there are some parties in the West that find success in deeply conservative areas with this type of message where's sort of like a more optimistic stance towards the resource sector with a more liberal left agenda elsewhere and finding success. So I think this is a very interesting political story to be tracking, including the result of the next election.
You can follow Rachel Notley on Twitter at @rachelnotley.