Royal Bank of Canada NYC Capital Markets speech
"It’s the job of our new government to establish trust and reassure investors. We’re working hard to make the transition as smooth as possible, and maintain as much stability as we can while we implement our plans."
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Thank you, ladies and gentlemen, for that very kind welcome!
It’s an honour to be here in New York City on my first international trip as Alberta’s premier. New York is a beautiful city and I’ve experienced tremendous hospitality from everyone I’ve met here. You sure know how to make a visitor feel welcome!
One thing that feels especially familiar is the feverish atmosphere of election season. We’re in the midst of that back home in Canada too, so it seems I can’t get away from it even when I leave the country.
But it’s very nice to be watching this election from the side lines, and not be in the thick of it like I was in the spring, when Alberta had its election.
Those of you who are Alberta watchers will know that a lot has changed for my province in the last year. Probably the biggest change is reflected in the price of oil.
Twelve months ago, oil was $94USD a barrel. Today it’s less than half that.
That’s a major shift for our province – and one that touches nearly every aspect of Alberta life, from employment and investment to government’s ability to support public programs, like health and education.
Another big change in the province is the one I just alluded to: in May, Albertans elected our province’s first new government in 44 years…and its first New Democrat government, which I am honoured to lead.
Elections can create uncertainty, especially when they lead to change at the top after such a long time. It’s the job of our new government to establish trust and reassure investors. We’re working hard to make the transition as smooth as possible, and maintain as much stability as we can while we implement our plans.
Those plans centre on living up to our promise to create prosperity for all Albertans.
Today I’d like to tell you how we are going to meet that challenge. And why Alberta will remain a stable, prosperous and inviting place for investment.
Alberta will continue to welcome investment
The first point I want to make is this: while there have been some pretty big changes in Alberta over the last several months, some things have not changed.
We have a very strong economy overall and we continue to benefit from the large capital investment that has been made in the past ten to fifteen years.
We continue to have world-class universities and colleges, and one of Canada’s youngest and best-educated workforces. And we’re going to keep investing in our workforce.
We still have, by far, the lowest overall provincial taxes in Canada, with no sales tax.
Collectively Albertans and Alberta businesses pay $8.9 billion less in taxes than they would in the province with the closest tax regime to ours. My government will protect Alberta’s tax advantage.
In addition we're the only province in Canada with zero net debt.
Albertans have always been innovative and entrepreneurial, and we still are. People who share those values will always find a warm welcome in our province.
As you know, our economy has taken a hit from low oil prices. But we’re not going to panic and act hastily. Just like investors, we are thinking long term.
And next month we’re going to deliver a budget that puts Alberta on the road to economic recovery.
It will first seek to protect and stabilize key public services to Albertans, within the context of a prudent, responsible and sustainable fiscal plan.
Secondly, it will present a plan to return to balance. During price shocks like we’re experiencing now, the provincial budget plays an important role as a shock absorber.
But as the economy recovers, we have to make sure the provincial government’s bottom line recovers too. So we need to manage the growth of public expenditures very carefully, and look for opportunities to reallocate funds from lower priority areas to higher ones.
Finally, the budget will outline our government’s plan to stimulate economic growth, diversification and job creation – and detail exactly how we will be a good partner to job creators in Alberta.
We will invest in the building blocks of the economy, including safe, modern public infrastructure, and a highly trained, highly skilled workforce.
We’ll take steps to become an even better place to start a new business, build on great innovation, and get new ideas off the ground.
My government understands that the way to prosperity is through an economy that is open, sustainable and diversified. An economy that creates good jobs and benefits for all Albertans…and one that offers investors stability and certainty.
We aim to be a good partner in building a 21st century economy. We know we can’t accomplish this by ourselves.
We will be honest, thoughtful partners to enterprise.
And we will maintain a warm welcome for investors, and uphold their right to earn fair returns on their investments.
This definitely applies to energy.
The energy industry is very important to Alberta and always will be. In addition to having the third-largest oil deposits in the world in the oil sands, we also have abundant conventional oil and natural gas…as well as renewable forms of energy, especially wind and solar power. We’re an energy province and that’s not about to change.
To expand existing oil sands projects, establish new opportunities in the energy economy, and pioneer advanced technologies – all this requires investment on a large scale.
So under our government’s leadership, Alberta’s abundant oil and gas reserves will remain wide open to investment.
We understand that investors need to be confident to commit to large-scale capital expenditures in any industry.
Major infrastructure is the work of years, and investors need the certainty that they can expect fair returns, whether those returns are two years away or ten years away.
We also know that competition for investors’ dollars is fierce. And I can assure you that we do not take them for granted.
Our government will deliver the certainty investors seek. There will be no unpredictable changes.
When change comes, it will be signaled well in advance, and it will come only after consultating with those who are affected, as is happening now in two key areas: royalties and climate change.
Making sure the royalty system works for everyone
I’ll start with royalties, because I know this is causing some unease in the energy sector and in the investment community.
The royalty review that is currently underway is about modernizing and updating our royalty system so that it fits the energy industry’s future, instead of its past.
We are doing this work in the context of the broader economic climate, and with a view to all of industry’s cost pressures. So we can end the uncertainty and bring stability to the resource sector, no matter what the price of oil is.
There are questions to be answered about how to manage royalties so they better support processing, diversification and value-added development – along with the jobs and growth that come with them.
And as prices recover, we want to collect and begin to save an appropriate share of our resource wealth, while recognizing that the returns of energy development are more than just royalties. They also include jobs, investment in our communities, innovation and development in other parts of the economy.
People I speak to in the industry understand why we are conducting this review, but urge us not to prolong it, and to make it clear that we value stability. We will follow their counsel in this.
We have not predetermined the outcome of the review otherwise there would be no point in conducting one.
We’ve also committed that if changes are recommended they would not be implemented before the end of 2016. This allows investment decisions to be made with no surprises.
So let me be perfectly clear on this point. We are planning results of the review by the end of 2015 and implementation to take effect in 2017.
Mitigating the environmental impact of development
Another area where industry has asked for certainty is in regard to climate change.
This is a global problem that every community and every jurisdiction must help address, especially energy-producing jurisdictions like Alberta. Albertans feel strongly about this, as do many business leaders.
We need to find ways to protect the environment, and the health of Albertans and others who share our air and water.
But this is an economic issue as well. If we don’t get our act together, a solution is going to be imposed on us – sooner or later – by others. By the federal government and by our markets, who are increasingly insisting that the energy products they buy be produced, processed and transported responsibly.
Taking action on climate change is the price of admission to the big leagues of the world energy market.
Previous governments have talked the talk but they failed to walk the walk. The energy industry has shown innovation and determination, but they haven’t had a cohesive policy framework to work in. We need to do better, and we will.
In both these areas – royalty review and climate change – we’ve enlisted expert panels to review the knowledge that’s out there in Alberta and in other jurisdictions.
Our panel members aren’t partisan appointments. The climate change panel is being chaired by Dr. Andrew Leach, a highly respected professor at the University of Alberta. The royalty review is being chaired by Dave Mowat, the President and CEO of ATB Financial, an Alberta-based financial institution.
Both were selected for their expertise and insights. They are leading panels representing a wide range of experience and knowledge, and are holding open engagement processes to hear from experts, stakeholders, and Albertans.
When the time comes to make decisions, no one will be surprised by how things unfold. Because those who stand to be affected have had the opportunity to be part of the process all the way along.
We know that we can’t make changes to environmental policies without affecting the energy sector or vice versa. But the right policies can actually benefit both.
I’ve focused a lot on energy in my remarks today and that’s an important business for Alberta. But it’s not our only business.
My province also has thriving forestry, manufacturing and agriculture sectors.
We are globally recognized as a responsible, sustainable operator, with 77 percent of our forests internationally recognized through third-party certification last year.
Alberta’s is the largest producer of Canadian beef, and we are global leaders in livestock traceability and safety.
Alberta is also a growing centre for financial services, and advanced technology sectors – including clean energy, information and communication technology, life sciences and nanotechnology.
For a province of only four million people, we punch way above our weight economically. And that is another thing that’s not about to change.
Success happens when entrepreneurs, good ideas people and visionaries come together with an innovative, productive workforce like we have in Alberta.
Government’s role is not to drive success but to enable it by being a good partner.
By investing in modern and efficient infrastructure, and a workforce that’s ready to meet the demands of the new economy.
By taking a balanced, responsible approach to public finances.
By being a good trade partner, and an attractive destination for capital.
A confident industry, secure in the value of its investments, is vital to all of these things.
And our government will do everything within its power to earn that confidence.
I now have time for some questions and discussion