Alberta desperately needs Peter Lougheed 2.0

The Alberta Federation of Labour (AFL) is a big fan of industrial strategy and policy. It’s a pretty simple idea. Instead of relying solely upon “free” markets and private capital, the Alberta government should take a more active role to diversify the provincial energy economy, building more industry, and creating a new foundation for future prosperity. Just like Premier Peter Lougheed did 50 years ago.

“Lougheed reminded Albertans that the province’s vast natural resources belonged to them – and he famously urged them to ‘act like owners,’” we wrote in our economic blueprint for Alberta, Skate to Where the Puck is Going.

What does “acting like an owner” of the province’s oil and gas resources look like?

If the 1970s oil company CEOs had their way, Alberta’s resources would have been dug up, processed just enough to put in a pipeline, and shipped to customers in the United States to be refined into gasoline (oil) or turned into petrochemicals (gas).

Being “hewers of wood and drawers of water” wasn’t good enough for Lougheed. He wanted to see more of that resource processed in Alberta. Lougheed was quite prepared to use the power of government, including public ownership, to diversify Alberta’s economy.

For example, the Alberta Energy Company (AEC) built pipelines to supply new petrochemical plants with ethane from “straddle plants” that stripped it from natural gas liquids. Today, Alberta has the second largest petrochemical cluster in North America behind Texas and Louisiana in the US Gulf Coast. That industry would be located south of the border if not for Premier Lougheed.

Probably the most consequential move by Premier Lougheed’s Progressive Conservatives was the establishment of the modern oil sands sector in the early 1970s.

Syncrude gave the government an ownership stake in production and a pipeline that carried bitumen to Edmonton. Lougheed’s government used $100 million from the newly created Heritage Fund to create and fund the Alberta Oil Sands Technology Research Authority, commonly known as AOSTRA, that developed the steam-assisted gravity drainage (SAG-D) process that has driven the sector’s expansion for two decades.

The oil sands projects are the biggest industrial complex in Canada, producing nearly 3.5 million barrels of heavy crude oil per day. Bitumen royalties for the 2022/23 fiscal year were almost $17 billion. The economic impacts of job creation, supply chains, and government revenue is felt across Canada.

Premier Lougheed helped create the golden goose of the provincial and national economies. But, like all good things, the dominance of the oil sands is likely to begin ebbing later this decade. The International Energy Agency (IEA) predicts that global oil demand will peak by 2030 as electric vehicles erode the consumption of gasoline and diesel. Oil sands producers, like all oil companies, will be negatively affected as prices eventually fall.

The time to diversify Alberta’s energy economy is now. Not somewhere in the distant future, as Premier Danielle Smith has vaguely suggested. The UCP government, unfortunately, does not have a diversification plan. The AFL does.

The number one thing Alberta can do is build a new market for oil sands bitumen. A domestic market, where we turn the gooey, peanut butter-like hydrocarbon into advanced materials like carbon fibre. Just like AOSTRA gave us SAG-D and an oil sands industry, Alberta Innovates has given us Bitumen Beyond Combustion.

The provincial agency began experimenting with turning the asphaltenes – the “heavy end” of a barrel of heavy crude – into materials back in 2016. A few years ago, it started the Carbon Fibre Grand Challenge, which pitted teams of scientists from around the world against each other in a race to develop a commercial process that turns bitumen into carbon fibre precursor. Precursor is the feedstock for carbon fibre manufacturing plants.

If we assume that a barrel of bitumen fetches $30 to $50 as feedstock for an American refinery, then turning that barrel into carbon fibre creates a value of over $200. Or $100 of value if it becomes the binder used in road material. And even more if it is transformed into a battery input.

And the companies that make carbon fibre locate manufacturing plants as close to the source of the precursor as possible. That would be in Alberta.

And because Alberta Innovates is a government agency, the intellectual property (IP) created by all that Bitumen Beyond Combustion research belongs to the people of Alberta.

The AFL would create a Crown corporation to do just that. Ownership of the IP would be leveraged to ensure that as much as possible of the production, manufacturing, and supply chains are located in the province. At the very least, the provincial government would receive equity in the private companies in return for access to that IP.

This was Lougheed’s strategy 50 years ago and it worked brilliantly. There is no reason it won’t work today.

The time has come for Peter Lougheed 2.0.