Ottawa and its Alberta problem: Federal government keeps a close eye on province's economy

Originally published August 29.

Naturally, Albertans are preoccupied with the province'sstumbling economy.It turns out theyare in good company.

According to briefing notes acquired through access to information requests, thefederal governmentisjust as worried about the state of affairs in Alberta.

Over the past year, the federal Department of Finance Canada, Natural Resources Canadaand the Prime Minister's Officespanning two governmentshavereceived at least a dozen briefings, some marked confidential or secret,on the healthof Alberta'shousing market (it'sholding on), the direction of oil prices(who knows?), thehealth of individual energy companies(redacted),the strength of the job market (so-so) and whether pipelines will help (probably).

CBC News has written about some of these briefing notes here:

• Why Calgary's real estate prices haven't been hit as hard as the rest of the economy yet
• New Energy East memo reveals conflicting government views on pipeline's value
• Jingle mail rears its ugly head in Alberta again

Individually,each report is interesting. Collectively they show a federal governmentthat iswell aware of Alberta's position as a significant economic engine in Canada and is worried that as that engine stalls, it will cause the national economy to sputter.

So what have the feds learned over the past year or so?

Dependency on fossil fuels

In January 2016, a memo was prepared for Prime Minister JustinTrudeau by the clerk of the Privy Council that offered an update on the state of the economy in Alberta. It pointed out that Albertarepresented nearly 20 per cent of Canada's GDP in 2014, with just 12 per cent of the population.

• Alberta's financial troubles deepen as deficit swells by $500M
• Alberta economy still the best in Canada by some measures

The economy is somewhat more diversified than it was in the 1980s, but still too dependent onfossil fuels, the memo says. Salaries were so high in Alberta that other (non-oil) industries had a tough time competing for workers.

Those same high wages created ahigh oil price dependency for finance and insurance companies, as well as retailersand the real estate business.

None of this is news to anyone living in Alberta, but it's still a depressing roundup.

The pipeline question

In terms of the political implication, the most interestingnote had to do with the importance of pipelines.The federal government has played the field on pipeline approval in its nearly11 months in officeas it tries to balance Alberta's need for pipelines against strong opposition in B.C., Quebecand among First Nations.

Abriefing prepared for the minister of natural resourcesmade the case that a lack of pipeline infrastructure to access global markets cost Canadian producers $7 billion a year between 2011 and 2013, a total of $21 billion over three years. That amountedto oneper cent of Canada's GDP.

• Justin Trudeau's leadership measured by the pipeline question

• Both sides of pipeline debate play out at Liberal Party convention in Winnipeg

In a section titled "Building support for Pipelines,"the briefing note saidthat "to facilitate development, the federal government has committed to reviewing federal environmental assessment processes and modernizing the National Energy Board to build public confidence."

This briefing note was prepared onFeb.15, two months before a National Post columnargued thatTrudeauhadbeen convinced that pipelinesneeded to be a top priority for the federal government.

What about weak oil prices?

There are four briefing notes on the direction of oil pricesand the impact that low prices are having on the economy.

Three are dated December2015,followed by another in January. The later briefings build on the earlier versions, but all try to divine just what might happen to the Alberta economy with the persistent weakness in oil prices.

The notes expected oil to be trading around the $55 US mark by the second half of 2016, which hasn't happened, at least yet.

• Bad loans boom as Alberta busts

• Bankrupt energy firms add to Alberta's abandoned well problems

It is an indication that the price of oil still looms large in Canada.

Also in January, an assistant deputy minister in Finance Canadaprepared what appears to be a comprehensive look a the credit risks of a variety of energy companies, the banks that lend to themand the Crown corporations Export Development CanadaandBusiness Development Bank ofCanada.

The report was surely interesting, but only afew hundred words of the 27-page report could be read the rest were redacted. The pressures on the oil patch credit worthiness have beenwidely reported on, as has the ripple effect on the banking community.

What does this all mean?

The federal government does not deny that it is interested in Alberta.

In a statement to CBC, Annie Donolo, press secretary for Finance Canada,said it's about understanding the situation.

"The minister and this government are watching the situation in Alberta closelyand have been monitoring developments in the region. This will continue to help our government better understand the realities facing Albertans in order to support them effectively."

It is not particularly surprising that the federal government is keeping a close watch, given the dominant role Alberta's economy played in Canada over the past several years.

"They are concerned for good reason," said MichalMoore, a senior fellow with the University of Calgary's school of public policy.

"The Alberta economy is so big, it has connections to every other piece of the Canadian economy."

Moore said that with somuch spending originating in Alberta andreverberatingthrough the Canadian economy, Alberta has an outsized impact on the country as a whole.

"I'm sure that Ottawa is taking note,if not on a daily basis, at least weekly basis."