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Varcoe: A no-growth economy is Alberta's top business story of 2019 – Calgary Herald

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Pictured is a power line with the downtown skyline in the background in Calgary on Thursday, October 17, 2019. Azin Ghaffari/Postmedia Calgary


No growth or slow growth, it doesn’t really matter what you call it.

The tale of 2019 is just about over and it’s unclear whether the province slipped back into an economic recession during the past 12 months or narrowly avoided it.

But many Albertans felt like they were mired in a downturn with high unemployment levels, less consumer spending and sluggish activity in the energy, housing and construction sectors.

It was a year when the provincial economy spun its wheels like a car stuck in an icy rut.

Oil production quotas, trade troubles for canola producers and a major petroleum producer relocating its head office to the United States added to the dreariness.

“The biggest story is no growth in the economy,” says Ken Kobly, chief executive of the Alberta Chambers of Commerce. “Until we get some positive news, we’re going to be sitting in the doldrums.”

The economic slowdown was the most important business story of the year in Alberta.

Politics also played a huge factor during 2019, with voters electing a new provincial UCP government and a minority Liberal government in Ottawa.

The surprising acquisition of WestJet Airlines by Onex Corp. and Calgary’s business tax revolt also commanded headlines, as did battles over energy policies and pipelines.

However, the low-growth, no-growth economy was an overarching theme with far-reaching implications.

Here are my top business stories of the year for Alberta.

1. Flirting with a recession — A punishing

in the middle of this decade gave way to two years of economic expansion, but 2019 stopped the momentum in its tracks.

Progress initially came to a halt following a steep downturn in Alberta oil prices last fall caused by a lack of pipeline capacity. The Notley government introduced temporary oil production limits this year which buoyed crude prices, but limited industry investment.

Overall growth in employment drooped over the back half of this year. In November, the jobless rate in Alberta jumped to 7.2 per cent, a full percentage point higher than a year earlier.

“Don’t blame Albertans for thinking their economy is still in recession,” RBC said in a report this month. “The level of activity in the province is still below what it was in 2014.”

There are a few reasons to feel more enthusiastic heading into 2020, but the past year has definitely been a downer.

“2019 was the year of (playing) defence … flirting with recession,” says Martin Pelletier, a portfolio manager at TriVest Wealth Counsel.


An abandoned kitchen space for lease along Kensington Road and 10A Street N.W.

Brendan Miller/Postmedia

2. Exit Encana — As one of the country’s largest petroleum producers, Calgary-based Encana Corp. has a history firmly rooted in Alberta.

Created by the $27-billion merger of Alberta Energy Co. and PanCanadian Energy Corp., the company’s name combined “energy” and “Canada” to reflect its home turf.

Under the leadership of CEO Doug Suttles since 2013, Encana has been gradually shifting its attention toward the U.S., punctuated by the US$7.7-billion purchase of Newfield Exploration last year. And the Texan began working out of the company’s Denver offices last year.

Yet, when Encana announced in November it would change the company’s name to Ovintiv Inc. and move its corporate domicile to the U.S. (pending shareholder approval), it commanded national headlines, becoming a symbol of the Alberta energy industry’s uncertain future.

Encana insists the relocation will help it attract larger pools of investment and stressed it still has about 1,100 people working in Canada. It later confirmed its new head office would be based in Denver.

Political analyst David Taras of Mount Royal University says the relocation is “symbolically a big story” given the Canadian oilpatch’s recent woes.

“If Encana can leave, what’s next?” he says.


Encana Corp. a leading oil and gas producer in Calgary, is moving its headquarters from the Bow building to the U.S. and is changing name to Ovintiv.

Postmedia

3. A political year — With two crucial elections fought in just 188 days — and a series of incendiary federal-provincial battles waged during the year — the shadow of politics loomed over Alberta businesses in 2019.

UCP Leader Jason Kenney’s victory in the April provincial election signalled a sharp turn away from the former NDP government’s policies.

Kenney killed the provincial carbon tax and vowed to scrap the NDP’s $3.7-billion strategy to lease rail cars to ship more oil out of Alberta, planning to shift these contracts to the private sector.

The UCP pledged to cut the corporate income tax rate by a third. It ditched efforts to transform the province’s electricity sector to a capacity market and eliminated an investor tax credit program during the fall budget.

The new government also adopted an aggressive stance toward Ottawa and oilpatch foes, creating an energy war room and launching a contentious public inquiry into the foreign funding of anti-oilsands groups.

On the federal scene, Justin Trudeau captured a minority government in the October election during a campaign that prominently featured climate issues, and the Liberals didn’t win any seats in Alberta.

Kenney responded by creating a “fair deal” panel to examine issues such as the creation of an Alberta Pension Plan.

“The provincial election validated or legitimized some anger,” says Jim Dewald, dean at the University of Calgary’s Haskayne School of Business.

“And then the federal election said, ‘Well you might feel that way in Alberta, but that’s not how the rest of us feel.’ ”


Jason Kenney greets supporters at the United Conservative Party 2019 election night headquarters in Calgary, AB on Tuesday, April 16, 2019.

Jim Wells/Postmedia

4. WestJet flies into the arms of Onex — The country’s second-largest airline is an Alberta-made business success story, beginning 23 years ago with just three planes and fewer than 250 workers.

It now has 14,000 employees and more than 180 aircraft — and a new owner. In May, a $5-billion friendly takeover offer for WestJet was unveiled by Toronto-based Onex Corp., which plans to take the airline private.

“It is the end of an era,” says Dewald.

Onex, one of the country’s largest private equity players, offered a 67 per cent premium to WestJet’s share price. Onex executives said it has no plans to alter the air carrier’s expansion strategy or shift its headquarters out of Calgary.

Rafi Tahmazian, a senior portfolio manager at Canoe Financial, said Onex can see WestJet’s underlying value, as global air travel is expected to increase in the coming years.

“Onex was leap-frogging ahead of everybody,” he says. “They want this thing to become big and participate in that growth.”

5. Trouble at the regulator — The province’s powerful energy regulator made news for all the wrong reasons this year.

Former chief executive officer Jim Ellis left the organization in late 2018. Controversy soon followed.

Kenney campaigned on reducing lengthy approval times for energy projects within the AER. After firing the regulator’s board in September, he initiated a review of the AER’s mandate and governance.

In October, the province’s auditor general, public interest commissioner and ethics commissioner jointly released damning reports into the International Centre of Regulatory Excellence (ICORE).

The investigations found AER created ICORE to generate revenues by offering training to foreign regulators — outside of its core mandate — and used the AER’s resources. The A-G estimated at least $2.3 million was spent, through out-of-pocket and in-kind AER resources, on the new centre that was not recovered.

A report by public interest commissioner Marianne Ryan concluded Ellis “grossly mismanaged public funds,” as well as public assets in establishing and supporting ICORE.

Ethics commissioner Marguerite Trussler said the main motivation behind ICORE was to create future employment or remuneration for the former CEO.

And in November, the auditor general highlighted improper expenses and financial reporting issues within the regulator.


This Sept. 19, 2011 aerial photo shows a tar sands mine facility near Fort McMurray, in Alberta. A new wave of cold water is about to hit Canada’s much-buffeted oilsands industry but whether the storm will be perfect or another tempest in a teapot is yet to be determined.

Jeff McIntosh /

THE CANADIAN PRESS

6. Trade troubles — China has been a lucrative growth market for Alberta agriculture producers for the past five years.

In March, China decided it wouldn’t accept canola shipments from this country, citing insect contamination in Canadian product — a claim rejected by Ottawa. By June, Canadian beef and pork were also blocked, although this was later rescinded.

The dispute came as tensions between the two countries intensified over Canada’s arrest of Huawei Technologies’ CFO Meng Wanzhou.

Trade problems soon squeezed Alberta farmers. Canola is the province’s largest export to China and 14,000 Alberta farmers sold almost $800 million of product to the country last year.

ATB Financial reports the canola ban pushed Alberta crop exports down by 13 per cent during the first nine months of the year, worth nearly $500 million.

“Trade became political,” says Sandip Lalli, head of the Calgary Chamber of Commerce. “That impacts all business sectors, it doesn’t just impact agriculture.”


Canola fields in full bloom in Alberta on July 23, 2019.

REUTERS/Todd Korol

7. Curtailment commotion — When the Notley government announced late last year it would impose oil production quotas on large petroleum producers on Jan. 1 it marked a dramatic intervention into energy markets.

It also sparked an industry tug-of-war between refiners opposed to the concept and producers who saw it as a necessary evil. The policy was later extended into 2020 by the Kenney government.

Curtailment kept Alberta oil prices from plummeting, but producers also cut capital spending and didn’t move ahead with growth projects.

The province has been lowering curtailment levels and said in November that producers who add incremental crude-by-rail shipments would see those barrels exempted from the limits.


With the Rockies in the distance a pumpjack operates on the prairie east of the Calgary city limits

Ted Rhodes /

jpg

8. Calgary’s tax revolt — The anger of Calgary business owners facing massive property tax increases has been building for years.

It finally erupted in the summer of 2019. Hundreds of business owners rallied at city hall in June to demand council take steps to buffer them from soaring bills caused by the municipal property tax reassessment process.

“You saw CEOs show up, small business owners show up, mid-sized companies show up,” says Lalli. “It was not a comfortable space for anybody.”

The tax revolt was ignited by a plunge in the assessed value of downtown office towers that shifted $250 million in tax revenues onto other commercial property owners.

When bills went out this spring, almost two-thirds of non-residential properties saw double-digit tax increases.

After initially deciding to do nothing to soften the blow in May, the backlash saw council later adopt a $131-million assistance package.

In late November, council passed a 2020 budget that saw more of the tax burden shifted to homeowners.


A sign for Wurst Restaurant in Calgary’s Mission district shows the increase in its property taxes over six years. City businesses have shouldered more of the tax load than homeowners as property values in Calgary’s downtown have fallen.

Dean Pilling /

Postmedia

9. Energy wars — A fight that started in 2018 over the federal government’s new environmental Impact Assessment Act carried over into this year, becoming a potent symbol of the divisions between Alberta and Ottawa.

Industry groups and the Alberta government said the legislation threatened to stop new pipeline projects from being built but the Trudeau government disagreed, passing Bill C-69 before the fall election.

In September, Alberta launched a court challenge to the bill. Other energy scraps erupted, involving the federal moratorium on oil tankers off the northern B.C. coast, and the future of the Trans Mountain pipeline expansion.

After the project’s federal approval was quashed by the courts last year, Ottawa conducted a new round of consultations and gave the Trans Mountain expansion the green light in June. Construction is now underway.


Pipe for the Trans Mountain pipeline is unloaded for construction.

Canadian Press/Jason Franson

10. Unwanted wells and natural gas pains

wells have become a super-sized problem in Alberta since the energy downturn began, and it expanded as natural gas companies struggled this year.

The failure of Houston Oil & Gas Ltd. in November, and Trident Exploration Corp. last spring, tossed potentially thousands of old wells into the hands of the Alberta Orphan Well Association, an industry-funded group that cleans up facilities that no longer have an active owner.

Meanwhile, a key Supreme Court of Canada ruling in January on the case of Redwater Energy Corp. clarified the issue of environmental liabilities and bankruptcy proceedings, supporting the polluter-pay principle.


Abandoned oil well equipment, once owned by now defunct Legal Oil and Gas Ltd., on an Alberta farm.

Supplied /

Postmedia/File

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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Doug Ford rejects regional approach to reopening Ontario's economy – Toronto Star

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One size fits all.

That will be Ontario’s mantra for reopening the economy in the wake of the COVID-19 pandemic, insists Premier Doug Ford.

Even though the Greater Toronto Area accounts for 65.6 per cent of Ontario’s cases, leaving huge swaths of the province relatively unscathed, Ford is rejecting the regional approach of opening up as is being done in neighbouring Quebec, Manitoba and New York state.

“I have to follow science and the medical advice. I always have, I always will,” the premier said Thursday, emphasizing that provincial chief medical officer of health Dr. David Williams and other public health officials will make the call.

“I’ll take their advice and if Dr. Williams doesn’t think it’s the right thing to do, then I’m following his advice. I have from the beginning. I’ll continue to follow it,” he said.

Ford admitted he is under a lot of pressure to expedite the opening of the economy in regions beyond the GTA.

There are far fewer coronavirus cases in Kenora, Algoma, North Bay, Parry Sound, Sudbury, Kingston, Renfrew, Huron-Perth, Prince Edward County, and most of southwestern Ontario outside the Windsor city limits.

“I hear it at cabinet, I hear it at caucus. I hear it all the time from our own members,” the premier said.

Indeed, Progressive Conservative MPPs from outside the Golden Horseshoe privately confide that they are feeling heat from their constituents.

“How am I supposed to keep telling businesses in my area to remain closed for what’s essentially a Toronto problem?” said one rural Tory MPP, speaking on condition of anonymity in order to freely discuss internal caucus discussions.

“At a certain point, we’ve got to reopen,” added the MPP, who personally lobbied Ford against the universal reopening approach.

But the premier, who began the first phase of reopening the economy last week when stores with street-front entrances were allowed to welcome customers, said “we just have to be cautious” to curb the spread of a virus that has killed 2,248 people in Ontario.

“On a long weekend in the summer, there’ll be half a million cottagers going up to the Muskokas, the Haliburtons, up to the cottage area — and they’re coming, primarily, they’re coming from the 905 and 416 area,” he said.

In Quebec, where 4,228 people have died from COVID-19, Premier François Legault has pushed a phased regional approach to opening.

Outside of Montreal, the epicentre of the pandemic in that province, much of the economy will be up and running next week, including indoor shopping malls.

“We have to continue to be careful because we cannot afford to have large increases in the next few days or weeks in the number of people in our hospitals in Montreal,” Legault said earlier this week.

In Manitoba, where only seven people have died of COVID-19, Premier Brian Pallister announced Tuesday that most businesses — including restaurants, bars, and gyms — will be open next week.

Pallister stressed “slow and careful movement in the direction of easing our restrictions is the right approach.”

New York state has suffered 23,282 deaths — more than 10 times as many as Ontario despite a population of 19.5 million compared to the province’s 14.5 million — but is pushing forward with phased regional reopening.

In New York, a region must meet seven different metrics before being allowed to move a broader stage of reopening, including a sustained decline in total hospitalizations over a three-day rolling average and a decline in deaths.

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Each region must have at least 30 per cent of its intensive care unit beds and 30 per cent of all hospital beds open and must meet diagnostic testing and contact tracing capacity.

Western New York, across the Niagara River from Ontario, currently meets all seven requirements for reopening selected businesses and services.

Earlier this month, Gov. Andrew Cuomo defended his plan.

“Close down everything, close down the economy, lock yourself in the home — you can do it for a short period of time, but you can’t do it forever.”

Robert Benzie is the Star’s Queen’s Park bureau chief and a reporter covering Ontario politics. Follow him on Twitter: @robertbenzie

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Province's decision to reopen economy still lacks some clarity: CFIB – HalifaxToday.ca

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The Atlantic Vice President of the Canadian Federation of Independent Business says he’s pleased with the province’s decision to reopen the economy, but adds it still lacks some clarity.

On Wednesday, Premier Stephen McNeil announced the province’s next steps to reopening the economy, saying businesses that were required to shut down due to the COVID-19 pandemic will be able to restart operations on June 5.

Jordi Morgan told NEWS 95.7 he’s happy to hear this, but adds there are still some questions that need to be answered.

“It remains to be seen how well this happens because we’re still not entirely clear on what all the requirements are for these individual businesses,” said Morgan.

Morgan is also pleased with the province’s new small business reopening and support grant, a $25 million fund that will help businesses welcome back customers safely.

“Very happy to see that because there are a number of businesses that are going to require some bridging to reopen, invest in personal protective equipment and other things that are necessary in order to operate the business,” said Morgan.

He says once they get all the guidelines in place, they’ll have a better idea of how to operate and keep both the public and employees safe.

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Nearly 40% of the economy may vanish in Q2 because of COVID-19, but then do something surprising – Yahoo Canada Finance

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The S&P 500 has crossed the 3,000 level again and investors are clearly riding high on hope for a second half economic recovery post the worst of COVID-19.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="But that doesn’t mean the market is immune to a pullback this summer primarily because the economic data will likely continue to be horrible. Remember bulls, the U.S. economy has been kicked in the face by the pandemic, and a rebound won’t happen overnight simply because states are reopening. Corporate sales and profits remain under severe strain, sending many off to explore bankruptcy or cut thousands of workers even with quarantines being lifted.” data-reactid=”17″>But that doesn’t mean the market is immune to a pullback this summer primarily because the economic data will likely continue to be horrible. Remember bulls, the U.S. economy has been kicked in the face by the pandemic, and a rebound won’t happen overnight simply because states are reopening. Corporate sales and profits remain under severe strain, sending many off to explore bankruptcy or cut thousands of workers even with quarantines being lifted.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“We think that the reported unemployment rate may be around as high as 20% in May,” Barclays chief U.S. economist Michael Gapen warned on Yahoo Finance’s The First Trade. The unemployment rate in April increased by 10.3 percentage points to 14.7%.” data-reactid=”18″>“We think that the reported unemployment rate may be around as high as 20% in May,” Barclays chief U.S. economist Michael Gapen warned on Yahoo Finance’s The First Trade. The unemployment rate in April increased by 10.3 percentage points to 14.7%.

Gapen believes the U.S. economy may contract a whopping 40% annualized in the second quarter, then surprisingly grow by 25% in the third quarter and 8% in the fourth quarter.

Part of Gapen’s cautiousness on the economy in the second quarter stems from his outlook on the consumer, which comprises two-thirds of the U.S. economy as is often cited.

A woman shops for clothes Wednesday, May 27, 2020, in Los Angeles. California moved to further relax its coronavirus restrictions and help the battered economy. Retail stores, including those at shopping malls, can open at 50% capacity. (AP Photo/Marcio Jose Sanchez)
A woman shops for clothes Wednesday, May 27, 2020, in Los Angeles. California moved to further relax its coronavirus restrictions and help the battered economy. Retail stores, including those at shopping malls, can open at 50% capacity. (AP Photo/Marcio Jose Sanchez)

“I think when we move into the third quarter, the savings rate will start coming down. All else equal, we are expecting the consumer to remain cautious. I think you will see a blend. Some return to normalcy, but it will take time,” Gapen explains. “Negative wealth is still at play. Equity markets are doing well, but the average household may not feel that. And I think that there will be caution and a preference for saving.”

To be sure, recent economic data warrants the markets taking a short-term breather.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Another 2.123 million Americans filed for unemployment benefits&nbsp;in the week ending May 23. Over the past 10 weeks, more than 40 million Americans have filed for unemployment insurance. U.S. durable goods orders tanked 17.2% in April, U.S. Commerce Department data showed Thursday. Durable goods dropped 16.6% in March.” data-reactid=”34″>Another 2.123 million Americans filed for unemployment benefits in the week ending May 23. Over the past 10 weeks, more than 40 million Americans have filed for unemployment insurance. U.S. durable goods orders tanked 17.2% in April, U.S. Commerce Department data showed Thursday. Durable goods dropped 16.6% in March.

Pending home sales in April fell 33.8% year over year, the National Association of Realtors said Thursday. That marked the biggest decline since January 2001.

“I think the market has priced in that April is probably the worst of the economic data,” explained Sevens Report Research founder Tom Essaye. “While it looks like the worst is behind us — which is great — we need to start to see more improvement.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.” data-reactid=”37″>Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Read the latest financial and business news from Yahoo Finance” data-reactid=”38″>Read the latest financial and business news from Yahoo Finance

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.” data-reactid=”50″>Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.

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