Energy's nothing without infrastructure

DEBORAH YEDLIN
Globe and Mail
02-Feb-2006

CALGARY -- Alberta's Energy Minister, Greg Melchin, is scheduled to speak before the Calgary Chamber of Commerce tomorrow morning about Alberta becoming a global energy leader.

The press release promoting the event states "Minister Melchin will speak to his vision to help Albertans achieve a desired balance of development with environmental protection, while encouraging synergies between projects and commodities, and expanding value-added opportunities."

Sounds great, but there's a wee problem. This province has a huge infrastructure gap that must be bridged before Mr. Melchin's vision has a hope of being realized.

Paying off the provincial debt came at the expense of making investments in the roads, bridges, schools, hospitals and government departments that are needed to support the development of Alberta's rich resource base.

The province's debt-free status -- along with an industry that is firing on all cylinders and feeling confident after U.S. President George W. Bush's State of the Union address Tuesday night -- has given the provincial government a significant amount of room to make big investments that will better support the underlying economic engine.

"We need to build infrastructure that tracks economic development, not lags it," says Jim Dinning, Alberta's former treasurer who spoke to a large crowd at a energy conference in Calgary Tuesday evening.

One of the items Mr. Dinning -- and others -- highlight is the need to improve the road network in the northern part of the province so that it is no longer the "pinch point" when it comes to moving people and materials north from Edmonton to the far corners of the province, not just booming Fort McMurray.

To say the existing infrastructure is inadequate is an understatement -- and this doesn't factor in the exponential growth that will take place when construction on the Mackenzie Valley Pipeline begins in late 2007 or early 2008.

Another part of the infrastructure puzzle that needs to be addressed is that of railway access to the West Coast and its ports. With China and other Asian countries showing increased interest in Alberta's energy resources, ease of access to the shipping points in British Columbia will become increasingly important.

But it's not just physical infrastructure that's lacking. The regulatory side is just as stretched.

Whether it's the Department of Sustainable Resource Development or the Energy and Utilities Board (EUB), the song remains the same -- not enough money to hire and keep the people needed to meet the demands being made because of the hot energy market. Anyone with experience is being snapped up by the private sector, which means not just a lack of bodies to do the work but also the loss of their experience. There are rumblings that Sustainable Resources doesn't have the equipment or the manpower to do the field inspections it is required to complete.

Put another way, in 2002 the oil and gas industry drilled 14,000 wells, while the 2005 number is expected to be close to 25,000. That's an increase of almost 80 per cent, and it's a safe bet that the staffing levels haven't followed suit.

As a result, companies are seeing time spent in the regulatory process getting longer. One engineer said what used to take four to six weeks, now takes 11 to 12.

Adding to the EUB's workload is that, in addition to being an administrative body, it is charged with implementing legislation passed by the government. The framework might be in place but the how it actually works is left to the EUB to sort out. The Electric and Utilities Act, for instance, was passed in 1996 to set the stage for electricity deregulation; how it will be applied is still being worked out.

Mr. Melchin's plan to articulate an integrated energy strategy at tomorrow's event is an ambitious one and should have been in place long ago. The fact is, the provincial government benefits enormously from the work of the private sector. The trouble is, the government has been unwilling to accept that this business is a two-way street and that it, too, has obligations in order to keep the economy humming.

Mr. Melchin believes that, with the right strategy, Alberta could be the world's largest oil producer 50 years from now. Whether he is right or wrong remains to be seen, but he has to be given credit for taking the chance to think big within a government that has shown itself incapable of doing so.

dyedlin@globeandmail.com