What's New in Alberta: Winter 2010

In this edition, we have the results of two of our major business and energy surveys as well as analysis on the climate summit in Copenhagen and the Government of Alberta’s investment in carbon capture and storage.

The perfect storm

Both public and private energy companies want to strengthen their ability to survive the next economic downturn, according to a joint survey conducted by PricewaterhouseCoopers LLP and JuneWarren-Nickle’s Energy Group.

The 2009 Energy Survey Q3 Update finds that the top areas of strategic focus for companies over the next three years are asset management and optimization, operational performance, and financial performance.

"Similar to how Hurricane Katrina was a catalyst for long-term business continuity planning, the economic downturn in 2009 forced energy companies to examine and make changes to their operational models," says Scott Bolton, the leader of PwC's Canadian Energy practice. "With credit tight and cash flow constrained, many organizations have had to take a close look at ways to reduce their costs and improve operating performance."

Respondents also say the top five factors that will impact business over the next three years are the price of oil, natural gas prices, a possible downturn in the global economy, a potential disruption in capital markets, and energy input costs.

Political commitment, but little clarity

Businesses have pressed governments to send clear, long-term signals about the pace and direction of climate policy. However, the Copenhagen Accord did not accomplish this.

It reflects a broader coalition behind the intent to stay within two degrees Celsius of warming, but failed to deliver any specifics on national emissions targets or mitigation plans for either 2020 or 2050.

But even if it hasn't provided the clarity we sought, Copenhagen has reinforced a number of themes and trends which will require action by companies and their boards.

In the next five years, action on climate change will focus in the following areas: energy efficiency, regulation and standards, carbon management, reporting, marketing, carbon markets, and taxation.

While it is too early to call the accord a failure, it did not send a clear signal to businesses making strategic investments in clean technology, energy or energy-intensive projects, delaying long-term investments in these sectors.

National and regional regulations will be the most important driver of low-carbon investment in the private sector.

For more information, download Post-Copenhagen Analysis: Implications for Business.

Business confidence on the rise

Confidence among Alberta businesses and consumers continues to grow, according to the Business and Consumer Confidence Indices survey from PricewaterhouseCoopers and Leger Marketing.

The Business Confidence Index rose to 115 in January, up from November’s level of 109. A number above 100 is considered to be an optimistic sentiment.

"These figures are a good indicator that many of Alberta’s businesses have endured during the tough economic conditions and are feeling more confident in their current outlook and in Alberta’s business prospects for the coming year," says Ian Gunn, partner and leader of PwC's Private Company Services practice in Alberta.

Separately, the Consumer Confidence Index rose slightly to a level of 113 from 111 in November.

A total of 311 business leaders and 900 Albertans took part in the survey.

Province invests in carbon capture

The Alberta government plans to invest $495 million to help construct a 240-km carbon dioxide (CO2) pipeline system.

"This new pipeline will significantly advance Alberta’s capacity for future carbon capture and storage projects," Premier Ed Stelmach said in a press release. "It will be built with long-term capacity in mind so as more companies capture CO2, they will be able to connect to the line."

The Alberta Carbon Trunk Line will connect the industrial heartland near Fort Saskatchewan to oil fields near Clive, which is just north of Red Deer.

Construction is slated to start next year and begin operating in late 2012.