Understanding Fiscal Policy Change for the Alberta Oil Sands

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2018-09-13 Policy Entrepreneurship: Understanding Fiscal Policy Change for the Alberta Oil Sands

Weber, Jessica Dawn Marie

Weber, J. D. M. (2018). Policy Entrepreneurship: Understanding Fiscal Policy Change for the Alberta Oil Sands (Unpublished master's thesis). University of Calgary, Calgary, AB. doi:10.11575/PRISM/32947 http://hdl.handle.net/1880/107784 master thesis

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UNIVERSITY OF CALGARY

Policy Entrepreneurship:

Understanding Fiscal Policy Change for the Alberta Oil Sands

Jessica Dawn Marie Weber

A THESIS

SUBMITTED TO THE FACULTY OF GRADUATE STUDIES

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE

DEGREE OF MASTER OF ARTS

GRADUATE PROGRAM IN POLITICAL SCIENCE

CALGARY, ALBERTA

SEPTEMBER, 2018

Abstract

In 1995 and 1996 both the federal and provincial governments introduced major changes to their royalty and tax regimes for the Alberta oil sands industry. The stated goal of these reforms was to incentivize new investment. These changes came after decades of non- cooperation between the two levels of governments over oil sector policy and ignoring industry requests for fiscal reforms. Others have explained these changes as the result of a shift in priorities at high levels of government. However, there is no evidence that the policy change originated in government. Another explanation points to the creation of a new institution, the

National Oil Sands Task Force. This is a partial explanation, but it does not ask explain how and why the Task Force was created. Using the policy entrepreneur model of policy change, this thesis provides an alternative explanation. Drawing on first-hand accounts from those who participated in the policy changes, interviews, and a contemporary newspaper analysis, this study concludes that a single person, Eric Newell, was a key factor—a successful policy entrepreneur—in achieving these reforms. The thesis documents how Newell determinedly created narratives, formed coalitions, and navigated multiple institutional venues to shape new fiscal policies for the oil sands industry.

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Acknowledgements

Many debts make for many thanks.

For financial help, thank you to both the Social Sciences and Humanities Research

Council and University of Calgary’s department of political science. Thank you to the Petroleum

Historical Society for the funding as well as the genuine encouragement and enthusiasm for my project. Thank you Eric Newell for generously sharing your time and stories.

For a thesis focused on the importance of coalitions, I have thought much about the importance of relationships. I owe much to my friends and family who have been unwavering in their support. To my brother Dawson, thank you for insisting that I took regular breaks, and for always sending me home with delicious food. To my brother Casey, thanks for always calling to check in. To my parents, Florence and Lee, thank you for being excited for me, and always believing that I had this project well in hand. Thank you for your overblown confidence in my abilities, in this and in everything else.

I consider myself extraordinary fortunate to have formed such deep friendships with my fellow graduate students. John, your passion and calm introspection has been a constant source of inspiration for me to be more bold and resolute. Connor, your commitment continually raising meaningful, tough questions ensured that 717 was truly the safest place for conversation.

Andrew, your genuine curiosity about people and the world has been uplifting, your work ethic has inspired me to trust the process and put in the hours. To my friends, thank you for listening to me grapple with philosophical musings. To John Santos, Connor Molineaux, and Andrew

Klain, your friendship has been a gift. Thank you for all of the stories, shared frustrations, late night ramblings, and for helping to knock off my rough edges. iv

To my friends outside of university, thank you for both for your support, and for ensuring

I spent enough time playing in the mountains. Thank you to those who proofread early drafts of these chapters: Cassandra Sampson, Michela d’Entremont and Morgan Hordal.

To the professors who have challenged me to ask better questions, I owe a debt of gratitude. To Dr. Dennis Westergaard who first introduced me to political philosophy, thank you for expanding my world. To Dr. Cooper, thank you for all the conversations, the books, and the fun classes. Thank you for hiring me as your Teaching Assistant and Research Assistant. To all of the faculty and staff in the department, thank you for the challenging classes, and the encouragement.

To my supervisors Dr. Ted Morton and Dr. Jack Lucas, thank you for your kindness and thoughtful assistance. You have both been very generous with your time and care. While I have learned much about researching and writing, I most appreciate the time you invested in me as a person. Thank you for all of the stories you shared over venison and in the office.

Table Of Contents

ABSTRACT ...... II ACKNOWLEDGEMENTS...... III TABLE OF CONTENTS ...... V LIST OF TABLES AND FIGURES ...... VII CHAPTER ONE: INTRODUCTION ...... 1 OIL POLITICS LITERATURE ...... 5 FIRST MINISTERS’ CONFERENCES ...... 7 MAJOR PLAYER ANALYSIS ...... 10 OVERVIEW OF THE THESIS ...... 13 CHAPTER TWO: A HISTORY OF BITUMEN POLITICS...... 16 INTRODUCTION ...... 16 THE ALBERTA OIL SANDS: AN OVERVIEW ...... 16 JURISDICTIONAL DIFFERENCES ...... 18 HISTORICAL TENSIONS ...... 20 Oil Crises and the National Energy Program ...... 22 Supreme Court Challenges and The Constitution Act, 1982 ...... 26 Election of Prime Minister Mulroney: A New Chapter? ...... 27 1995/96 POLICY CHANGES ...... 30 CHAPTER THREE: LITERATURE REVIEW AND METHODS ...... 34

INTRODUCTION ...... 34 EXPLANATIONS OF THE POLICY CHANGE ...... 34 Election of Prime Minister Mulroney ...... 34 Alberta Chamber of Resources and the Task Force ...... 36 WHY WE NEED A THEORY OF POLICY ENTREPRENEURSHIP...... 38 WHO CHANGES POLICY? ...... 39 A THEORY OF POLICY ENTREPRENEURSHIP ...... 41 ATTRIBUTES OF A POLICY ENTREPRENEUR ...... 42 STRATEGIES OF A POLICY ENTREPRENEUR ...... 44 Ideas and Framing ...... 44 Coalition Building ...... 45 Brokering Ideas to Political Actors Through Multiple Venues ...... 46 OVERCOMING OBSTACLES TO POLICY CHANGE...... 47 METHODOLOGY ...... 47 CHAPTER FOUR: CHANGING THE NARRATIVE ...... 51 INTRODUCTION ...... 51 ORIGINS OF THE TASK FORCE: AN IDEA WHOSE TIME HAD COME...... 53 CREATING A VISION ...... 56 Perceptions of Industry ...... 57 CRAFTING A NARRATIVE: DEFINING THE PROBLEM...... 59 Replace Conventional Oil: Energy Security ...... 62 Industry as Viable and Investible ...... 63 Equal Treatment ...... 64 Pan-Canadian Benefits ...... 66 vi

CONCLUSION ...... 68 CHAPTER FIVE: CREATING COLLABORATION ...... 70 INTRODUCTION ...... 70 THE TASK FORCE ...... 72 OPPOSITION, OR LACK THEREOF ...... 79 INSTITUTIONAL VENUES ...... 79 The Alberta Government ...... 80 The Federal Government ...... 83 Expanding the Coalition: Non-Governmental Support ...... 87 MOBILIZING PUBLIC OPINION ...... 89 CONCLUSION ...... 90 CHAPTER SIX: CONCLUSION ...... 92

OVERVIEW OF THESIS ...... 92 WAS A POLICY ENTREPRENEUR A CAUSE OF THE POLICY CHANGE? ...... 92 HOW WAS ERIC NEWELL SUCCESSFUL AS A POLICY ENTREPRENEUR? ...... 93 Complexity in the Policy Process ...... 94 Limited Attention Span ...... 97 Resource Intensive Process ...... 98 WHY DID THE GOVERNMENTS COLLABORATE? ...... 99 IMPLICATIONS ...... 100 FUTURE RESEARCH ...... 104 CONCLUSION ...... 105 BIBLIOGRAPHY ...... 106 APPENDIX A – TIMELINE OF KEY DATES ...... 116

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List of Tables and Figures

Figure 1: Select Topics Discussed at First Ministers Meetings 8

Figure 2: Interview Analysis identifying Major Players in the 1995/6 Policy Changes 11

Table 1: Newell’s changing narrative of the oil sands industry in Canadian news articles 59

Table 2: Evaluating how Policy Entrepreneurs Overcome Obstacles in the Policy Process 93

CHAPTER ONE: Introduction

Monday, June 3rd, 1996 in Fort McMurray, Alberta: standing on stage together at the sports arena were Prime Minister Jean Chrétien, federal Minister of Natural Resources, Anne

McLellan, Alberta Minister of Energy Patricia Nelson,1 and eighteen oil executives including

Syncrude CEO Eric Newell. They stood together holding hands, smiling for pictures. The event looked as if it could have been a festival. There were bands, flags, crowds, and photo opportunities. Together they had signed the Declaration of Opportunity, announcing $5.6 billion in new investment and 10,000 new jobs for oil sands projects.

These investments were the result of the newly approval fiscal policies from both levels of government (Chambers, 1996). The policies required the two governments to work together to harmonize their fiscal policies for the oil sands industry. In November 1995, the Alberta government announced the province’s first standardized royalty regime for the oil sands industry. In March 1996, the federal government announced that it would change its income tax structure for the industry. The governments announced their new fiscal policies within four months of each other.

Not long before the Declaration of Opportunity was signed, the federal and Alberta governments had had a heated and uncooperative relationship over energy issues. This conflictual relationship was initiated by the 1973 and 1979 oil crises in the Middle East and the subsequent tripling of oil prices. The result of these crises was a battle between Alberta and

Ottawa over control of the price of oil, competition for revenues, and the management of the oil industry. In 1980, Prime Minister Pierre Trudeau introduced the National Energy Program

1 Formerly known as Patricia Black. I will hereafter refer to her by her chosen name, Patricia Nelson.

(NEP), and Alberta Premier Peter Lougheed retaliated against federal encroachment into provincial jurisdiction. In addition to such overt conflicts, there was also no coordination of tax and fiscal policies for the oil sands. According to the Constitutional division of powers, both governments have jurisdiction over aspects of natural resources policy. The two governments share powers over collecting revenues from natural resources, and these resource revenues can be lucrative. As a consequence, “few issues, including constitutional reform and Quebec, have stimulated and maintained as high a level of political controversy in Canada throughout the

1970s and 1980s as energy issues have” (Doern and Toner, 1985: 2). But just one decade after

Doern and Toner wrote these words, the federal Liberal Chrétien government, the same party that had introduced the NEP, and the Alberta Progressive Conservative Klein government worked together and harmonized their energy policies.

In the late 1980s and early 1990s, the oil sands industry had a poor reputation as an investment opportunity. During this time people would “spit on the floor” at the first mention of the oil sands (Camarta, 2012: 7). For decades, the oil sands were considered the “plump unattractive wallflowers of Canadian oil” due to their high cost, high level of government funding and marginal profitability (Foster quoted in Haliechuk, 1993: D1). Between the mid-

1980s and the mid-1990s the industry stagnated. Yet, in June 1996, this industry was celebrated by Prime Minister Chrétien as a “success story” and advantageous to Canada’s economic future

(Chrétien quoted in Kenny, 1996: F1).

The systems in place before 1995 and 1996 had undermined investor confidence in the industry. Before the Alberta government adopted a standardized royalty regime, royalties were 3

negotiated on a project-by-project basis.2 In March 1996, the federal government announced that the income tax system for the industry would allow for accelerated capital cost allowances. As both governments have the power to collect revenues from natural resource industries (the provincial government collects royalties, land sales and rents; the federal government collects income tax), their fiscal policies interact with each other. When the governments do not harmonize their policies, it results in inefficient natural resource policy (Cairns, 1987). Both governments had to coordinate successfully to incentivize investment in the oil sands industry through their fiscal policies.

These policies were initially unpopular with some elected officials because they would defer the recovery of taxes from resource companies. Oil sand companies were set to save $2.8 billion over eight years in tax and royalty breaks (MacDonald, 1996). Both governments were in debt and operating with a deficit. Reducing this debt was at the forefront of their respective election campaigns, and by passing these policies, they would forego billions of dollars in revenues that would see them into the next election cycle. While incentivizing investment was likely to benefit the Albertan and Canadian economy in the long-term, both governments chose to adopt these policies knowing they were unlikely to reap any short-term political benefits.

Eric Newell, who stood on stage with Prime Minister Chrétien in Fort McMurray on June

1996, was beaming. He was the CEO of Syncrude, former President of the Alberta Chamber of

Resources, and the spokesperson for the National Oil Sands Task Force.3 The Task Force was an industry-led organization that made policy recommendations to both governments in May 1995.

2 Royalties are a price that a resource owner charges developers. As the majority of natural resources in Alberta are owned by the provincial government, it sets the royalties for the developers. Developers pay royalties monthly during production. 3 The National Oil Sands Task Force is sometimes referred to the National Task Force on Oil Sands Strategies. For simplicity, this thesis will hereafter refer to it as the Task Force. 4

These policy proposals included a request that the Alberta government adopt a standardized royalty regime and that the federal government change its taxation structure to incentivize investment. For decades the federal and provincial tax and royalty system had functioned as

“substantial stumbling blocks” for the industry (Moralis, 1984, n.p.; Chastko, 2004). Prior to

1995, industry had asked the governments to change their fiscal policies but without success

(Chastko, 2004; Steward, 2017).

The effects of the new fiscal policies were staggering. In the Declaration of Opportunity, industry’s goal was to triple oil sands production in 20 years. In reality, production tripled in less than a decade. Eric Newell had hoped for $21 billion in investment over a twenty-five year period; by 2004, more than $65 billion in investment had been announced (Hoberg and Phillips,

2011). While other factors contributed to increased investment in the industry, the new fiscal policies played a central role.4

The policy changes described above are puzzling. They represented a transformation in both industry-to-industry relations and government-to-government relations. Industry executives who had been in direct competition with one another now collaborated closely. Governments that had been engaged in bitter conflict over energy revenues came together to cooperate. Short-term government revenues were foregone in favour of longer-term gains. None of this could have been predicted at the start of that decade. The goal in this thesis is to understand this puzzle, and to answer the question: Why did the federal and the provincial Alberta governments collaborate to change their fiscal policies for the oil sands industry?

4 Oil sands companies introduced new technologies in the late 1990s that contributed to increased production. The price of oil started to increase in 2000, which later contributed to the increased investor attention in the industry. For more on how these other factors contributed to the growth of the oil sands industry see Chastko, 2004; Steward, 2017; Steinmann, 2005. 5

Oil Politics Literature Since the 1990s there has been little research on Canadian energy politics in general, and less on oil sands politics specifically (Gattinger, 2012). Much of the literature written between the 1970s and 1990s focused the federal-provincial conflicts that arose from the energy crises, the NEP and Constitutional reform (Cairns, 1992; Doern and Toner, 1985; Fossum, 1997;

McDougall, 1982; Milne, 1986; Pratt, 1976). Since the end of the NEP, the main focus of

Canadian energy politics scholarship has been on the environment and climate change (Doern,

2005; Meadowcroft and Langhelle, 2009; Shaw, 2011). Most of this scholarship focuses on the conventional oil and gas industry and not the oil sands industry.

In the wider academic literature on the oil sands, economists have made important contributions in studying the government’s fiscal policies for the oil sands industry (MacFadyen and Watkins, 2014; Mintz and Chen, 2010; Plourde 2009). While these studies provide a good analysis of the economics of the industry, they do not examine the politics that produced these fiscal policies. The same critique applies to Chastko’s (2004) comprehensive historical text on the development of the oil sands industry. There has also been interesting publications on how the oil sands industry has been covered by journalists (Paskey et al., 2013; Steward, 2017).

Overall, oil sands politics are understudied in political science in general, and intergovernmental policy change in the oil sands industry is particularly understudied.

Scholars acknowledge that the federal and provincial fiscal policy changes in 1995/96 were significant (Chastko, 2004; Steinmann, 2005; Steward, 2017; Hoberg and Phillips, 2011).

However, these scholars do not agree how to understand the policy changes. Some focus on the role of high level politicians, and others on the lobbying efforts of an industry association.

The most common explanation is that there was an ideational shift at high levels of government that led to policy change. Most of the scholars who subscribe to this explanation 6 contend that the 1984 election of Prime Minister Brian Mulroney introduced a pro-market policy shift in the government (Chastko, 2004; Plourde, 2012; Doern, 2005; Brownsey, 2005; Doern and Gattinger, 2003; Fossum, 1997). The introduction of new ideas made the policy changes in the 1990s possible (Chastko, 2004). Others write that this shift occurred at the provincial level with the 1992 election of Premier Ralph Klein (Steward, 2017; Steinmann, 2005). While both the

Mulroney and Klein governments introduced pro-market policies, this economic explanation does not account for why the two governments coordinated their formerly divisive energy policies. These explanations also fall short, as a detailed historical time-line shows that the ideas for the fiscal changes did not originate in government. For decades, industry had asked both governments for these policy changes, but they were dismissed. Governmental bodies, such as the Alberta Tax Reform Commission, had proposed similar policy changes to both governments in the 1980s and early 1990s, but they too were ignored. This focus on ideational shifts at high levels of government has caused prior analysists to overlook the role of policy actors outside of government.

Other scholars point to the non-governmental organization, the Alberta Chamber of

Resources, and argue that this organization formed the Task Force that then lobbied governments to change their policies (Woynillowicz et al., 2005; Hoberg and Phillips, 2011). While I agree the Task Force played a critical role, this explanation is incomplete because it does not account for why the Task Force was created and how it was successful when previous lobbying efforts were not. It is still not clear where the Task Force came from, or why it emerged in the early

1990s and not at some other time. If the Task Force was connected to Conservative, pro-market ideology, we would have expected to see it emerge in the 1980s when Mulroney was in power, rather than under Chrétien’s leadership. One study does emphasize the crucial role that Newell 7 played, but does not account for how he brought the governments together to collaborate

(Urquhart, 2018). This thesis inquires why the Task Force started and how it was successful.

First Ministers’ Conferences To consider first why these fiscal policies changed, I searched for evidence of where the ideas for the change originated. I searched for evidence that these policy changes originated at high levels of government and did not find any. If the idea to change the fiscal policies originated in the highest levels of government, it likely would have been discussed at the First Ministers’

Conferences. The First Ministers’ Conferences brings together the premiers and prime minister to discuss topical issues, especially those that require intergovernmental coordination. These conferences are conducted in private, but the agendas reveal the main topics of discussion. I reviewed the agendas of the relevant First Ministers’ Conferences to see if these policy changes were discussed at the inter-governmental level. While economic development was discussed repeatedly through the late 1980s and early 1990s, energy was not. 8

Figure 1: Select Topics Discussed at First Ministers Conferences

Select Topics discussed at First Ministers Conferences 5

2 Number of Meetings Numberof

Energy Natural Resource Economic Development

I first reviewed all 64 First Ministers’ Conference agendas between 1950-1999.5 To create this figure I set aside conferences specifically on the Constitution, as I was only interested in meetings where the agenda included other issues. The remaining 43 meetings included both economic conferences and federal-provincial conferences. I was most interested in agenda topics involving oil politics in Alberta, so I began by ensuring that delegates from Alberta were present at every meeting. They were. I then reviewed the agendas and systematically coded the topics of discussion for issues involving energy, natural resources, and economic development. I then aggregated these codes to produce Figure 1. Topics coded as energy include general mentions of

5 Canadian Intergovernmental Conference Secretariat. 2004. First Ministers’ Conferences 1906-2004. http://www.scics.ca/wp-content/uploads/2016/10/fmp_e.pdf 9 energy as well as specific topics such as oil and gas supply and security. I coded for natural resources to account for any conferences in which oil may have specifically been discussed within this general agenda topic. I coded for economic development to note when the governments were discussing ways to increase the economic prosperity of their provinces. This was important to include as the fiscal policy changes were designed to increase investment in the oil sands, which was anticipated to have a positive economic benefit for Canada as a whole. I was interested in determining if the two levels of government discussed increasing economic development by coordinating their energy policies.

By looking at the black bars in Figure 1 we can see that energy was discussed at First

Ministers’ Conferences at least once every decade until the 1980s. Conferences involving discussions on energy peak between 1975 and 1979. This coincides with the beginning of Prime

Minister Trudeau and Premier Lougheed’s bitter relationship over control of the energy industry and its revenues. Between 1980 and 2000 energy was not discussed at these conferences.

While energy issues were scarcely discussed, economic development, reported with blue bars in Figure 1, was a regular feature on the conference agenda. In the ten First Ministers’

Conferences held between 1985 and 1995, economic development was discussed at six of them.6

On the agenda for February 10, 1992 is “Pre-budget discussion of common economic recovery”

(Canadian Intergovernmental Conference Secretariat, 2004: 95), and on December 21, 1993 is

“Job creation and competitive economy” (Canadian Intergovernmental Conference Secretariat,

2004: 101). While governments were evidently concerned with increasing investment in the early 1990s, they did not identify energy as a means to accomplish this. During this time, other natural resource industries, such as agricultural and fisheries in 1992 (Canadian

6 This does not include Conferences on the Constitution, of which there were six in this period. 10

Intergovernmental Conference Secretariat, 2004: 96) were discussed. Contrary to the conventional explanation that the idea to change the fiscal policies originated inside federal and provincial governments, I did not find any evidence of this in the First Ministers’ Conferences.

Major Player Analysis I then investigated the second explanation, that the policies changed owing to the lobbying efforts stemming from the Alberta Chamber of Resources. To test this claim, I researched why the Task Force was created and how it was successful. I searched for first-hand accounts from those who were involved in the policy change. Here, I repeatedly observed mentions of the contributions of Syncrude CEO Eric Newell to the policy change efforts. To generate Figure 2, I read each of the 117 interview transcripts in the Oil Sands Oral History

Project to identify interviewees who discussed the policy changes. The Oil Sands Oral History

Project was managed by the Petroleum Historical Society and donated to public archives. Video and audio recordings as well as transcripts of the interviews are publicly available on the

Glenbow Museum webpage.7 Of the 117 interviewees, 20 discussed the policy changes. From this subset of interviews, I coded each individual who was mentioned as being a major figure in the 1995/96 policy changes.8 A major player was given one count if they were credited as important to the policy change efforts, regardless of how many times they were mentioned by an interviewee. I then aggregated these codes to produce Figure 2, which reports the total number of mentions of each individual. Non-governmental individuals are reported with diagonal hashes, and governmental individuals are reported with black bars. I included the non-governmental association, the Alberta Chamber of Resources since a significant number of interviewees

7 http://www.glenbow.org/collections/search/findingAids/archhtm/oilsands.cfm 8 A major player was defined as someone credited as playing a leading role in the 1995/96 policy changes. This method was inspired by Baumgartner et al., 2009. 11 credited it as playing a major role in the policy changes. Besides this one, no other institutions were mentioned as playing a major role.

Figure 2: Interview Analysis identifying Major Players in the 1995/6 Policy Changes

Interview Analysis of Major Players in 1995/96 Policy Changes

Eric Newell Alberta Chamber of Resources Erdal Yildirim Jim Carter Don Currie Anne McLellan Al Hyndman Dee Parkinson Jim Dinning Howie Dingle Denise Carpenter Ralph Klein Paul Precht Pat Nelson John Nichols D'Arcy Levesque Bert Lang 0 2 4 6 8 10 12 14 Number of times mentioned

The top bar shows that of the 20 people who discussed the policy changes, Eric Newell was mentioned by 13 as a major player. Of the seven people who did discuss the policy changes and did not mention Newell as one of the major players, five did not identify any person at all as being a major influence on the policy. Only two people, Guy Boutilier (Mayor of Fort McMurray from 1995-1997) and Paul Precht (Alberta government bureaucrat), mentioned the policy changes and gave credit to people other than Newell as a major player.

Three of the top four most frequently mentioned people (Newell, Yildirim, and Currie) were in leadership positions in the Alberta Chamber of Resources. Newell was President in 1994. 12

Erdal Yildirim was President in 1992, and was also Chairman of the National Oil Sands Task

Force. Don Currie was the Managing Director of the Alberta Chamber of Resources from 1986 to 2000. Taken together, the combined mentions for the Alberta Chamber of Resources and these three top leaders is 27. This accounts for over half of the total mentions of major players in the interviews.9 Newell, Yildirim and Currie all held leadership positions both on the Task Force as well as in the Chamber. Of the top five entries in Figure 2, Jim Carter is the only individual who did not hold a leadership position within the Task Force. However, he was the vice president of operations for Syncrude in the early 1990s and was involved with Newell in efforts to change the policies (Carter, 2011).

In these interviews, members from private industry were credited many times more than were politicians in driving policy change. Compared to the 41 combined mentions of industry members and their association, there were only seven mentions of politicians. Four politicians were credited as major players: federal Minister of Natural Resources Anne McLellan, Alberta provincial Treasurer Jim Dinning, Premier Ralph Klein, and Alberta Minister of Energy Patricia

Nelson. One Alberta bureaucrat, Paul Precht, was mentioned by one person as being a major player. Precht was an economist from the Alberta Department of Energy who worked to develop the standardized royalty regime while on the Task Force.

While Newell was mentioned twice as often as the next most frequently mentioned organization or individual, it is likely that this advocacy effort, like most other large projects, was truly a collaborative project. It is a rare case indeed when a single individual is solely responsible for enacting dramatic change. Despite receiving most of the credit for the policy change, Newell has rarely taken sole credit for any ideas or achievements (Newell, 2018). While

9 The 20 people who discussed the policy changes in their interviews, named 16 people and one organization a combined total of 49 times. 13

I acknowledge that many people likely contributed, it is important to note that the vast majority of people involved in the mid-1990s policy change identified a single person, Eric Newell, as the

“central figure[e] in the drama” (Kingdon, 1984: 189). As Newell was the person most frequently credited as playing a major role, this analysis will examine his actions as the chief actor in driving the policy changes.

This thesis accounts for the 1995/96 policy changes by focusing on a different aspect than the conventional explanations. I point to the specific actions of a single “policy entrepreneur.” A policy entrepreneur is someone who seeks to initiate dynamic policy change (Baumgartner and

Jones, [1993]2009; Kingdon, 1984). This project will look at the actions of Eric Newell as the key policy entrepreneur who used his own means to pursue policy changes.

Many public policy studies think of dramatic policy shifts as originating in high levels of government. More recently, some scholars have begun to focus on the role of an individual in the policy process: the role of policy entrepreneurs (Mintrom and Norman, 2009). Some of the policy change literature is skeptical about the ability of individuals deliberately to shape policy change (Cohen et al., 1972). This skepticism is grounded in an argument that the complexity of the policy process presents substantial obstacles to those who want to direct policy change.

Newell effectively influenced policy, and examining the strategies he used will further our understanding of how policy entrepreneurs succeed. If a single devoted individual was able to make a difference in this particular complex intergovernmental policy domain, suggests that policy entrepreneurship might play a more important role in policy change than the scholarly literature suggests.

Overview of the thesis To explore why the policies changed, I will examine the strategies of Eric Newell as a policy entrepreneur throughout the early 1990s. To accomplish this, the study is organized in six 14 chapters. Chapter two is a descriptive chapter that reviews the historical context. It is essential to understand the historical circumstances because the time-line of events led me to question the leading conventional explanations and to propose a new one. Chapter three outlines the theory and methods beginning with an account of the conventional explanations for why the policies changed and the shortcomings of such accounts. The theoretical outline for the thesis is informed by the policy entrepreneurship literature. This literature outlines the complexities in the policy process and the strategic actions and necessary attributes that a policy entrepreneur must exhibit to be successful. The methodology for this in-depth case study is called process tracing. The primary data sources are interviews and newspaper articles. I systematically read and hand coded

117 interviews. These interviews conducted between 2011-2013 are supplemented by an analysis of 154 newspaper articles published between 1990-1996. In addition to these sources, I conducted an extended in-person interview with Eric Newell (2018).

Chapters four and five present the analytical substance of the study. These chapters are the empirical testing of the policy entrepreneurship literature outlined in Chapter three. Chapter four traces how Newell created the ideas to change the fiscal policies and how he framed the policy problem and policy solutions. This chapter includes a newspaper analysis tracing how his narrative of the oil sands industry changed over time. Chapter five covers how Newell formed coalitions and sold his policy proposals to the governments. This chapter outlines how he worked to form relationships with individuals to gain greater access to resources and build support for his policy proposals.

Chapter six analyses Newell’s actions as a policy entrepreneur in light of the theory covered in Chapter three. It summarizes how Newell was successful in initiating policy changes.

This chapter concludes with suggestions for future research that could build on this thesis. 15

CHAPTER TWO: A History of Bitumen Politics The oil sands found itself going from an orphan to a pop star almost overnight. -David Ryan, 2012: 25

Introduction The federal and provincial governments have long had a fraught relationship over the oil sands. To demonstrate why their cooperation in the 1990s was a departure from the past relationship, this chapter outlines historical intergovernmental tensions over the industry. This chapter provides an overview of the oil sands industry, and the challenges inherent in developing the resource. Next, it summarizes the federal and provincial jurisdiction over oil sands policy. At times, each government has tried independently and without coordination to exert control over the oil sands often the result was conflict. The chapter then provides an overview of these intergovernmental tensions and conflict. It ends with a description of the 1995/96 policy changes and their significance.

The Alberta Oil Sands: An Overview The Athabasca oil sands are an unconventional crude oil reserve primarily located in northern Alberta. The potential of this resource is enormous. As of 2016, Alberta’s proven oil sands reserves were 165.4 billion barrels (Government of Alberta, n.d.). In relation to other producing nations, the Canadian oil sands are the third largest known oil reserve in the world, next to Venezuela and Saudi Arabia. This reserve of oil is valued for both its strategic importance to Canada and its allies, as well as its potential to contribute to national wealth through tax generation and employment opportunities.

The oil sands industry differs from the conventional oil industry in ways that have necessitated different government policies. Accordingly, the oil sands need to be studied separately from the conventional oil industry. The term “unconventional” refers to the unusual 17 methods needed to extract and produce oil sands insofar as established conventional means are inadequate. Unlike conventional oil, which can be drawn up from an underground reservoir, open-pit oil sands facilities operate more like a mine, as the earth itself is scooped up and processed. Oil sands are comprised of a combination of sand, water, and bitumen (a highly viscous form of oil). Unlike conventional oil, which exists in large pools underneath the earth’s crust, oil sands consist of countless drops of oil, each attached to sand and water. To extract the oil, bitumen must be separated from the other particles. The nature of bitumen necessitates complex technology to extract oil and this specialized technology raises the cost of producing oil. As a result, the profit margin can be narrow.

In addition to open-pit oil sands mines, in situ is another process of extracting bitumen. In situ production uses specialized technology to recover bitumen not accessible via open-pit mining methods. About 80% of the bitumen reserves are located deeper below the surface and are not recoverable using open-pit mines. These deeper reserves are recoverable with in situ production, dramatically increasing the amount of recoverable bitumen. Most in situ projects use steam-assisted gravity drainage (SAGD): a procedure in which steam is pumped underground to liquefy bitumen, which is then pumped to the surface. This procedure had first been experimented with in 1929, and was perfected in the late 1980s.

Due to the complex particle structure of the oil sands, specialized technology is needed to extract bitumen. Primarily, oil sands extraction relies on a complex extraction facility. These facilities are investment intensive, requiring typically a five to seven year construction period costing billions of dollars, before they can begin to generate any sales and revenue. The upfront financial cost, and the time it takes to construct the facilities, are hurdles to new investment in the industry. The high cost of the facility drives up the cost to produce oil from oil sands. 18

The world price of oil reflects the global supply and demand: as demand increases, so too does the price. Higher prices, in turn, usually incent increased exploration and production.

Alberta oil producers are price-takers on the international market, which means they cannot set the selling price for their oil, but have to sell at a price that is pegged to the world price. Since they have to accept the world price, they cannot adjust their selling price to allow for a predictable profit margin that encompasses their cost of production. When the price of oil dips, industry’s profit margin does as well. Government policy can respond to changes in the price of oil by creating fiscal policies that provide royalty or tax breaks when the price of oil is low. In doing so, government can offset the volatility of the oil market, and reduce the financial risk for investors.

The high front-end costs plus the volatility of oil prices make the oil sands industry a higher risk investment than conventional oil. The profitability of the sector depends on advancements in technology, the world price of oil, and government policy. Due to the vast size of the oil sands deposits, if the above three factors are favourable – technology that lowers the cost of production, a world price of oil high enough for production to be profitable, and government fiscal policies designed to incentivize investment – a company’s investment in the oil sands can be profitable for a long time. Of these factors, this thesis focuses on government policy.

Jurisdictional Differences Compared to other federations, provinces in Canada have considerable power over natural resource policy (Cairns, 1992). At Confederation in 1867, provinces were granted ownership over their lands within their borders as their main means to generate revenues.

Provinces have jurisdiction over managing, developing, as well as raising revenues from resource development. The provincial government collects revenues through royalties, land sales 19 and rents as well as corporate income tax. Natural resources tend to be unevenly distributed across the country, leading some provinces to have greater wealth than others.

The majority of the Athabasca oil sands are located in Alberta, which has a small population relative to the rest of Canada. As a result, Alberta has a comparatively small representation in the House of Commons (Alberta has 21 seats out of the national total of 282).

The relationship between Alberta’s high level of natural resources and its low level of federal political representation have led some to refer to the province as “oil rich, and voter poor.” This situation is contrasted with Ontario and Quebec, provinces that have few hydrocarbon resources and high levels of political representation owing to their large populations (Ontario has 95 seats in the House of Commons, and Quebec has 75). To continue the comparison, Ontario and

Quebec can be said to be “voter rich, and oil poor.” As the bulk of the federal government is usually formed by Members of Parliament elected from these two provinces, the federal government can be preoccupied with satisfying their major electoral base: Ontario and Quebec.

The contrast between levels of natural resources and political representation has led to conflicts between the federal and Alberta governments.

Most of what is produced from natural resources is exported from the province of origin, resulting in trade and exports being an important issue in natural resource management. Trade policy and resource management are inescapably connected, insofar as alterations in one invariably affects the other (Cairns, 1992). The federal government has jurisdiction over interprovincial and international trade. In this domain, federal and provincial policies are interdependent and “accommodation between management and trade policies is necessary”

(Cairns, 1992: 56). Because it levies corporate income tax the federal government also has revenue-raising powers over resources. Since both levels of government have concurrent powers 20 to raise revenues from resources, the policies of one affects the other. The jurisdictional division of powers means that the policies enacted by the two levels of government in the management, development, trade, taxation and resource-raising aspects will affect the policies of the other.10

Both the federal and provincial governments have jurisdiction over collecting revenue from natural resource industries, and thus have the power to influence industry through their fiscal policies. The governments can use their powers of taxation to achieve their broader political goals. Since both the federal and provincial governments can levy taxes, their policies interact with each other. The federal and provincial governments have often enacted policies that conflict. The oil sands resource is both strategic and lucrative, and the two governments have differed in their view of how best to capitalize on the resource. The two governments frequently have had different goals that set their policy agendas. The priorities that best serve the interests of the 4 million Albertans, are often different from and may conflict with the interests of the other 32 million Canadians across the rest of Canada. It would be more surprising when their energy policies align than when they differ.

Historical Tensions The conflict between the federal and provincial governments is a common theme in the history of the oil sands industry. The oil sands captured the interest of the federal government as an important resource as early as the 19th century. In 1882, the federal government conducted a geological survey to assess the potential of the Athabasca oil sands reserve and found that they were vast and likely to be high yielding for a long time (Chastko, 2004). The federal government deemed this a strategic resource and wanted to maintain control over it (Chastko, 2004). In 1905, when Alberta and Saskatchewan became provinces, the federal government retained ownership

10 The governments also have overlapping jurisdiction in environmental matters. 21 over natural resources in these provinces. This decision was highly contentious in Alberta. All other provinces maintained or received ownership over natural resources within their borders when they became provinces. The provincial government wanted to manage and control the development of its natural resources mainly land, but including the oil sands. Finally, in 1930

Alberta and Saskatchewan gained control over most of their natural resources with the Natural

Resources Transfer Act of 1930, 25 years after becoming provinces. However, there was a caveat in the Transfer Act that stated the federal government would control 2,000 square miles of territory in northern Alberta: specifically, 2,000 square miles of the Athabasca oil sands deposit.

The federal government did not sign over full ownership of these 2,000 square miles to the

Alberta government until 1945.

In the early 1960s, Ernest Manning’s government in Alberta approved the Great

Canadian Oil Sands (GCOS), the first oil sands project. The project’s prospects for success were riddled with doubt, as the price of oil had been decreasing since 1957. There were no assurances that the project was technologically feasible or could operate profitably. As this was the first commercial oil sands plant, many of the operations were still experimental. Despite these legitimate risks, the Energy Resources Conservation Board approved it (Chastko, 2004). As it was the first commercial oil sands project, there was no precedent or established policy for how to collect resource revenues from it. The royalty regime was complicated and a source of uncertainty for investors (Chastko, 2004). Premier Manning was personally involved with creating regulatory regimes that sheltered the industry.11

11 Under the royalty regime GCOS would pay 8% on crude production up to 900,000 barrels and 20% on subsequent production. Refined and specialized bitumen by-products were subject to an addition 16.66% royalty. Through the Energy Resources Conservation Board, the Manning government guaranteed oil produced from oil sands plants a place in the market, but limited it to 5% of total demand for Alberta oil. This allowed just enough space on the market for the GCOS project, but did not allow space for additional oil sands plants to start. This 5% limit was in place until 1971 (Steinmann, 2005). 22

When Syncrude was approved by the regulator a decade later, in 1969, it too had unique fiscal arrangements with the governments.12 In December 1974, the Syncrude project nearly failed when Atlantic Richfield suddenly withdrew its 30% stake from it. To keep the project from floundering, the provincial and federal governments became direct investors in it. After a hurried meeting in a Winnipeg hotel on February 3, 1975, the partnership of Syncrude became:

Imperial Oil (31.25%), Cities Service (22%), Gulf (16.75%), the federal government (15%),

Alberta government (10%), and Ontario government (5%). Up to this point the federal and provincial governments were both supportive of the oil sands industry. Despite their mutual support of the industry, they came to differ in their policies.

Oil Crises and the National Energy Program The 1970s and early 1980s are notable for federal and provincial conflict over energy policy and revenues. The two governments chose very different policies in response to the same external economic factors. The oil crises in 1973 and 1979 led to international oil supply disruptions, resulting in a spike in the world price of oil. The price increase was dramatic. After the 1973 crisis, the price nearly tripled in just three months. The price surge meant different things to the federal and provincial governments, causing them to adopt different policies. The increase in the price of oil signaled an energy security issue to the federal government, and an economic opportunity to the Alberta government. The conflict between the governments centered around control over the price and management of oil.

The federal government, led by Prime Minister Pierre Trudeau, perceived the crises as an energy security issue where Canada’s supply of affordable oil was compromised. The federal

12 Economist Paul Precht said “The original Syncrude agreement was kind of very different structure from I think had ever been seen before, certainly in Canada or in North America in terms of royalty structure” (Precht, 2013: 13). Instead of the traditional approach to collecting royalties where they are based on gross revenues, Syncrude’s was based on profits. This was called a Share of Deemed Net Profit approach rather than an Ad Valorem Royalty. 23 government intervened and enacted policies designed to achieve national energy self-sufficiency and energy security (Fossum, 1997). They sought to shelter Canadian consumers from the higher cost by controlling the price of oil. Between 1975 and 1979, the federal and provincial governments had an “uneasy equilibrium” through their oil pricing agreements (Cairns, 1987:

504). But after the second price shock in 1979, the federal government acted unilaterally to manage the oil industry.

In 1980, in response to the second oil shock, the federal government created the National

Energy Program. The federal government sought greater revenues, and control over and management of the oil industry without involving the provincial government. The federal government set the price of Canadian-produced oil significantly below world prices; introduced new taxes for the oil industry; and used the revenues from these taxes to subsidize the price of oil imported to eastern Canada (Fossum, 1997).13 It also controlled the price and quantities of oil exported from Canada (Fossum, 1997). These policies directly interfered with the policy priorities of the Lougheed Government in Alberta. Lougheed interpreted the increase in price as an economic opportunity for the province to sell its product at the higher global price, and thus capitalize on the increased demand for oil. Trudeau and Lougheed had different priorities, as

Alberta had elected no Liberal Members of Parliament in the 1980 election. Trudeau’s majority government was built on sweeping support in Ontario and Quebec with little support in the west.14

13 These taxes included the Petroleum and Gas Revenue Tax (PGRT) as well as the Petroleum Incentives Program (PIP) which incentivized investment on federal lands rather than provincial and consequently diverted significant investment away from Alberta. 14 The Liberal government had 55 Members of Parliament elected from Ontario and 60 from Quebec. This is contrasted with 8 from British Columbia, 0 from Alberta, and 3 from Saskatchewan. 24

Premier Lougheed and Prime Minister Trudeau viewed their interests as essentially at- odds with one another. In an effort to retaliate against the federal government for the policies adopted under the NEP, Lougheed’s government adopted policies that were detrimental to

Alberta’s own financial interests. In 1980, the Alberta government cut back oil deliveries to eastern Canada, citing “conservation reasons” (Cairns, 1987: 504). This policy choice was widely viewed as not being about conserving oil, as much as a political retaliation to federal encroachment through the NEP (Cairns, 1987). While Alberta lost oil sales to eastern Canada, the federal government was pressured to import more foreign oil at a much higher price than

Canadian oil. This policy demonstrates the antagonism between the two governments, as their policy choices harmed each other’s interests. Both governments were responding to the same economic factors, and both chose different policies due to their different political and financial goals.

Although the policies enacted by the NEP were designed to shelter the oil sands industry by differentiating between it and the conventional industry, the NEP had a negative effect on the oil sands industry. Although oil sands companies could not sell their crude at the world price, they were permitted to sell at a higher price than the conventional industry (Chastko, 2004). In addition, the NEP added fewer new taxes to the oil sands industry than to the conventional industry (Helliwell et al., 1988). During this time, the oil sands industry retained their depletion allowance and “received special consideration from the federal government” (Chastko, 2004:

184). 15 Despite these measures, investment in the oil sands industry declined during the NEP, because the conventional and unconventional oil industries in Alberta are interrelated (Chastko,

2004). Many companies that had investments in the oil sands industry also had investments in

15 Depletion allowance permits companies to deduct a portion of certain exploration and development expenses from their income tax. 25 the conventional oil industry. In these cases, companies can take their profits generated in the conventional industry and apply them to the more capital-intensive oil sands industry. By heavily taxing and suppressing the conventional oil industry, the NEP decreased the available capital that would have funded research and expansion in the oil sands industry. In summary, policies that harmed the conventional industry ultimately negatively affected the oil sands industry as well.

Furthermore, two oil sands industry projects suffered directly from the intergovernmental political battles of the NEP. In 1980, Lougheed stalled the development of both the Alsands and

Cold Lake projects, hoping that this announcement would serve as “trump cards” in negotiations with the federal government (Chastko, 2004: 185). Neither of these projects recovered from this delay, and by 1982 both were cancelled. Again, both governments had set restrictive policies that harmed their own interests and “[n]either government appeared to take seriously the notion that their restrictive policies might force the cancellation of the project” (Chastko, 2004: 191). While neither government may have intended to suppress the growth of the oil sands industry, their policies eroded investors’ confidence (Chastko, 2004). Referring to the cancellation of the

Alsands project, historian Paul Chastko notes that investors did not want to invest “$13 billion in a project subject to the whims of two governments locked in political combat” (2004: 187). In short, energy policies were highly politicized, and the federal and Alberta governments adopted policies that opposed the interests of each other.

Scholars suggest that the battles that were fought under the guise of energy politics in the

1970s and 1980s were actually political battles (Doern and Toner, 1985). When Premier

Lougheed limited shipments of Alberta oil to eastern Canada in 1980, he was willing to endure an economic loss for the sake of a political victory over the NEP (Doern and Toner, 1985).

Trudeau’s policies were driven more by political goals of national unity, energy security, and 26 winning the next election rather than collecting taxes from oil (Doern and Toner, 1985). Suffice it to say that it is unlikely that the conflict was driven simply by ambitions of collecting resource revenues.

Notwithstanding these conflicts, in 1983 small but notable growth in the oil sands began again. In that year, Imperial Oil’s small oil sands plant in Cold Lake was approved.16 The following year, the Energy Resources Conservation Board approved additions to oil sands projects in Fort McMurray, Cold Lake and Peace River. In a time of energy conflict and restrictive policies for the conventional oil industry, these approvals are significant because they show that prior to the end of the NEP, the oil sands industry was once again beginning to grow.

Supreme Court Challenges and The Constitution Act, 1982 While energy dominated the political debates in the 1970s and 1980s, intergovernmental conflict was also about competing claims of federal and provincial jurisdiction (Cairns, 1987).

Two major court decisions altered the federal-provincial balance of powers for natural resources.

In both cases, CIGOL in 1977 and Central Canada Potash in 1978, the Supreme Court altered the balance against the provincial government (Chandler, 1986). In CIGOL, the Court struck down Saskatchewan’s “windfall profits tax,” an initiative designed to raise more resource revenues (Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan et al., 1977). The

Supreme Court ruled that Saskatchewan’s royalty surcharge constituted an indirect tax instead of a royalty, which they did not have the jurisdiction to levy. In Central Canada Potash, the Court invalidated Saskatchewan’s regulation of production and price fixing of potash as it unduly infringed on the federal trade and commerce power (Chandler, 1986; Cairns, 1981). Alberta,

Manitoba and Quebec all intervened in both of these cases to support Saskatchewan, and, by

16 This plant had its own unique royalty agreement called the “Cold Lake Formula” (Precht, 2013: 14). 27

extension, their own jurisdiction over resource development (Cairns, 1981).17 The Western provinces, led by Alberta, were eager to confirm and expand their jurisdiction over natural resources and to limit the scope of federal regulation (Riddell and Morton, 2004).

The Constitutional Act, 1982 strengthened provincial jurisdiction over natural resources.

The resource amendment Section 92A, bolstered provincial scope over managing, developing and taxing natural resources, while the federal government retained powers over the taxation of businesses in the natural resource sector (Riddell and Morton, 2004; Chandler, 1986). Provincial powers to tax were extended to “any mode or system” and as a result can levy indirect taxes as well as direct taxes (Hogg, 1982: 101). The federal government retained jurisdiction over interprovincial and international trade and commerce (Cairns, 1992). Thus, Alberta (and the other Western provinces) won back the jurisdictional powers that they had lost in the earlier

CIGOL and Potash cases (Riddell and Morton, 2004).

Election of Prime Minister Mulroney: A New Chapter? In 1984, Progressive Conservative Brian Mulroney became Prime Minister, ending nearly

16 years of Liberal Party control of the federal government. Other than Joe Clark’s six month tenure as prime minister in 1979-1980, Trudeau had been in power since 1968. Mulroney campaigned on abolishing the NEP and won every seat in Alberta. Within his first year in office,

Mulroney signed The Western Accord with Alberta and Saskatchewan. The Western Accord aimed to undo many of the policies brought in by the NEP. The Accord ended price controls on oil, special taxes on oil and gas industry, and restrictions on export sales.18

17 The full list of interveners for CIGOL v Government of Saskatchewan et al., are: The Attorney General of Canada, Quebec, Manitoba, and Alberta (1978). And for Central Canada Potash Co. Ltd. Et al. v. Saskatchewan are: Quebec, New Brunswick, Manitoba, Alberta, Newfoundland (1979). 18 The price of synthetic crude produced from oil sands was determined by the New Oil Reference Price which was set higher than oil produced via conventional means, to reflect the higher cost of production. Yet the price was still lower than the world price (Chastko, 2004, p.181). The federal government phased out Petroleum Incentives Program (PIP) grants and the Petroleum and Gas Revenue Tax (PGRT). The PGRT was designed to fund the PIP 28

New investment in the oil sands looked promising as in 1987, the federal and Alberta governments committed to take a direct role in the development of a new oil sands project called

OSLO (Other Six Lease Operators). This project consisted of a consortium of investors including the Alberta government with a 10% stake, and the federal government planning on contributing

$1 billion to the project’s cost (Steward, 2017). Whereas the initial oil sands plants, Suncor and

Syncrude, were initiated by private investors and were negotiated for years with government, the

OSLO project was initiated by government itself (Chastko, 2004). The Alberta energy minister of the time, Neil Webber, said that construction for the project should begin “not at the timing of the international oil companies or the major oil companies but the timing when the governments of Canada want these projects brought into place” (Webber, 1987: 318-319). This statement reflects the direct role that the federal and provincial governments took in encouraging investment in the industry. Both governments sought to direct new investment rather than create pro-market policies to encourage new investment. While Mulroney’s Western Accord signaled federal withdrawal from direct management of the energy industry, the OSLO project suggests that both governments were still interested in directly intervening in the oil sands industry.

Despite three years of federal-provincial negotiations, the OSLO project suddenly fell apart in 1990 when the federal government abruptly withdrew its funding. The federal budget that announced the Mulroney government’s withdrawal from the project came as a surprise to

Alberta (Chastko, 2004). The years of negotiations between the federal and provincial governments initiated public debate on the profitability of the project, and the role of government in subsidizing private business (Chastko, 2004). The federal government insisted they decided against the project due to economic concerns, but many Albertans believed that it was “simply a

which aimed at Canadianizing the oil and gas industry, and incentivizing the oil industry in marginal oilfields on Crown Lands (Chastko, 2004). 29 case of the East sticking it to the West again” (Chastko, 2004: 209). Alberta Energy Minister

Webber responded to Ottawa’s unexpected retraction by threatening to sell Petro-Canada’s leases in the oil sands reserves as a means of retaliation (Chastko, 2004). The relationship between the federal and provincial government quickly deteriorated and reverted to the kind of antagonistic rhetoric last heard in the days of the NEP (Chastko, 2004).

In 1992, Progressive Conservative leader Ralph Klein became premier of Alberta. A year later, Liberal Party leader Jean Chrétien won a majority government in Ottawa. The price of oil was low, and both governments were indebted and faced high unemployment (Steward, 2017).

The economy was so bad that in 1995, an editorial in the Wall Street Journal called Canada “an honourary member of the Third World” owing to its high level of debt (quoted in Palmer and

McCrank, 2011).

As Figure 1 in the previous chapter showed, the governments were actively discussing economic recovery at the First Ministers’ Conferences. Yet they were not discussing energy policies in this venue. As noted earlier, the Alberta government was advised by the Tax Reform

Commission to achieve economic recovery by means of altering their energy policy. In February of 1994, the Alberta Tax Reform Commission stated that “a stable royalty regime” for the oil sands industry would bring wealth and jobs to the province (Alberta Hansard, 1995: 1811). As

Adam Germain, the Liberal MLA for Fort McMurray noted, “[t]he government has not reacted to that report” (Alberta Hansard, 1995: 1811).

By the early 1990s the oil sands industry was stagnant, and after the sequential cancellations of the oil sands plants Alsands, Cold Lake, and OSLO, it was not clear that investment would ever return to the industry. In response, an industry-led association, the

Alberta Chamber of Resources established a task force to identify how to grow the oil sands 30 industry. The members of the Task Force were primarily from industry, with some representatives from both the federal and provincial governments. The Task Force identified what its members saw as the main obstacles to industry growth, and proposed policy solutions to overcome them (National Task Force, 1995a). In 1995 the Task Force published its Final Report recommending that the federal and Alberta governments adopt “a new, generic fiscal regime that will apply to all developers, with tax and royalty terms that…are stable and predictable”

(National Task Force, 1995: 8). The report specifically requested a provincial generic royalty regime and that the federal government change its income tax regime to incentivize investment.

1995/96 Policy Changes To foster new investment in the oil sands industry, in 1995/96 the federal and Alberta governments introduced new fiscal policies that allowed industry to deduct certain start-up, exploration, and development costs from their royalties and taxes. Since the oil sands industry relies on favourable tax incentives to offset high production costs, these policy changes had a major impact on the viability of the industry.

The 1995/96 fiscal policy changes postponed the time when companies had to pay royalties and taxes. These policies shifted revenue payments into the future, which incentivized investment by decreasing royalties and tax payments in the early stages of a project. For the governments, these policies decreased the amount of revenue collected from industry in the short-term, but accomplished a strategic long-term goal of increased investment and production.

The federal government changed its income tax structure, and the provincial government changed its royalty regime, both reducing the investment risk for companies by delaying the payment of taxes and royalties.

In 1995, the Alberta government adopted its first standardized royalty regime for the oil sands industry. Before this, each oil sands company individually negotiated its royalty rates with 31

the provincial government.19 This process was expensive, lengthy and often created doubt for would-be investors as to whether they were getting a good deal or not (Plourde, 2010).

Negotiating royalties on a case-by-case basis was a unique situation in Canada. As Newell remarked: “the oil sands was the only sector of the economy where you negotiated your fiscal terms on a project by project basis! And that just scares the hell out of investors” (Newell, 2018).

The adoption of the standardized royalty rate increased investor confidence because they could predict their future royalty costs before they invested in a project.

Former Alberta Minister of Energy Patricia Nelson remembered her surprise upon learning about the ad hoc nature of the royalty regime in Alberta: “I found that everybody had a different structure, depending when you'd started. Some didn't pay any royalty at all, some had structures where they were getting capital back... I said, [w]e can't go out to the world and say,

'come to Alberta and invest, but we'll make up the rules as we go along'" (Nelson, 2012: 9). The new royalty regime was not uniform because the rate differed depending on whether a company had recovered its initial investment. When starting a new project, investors had to pay one percent royalty on gross revenues. 20 The rate stayed at one percent until a company recovered its initial investment, at which point the rate increased to 25% of net revenues. This regime allowed companies to recover their initial investment before paying full royalties.

In 1996, the federal government changed its income tax regime to incentivize new investment. This provision permitted companies to recover their initial investment sooner, as it deferred taxes to a future point in time. This was called the accelerated capital cost allowance

(ACCA), which permitted companies to deduct their initial capital investment from their income

19 Some companies paid royalties on their profits, and others on their revenues. Some, but not all, had a royalty waiver on the natural gas they consumed. 20 Royalties based on gross revenues is a traditional royalty approach, called an Ad Valorem Royalty. 32 tax as if it were an operating expense. It also permitted industry to write off expenses related to upgraders to improve the efficiency of existing plants. These tax write-offs had a “huge impact, because then you’ve got all these fast write-offs applied to the most capital intensive part of the business” (Newell, 2018). Most significantly, the expansion of the ACCA deduction allowed companies to write off their capital investment from their corporate income tax payments for a technologically different method of bitumen extraction called in situ. Up until that point, only open-pit mines had ACCA.

With this policy, the federal government removed the bias in favour of open-pit mining at the expense of in situ. Despite being established as a successful and profitable method of extraction in the late 1980s, in situ projects did not increase until the late 1990s, after the federal

ACCA policy change. This created a uniform tax regime for oil sands producers, regardless of the technology they used.

The late 1990s began a period of rapid growth and investment in the oil sands industry.

Whereas the tax and royalty policies of the oil sands had previously been distinct from other mining operations in Canada, and were negotiated on a case-by-case basis, the policies were aligned to be similar to other comparable industries. The effect of these changes was increased investor confidence, and increased investment in the oil sands industry (Plourde, 2010). The fiscal policies were considered as crucial to the later increased investment.

Federal Minister of Natural Resources, Anne McLellan, said that “there’s no question that the changes that were made at the time on the fiscal side, both within the province on the royalties side, on the federal side with the tax act, helped enormously” to increase investment in

Alberta (2011: 11). By 1997, production had increased 18.6% from the year previous (Chastko,

2004). And between 1995 and 2006, $45 billion had been invested in oil sands projects in 33

Canada (Government of Alberta, 2006). This boom continued for another decade. The increased production led to tens of thousands of jobs, which has contributed to Alberta having either the lowest, or second lowest rate of provincial unemployment in Canada from 1996 to 2008

(Urquhart, 2018). 34

CHAPTER THREE: Literature Review and Methods If business entrepreneurs don't pursue and partner with large industry, things just don't happen. And, governments, as important as they are, are often not that creative. -Robert Rosen, 2013: 10

Introduction How does policy change happen? Some say it is random. Others say that elected officials drive it. Still others say that non-governmental actors can play a role. This debate matters because it affects how we understand the 1995/96 policy changes. Our theoretical assumptions about policy change inform us of what factors and political actors are relevant. This chapter first addresses the two established explanations for the 1995/96 policy changes. It then considers their limitations. This chapter then outlines the policy literature focusing on the complexity of the policy process and how policy entrepreneurs can overcome these obstacles.

Explanations of the Policy Change Existing explanations of the policy changes disagree why the policies changed. There is no agreed-upon moment of change or causal mechanism. The first explanation states that the critical moment was the election of Prime Minister Mulroney in 1984. This explanation posits that the policy changes precipitated from Mulroney’s influence a decade later. The second explanation attributes the policy changes to the Alberta Chamber of Resource and its Task Force, which successfully lobbied the governments.

Election of Prime Minister Mulroney The election of Prime Minister Mulroney in 1984 is the dominant explanation for a series of pro-market policy changes for the oil industry in the 1980s and 1990s, including the 1995/96 policy changes. The basis for this argument is that Mulroney’s political victory brought new, more pro-market ideas to government that differed from the leanings of the previous Liberal 35 government of Pierre Trudeau. Mulroney’s government led to the widespread adoption of pro- market policies first federally, and then provincially (Brownsey 2005; Doern 2005; Doern and

Gattinger, 2003; Fossum, 1997; Plourde, 2012). The scholars who propose this explanation argue that the signing of the Western Accord in 1985 was the decisive moment that brought the federal and provincial governments together and marked an end to their earlier conflictual relationship that characterized intergovernmental relations in the 1970s and early 1980s. The crux of this argument is that the ultimate cause of the 1995/96 policy changes came from a political shift at the federal level, that eventually influenced provincial governments across Canada. This explanation suggests that it was the governments that proposed the fiscal policy changes.

Although the election of Mulroney and the Western Accord resolved some of the conflict between the federal and provincial governments, this is not an adequate explanation for why the fiscal policies regarding oil sands changed. The policies of the NEP were largely focused on the conventional oil industry, and the oil sands industry was formally sheltered from the program

(Chastko, 2004). The dismantling of the NEP did not therefore signal a directional pro-market shift for the oil sands industry.21 Although dismantling the NEP and the subsequent improvement in intergovernmental relations helped to restore some industry confidence in the Alberta petroleum industry, the oil sands industry did not significantly grow again until the late 1990s, more than a decade later. This is contrasted with the limited but pronounced growth in the oil sands industry in 1983 mentioned earlier. An examination of federal and provincial actions in the oil sands industry after 1984, show that they were unharmonious and unsuccessful in increasing investment.

21 Mulroney’s broader political support in the West was rapidly evaporating in the wake of his Meech Lake and Charlottetown initiatives. In the 1993 election not a single Conservative Party MP was elected in Western Canada. 36

The government handling of the OSLO project suggests that the Mulroney government did not create a pro-market shift in the oil sands industry. Between 1985 and 1992, during

Mulroney’s time in office, no new oil sands plants were approved, and no new incentive programs were created for the oil sands industry. In fact, in 1987, the Mulroney government phased out Earned Depletion, which resulted in increased income taxes for the oil sands industry.22 OSLO, the only oil sands project proposed during this time, was not led by private industry, but was a government-led project. The OSLO project demonstrates that the federal and

Alberta governments wanted actively to set the terms and control the development of the industry, hardly a “pro-market” strategy. Contrary to this popular narrative, Mulroney’s policies undermined investor confidence during his time in office.

Alberta Chamber of Resources and the Task Force Some scholars note the importance of the Task Force but emphasize the role played by elected politicians. Many credit Klein as creating the conditions for the success of the Task Force

(Steinmann, 2005; Steward, 2017). Chastko suggests that Klein made the Task Force possible by introducing a “philosophical change” in government’s relation to the industry (Chastko, 2004:

217). Hoberg and Phillips credit the government for the Task Force’s success and wrote that the

Task-Force was a “clear government-industry alliance” (2011: 512). Few of these scholars identify any of the individuals who played a role in the Task Force.23 Taft does note that Newell was a “crucial figure” in the Task Force, but mainly focuses on the elected politicians Patricia

Nelson and Anne McLellan as the primary actors (2017: 159).

22 Depletion allowance permits companies to deduct a portion of certain exploration and development expenses from their income tax. 23 Steward notes that Newell was a “key promoter” of the Task Force (2017: 18). 37

While the politicians who came into power in the 1980s and 1990s may have created a window of opportunity, the politicians themselves did not create the policy change.24 The elections of Mulroney in 1984 and Klein in 1992, provided fertile ground for a policy advocate to act. The accounts given above are partial explanations for the policy changes, but they do not account for why or how the Task Force was successful, and how the government-industry alliance came to be. A complete explanation, I argue, has to account for the emergence and the success of the Task Force.

Ian Urquhart’s recent book on oil sands politics (2018) identifies Newell as the major catalyst for the 1995/96 policy changes. While Urquhart does not elaborate on how Newell was successful, he does emphasize the amount of work Newell put in to persuading the governments to change their policies. He recounts how Newell traveled extensively across Canada “spreading the gospel” about the benefits of the oil sands (Urquhart, 2018: 77). While Urquhart’s assessment of Newell’s central role in driving for policy change is correct, his explanation of how he was successful is inadequate.

Specifically, Urquhart does not discuss how Newell was successful in forming coalitions within a previously disjointed industry, between industry and government, as well as in creating opportunities for intergovernmental cooperation. Urquhart wrote that “the province warmly received the essence of the Task Force’s analysis and recommendations,” without noting the deliberate efforts Newell took to collaborate with the Alberta government (2018: 82). He did not mention that at the Task Force’s invitation, a seasoned public servant and economist employed by the Alberta Department of Energy worked for two years with the Task Force to devise its analysis and recommendations (Precht, 2013), which is likely why the province so warmly

24 Kingdon’s three streams framework examines politics, problems and policies and how these three factors can converge to create a window of opportunity for policy change (1984). 38 received the recommendations. Besides briefly mentioning Paul Precht’s involvement in the

Task Force, Urquhart does not mention any other coalition member by name. As a result, he does not give an account of the personal relationships that made the expansive coalition possible.

Urquhart does not account for how Newell fostered relationships and ultimately persuaded a disjointed industry, and two levels of government to collaborate.

Why we Need a Theory of Policy Entrepreneurship The explanations addressed above do not give a complete account for why the fiscal policies for the oil sands industry changed in 1995/96. How did policies designed to incentivize the oil sands industry get on the federal and provincial agendas? The stagnant oil sands industry was not clearly a political problem requiring a government solution. The oil sands literature emphasizes those political actors occupying the highest offices, the Prime Minister and the

Premier of Alberta, as playing the most important role in these policy changes. These explanations do not satisfactorily explain why the government interpreted industry’s condition as a problem necessitating government attention, and how these particular fiscal policy changes were chosen as the solution. The second explanation focusing on the Alberta Chamber of

Resources’ creation of the Task Force does not explain how this Task Force was successful when previous lobbying efforts were not. These explanations do not take into account the pivotal role played by key individuals from private industry.

In asking why the fiscal policies changed in the 1990s, I consulted the policy sciences literature. I argue that by shifting the focus from the federal government to individuals outside government we can learn more about how the stagnant conditions of the oil sands became a political issue. This section will review the debates in the policy sciences literature on who changes policy and how policy change occurs. 39

Who Changes Policy? Certain accounts in the policy literature casts doubt on the ability of individuals to deliberately change policy (Huitema and Meijerink, 2010; Cohen et al., 1972). Some suggest that the policy process is random and unsusceptible to direction or planning (Cohen et al., 1972). The

“Garbage Can Model” of policy change points to the complexity of the policy process as the main reason why policy change is not subject to deliberate planning. The policy process can involve many different people at a number of institutional levels and therefore any individual change in policy is the result of multiple causes. This complexity makes it difficult for an individual to have a clear grasp on the different factors involved, and to be able sufficiently to influence all relevant decision makers. This model posits that problems and policy solutions are randomly matched (Cohen et al., 1972). The erratic coupling of problems and solutions in this model does not allow for individuals to exert their agency and intentionally pair together problems and solutions in pursuit of their own interests (Cohen et al., 1972). Others think that the policy system is resistant to change, and will not change in the absence of external pressure or an external shock event (Sabatier and Jenkins-Smith, 1993).

Creating policies and navigating the policy process are complex undertakings. Policies have multiple and contradictory effects on diverse constituencies and can therefore be difficult to create (Baumgartner et al., 2009: 19). Policies will affect different people differently, and as a result are subject to a wide array of interests and arguments (Baumgartner et al., 2009). Creating a policy that is suitable to all relevant constituencies is difficult because it involves deliberating on many possibilities. Cognitively, this process is limited by bounded rationality, which is the

“failure of people to to tally up costs and benefits from a potential decision and then to choose the best course of action” (Baumgartner and Jones, [1993]2009: xxiii). As such, there are limitations to creating a good policy proposal rationally (Simon, 1985). 40

The expansive and contradictory effects of a policy also make it difficult to gain enough political support for a policy. Even persuading people to work together to develop a policy proposal is challenging, never mind gaining political support (Olsen, 1965; Hacker and Pierson,

2014). As a result it can be difficult to create a policy that both achieves one’s goals and is politically feasible.

Navigating the policy process is complex because there are many political actors who may be the relevant decision makers for the subject matter, and these individuals are likely to be involved in different institutions. It is not always obvious which political department has ownership over a particular issue. It is possible that many institutions, each connected to many more decision makers, could be relevant to any given issue. Maneuvering through the institutional layers and finding the relevant decision makers who could be convinced to support a policy proposal is time-consuming and complex.

Convincing a decision maker to support a policy proposal is challenging because many tasks and issues compete for their limited attention. Like all people, decision makers have a limited attention span, which means they can only focus on an issue for so long before a different issue demands their attention (Simon, 1985; Baumgartner and Jones, [1993]2009; Hacker and

Pierson, 2014). With many issues competing for space on the perpetually crowded agenda,

“getting others to pay attention to your cause is not an easy task” (Baumgartner et al., 2009: 71).

Advocates compete for scarce agenda space by endeavoring to make their policy solution relevant to the political interests of the government of the day (Baumgartner et al., 2009). The great number of issues competing for space make it difficult for an advocate to keep their problem and policy solution topical for the length of time required to convince decision makers 41 to adopt it. Public opposition to policy proposals is an additional obstacle, because it introduces confusion and debate about the claimed benefits of the policy (Baumgartner et al., 2009).

Another challenge inherent to the policy process is that it takes significant time and resources to pursue policy changes (Cohen, March, Olsen, 1972). To negotiate policy proposals among stakeholders and then to persuade decision makers to adopt the proposals is resource intensive (Hacker and Pierson, 2014). The above listed features of the policy process present legitimate obstacles to individuals seeking to intentionally influence policy.

Acknowledging that the obstacles detailed above are inherent in the policy process, a body of literature proposes that individuals can act to overcome them. This literature proposes that non-governmental actors can effectively achieve their policy goals and influence policy. But this does not happen easily. It takes a skilled person to manage this. As Hacker and Pierson note, organized groups seeking policy change do “not emerge naturally and automatically” (2014:

646). Overcoming the obstacles inherent in the policy process listed above takes determined effort and work. To comprehend how these obstacles can be surmounted, requires a theory of policy entrepreneurship.

A Theory of Policy Entrepreneurship Some scholars think that if certain individuals are highly motivated and invest enough resources, they can overcome both the complexity of the policy process and the cognitive limits to direct policy change deliberately (Hacker and Pierson, 2014; Huitema and Meijerink, 2010;

Mintrom and Norman, 2009; Kingdon, 1984; Baumgartner and Jones, [1993]2009). Mintrom and

Norman (2009) revisit some of the classical policy change literature to examine what it says about individual agency in policy change. They find that in these classic theories there is genuine room for individual agency in policy change. Grace Skogstad notes that a criticism of the policy 42 network approach is that “greater recognition needs to be given to the role of agency within policy networks as a driver of policy outcomes and policy change” (2008: 206).

The literature describing individual agency in policy change has a number of different terms for these actors, but I will call them policy entrepreneurs. Policy entrepreneurs are defined by Kingdon as “people willing to invest their resources in return for future policies they favor”

(1984: 214). These are people who seek dynamic policy change in an area that they are specifically interested in, and “are not content simply to push for changes at the margins”

(Mintrom and Vergari, 1996: 423; Kingdon, 1984; Arnold et al., 2017). In this way, a policy entrepreneur differs from a lobbyist who typically does not seek major change, or is simply defending the policy status quo (Boasson and Wettestad, 2014). The individual motivations and goals that a policy entrepreneur has for seeking policy change can vary greatly, though one of the factors that distinguishes and unites these individuals are the attributes they possess and actions they perform (Mintrom and Vergari, 1996; Boasson and Wettestad, 2014; Huitema and

Meijerink, 2010).

Attributes of a Policy Entrepreneur There are common themes in the literature about the attributes that distinguish a policy entrepreneur. Overwhelmingly, policy entrepreneurship scholars agree that this individual is an expert who has great social skills and is persistent.

First, the person must have a claim to a hearing, which can originate from their expertise or leadership position (Kingdon, 1984; Huitema and Meijerink, 2010; Weissert, 1991; Hacker and Pierson, 2014). Expertise grants a person authority in their niche. This knowledge or status can increase the individual’s reputation as being competent in their field. Such a reputation can be instrumental in aiding them in creating coalitions (Weissert, 1991). Coalitions rely on highly motivated and dedicated individuals. Motivating people to work together can be difficult and a 43 leader whose expertise accords them respect can do this more easily (Olsen, 1965). A competent leader can help keep a group united and focused (Olsen, 1965). In addition to aiding them in forming coalitions, policy entrepreneurs lead by example and take personal risks to persuade decision makers (Mintrom and Norman, 2009). Their personal investment can decrease the perception of risk attached to the course of action they propose (Mintrom and Norman, 2009;

Mintrom and Vergari, 1996).

Second, a policy entrepreneur is known for their social skills. Social skill or the ability to

“motivate others to cooperate,” is essential in forming coalitions (Fligstein, 2001: 105). Mintrom and Norman call this skill “social acuity” (2009: 652). Social skills are essential for a number of reasons. As mentioned above, a policy entrepreneur needs to motivate people to work together.

To accomplish this they need to be perceptive and responsive to others (Mintrom, 2009). Being skilled at negotiating and making use of political connections helps policy entrepreneurs overcome complexities in the policy process (Kingdon, 1984; Mintrom and Norman, 2009;

Huitema and Meijerink, 2010; Oborn et al., 2011). Some highlight social awareness as the quality that enables policy entrepreneurs first to perceive and then to take advantage of windows of opportunity (Kingdon, 1984; Boasson and Wettestad, 2014; Huitema and Meijerink, 2010;

Oborn, Barrett and Exworthy, 2011). Windows of opportunity are short moments in time when circumstances are favourable for a policy entrepreneur to act to gain support for their new policy proposal (Kingdon, 1984; Boasson and Wettestad, 2014).25

Third, “and probably most important,” is that policy entrepreneurs are persistent

(Kingdon, 1984: 190; Boasson and Wettestad, 2014; Weissert, 1991; Arnold et al., 2017). To

25 This project does not analyze the actions of a policy entrepreneur in light of windows of opportunity. While understanding the problems, politics, and policies that make up a window of opportunity is one way to understand the success of a policy entrepreneur, undertaking this endeavour would likely necessitate a thesis in itself. This project focuses on other qualities and strategies of a policy entrepreneur which will be discussed below. 44 begin with, becoming a respected expert in a field simply takes a long time (Weissert, 1991). In addition, it takes a long time to advocate for a policy proposal in the multitude of ways that are necessary to persuade decision makers to adopt the policy. These processes are often experimental and a policy entrepreneur has to have the tenacity to keep giving talks and showing up to meetings, knowing that many of their efforts will be fruitless (Baumgartner et al., 2009).

Policy entrepreneurs rarely have a detailed, deliberate plan for how they will broker their policy proposals to decision makers. Rather, they have to persist in seeking out opportunities,

“swimming upstream, trying to make the best out of a situation they do not control”

(Baumgartner et al., 2009: 110). Their plan often emerges from changing political conditions and as a result a policy entrepreneur has to be flexible to adapt (Oborn et al., 2011; Hacker and

Pierson, 2014).

Strategies of a Policy Entrepreneur Much of the literature in the last few decades has focused on identifying the concrete actions and strategies of policy entrepreneurs. These activities can be clustered into three general categories: idea forming and framing, coalition building, and selling the policy proposal. These activities are not sequentially ordered as they often occur concurrently and repetitively (Roberts and King, 1991).

Ideas and Framing Problems that require government attention are not always obvious. As Stone wrote,

“[t]here is an old saw in political science that difficult conditions become problems only when people come to see them as amenable to human action” (1989: 281). Developing new policy ideas and proposals is intrinsically linked to defining and framing the problems and solutions

(Kingdon, 1984; Walker, 1981; Roberts and King, 1991; Mintrom and Norman, 2009; Mintrom and Vergari, 1996; Boasson and Wettestad, 2014; Huitema and Meijerink, 2010; Oborn et al., 45

2011; Béland and Cox, 2016). Narratives can give an account of a causal idea and can attribute cause, blame and responsibility about a condition (Stone, 1989). As such, narratives can link problems to solutions. Since most people are not knowledgeable on all topics, those who are specialists can portray their pet issue in a way that serves their goals (Baumgartner and Jones,

[1993]2009). In creating a narrative, political actors “deliberately portray [conditions] in ways calculated to gain support for their side” (Stone, 1989: 282). Baumgartner and Jones say that occasionally, when the “stars can align,” policy shifts occur as a result of people successfully reframing the debate ([1993]2009: xxv). They are quick to note that this does not happen often, but is possible in certain circumstances. Framing and story-telling are political acts and are crucial to understanding how problems are created out of conditions.

Coalition Building A policy entrepreneur’s success is dependent on them forming relationships with others and bringing together a coalition. Coalitions equip a policy entrepreneur with a number of instrumental benefits such as gaining access to greater resources and building support for the policy proposals (Roberts and King, 1991; Mintrom and Norman, 2009; Mintrom and Vergari,

1996; Boasson and Wettestad, 2014; Huitema and Meijerink, 2010; Oborn et al., 2011; Hacker and Pierson, 2014). To form a coalition, policy entrepreneurs can strategically use the narratives they created about their policy to bring people together. Béland and Cox write that in this way ideas can be used as a “coalition magnet” (2016: 429).

Beyond ideas, coalitions can be formed through personal relationships. Friendships creates bonds of trust and loyalty between people (Annesley et al., 2018). New friendships can serve as a bridge and bring dissimilar people together (Putnam, 2000) This can effectively function to expand a coalition. Friendship makes cooperation easier within a group and fosters a sense of reciprocity between people (Bjarnegård, 2013). Another aspect of loyalty and friendship 46 that has political significance, is that friends can be trusted. They will be reliable, keep promises and secrets (Bjarnegård, 2013). By fostering friendship and trust, policy entrepreneurs will genuinely be supported in their tasks. In addition to the instrumental reasons of for why coalitions are important, such as gaining resources and support, other literature simply points to the centrality of personal relationships to politics (von Heyking, 2017; Schabert, 2002). These scholars state that personal friendships and the traits that belong to it are fundamental to the political experience.

Brokering Ideas to Political Actors Through Multiple Venues Successful policy entrepreneurs seek support to get their policy proposals on the agenda.

Specifically, this includes brokering the ideas to political actors, mobilizing public opinion, and setting the agenda (Eyestone, 1978; Kingdon, 1984; Walker, 1981; Roberts and King, 1991;

Huitema and Meijerink, 2010). Boasson and Wettestad call these strategic activities “procedural engineering” where policy entrepreneurs work to change the rules of the game to suit their goals

(2014: 405). To accomplish this, policy entrepreneurs can be active in a number of different institutions or groups that have authority over their issue (Baumgartner and Jones, [1993]2009;

Huitema and Meijerink, 2010). Baumgartner and Jones calls these different institutions policy venues ([1993]2009).

Policy entrepreneurs explore different institutional venues of political action and may even create new venues as a way of creating new opportunities (Baumgartner and Jones,

[1993]2009). By interacting with individuals in different venues, policy entrepreneurs seek to find decision makers who will be receptive to their policy proposals (Baumgartner and Jones,

[1993]2009). 47

Overcoming Obstacles to Policy Change Policy entrepreneurs who engage in these activities and exhibit these attributes can overcome the obstacles that can inhibit individuals from deliberately influencing policy. The obstacles covered at the beginning of this chapter, such as the complexity of the policy process, cognitive limitations, and finite personal resources, can be dealt with by a policy entrepreneur by developing and framing new ideas, forming a coalition, and brokering ideas to political actors through multiple institutional venues.

These three categories of strategic activities form the theoretical framework for this thesis. The actions need to be performed by an individual who is an expert, is socially skilled, and is persistent. If the 1995/96 fiscal policies changed due to the actions of a policy entrepreneur, we should expect to see these strategies and attributes in Eric Newell. This analysis examines how Newell, as a policy entrepreneur, developed and framed ideas, built coalitions and controlled institutional venues to sell his policy proposals. This framework accounts for multi- causality that is inherent in the complexity of the policy process.

Methodology To answer why the fiscal policies changed in 1995/96 this thesis develops the novel hypothesis that a policy entrepreneur was a key mechanism of change. To understand how

Newell was successful at shaping policy, I consult strategies outlined in the policy entrepreneurship literature. I use historical process tracing to examine events in the early 1990s as a case study. This is a suitable method insofar as it permits an in-depth understanding of the sequence of events. Creating a detailed timeline is essential to rejecting the conventional explanation that the elections of Mulroney and Klein were the key mechanism of the policy changes (see Appendix A for a timeline of key dates). Process tracing enables the study of the sequence of events to understand which aspects and principles of an observed situation mattered 48 to the outcome of a case (George and Bennet, 2005). By tracing the sequence of events, one can begin to narrow down the possible explanations that may have led to a particular outcome

(George and Bennet, 2005). Process tracing allows for the examination of a large number of events within a single case study, which in turn enables one to test a theory that accounts for the causal process in question. To test a novel theory, one has to find an explanation that accounts for the range of observations in a way that is consistent with the outcome of the case study

(George and Bennet, 2005).

This examination of a single case study allows for an in-depth study of the nuances of this period of time. A case study is a “detailed examination of an aspect of a historical episode” that is used to evaluate a specific explanation for the events that then may be generalizable

(George and Bennett, 2005: 5). Because of the deep-context that can be examined in a case study, it is a good method to pair with historical process tracing. This qualitative project enables us to explore the deep context to examine a large number of intervening variables, such as the election of new politicians as well as the actions of non-government actors. Since policy entrepreneurship involves a number of complex, interrelated activities and attributes, studying the event as a case study using historical process tracing is a good way to understand the sequence of events. Other examinations of policy entrepreneurship are studied using both historical process tracing and case study methods (Mintrom and Norman, 2009; Boasson and

Wettestad, 2014) Contextual variables and individual actions can be evaluated as to whether or not they fit within a theory of policy entrepreneurship.

The 1995/96 policy changes are a candidate for a good case study because the period was a moment of significant policy change that occurred in multiple venues, at both the federal and 49 provincial levels of government. The policy change was consequential for the industry and the

Albertan economy.

A limitation of case studies is that it can be difficult to measure how much each factor mattered. So while I explore how Newell used different strategies (develop new ideas, specify policy solutions, frame problems and solutions, create a narrative, form a coalition, broker ideas to political actors, and mobilized public opinion), I cannot measure the degree to which the various factors mattered. Case studies are effective at identifying whether and how each of these factors matter, but not the scope of the factors. I can point to contributing causes rather than necessary conditions. This thesis fills an important gap in the study of oil sands policy change by proposing an alternate account by examining the actions of individuals outside of government.

Following the political science literature that described the policy changes originating at high levels of government, I initially looked at the agendas for First Ministers’ Conferences to determine if there were discussions at this venue to incentivize the oil industry through policy.

Not finding evidence of this change, I then searched for primary accounts from people who were involved in the policy change.

As a primary data source, I used interviews and historical newspaper articles. Many of the interviews used for this thesis are part of “The Oil Sands Oral History Project,” collected by the Petroleum Historical Society. These 117 interviews were conducted by a team of researchers between 2011-2013. They are publicly available through the Glenbow Museum Archives and transcriptions are available online. The interviews canvass a broad array of people involved in the oil sands industry, which provides a comprehensive view of the historical events. The interviews especially relevant to this thesis are those with politicians, bureaucrats, and industry executives, as many of these people were directly involved in the policy change process. These 50 interviews were essential to understand the perspectives of those who participated in the policy change.

In addition to the Oral History interviews, I conducted an extended semi-structured interview in-person with Eric Newell to gain a more in depth understanding of his perspective on this period (2018). From Newell’s 2011 interview in the Oral History Project, I was able to ask follow-up questions and gain a more complete understanding of his actions in the mid 1990s.

To complement the interviews, I did a historical newspaper analysis to ensure that I captured how events unfolded at the time. A drawback of consulting interviews about a historical event that occurred more than 15 years before the interviews were collected is that a person’s recollection of history may not be accurate. This drawback is mitigated by consulting newspaper articles. I consulted a broad array of Canadian newspapers published between 1990 and 1996.

These were essential for creating a detailed timeline. The newspaper articles provided a snap- shot of history which enabled me to verify the accounts given in the interviews and to clarify the timing of events.

CHAPTER FOUR: Changing the Narrative People you used to ask me, ‘Eric, how did you get everything you asked for, especially on the fiscal regime.’ And I said, ‘It wasn’t me asking! It was Canadians that were asking for it.’ -Eric Newell, 2018 Introduction This chapter outlines how Eric Newell developed the ideas for the policy changes and the creation of a task force. This chapter uses the policy entrepreneurship literature outlined in

Chapter three to understand how Newell was successful in creating a narrative. This chapter empirically tests the policy entrepreneurship theory for how policy entrepreneurs can define and frame problems and solutions to create narratives about a policy objective. It examines how

Newell framed these ideas to inspire people to become involved in his burgeoning advocacy organization, and ultimately how the policy stories he told gained political traction. Newell crafted narratives that shaped the way people understood and discussed the policies. The essential challenge facing the oil sands industry was the meagre outside interest in the industry, and that investment had stagnated. Framed in this way, it was simply an industry problem. But

Newell framed it as a political problem that needed a political solution.

In the early 1990s Newell witnessed the approval of Hibernia, a costly offshore oil project in Atlantic Canada. The approval of this project occurred while he watched his own oil sands industry stagnate. Newell noticed that advocates of the offshore oil industry gained political support for their project by lobbying government (Worron, 1996), and took note of the effort and deliberate actions taken by the offshore industry. He said, “[t]hey’ve seen a lot of momentum, a lot of attention going to the East Coast and they wanted in on it. They figured, if that’s the way it’s done, we’ll do it” (Newell quoted in Worron, 1996: H1). Newell saw that political lobbying was successful as a means to achieve an industry goal. 52

The approval of Hibernia was likely only one of the factors that spurred Newell to start the Task Force. The previous cancellation of Alsands and Cold Lake in 1981, followed by the cancellation of OSLO in 1990, solidified the perception that the oil sands “had lost its momentum and there wasn’t a whole lot happening on the horizon” (Precht, 2013: 9). After the cancellation of the megaproject OSLO in 1990, the industry as a whole was no longer perceived as an attractive investment. The most important factor that prompted Newell to take action was when the federal government withdrew its funding from OSLO, effectively terminating the project. After this, Newell realized a new strategy was needed to increase investment in his industry. The Task Force was the result (Newell, 2018).

At this time the industry was not well known or understood in Canada. Among those who were aware of it, it had such a bad reputation that when someone mentioned “the word ‘oil sands’ … people would spit on the floor” (Camarta, 2012: 16). The bad reputation stemmed from general perceptions that the oil sands industry was not profitable, was highly subsidized and operated more as a scientific experiment than a viable industry (Newell, 2018; Worron, 1996). If investment was going to increase, the perception of the potential of the industry had to change.

Indeed, as one commentator said "one of the toughest jobs facing the National Task Force on Oil

Sands Strategies is how to change a national mind-set about the Athabasca oil sands" (Ziegler,

1995: F7).

To change the national mind-set, Newell had to craft a story that explained why the

Alberta government and the federal government should change their fiscal policies for this particular industry. He had to create a story that the general public as well as politicians could relate to. He had to create a political problem that required a political solution. 53

Policy entrepreneurs intentionally craft a problem and solution, and frame these ideas to control how others understand and discuss them (Huitema and Meijerink, 2010). Framing a policy is to tell a story about it and to attribute cause, blame, and responsibility (Stone, 1989).

Framing influences how people perceive issues and therefore plays a significant role in decision making (Tversky and Kahneman, 1986). The same information presented in different ways will be perceived differently by a given audience. Being aware of this, policy entrepreneurs consciously change the way they frame a problem to appeal to different people. This process is akin to artistically creating different likenesses of a scene. Policy entrepreneurs make different images of a situation to portray it as a political problem and to “gain support for their side”

(Stone, 1989: 282). Baumgartner and Jones call this creative activity crafting a policy image

([1993]2009: 26).

Policy entrepreneurs can tailor their policy images to their audience. To do so, they need highly-tuned social skills to imagine the policy from the perspectives of others. They need to be socially aware to understand how their own policy objective could resonate with others. It takes imagination and empathy to understand how people in other places may be convinced to support their particular policy proposals. Creating policy images can appear experimental because a policy entrepreneur cannot anticipate which policy images will be most effective. Socially skilled people “will do whatever it takes to induce cooperation, and if one path is closed off, they will choose another” (Fligstein, 2001: 113). If policy making is “mostly a matter a persuasion,” then astute policy image creation is key to successful policy making (Goodin et al., 2006: 5).

Origins of the Task Force: an Idea Whose Time Had Come Just as the lobbying efforts were collaborative, the origins of the idea to start a task force also involved a number of different people. In the early 1990s, the idea to change the fiscal policies for the oil sands was not new. As a Fort McMurray newspaper remarked in 1984, “major 54 tax and royalty concessions from both federal and provincial governments have been substantial stumbling blocks for projects in the past" (Moralis, 1984). The plan to start a task force as a means to pursue fiscal policy changes appears to have occurred within the Alberta Chamber of

Resources as well as among the Syncrude executive at the same time in the early 1990s.

The Alberta Chamber of Resources had experience with forming organizations and institutions as a means to pursue their members’ goals. In the 1980s, this Chamber organized a task force to investigate building an upgrader in Alberta with the goal of persuading the government to approve such a project. This task force studied the provincial rules, regulations, as well as taxes, and presented this information to the Alberta Energy Minister John Zaozirny.

While the task force was not successful in convincing the government to approve their proposed upgrader, they received feedback from Zaozirny about how to improve their proposals. They were told what kinds of studies and recommendations the government wanted from a task force.

Yildirim says that it was this experience with the 1984 task force that led to the Oil Sands Task

Force forming in 1993 (Yildirim, 2011). The institutional structure of the 1993 task force was similar to the 1980s task force, but the focus changed to “more serious issues” such as taxation

(Yildirim, 2011: 14).

Yildirim was involved with the Chamber since the early 1980s and says the idea for the

Task Force originated at the Chamber. Yildirim himself played a lead role in the Task Force, where he was “the main producer of numbers and ideas” (Yildirim, 2011: 14). Newell says that

Yildirim played a key role in developing the technological and scientific vision for the Task

Force (Newell, 2011). Contrasting his own role with Yildirim’s, Newell says “I firmly believed that that [writing the report] was only the beginning, that we had to then go out and sell it”

(Newell, 2011: 19). Whereas Yildirim played a principal role in developing the working groups 55 and their technological visions, Newell’s role focused on crafting a narrative, and bringing people together to sell the policy proposals.

As the Chamber was exploring these ideas, Newell and his partners at Syncrude were also discussing a way to convince the governments to change their taxation policies. In 1991,

Newell and a few other Syncrude executives proposed the idea of starting a national task force for the oil sands at an energy and mines ministers meeting (Newell, 2011: 18). They were seeking to “unlock the power of the oil sands” and determined that they needed to form a national task force to do it (Newell, 2018).

The goal of the Chamber of Resources was to improve the general business environment in Alberta for natural resources industries. Speaking about the business environment for

Syncrude specifically, former vice president of Syncrude, Jim Carter said that, “we could have worked forever to lower our costs, but we could never have made it attractive to reinvest with a

50 per cent royalty. It just wasn't going to work. That's when the work for the National Oil Sands

Task Force, through the Alberta Chamber of Resources, got an initiative” (Carter, 2011: 12). At

50%, Syncrude was paying relatively higher royalties than the others. Imperial’s operation at

Cold Lake was paying 35%, and others were paying 30% (Carter, 2011). The high royalty rate had “hand-cuffed” Syncrude’s development (Dingle, 2012: 13). Uniform fiscal policies for all producers would ensure that the economic competition would be fair, but it also served the specific business interests of the Syncrude executives (Carter, 2011; Dingle, 2012). With uniform fiscal policies, the entire industry would appear more attractive to incoming investment.

Referring to the creation of the Task Force, past managing director of the Alberta

Chamber of Resources Harold Page said, “we [the Chamber] may have triggered it, headed it in that direction. But, I think it happened not because we were prescient but it was natural” (Page, 56

2013: 18). In summary, it is likely that a few people had the same idea for the policy change at the same time, and that these people coming together to pursue this idea made it happen.

Newell often credited others for their contributions in developing ideas and working to pursue the policy changes (Newell, 2011, 2018). He has readily acknowledged that it was a collaborative effort. Yet, wherever ideas were being formed, and action taking place, Newell was present. In interviews, Newell often credited others as having a major influence on his ideas for the policy changes (2011, 2018). He credits fellow Syncrude executives for helping to come up with the idea for starting the task force, D’Arcy Levesque for helping with framing the ideas, and numerous others for their contributions through every phase. Newell did not claim to be in control of the entire scope of events. Instead he recognized the complexity of the process and his limitations as an individual.

Creating a Vision Newell’s primary task was to change the negative public stereotype of the industry. This required creating a new narrative that could be broadcast to replace the earlier one. Newell was aware that he had to change the perception of the industry and unite people around a common vision its future. He knew what the goal was for the industry, but had to create a story that described why it was good, not just for Alberta, but for all of Canada.

Newell had experience with creating a unifying vision and mobilizing people around it.

He said that one of the first things he did when he became CEO of Syncrude in 1989 was to develop the “whole vision and values statement” for the company (Newell, 2018). At the time, the price of oil was low, the environment at Syncrude was bleak, employees were scared for their jobs, and there were numerous operating problems at the company (Newell, 2018). In this adverse environment, Newell created a vision for Syncrude that has been kept in its entirety to this day. The vision statement was: “Secure Canada’s energy future with the vision to lead, the 57 knowledge to succeed, the commitment to do better and the heart to win the race” (Bridges,

1990: 112). After branding and framing his company, he “mobilized all the employees around it”

(Newell, 2018). Newell’s experience at Syncrude helped to hone the skills he needed to make the Task Force successful.

Newell led Syncrude with studied and deliberate leadership knowledge. When he talked about his advocacy work, Newell referred to the leadership book The 7 Habits of Highly

Effective People by Stephen Covey (1989). He also referred to the “ABCs of change” (Newell,

2018). In this methodology of change, “A” stands for achieve awareness; “B” for build belief; and “C” for create commitment (Newell, 2018). Newell’s efforts in creating a vision, and creating a story about the policy image were undertaken deliberately to create policy changes.

Newell’s actions as a leader were not random. He was following a systematic methodology.

To shape the manner that the policy proposals were understood and discussed, Newell needed first to ensure people understood the industry. In particular, the way the federal government understood the industry had to change because their conceptualization of the industry affected the way the industry was taxed. To improve the latter, he had to change the former. The second perceptual shift was about how the industry could be more viable with smaller operations rather than with risk-intensive mega-projects.

Perceptions of Industry Federally, the fiscal terms for the oil sands were problematic. The industry was perceived to be more like a conventional oil operation than a mining operation (Rosen, 2013; Nelson, 2012;

McLellan, 2011). The reality was that the open-pit oil sands mines have more in common with a hard-rock mine than a conventional oil rig. Under the federal fiscal terms, hard-rock mines were permitted to write off their front-end costs from the initial investment in equipment and set up of the mine, and to deduct these costs from their taxes (Rosen, 2013). These mines had this 58 concession, because they had substantial upfront costs required to construct a mine. The government gave this allowance to incentivize new investment in these industries. Oil sands mines were treated like the conventional oil industry on the basis of the product they produced instead of the method they used to produce it. Former minister of energy for the Alberta government, Pat Nelson, said when the federal government “actually changed the taxation policy they finally recognized that this was a mine. I don’t know why it was such a surprise; I guess they’d never been out to see it” (Nelson, 2012: 12). Newell framed these fiscal changes as necessary and reasonable requests to correct flawed policy.

Newell and others had identified the “mega-project mentality” as one of the essential perceptions of the industry that had to be changed (Newell, 2018). In its early decades, the paradigm of the industry had been to build massively expensive mega-projects, operate them in a geographic area for their lifespan, determined by the speed it took to extract bitumen from the surface open-pit mines in the nearby area, then to dissemble the plant, and reconstruct it elsewhere. This method of operation was defined by the technology available at the time, primarily bucketwheels and conveyer belts limited the geographic area that a processing plant could service. With the introduction of new technology that could transport unrefined bitumen by trucks and pipes to processing plants, as well as SAGD technology that made extracting sub- surface bitumen possible, plants no longer needed to be “mega.”26 The advances in technology and the shift in transportation paradigms made small plants a viable option.

26 There were three main important technological advancements that enabled oil sands plants to expand the geographical scope of their extraction facilities. First, trucks and shovels replaced drag lines, bucketwheels and conveyer belts as a means to transport bituminous sands to the processing plant. Second, hydrotransport delivered bitumen slurry to an extraction facility in a pipeline while substantially decreasing the amount of energy needed to extract bitumen from the sand. Third, Natural Froth Lubricity transported rough cut extraction (bitumen, sand, and rocks) in a pipeline to an extraction plant. 59

Smaller plants reduced the upfront capital cost to investors, which decreased the amount of financial risk. This permitted another paradigm to change: no longer would governments need to participate directly in the financial arrangements for a plant on a case-by-case basis to decrease risk. Instead, the governments could change their role by adopting fiscal regimes that increased investor confidence and incentivized investment.

It took the industry some time to change their view about mega-projects and consider an alternative business plan for their industry. In 1991 and 1992 Syncrude began experimenting with some of this technology that would enable them to service a greater area.27 Yet it was not until January 1993 that Newell told reporters there needed to be a shift away from mega-plants

(Haliechuk, 1993).

Crafting a Narrative: Defining the Problem For seven years, Newell was consistent in his requests for what kind of fiscal policy changes he wanted. The policy solution remained constant throughout the 1990s: provincially he asked for a standardized royalty regime, and federally for a taxation system that incentivized investment. Newell did not make specific, detailed requests about the fiscal changes. A general statement about requesting changes to “royalties and taxes” was typical. While the policy solution remained unchanged, over time how he framed the policy problem changed.

To track how Newell’s narrative of the oil sands changed over time, I conducted an analysis of newspaper articles published between 1990 and 1996. The results from this analysis is presented in Table 1. Over time, he gave different reasons why the policy changes were desirable.

27 See footnote 21 for details on the kinds of technology. 60

Table 1: Newell’s changing narrative of the oil sands industry in Canadian newspaper articles

Conventional Oil

Socio

Fair, equal rates

Increase Profile

energy security

Benefitall of

International

Government

Opportunity Creates jobs

Investment of Industry

reven

Increase Benefits

Replace

Canada

Total

economic

ues

1990 1 1 1991 1992 2 2 1993 3 5 8 1994 9 6 3 6 3 27 1995 5 11 14 5 6 2 2 4 49 1996 1 7 1 7 3 5 2 26

For this analysis, I read 154 news articles published across Canada between 1990-1996.

As I was interested in how Eric Newell framed the benefits of the oil sands over time, I searched for “Newell AND sand.”28 I was interested in how he portrayed the oil sands in different regions of Canada, so I included all published articles across the country. I limited the articles for this analysis to those in which Newell took on a role of a spokesperson for the industry as a whole, as opposed to occasions when he discussed his particular company. In total, 49 articles fit these parameters. I then coded each article for how Newell referred to the industry in terms of the benefits resulting from the policy changes. I aggregated these codes by year to illustrate how his framing of the industry changed over time.

Between 1990-1996, Newell framed the benefits of increased investment in the oil sands industry in nine different ways. Looking at the general trend in Table 1, we can see that over

28 The search term “sand” was chosen to include articles that referred to the resource as “tar sands” as well as “oil sands”. 61 time, Newell increasingly told a greater variety of stories about why increased investment in the oil sands was good. In 1990, he gave one reason why the oil sands were beneficial. Two years later in 1993, he gave two reasons. He initially focused on energy management issues, such as how the oil sands were necessary to replace dwindling supplies of conventional oil, and how investing in the oil sands industry was a profitable investment opportunity. In 1994, he gave five reasons; the next year, he expanded and gave eight different reasons. Newell began to tell narratives about how the policy changes were reasonable, fair requests, and how a bolstered industry would benefit the general public. In 1996, he gave seven reasons for why the policies should be changed. Empirically, based on Table 1, we can see that he did not develop a single consistent policy image. All eight of these rationales for increasing investment in the industry may be consistent with each other, but they likely appealed to different constituencies.

The frequency of news articles in which Newell spoke on industry’s behalf also increased. In 1990, there was one news article published where Newell essentially took on the role of a spokesperson and made an argument about the benefits of the entire oil sands industry.

The rate of published articles was low until 1993, when eight were published. The rate began to balloon, as 27 articles were published in the following year. The rate peaked in 1995, the same year the Task Force released its Final Report, with 49 published articles in which Newell acted as a spokesperson.

Newell seemingly acknowledged that policies would inevitably have multiple effects on diverse constituencies, and consequently told many different stories about his policy proposals.

He recognized that the policies appealed to different people for different reasons and increasingly presented a greater variety of policy images. This tactic is consistent with the literature that says that policies may not have “a single image [that] is well accepted by all” 62

(Baumgartner and Jones, 1993[2009]: 26). To overcome this potential obstacle, policy entrepreneurs frame policy proposals in different ways to appeal to different people and venues

(Baumgartner and Jones, [1993]2009; Mintrom and Vergari, 1996). The ability to frame policies in different ways demanded that Newell had a high degree of social awareness. He had to be aware that others would see his policy proposals from different perspectives, and that they could have different values from his.

Newell endeavored to frame the policies in a way that showed how they would help all

Canadians. He said, “we could not afford to have this thing look partisan. As soon as someone argued that this was to help big oil, we were dead” (Newell, 2018). An examination of news articles in the early 1990s shows how Newell framed the oil sands industry at different times, as well as how the fiscal changes would benefit Canada. Over time, Newell developed four different policy images: energy security; the industry as profitable; the need for fair treatment; and pan-Canadian benefits.

Replace Conventional Oil: Energy Security Years before the idea of the Task Force was introduced, the importance of the oil sands was promoted as the way to provide energy security by replacing conventional oil (Jaremko,

1990). The conventional oil industry in Canada was depleting its reservoirs and further development of the oil sands was presented as the way to ensure continued energy security. In

January 1993, Newell said the oil sands were “the key to Canada’s self-sufficiency” (Haliechuk,

1993: D1). Self-sufficiency was portrayed as being the safest option for Canada, as

“unpredictable foreign suppliers and sporadic price fluctuations leave us too vulnerable, and if an energy shortage were to occur, the consequences would be disastrous” (Newell quoted in Sharpe,

1997: S2). This framing was effective because as it introduced an element of urgency into the policy image. 63

Since it takes a number of years to build the extraction facilities for an oil sands plant,

Newell emphasized that the industry had to be developed as soon as possible to be ready for future increases in demand. He said that “[p]eople have this idea that we have this tremendous resource in the ground; that we can just sit here and wait. Or that we can just save it all for

Canada when we need it. It doesn't work that way" (Newell quoted in Ziegler, 1995: F7). He communicated a sense of urgency: “unless the changes are made, further development of the oilsands [sic] is unlikely” (Newell quoted in Hryciuk, 1995: A1). This crisis framing also suggested a foreboding sense of regret if action was not taken: “if we don’t [develop the oil sands], we’ll have made a tragic mistake in this country” (Newell quoted in Haliechuk, 1993:

D1). Creating a sense of urgency when framing a policy image is consistent with the theoretical literature, which says that policy entrepreneurs may “suggest a crisis is at hand” when pressing for their policy proposal (Mintrom and Norman, 2009: 652). This framing can influence politicians to put the proposal on the agenda and make a decision faster than they normally would. Framing the policies this way created a sense of crisis, but Newell also communicated hope. He said that “Canada’s energy supply could be secure for more than 200 years” if the industry was further developed (Newell quoted in Herald Staff, 1996: C2).

Industry as Viable and Investible To draw in investment, the common perception of the oil sands had to be changed to portray a lucrative and established industry. Despite commercially producing oil since 1968, the perception of the industry was that it was “just a pilot plant” (Yildirim, 2012: 14). Even within

Alberta this perception existed. A 1996 Edmonton Journal news article refers to the oil sands as

“the huge northern bog that has been the source of so much folly and fiasco” (Worron, 1996:

H1). 64

Newell wanted to raise awareness of the successes of the industry, to show government as well as potential investors that it was a viable industry. To do so, Syncrude made a 24 minute video called Syncrude: A Canadian Success Story (1994). The creation and use of this film involved more than just Syncrude. As Minister of Energy Pat Nelson said, “during that time we created an old VHS tape that was called, “The Canadian Success Story,” which was about the development of Syncrude (1994). And, we went out and sold the benefit of the oil sands, and what it would mean for the long-term security of supply” (Nelson, 2012: 16). While the video explicitly promoted Syncrude, the Alberta Minister of Energy used it to persuasively advocate for policy change.

To promote how good investment in the oil sands industry was, Newell compared it with oil projects in Venezuela and Hibernia. Newell said that $48 billion was being contemplated for investment in Venezuela, despite it being more costly to produce oil there than from the

Athabasca oil sands (Chalmers, 1994). Newell also argued that the oil sands were a better investment, as it was a larger oil reserve (Chalmers, 1994). By comparing the Athabasca oil sands to Venezuela, Newell was able to create a sense of urgency, that the Canadian oil sands industry may miss a window of opportunity, as potential investors may go south if the fiscal policies in Canada were not changed. The oil sands were touted as “the largest potential single private sector investment opportunity remaining in Canada” (Newell quoted in Sharpe, 1995: 5).

By framing the industry as a promising, viable investment opportunity, this policy image was appealing to governments as well as potential investors.

Equal Treatment The request for provincial standardized royalty rates was framed as being more fair and equal than the current policy. Industry said they wanted fair fiscal rules that would enable business to be more competitive. Paul Precht, the Alberta bureaucrat who worked on the fiscal 65 regime with the Task Force, recalls industry framing their request for a standardized royalty regime as wanting something that was transparent (Precht, 2013). This framing was politically effective as it communicated that the proposed policies would be more democratic. The standardized royalty regime garnered wide support, and this policy image was repeated by others, demonstrating its effectiveness. Mike Percy, former resource economist and MLA with the opposition Liberal caucus, said that the standardized royalty regime is “transparent, so you don’t have to go to the back room and negotiate deals” (Chambers, 1996: B12). This policy image also helped reinforce the narrative that industry was not just acting for its own benefit, but was concerned about loftier goals. By emphasizing that the current policies were neither fair nor transparent, Newell highlighted the failures of the current policies. This strategy is identified in the literature as an effective tactic of policy framing as it suggests an obligation on the part of policy makers to correct a failure (Baumgartner and Jones, 1993[2009]).

Newell also framed his requests for federal fiscal policy changes as necessary for equal, fair treatment. He made a case for the oil sands industry meriting similar tax treatment as the hard-rock mining industry due to both requiring intensive upfront investment. When he spoke about the requested federal changes, he said that “industry isn't looking for handouts, just a fair tax system that can attract investors” (Newell quoted in Worron, 1996: H1). Newell was careful about how he framed his requests for the policy changes. Cognizant of the oil sands industry’s long history of receiving government funding and assistance for research and development, he did not want these policy proposals to sound like a request for more financial aid. Repeatedly in news articles Newell would mention that “the industry frowns on government help in the oil sands” (Canadian Press NewsWire, 1994). 29 This framing reinforced the image that the industry

29 In news articles since 1992 Newell mentioned that industry was not seeking government handouts: Jaremko, 1992: F1; Chalmers, 1994: G1; Brent, 1996: B1. 66 was viable and worthy of investment. It also reinforced the shift from mega-projects, which had only existed with government help, towards smaller operations that could exist on their own.

Most of the policy images between 1990-1994 focused on the management of the industry. Championing the benefits as resulting from a reliable supply of oil, a good investment opportunity, a viable industry profile, and fair and equal rates, appealed to both policy makers and industry partners. In 1994 and 1995 there was a shift in the policy images aimed at appealing to the average Canadian.

Pan-Canadian Benefits Key to Newell’s strategy was to frame the oil sands industry as affecting the entire nation. While physically the Athabasca oil sands were limited to a geographically delineated area mostly in one province, the importance of the industry was framed in national terms. Many people besides Newell recognized the importance of using nationalistic language when promoting the policy proposals. Anne McLellan urged Newell to change his rhetoric and told him that he had to “sell this as a national project” (McLellan, 2011: 9). Newell credits D’Arcy

Levesque, then head of Syncrude’s Public and Government Affairs, for convincing him to change the narrative from industry-focused to Canada-focused:

Really the whole thing was that we had to make this look like a really good thing for Canada. Believe it or not, it’s hard to believe, but most Canadians don’t really care if Imperial Oil’s profits go up, or Shell’s [laughs], or all that. So we said, ‘why would we ever talk in terms of that, what they’re really interested in, is how many jobs are you going to create, how many royalties, or taxes are going to go to government to fund those programs that we all value as Canadians – healthcare, education, all that.’ So we developed the vision (Newell, 2018).

In a news article published in December 1994, Newell spoke about the Task Force focusing on four key areas: science and technology, tax and royalty, markets and transportation, and regulatory framework (Chalmers, 1994: G1). In the Task Force’s Final Report published

May 1995, the tax and royalty subcommittee appears to have developed into the Fiscal and 67

Socio-economic Committee. Vice president of Syncrude, Jim Carter, confirmed that the socio- economic aspect was something that was eventually added into the Task Force as it was not originally part of the plan (Carter, 2011). Newell first referred to socio-economic benefits in a news article in November 1994 (Canadian Press NewsWire, 1994). In this article he spoke of the numbers of jobs that would be created, how Canada’s trade balance would improve, and potential increases to the GDP (Canadian Press NewsWire, 1994).

Newell and his team tailored the narrative about pan-Canadian benefits stemming from the fiscal changes to different regions in Canada. In January 1996, former Deputy Minister of

Industry Canada, Kevin Lynch, and the Canadian Manufacturers’ Association released a study investigating what parts of Canada would benefit from increased investment in the oil sands

(Toronto Star, 1996). They found that 40% of the economic benefits would go to Alberta, 40% to

Ontario and Quebec, and the remaining 20% would be to the rest of Canada (Newell, 2018). This study aided Task Force members in framing the pan-Canadian benefits of the oil sands.

Levesque, head of Public and Government Affairs for Syncrude, said in a news article that,

“whether you’re running a rubber factory in Quebec or a steel mill in Hamilton, Canadians from coast to coast are going to benefit” (Canadian Press NewsWire, 1996). And when Newell spoke with a reporter in Edmonton he said “the real big winner out of this will be your fine city,” referring, of course, to Edmonton (Hryciuk, 1995: E1). By emphasizing how many regions in

Canada would benefit from oil sands industry growth, Newell was appealing to the general public, as well as to politicians who were sensitive to the high rates of unemployment in their jurisdictions.30

30 Some have taken issue with the framing of the oil sands as being in the national interest and with the portrayal of an industry lobbying organization as a “National” Task Force. In a 1996 news article, a reporter is critical of the Task Force and said “despite its office-sounding name, the task force was largely the creation of the industry and its report a sales pitch for major expansion of oil sands investment" (Corcoran, 1996, B2). Gillian Steward’s 2017 68

In the nineties, at both federal and provincial levels, government debt was a leading problem. Although the requested fiscal changes would decrease the amount of resource revenues governments would receive in the short-term, the Task Force framed the policies in terms of governments’ long-term benefits. The Task Force realized they could craft a narrative that suggested that the fiscal changes would “grow the pie so large” that the government, and

Canadians would benefit in the long-term (Carter, 2011: 12). Newspaper articles reported that governments would gain $97 billion in additional revenues after 2002 (Hryciuk, 1995: A1). The timespan for when government would reap the revenue benefits extended far beyond the next election cycle, and the short-term goals of elected politicians. Newell worked to shift the perspective to a long-term time span, and to what was best for the Canadians. After speaking about the increase in resource revenues, he said “Canadians will capture an enormous prize -- tremendous social and economic benefits” (Hryciuk, 1995: H1).

Framing the policy proposals in terms of their socio-economic benefits promoted the industry as being “a part of the public interest” (Hyndman, ca. 2011-2013: 9). This emphasis made the fate of the oil sands industry relevant to people all across Canada. It gave people the sense that they had a stake in the industry as they were set to either benefit or lose depending on the outcome of the advocacy efforts.

Conclusion Many aspects of the policy images listed above were aspirational. Newell told stories about what could be possible if the governments changed their fiscal policies and if the oil sands industry was further developed. Newell said that he “used to sweat bullets when I used to say

report is critical of the official sounding branding and narrative created by the Task Force. She said that the vast majority of the news coverage of the Task Force was paid for by industry and that the coverage failed to make clear that the Task Force was industry driven. 69 that $21-25 [billion] because we had zero dollars going in” (Newell, 2018). This quote suggests that he was aware of how radical his vision was and that people may not be convinced by his stories. His stories described a vision for a future that hinged on at least $21 billion being invested in the following 25 years.

Not everyone agreed with Newell’s vision for the future. In 1995, his counterpart at

Suncor, CEO Rick George “was cautious about embracing the vision of Syncrude president Eric

Newell” (Chalmers, 1995: B6). Having the CEO of the only other oil sands mega-project doubt his vision did not deter Newell. One month after George’s statement, Newell proclaimed that the oil sands were “on the brink of a turnaround” (Newell quoted in Tanner, 1995: B2).

The changing narratives that described how the oil sands could solve different problems in Canada shows that Newell and his team were experimental in their messaging. They were trying different stories to determine which ones worked best to mobilize support. The ways the benefits of the policy changes were framed may have been experimental, but the awareness of the importance of framing was intentional. By creating a sense of urgency and potential, fiscal policy changes for the oil sands made it on to the political agenda as a solution to problems that the governments faced due to other conditions. Newell framed the growth in the oil sands industry as helping government reduce their debt, reduce unemployment and gain a long-term supply of oil.

Referring to Newell’s “ABCs of change,” his systematic way of understanding how to create change, he first a) achieved awareness, then b) built belief in his vision. Newell accomplished these goals by crafting numerous policy images that appealed to different people in different venues. Newell accomplished the third goal, “C” for create commitment, by establishing relationships and creating coalitions. 70

CHAPTER FIVE: Creating Collaboration We had to get away from this: ‘how are we going to share the pie, the zero sum game.’ To how are we going to grow the pie bigger, so then we all win. -Eric Newell, 2018. Introduction In the 1980s the culture among oil sands companies was antagonistic. The two largest oil sands producers were highly competitive with one another. This environment existed at the upper management levels of the companies, and even trickled down to those labouring in the mines. As part of their uniform, employees who worked in the mines for the two companies wore different coloured hard hats depending on which company they worked for. The sense of competition was so strong that the mine workers knew that “the firms' top managers thought that guys with orange hard hats (Syncrude) shouldn't talk to guys with blue hard hats (Suncor)” (Ashar quoted in Nikiforuk, 1997: 52-55+).

This was the milieu that characterized the companies that Eric Newell brought together in

1993 to form a coalition. These two companies, plus many others, later presented a unified message to two levels of governments and successfully advocated for coordinated policy change.

From this fragmented industry culture, Newell brought together people from dozens of different companies, both levels of government, and numerous non-governmental associations. He is credited with forming coalitions and establishing friendships and trust between people, bridging industry and government. This process took years and was the result of persistent action, extensive resources, and expertly crafted narratives. These are the necessary ingredients for a policy entrepreneur to successfully change policy.

By collaborating and forming coalitions, policy entrepreneurs can overcome the natural limitations of an individual. They can reach beyond themselves to gain access to the time, resources, money, and energy of others (Cohen, March, Olsen, 1972). Coalitions also enable a 71 policy entrepreneur to gain consensus on their policy proposals to ensure they present a unified message to decision makers.

In an effort to find supporters for their policy proposals, policy entrepreneurs broadcast their policy images in different institutional venues to reach different groups of people (Pralle,

2003). Depending on the venue, policy entrepreneurs may change how they frame their policies so they will be better received among the target audience. Policy entrepreneurs can aim to manipulate venues to alter who participates in them, in an effort to seek out the most receptive people for the policy proposals (Baumgartner and Jones, [1993]2009).

There are no set rules that determine which institutions have authority over certain issues

(Baumgartner and Jones, 1991). Issues that have jurisdiction in multiple institutions have numerous different venues that can be exploited for purposes of policy change. Moreover, issues can appear differently when framed differently; thus they can appear to belong to different institutions depending how they are presented. For a policy entrepreneur to take advantage of different venues, they need to first recognize them, and then “venue shop” among them to choose strategically and find the best one (Huitema and Meijerink, 2010). Venue shopping is often experimental because policy entrepreneurs cannot be sure which venue will be receptive to their framed policy image (Baumgartner and Jones, 1991; Pralle 2003). Different institutions have different biases, participants and decision-making processes (Baumgartner and Jones, 1991).

Thus, policy entrepreneurs actively contact different institutions in an attempt to establish relationships with different groups of people whose biases and decision-making process may favour the policy proposals.

This chapter covers how Newell fostered collaboration among industry partners and governments. To do this, he used his vision for the industry to inspire individuals to join together 72 in a coalition. Then he and this coalition, the Task Force, actively engaged with decision makers and political influencers in multiple institutional venues. In this way, Newell brought together industry and government to collaborate on revising the fiscal policies for the oil sands industry.

This chapter draws on the policy entrepreneurship literature covered in Chapter three and uses

Newell’s experience to empirically test the theory.

The Task Force In 1991, Eric Newell and a few other Syncrude executives established the Task Force.

This would later become the formal coalition that Newell formed to define and support the policy proposals. Newell and his Syncrude colleagues were in Halifax in 1991 for the Energy and Mines Ministers Meeting, and they were primarily concerned with getting the “oil sands back on that national radar screen” (Newell, 2011: 18). The idea for forming the Task Force was specifically to gain access to the federal government. Newell and his associates anticipated that a formal institution would be necessary for them to get on the federal agenda. Newell was aware of the benefits of creating a formal organization to gain access to multiple government institutions.

At this meeting, Newell and a few other Syncrude executives announced they were starting a national task force for the oil sands despite not knowing “what the hell a national task force would be even” (Newell, 2011: 18). This experimental effort worked. The Mining Association put the Task Force on the agenda, and the Mulroney government approved it. From the beginning, Newell was cognizant of the strategic efforts necessary to achieve policy change in both levels of government.

Between 1991 and 1993, Newell worked to convince Jake Epp, the federal minister of energy, mines and resources, to approve the creation of a national Task Force. After Epp approved it in 1993, the Alberta Chamber of Resources formally adopted the organization and created the National Task Force on Oil Sands Strategies under its aegis. The Alberta Chamber of 73

Resources is a non-governmental, industry association comprised of companies involved in natural resource development, including mining, pipelines, service companies, transport, as well as oil and gas. Since the Chamber was an industry association that had a wide membership basis with individuals involved with the oil industry, it connected Newell with people that he could invite to join his coalition. The Chamber provided the Task Force with an institutional structure and the capacity to interested stakeholders with establish relationships with government.

Newell brought together three main parties into a coalition: oil sands producers and the supporting industries, the federal government, and the provincial government. Most of the Task

Force’s members were self-appointed representatives from private industry. Of the 57 committee chairs and members on the Task Force, six were from the federal government, six from the

Alberta government, and the remaining 45 positions were filled by industry.31

The government representatives were invited to participate in the working committees at a later stage in the formation of the Task Force.32 At this point, it appears that the formative ideas and direction of the Task Force were already established. Government representatives were invited to join the Task Force to give it the credibility of an official, government-sanctioned inquiry (Steward, 2017). Beyond the benefits to its reputation, the Task Force gained tax and finance experts such as Paul Precht, who worked on the provincial royalty regime. Working with employees from the provincial and federal finance and energy departments also helped the Task

Force gain wider access to government institutions. While it was to Newell’s strategic advantage to invite bureaucrats to work in the Task Force, all parties benefited from the arrangement.

31 The 57 roles were filled by 53 people, as Carl Purdy, Ian Walker, Richard Sendall and Al Hyndman each had two roles within the Task Force. 32 On May 16, 1995, Minister Patricia Nelson mentioned that the provincial Department of Energy and the federal Natural Resources Department had been working with the National Task Force for “the last year” (Hansard, May 16, 1995: 1811). Most of the industry representatives had been working together since 1993 when the Alberta Chamber of Commerce formally established the Task Force. 74

Newell aspired to form a comprehensive coalition. The representatives from industry came from 19 different companies. As there were only two major oil sands plants (Syncrude and

Suncor) at that time, the large number of companies involved shows an effort to be comprehensive. The coalition leaders engaged with companies that had a smaller presence in the oil sands industry. Of the industry partners, Syncrude had the most representation, as its employees held 10 of the 57 positions.33 While environmentalists chose not to participate, Newell did seek out Indigenous representation in a leadership position in the Task Force.34

The first step in creating a coalition was for Newell to bring together oil sands producing companies and invite them into the Task Force. Accomplishing this involved transforming the divisive existing culture and most critically, to change the perception of who the competition was. For the producing companies to collaborate, the divisions that extended down to the mine workers wearing different coloured hard hats had to be mended. To change this attitude, the concept of competition had to be framed differently for the oil sands companies. Erdal Yildirim past president of the Alberta Chamber of Resources, was cognizant of this when he posed the questions in a news article: “Why do we have to compete with each other? Why does Syncrude consider Suncor a competitor? There is no competition. You compete against Venezuela. You compete against Mexico” (Yildirim quoted in Boras, Mar 21, 1995: D1).

One of the key aids Newell used to motivate people to join the coalition was a persuasive narrative. While we saw in the last chapter how aspects of the narrative changed over time, the central narrative – that the oil sands industry was stagnant and required government fiscal policy change to increase investment – persisted. This narrative focused on the great opportunities that

33 Besides Syncrude, the next most represented organizations had members in six positions. The government of Alberta, Natural Resources Canada, Imperial Oil, and Suncor all had representatives in six positions. 34 David Tuccaro, who is Indigenous, was on the Steering Committee and a member of the Materials/Services and Coalition Building Subcommittee (National Task Force on Oil Sands Strategies, 1995a). 75 would be open to industry if the government changed their policies. These opportunities were focused on the exponential growth that could occur in the industry. Key to achieving this growth was that industry had to work together. In 1994, Newell wrote in news articles that if $21 billion was invested in the oil sands, overall production would increase from 390,000 to 1.2 million barrels per day (Swift, 1994). To convey the great potential and magnitude of the oil sands he said, “No wonder that OPEC is worried about the potential of Canada’s oil sands” (Swift, 1994:

19). At this time, many journalists and politicians on Parliament Hill did not know what the oil sands were. So while this statement may have been exaggerated, it served both to express the enormous potential of the resource, and to redefine who the real competition was.

The narrative that Newell created about the importance of the policy changes and the potential of the industry was essential to motivate industry representatives to become involved in the advocacy effort. Newell states that “once we got everybody excited about what the potential was, it was amazing how easy it was, relatively easy it was to figure out how to knock down those barriers” (Newell, Interview, 2011: 3). This coalition was animated by a desire to achieve a common goal, articulated by a story of what the oil sands could do for Canada.

To create a coalition of companies who could work together for a number of years,

Newell had to foster relationships and trust. This depended largely on Newell’s communication skills and the personal relationships that he formed with people. Trust and relationship-building are essential for coalitions because this “helps smooth out misunderstandings that otherwise might impede collective action” (Arnold et al., 2017: 431). This coalition was broad and included people from a variety of backgrounds. When reflecting on how important relationships were between Alberta politicians and early oil sands investors, Preston Manning observed that

“at the end of the day it’s amazing how many some [sic] of these big projects come down to a 76 couple of individuals and basically whether they trust each other or not, and that was the other dimension to that relationship. If they didn’t trust each other then that wouldn’t have gone ahead" (Manning, 2011: 5). Policy entrepreneurs need to be socially aware in order to bring unrelated people together to work towards the same goal (Kingdon, 1984; Mintrom and Norman,

2009).

The personal language of relationships can be seen in an appendix of the Task Force’s

Final Report, in a section titled “Friends of the Oil Sands” (1995a). In this section, over 300 businesses and individuals are listed over nine pages (National Task Force, 1995a). While the appendix does not make it clear what the role of a “Friend” of the oil sands is, the personal language reinforces the notion that this coalition was personal. And that the central coalition had expansive personal relationships with many businesses and people. This extensive list also suggests the coalition was inclusive and very well supported among the wider community. As this Final Report is the document that the Task Force used when lobbying government to inform them of their policy recommendations, it is likely that the Task Force wanted the governments to notice that the final nine pages of a 28 page document, nearly a third of its entire length, lists its

“Friends.”

The institutional structure of the Task Force, and the expertise and funds of its members, expanded Newell’s abilities, as it made a division of labour possible. Task Force members were able to direct their time, expertise, and funds towards research and policy development while

Newell focused on forming relationships and selling the policy image. The Task Force had six committees devoted to researching and proposing policy solutions in the following areas: marketing and transportation, science and technology, environment and regulation, government and communications, fiscal and socio-economic, and materials/services and coalition building. 77

For two years these committees conducted studies culminating in nine reports resulting in a total of 316 pages. 35 These reports, as well as the Final Report, were released in May 1995.

One of the chief purposes of a coalition is to provide a policy entrepreneur with resources beyond what an individual is capable. Forty-seven individuals, organizations, and companies are thanked in the “Acknowledgments” of the Comprehensive Report for their financial support, advice, research, and resources (National Task Force, 1995b). These contributions meant that

Newell was able to focus on bringing together industry and government to collaborate.

While the narrative animating the policy proposals had been consolidating since 1991, when the Task Force was proposed to the federal government, a coalition gave stakeholders an opportunity to contribute their input on the policy proposals for the first time. While the proposed policies concerned the oil sands industry as a whole, industry representatives wanted to ensure that their particular company interests were represented. Many companies operated on smaller scales than Syncrude and Suncor, and some smaller operators such as Imperial Oil wanted to be involved to ensure that their niche interests were included in the policy (Taylor,

2011a). By bringing together these different opinions during the formative period of the Task

Force, Newell ensured that the policy proposals represented all industry concerns. When Newell took his policy proposals to the governments he ensured there would not be divided industry factions opposing his proposals and lobbying for contrary policies. The Task Force achieved undivided support for its policy proposals by assembling a comprehensive coalition.

35 These reports are entitled The Oil Sands: A New Energy Vision for Canada, Comprehensive Report; A New Era of Opportunity for Canada’s Oil Sands, Final Report; Appendix A: A Science and Technology Strategy for Canada’s Oil Sands Industry; Appendix B: Securing a Sustainable Future for Canada’s Oil Sands Industry; Appendix B: Update Securing a Sustainable Future for Canada’s Oil Sands Industry; Appendix C: A Recommended Fiscal Regime for Canada’s Oil Sands Industry; Appendix D: Marketing Opportunities and Challenges for Canada’s Oil Sands Industry; Appendix E: Macro-Economic Benefits of an Expanded Oil Sands Industry; Appendix F: Canada’s Oil Sands Industry: Yesterday, Today, and Tomorrow. 78

One goal of a coalition is to seek consensus and support for the policy proposals. This was no easy task, since a policy that works well for a large operator may not work at all for a smaller operator. Newell had to be sure that there was sufficient buy-in by industry to ensure he had a simple, cohesive narrative when selling the policies. Attaining general agreement on the policies included major negotiations among producing companies. As one of the goals of the

Task Force was to persuade the Alberta government to adopt a standardized royalty regime, all oil sands producing companies had to agree to relinquish the particular royalty agreement that they had negotiated with the provincial government in favour of a standard rate. Some companies had obtained more advantageous rates than others. The individually negotiated royalty rates largely depended on the attitude of the government of the day when companies were starting out. Some producing companies did not pay any royalties at all (Nelson, 2012).

Despite the comparative advantage that some companies had over others because of lower rates, every company agreed to abandon their own agreements, even if it meant they would pay higher royalties with the new standard rates. Securing agreement from every company on royalty rates was no small achievement. Newell’s negotiation and communication skills are to be credited for this feat. One of the Task Force members said, “it was staggering that all these giant oil companies would agree. I don’t know what kind of magic Eric had, but he certainly accomplished that” (Rosen, 2013: 11). The fact that this agreement was reached before the

Alberta government became involved in the process, further demonstrates that this policy change was directed by industry actors as opposed to government.

In summary, this coalition allowed Newell to gain access to the resources necessary for him to succeed. This was possible as others were researching and writing reports on the policy proposals. A unified coalition was crucial to the success of the policy proposals. By successfully 79 organizing the stakeholders, Newell could present government with a single narrative supported by a unified industry.

Opposition, or Lack Thereof In the early to mid-1990s the oil sands industry had a low-profile and did not have organized opposition mobilized against it. In fact, the oil sands industry had such a small presence that in the early 1990s Newell spoke with a prominent newspaper editor in Montreal who asked if Syncrude had gone commercial yet (Newell, 2011).36 Newell liked to joke that he was “the CEO of the best kept secret in Canada” (Newell, 2011: 2). While Newell saw the low- profile as a problem for industry, it also benefitted Newell as he and his team had complete control over the narrative. The oil sands industry did not face organized opposition – such as environmental groups – presenting an opposing narrative to policy makers.37 Climate change was not yet high on the political agenda. Newell and his team were able to contact politicians who were, perhaps, learning about the oil sands industry for the first time, and they could frame the industry using their narrative to suit their policy goals.

Institutional Venues Because Newell’s policy goals included policy changes at both the federal and provincial levels, and better policy coordination between the two governments, Newell had to actively lobby across multiple policy venues. Within each level of government, there were numerous departments involved in the policy areas. While the number of venues could have been an

36 Syncrude had been commercial since beginning operations in 1978. In the early 1990s when Newell had spoken with this journalist Syncrude was producing over 10% of Canada’s crude oil (Newell, 2011). 37 News reports from the time recount that Newell states that environmental groups were invited to join the Task Force, but all declined (MacDonald, 1996). Two news articles refer to the position of representatives from the Pembina Institute who say they would prefer that job creation occurred in the renewables sector rather than the oil sands (Hryciuk, 1995; Seskus, 1997). A later article by Hryciuk in the Edmonton Journal states that after the royalty change opposition was found in a “small oilfield firm and an environmental group” (December 2, 1995: E1). As no other news articles mention dissent, it can be surmised that any dissenters who were active at the time were not successful at publicly broadcasting their opposition. 80 obstacle to policy change, as Newell and his team had to convince every department to support the policy, it also gave the team an opportunity to create personal relationships with each department. Actively advocating at multiple venues at the same time proved to benefit Newell, as his team was able to present tailored policy images to each department and to persuade them that the proposed policy was in their favour. This process was experimental, and in some instances

Newell had to first establish relationships with other institutions, such as non-governmental organizations, to gain access to policy makers in government.

Selling the policy began as early as 1991, and continued until the federal government changed its fiscal policies in 1996. Newell’s communication skills and persistence were key to his success at selling the policy proposal. Patricia Nelson said that, “Newell was probably one of the best communicators I ever met in the oil sands industry. We went on the road for two years, we went out there and sold Alberta's Advantage, and I mean we sold it” (Nelson, 2012: 16).

The Alberta Government By the 1990s, the Alberta Chamber of Resources was already an influential provincial institution and largely contributed to the success of the Task Force. Newell had been involved with the Alberta Chamber of Resources since 1989 and served as their President in 1994. One of the main functions of the Chamber of Resources was lobbying (Page, 2013). A Task Force member said that they had become aware of “the great leveraging” the coalition could have by working with the Alberta Chamber of Resources because the Chamber “could push where we couldn’t in government” (Anderson, 2013: 13). The Chamber had long established relations with the Alberta government. They had especially close relationships with the Department of Energy.

The deputy minister of energy would even regularly attend meetings at the Alberta Chamber of

Resources (Newell, 2018). Newell said that the deputy minister would attend “every one” of their board meetings (Newell, 2018). He said that this was a “tremendous trust relationship” and 81 was a “great example of how we worked so closely together” (Newell, 2018). Beyond the connections available to the Task Force through the Chamber, the coalition was fortunate for

Klein’s minster of energy appointment.

Provincial minister of energy, Patricia Nelson, had multiple connections in the oil industry. She came from a family that worked in the Alberta oil industry, and she was the first female manager of Sun Oil before she went into politics (Nelson, 2012). By the time she was in her early twenties, she was working on the deal that started the Great Canadian Oil Sands, the precursor to Suncor. In her own words, Nelson had “a passion for oil sands” (Nelson, 2012: 14).

This passion made her an early ally for Newell.

Through its connections with the Alberta Chamber of Resources and the support of

Minister Nelson, the Task Force faced few challenges in convincing the provincial government to adopt the proposed policies. The Klein government elected in 1992, expressed interest in broadly changing and simplifying the regulations for energy industries (Nelson, 2012). Klein had stated that his government would “maintain as competitive a tax regime as we possibly can to attract to this province new investment and to create economic growth and prosperity” (Hansard,

September 14, 1993: 211). This meant that the stated goals of the Alberta government coincided with the goals of the Task Force.

Yet, when the Alberta Tax Reform Commission released a report in early 1994 advising the government to change their royalty rates and adopt a standardized royalty regime for the oil sands, the government did not engage with it (Hansard, May 16, 1995: 1811). Despite having made similar recommendations as the Task Force would make a year later, the Tax Reform report was not commented on. The province did not debate changing their royalty rates for the oil sands before the Task Force released their 1995 report, despite being advised to do so. 82

Newell lobbied Klein specifically. In the lead-up to the provincial government changing their fiscal policies, Newell took Klein on a fishing trip to northern British Columbia (Newell,

2018). Newell saw this as an opportunity to discuss the opportunities that would come from the policy changes. The way Newell later reflected on the trip demonstrates how much value he placed in having that time with the Premier. Newell said: “I actually got him on a fishing boat once. I had five hours with him on a fishing boat. He was so excited Jessica! Because we used to do this thing, we had a few friends of the Premier’s and we used to take them away one weekend a year, just to take them away from everything so they could relax. He loved to fish” (Newell,

2018). In his effort to persuade Klein to adopt the policy proposals, Newell made an effort to appeal to Klein’s personal interests, and to get to know him personally.

Newell’s actions in lobbying Klein demonstrate his social awareness. As outlined in the literature, policy entrepreneurs need to be socially-skilled to be able to persuade others to support their policy proposals. Certainly, one of the key individuals to convince was the premier of

Alberta. Newell’s awareness of Klein’s fondness for fishing, demonstrates that Newell took the time and interest to understand the political actors he had to convince. In the literature, Schabert emphasizes the importance of fostering personal relationships for a person to achieve their political goals (2002). Schabert wrote: “When one wonders about the human person, one is asking above all another question, the real question: What is important about this person? What is the political element that mobilizes and directs this person, giving him his capacities, making him, in one way or another, a figure in the universe of power?” (Schabert, 2002: 26). A person’s individual qualities and characters are important because they affect their political influence

(Schabert, 2002). Further, Newell’s use of his political connections to gain access to Premier 83

Klein is one of the strategies policy entrepreneurs use to complement their negotiation skills

(Kingdon, 1984; Mintrom and Norman, 2009; Huitema and Meijerink, 2010; Oborn et al., 2011).

These efforts were successful. Newell said that after discussing the potential of the oil sands industry for five hours on the fishing boat, Klein “was so excited! That’s all he could talk about all through dinner…And he got it” (Newell, 2018). As soon as the Task Force’s Final

Report was released in May, 1995, the Klein government began deliberations on the recommendations of the Task Force. Four months later the Alberta government had adopted nearly all of the recommendations (Steward, 2017). Some commentators have asserted that

“Ralph Klein’s Alberta government didn’t need a sales job” (Steward, 2017: 27). There is no explicit evidence to support this interpretation. And Newell’s account of the time he spent with

Klein suggests otherwise. This study indicates that Premier Klein was personally convinced by

Newell to adopt the policy changes.

The Federal Government In December 1995, a Toronto Star article reported in an interview with a senior federal finance official who said that Ottawa would not accept the proposed policy from the Task Force

(McCarthy, 1995). The article added that the federal government was seeking to “reduce business tax incentives, not increase them” (McCarthy, 1995: 3). The official was further quoted as saying that “It’s very clear cut for us…. They’re not getting anything more than they’ve got”

(McCarthy, 1995: 3). Yet three months later the federal government adopted the proposed policies, and changed their fiscal regime for the oil sands. This abrupt policy reversal was achieved by persistent lobbying by the Task Force.

Convincing the national government to change their policies took considerable persuasion. While Newell’s plan was to persuade the provincial and federal governments to change their policies, the focus in creating the Task Force was directed at accessing federal 84 institutions (Newell, 2011; Motherwell, 1994). Newell said that they anticipated they would have difficulty accessing federal institutions, and that they “couldn’t do it through a provincial association” (Newell, 2011: 18). Creating a National Task Force for a natural resource industry primarily located in one province gave Newell more legitimacy to lobby the federal government.

One of the key players was the federal Minister of Natural Resources Anne McLellan.

She was part of the first Liberal government elected since the National Energy Program, and on election night in 1993 she won her Edmonton seat by only one vote.38 Unlike her provincial counterpart, McLellan was a lawyer, without inside knowledge of the oil industry or personal connections with industry representatives. Rather, her first direct introduction to the oil sands was in 1993 when Eric Newell met her in Ottawa to discuss the Task Force and its policy recommendations (McLellan, 2011). As McLellan did not have any prior knowledge of the industry, she was dependent on the knowledge of others. Newell introduced her to both the technical aspects of the industry and the obstacles that industry faced. Undoubtedly, this information was animated by a narrative favouring his policy proposals. In a news article,

McLellan said that she “didn’t understand the magnitude of the reserves under the ground until

Eric Newell and others put it into perspective” (Worron, 1996: H1). While McLellan had a department with knowledgeable people supporting her, it appears Newell had an inside track in shaping her perception of the industry.

McLellan supported the policy proposals and worked with Newell to convince her government to adopt them. One of the Task Force members describes her as “a superstar in her ability to get the rest of Canada, particularly the Government of Canada, Jean Chrétien and Paul

Martin, to understand that the royalty changes were good for Canada” (Rosen, 2013: 7). She

38 The recount showed that McLellan had in fact won by 12 votes. This earned her the nickname “Landslide Annie.” 85 acknowledged that convincing Ottawa to adopt the policies was not easy. She understood that how the policy was framed was important for how it was received by the government.

McLellan’s advice to Newell was to frame the policy as a “national project” (McLellan,

Interview, 2011: 9). McLellan’s awareness of the importance of framing suggests that she recognized that policy-making was not just about reacting to changes in conditions, such as the price of oil, but involved people creating a persuasive narrative to convince policy makers to act.

To succeed, the Task Force also had to establish relationships with other members of the

Liberal Party in Ottawa. McLellan explains that Newell redirected some of his Syncrude staff from working on the mine in Alberta, to working on building relationships with politicians in

Ottawa (McLellan, 2011). One of Syncrude’s employees who was re-assigned to Ottawa was Al

Hyndman. Concerning his new assignment, he said “strangely for an engineer, my piece of it was the tax royalty system” (Hyndman, ca. 2011-2013: 9). The Task Force did not assign an economist or a tax expert to this role, but an engineer who was knowledgeable about the industry and not necessarily about economics. This suggests that the primary goal of the Task Force in sending Hyndman to Ottawa was to build relationships with decision makers.

McLellan said that Hyndman “practically lived in Ottawa,” as he was there so often talking with politicians (McLellan, 2011: 9). Hyndman arranged to be in attendance at all Liberal

Party events, even the private Christmas party. His unsolicited presence became a joke between him and McLellan, as she would ask him how he managed to get invited to every event

(McLellan, 2011). In response, Hyndman would laugh and say “I know people” (Hyndman quoted in McLellan, 2011: 9). Hyndman’s role seemed to be to establish personal relationships with politicians, especially Finance Minister Paul Martin. McLellan said that “wherever the

Minister of Finance was, you’d find Al Hyndman not far behind” (McLellan, 2011: 9). 86

The federal Finance Department took a lot of persuading. In the 1993 election, the government had made promises about balancing the budget. That election was dominated by federal debt and deficit issues (Freehan, 1995). Debt management was the most important aspect of the 1995 budget and the government was not “interested in the potential of foregoing any revenue at that particular time” (Freehan, 1995: 31; McLellan, 2011: 9). The finance department was initially opposed to the policy proposals, because in the short-term it reduced resource revenues.

Beyond meeting with the finance department, representatives from the Task Force met with numerous other federal departments, further expanding the number of venues they lobbied in. Robert Taylor, another engineer assigned by the Task Force to work on the tax system learned that this was an exploratory process. He remembers “discovering” that “every other ministry of the government has an energy section” and Taylor and his fellow Task Force associates met with all of them (Taylor, 2011a: 23). Navigating multiple venues is a learn-as-you-go process. Taylor met with “the oil and gas guys at Environment and the oil and gas guy at Industry Trade and

Canada [sic], Transport Canada” and so on (Taylor, 2011a: 23). There was no assurance for

Taylor, or anyone else, which department would be receptive to the policy image. So they had to visit every ministry repeatedly.

Beyond appealing to various departments independently, the Task Force also brought these departments to work together. The Task Force recognized that one of the obstacles in gaining sufficient support for their policy proposals from the various departments was that the departments used different data as inputs when debating policy (Newell, 2018). To overcome this, the Task Force bought together representatives from the Alberta treasury, Alberta energy, federal finance, federal mines, minerals and resources, as well as individuals from industry. 87

Together this consortium worked on concrete fiscal projects. The Task Force gave the group one data set and 21 test cases to use for “various sorts of playing around” to encourage the newly formed team of bureaucrats and industry representatives to collaborate (Newell, 2018). They were successful. Newell said that he thinks “it was the first time in history that the Department of

Finance and Department of Energy, Mines and Resources [sic] used the same data and worked that closely together” (Newell, 2018).

By bringing together representatives from a number of different government departments at two levels of government, the Task Force successfully overcame some of the complexity of the policy process. As is demonstrated in the literature, policy change is complicated by the numerous institutional levels and number of relevant actors to every policy issue. By bringing these different actors together, and persuading them to collaborate, Newell was able to set favourable conditions that led to the different departments agreeing on a fiscal policy.

The advocacy effort in Ottawa was marked by determined persistence. This process took individual effort and time: Robert Taylor recounts how he would “wear the shoe leather off [his] shoes” walking around Ottawa meeting with ministers on energy issues (Taylor, 2011a: 22).

Because the Task Force required a sizeable team stationed in Ottawa meeting with politicians for over a year, this process was only possible with significant resources (McLellan, 2011). The oil sands industry had both the expert personnel to station in Ottawa, and the resources to pay them, and to do so for as long as it took.

Expanding the Coalition: Non-Governmental Support To improve their lobbying efforts, Newell sought out support from another venue: a non- governmental institution. Newell contacted chamber of commerce offices to ask for their support. Both the Edmonton and the Fort McMurray chambers of commerce offices supported

Newell’s endeavour and presented the policy proposals to the Canadian Chamber of Commerce. 88

The Canadian Chamber was asked by the local branches to lobby Ottawa on industry’s behalf

(Ziegler, 1996). The Canadian Chamber was convinced and brought the policy proposal to federal Minister of Finance Paul Martin (Ziegler, 1996). Newell stated that it was “very unusual” that the Canadian Chamber of Commerce would “stand up for one industry” (Newell, 2018).

Another national organization that supported the policy proposals was the Federation of

Canadian Municipalities. They offered their unanimous support for the oil sands industry and recognized the industry “as a national issue that will have positive economic impact [sic] on municipalities across the country” (Ziegler, 1995: H1).

These endorsements were effective in reaffirming Newell’s narrative that the oil sands served the national interest and would benefit small businesses across the nation (MacDonald,

1996). As quoted earlier in the Toronto Star article, the senior finance official was opposed to giving industry “anything more than they’ve got” (McCarthy, 1995: 3). With the assistance of the Canadian Chamber of Commerce, the narrative was shifted from being about industry asking for hand-outs, to being about creating jobs in small businesses across Canada. A news article in

January 1996 reported that the endorsement by the Canadian Chamber of Commerce is “clear recognition from them that the oil sands industry represents a broader amount of growth and job- creation” (MacDonald, 1996: F1).

In addition to harnessing the support of these non-governmental associations, Newell also persuaded organized labour to endorse the recommended policy changes. The unions were convinced to support the policy proposals since they would benefit their members. On request from Newell, the head of the Building Trades of Alberta Union, Bob Blakely, arranged a “write- in” and mobilized his union supporters to send letters advocating for the Task Force’s policy 89 changes (Newell, 2018). The union supporters sent in 35,000 letters to the federal government, until the Prime Minister’s office asked them to stop (Newell, 2018).

Gaining the support of non-governmental associations lent credibility to Newell’s narrative that the policy changes would be advantageous for Canada as a whole, not just oil companies. Newell deliberately invited these associations to participate in the policy process. He said that key to forming coalitions with people and associations is to get them involved at the beginning: “[d]on’t involve people after the fact with your wonderful idea, if it’s so wonderful, get them involved front-end” (Newell, 2018). By involving people in his coalition in the beginning, Newell could develop common ground with them, invite them to contribute their ideas to the policy proposal, and finally to gain their support for the objectives.

Mobilizing Public Opinion Newell went on tour selling the policy proposal. He traveled extensively across Canada to broadcast his policy proposal. He states that there were a number of years where he did more than 50 major speeches a year on the proposed policies (Newell, 2011). Newell travelled to

“every chamber of commerce he could possibly get an invitation to talk about the benefits, the potential benefits” for each part of the country (McLellan, 2011: 9). On these talks, he would tailor the message to suit the region he was in, such as talking about the benefits to the steel industry while he was in Hamilton, or when in the Alberta capital saying that Edmonton would be “the real big winner” from the policy changes (McLellan, 2011; Hryciuk, 1995: D8).

In the early 1990s, before the Task Force released its report in 1995, Newell used his position as president of the Alberta Chamber of Resources to travel across Canada and give speeches on the policy proposals. An Edmonton Journal news article says that he was “trying to build national interest” for the proposals and was working to change the image of oil sands projects themselves (Chalmers, 1994). 90

Beyond those in industry and government, Newell sought to reach a greater community of people across Canada. Newell’s successes in forming a coalition and forging relationships between unconnected groups of people was recognized by the University of Alberta who named him Canadian Business Leader of the Year in 1997. In a news article titled “Leaders must sell visions” that covered the award, Newell said that it was not enough to have the support of politicians and the business people directly involved, but that ordinary Canadians need to be involved in the coalition as well (Sass, 1997). Newell is quoted as saying “We had to build alliances. And beyond that, we also had to convince ordinary, everyday Canadians of the value of our vision” (Sass, 1997). To accomplish this, Newell engaged with Indigenous peoples, manufacturers, unions, and community organizations to persuade them that the policy changes for the oil sands industry was in their best interest (Sass, 1997). The policy entrepreneurship literature states that gaining public support for their objectives is a way to “gain greater visibility and credibility for their cause” (Roberts and King, 1991: 166).

Conclusion The success of the coalition depended on a diverse group of partners. It was necessary for

Newell to navigate multiple institutions deliberately. While Newell had a strategy and planned these goals as early as 1991, part of this process was experimental, such as forming a National

Task Force, venue shopping, and contacting countless federal ministries. Newell demonstrated that he had both a long-term strategic vision as well as a flexible and creative approach. These are both necessary attributes for a successful policy entrepreneur (Roberts and King, 1991).

Key to Newell’s success was his communication skills, expertise and persistence. Newell had a reputation for competence and an ability to provide both industry associates and politicians with reliable, trustworthy information. These characteristics helped him establish relationships and trust between those in the coalition, as well as with policy makers and representatives from 91 non-governmental institutions. Newell demonstrated that he had the expertise, persistence, and social acuity that are all essential characteristics for a successful policy entrepreneur (Kingdon,

1984; Weissert, 1991; Baumgartner and Jones, [1993]2009). 92

CHAPTER SIX: Conclusion Overview of Thesis This thesis set out to answer the question: why did the fiscal policies changed for the oil sands industry at both levels of government in 1995 and 1996? In 1995, the provincial government announced it would adopt a standardized royalty regime for the industry. In 1996, the federal government announced it would change its income tax structure for the industry. One broadly held explanation for this change points to the creation of a new institution: The National

Oil Sands Task Force. While this is a partial explanation, it does not consider why or how the institution was created. A second explanation is that these changes resulted from an ideational shift at high levels of government. However, I found no evidence of the policy change originating in government. I then turned to first-hand accounts from those who participated in the policy change. I noticed a pattern in these accounts: people overwhelmingly mentioned that Eric

Newell was a major player in the policy changes. I then formed the hypothesis that policy entrepreneurship was a key factor in achieving these policy changes.

Was a Policy Entrepreneur a cause of the policy change? This study suggests that Eric Newell, acting as a policy entrepreneur, was a major cause for the policy changes. Detailed historical analysis demonstrates that between 1990-1996 Newell acted to develop ideas, framed narratives, and formed coalitions with the purpose of brokering his ideas to decision makers. For policy entrepreneurship to be considered a necessary condition for the policy changes, it must be assumed that the policies would not have changed without the participation of this individual (Mahoney, 2015). Hypothetically, if all conditions of Alberta and

Canadian politics had remained the same, and the price of oil and state of technologies remained unchanged, it is difficult to imagine that the fiscal policies would have changed in 1995 and

1996. In other words, the words and actions of a single individual was in fact decisive. 93

Before the Task Force released its Final Report in 1995, both the Mulroney and Klein governments were specifically asked to change their fiscal policies for the oil sands industry by agencies within their own government, but neither did. Furthermore, in interviews with politicians, bureaucrats, and individuals in industry, the vast majority credit Eric Newell as playing a central role in the policy changes. Based on this evidence, Newell appears to have played a necessary role in the 1995/96 policy change processes. It is not enough to say that

Newell was involved. Policy entrepreneurship scholars have endeavoured to understand how these people are successful. This literature has outlined the strategies and attributes of a policy entrepreneur.

How was Eric Newell successful as a Policy Entrepreneur? I made Table 2 to summarize the main theoretical findings of this thesis as structured by the policy change literature covered in Chapter Three. The policy literature that expresses skepticism about how much individuals can deliberately influence policy identifies legitimate obstacles inherent in the policy system. These obstacles are listed in the first column of the table below. This analysis uses these obstacles as a way to understand the strategies and attributes of a policy entrepreneur. I suggest that a policy entrepreneur can overcome each of these obstacles by carrying out certain strategic activities and possessing certain personal attributes. From the policy entrepreneurship literature I aggregated the necessary tasks, strategies, and attributes of a successful policy entrepreneur to create the table below. These activities are listed in the second, third and fourth columns.

The following analysis will go through each obstacle in the policy system and will draw on Newell’s activities as covered in Chapters Four and Five. This analysis demonstrates how the combination of the strategies Newell used and the attributes he possessed were collectively 94 sufficient for him to perform the tasks necessary for him to overcome the obstacles in the policy system.

Table 2: Evaluating how Policy Entrepreneurs Overcome Obstacles in the Policy Process

Obstacles to Policy Entrepreneur Attributes of a Policy Policy Task to overcome obstacles Strategies Entrepreneur Change

Form a coalition, Develop Develop a politically feasible policy Expert, Socially Skilled, new ideas, Specify policy Policy Process proposal Persistent solution is Complex Connect with all relevant decision Form a Coalition, Broker Expert, Socially skilled,

makers in various institutions ideas to political actors Persistent

Frame problems and

Couple problem and Solution solutions, develop a Persistent, Socially skilled

Limited narrative

Attention Span Form a coalition, Broker

Keep issue relevant ideas to political actors, Persistent, Socially skilled

mobilize public opinion

Resource Partner with others to expand Expert, Persistent, Socially Form a coalition Intensive capacity skilled

Complexity in the Policy Process The first obstacle listed in Table 2 is that the policy process is complex. There are two aspects to this: developing politically feasible policies is difficult, and navigating the multitude of decision makers is difficult. Policies are complex because they have diverse effects on various groups (Baumgartner et al., 2009). As a result, developing a policy proposal that is both politically feasible and likely to achieve one’s objective is challenging. In ideal conditions it is 95 cognitively difficult to appraise the vast multitude of policy options and to choose the best course of action (Baumgartner and Jones, [1993]2009). This task is exacerbated by the challenges an individual naturally has in overcoming his or her own limited perspective. A politically feasible policy proposal needs broad support. To appeal to others, a policy entrepreneur needs to take account of other people’s interests. It is difficult for an individual to develop a policy proposal that fits these requirements by means other than forming a coalition. Through a coalition, one can gain direct access to the perspectives of others. Recent research demonstrates that the wisdom of the crowd can enable a group to consider multiple choices and choose better actions

(Hong and Page, 2008). For a coalition adequately to attain the wisdom of a crowd it is necessary for it to consist of individuals who are diverse and smart enough (Hong and Page, 2008).

One of the essential actions Newell took to overcome complexity in the policy process and the difficulty of devising a politically feasible policy solution was to form a diverse coalition. To do so, Newell had to persuade a diverse group of people to work together. He accomplished this by being a credible expert in his field, having excellent social skills, and being persistent.

Newell used his leadership position as CEO of Syncrude and his reputation as an expert in the oil sands industry to bring people together. This coalition started with his fellow executives at Syncrude and later expanded to include members of the Alberta Chamber of

Resources. This diverse coalition enabled Newell to develop politically feasible policy proposals.

Together, industry and government representatives contributed their ideas and produced comprehensive policy proposals that could not have been produced by an individual. Newell’s efforts to create as diverse a coalition as possible ensured that the variety of perspectives would overcome his individual cognitive limitations. The diverse coalition also served to increase 96 support for the policy proposal among stakeholders, which increased the political feasibility of the proposals.

Newell's social skills were essential in motivating others to cooperate (Fligstein, 2001).

This was of particular importance in the early stages of coalition-building, because the major oil sands companies were competitive with each other. Newell worked to change this culture and form a tight knit coalition among companies that had previously seen each other as competitors.

Persuading people to work together is difficult, and it demanded that Newell be socially skilled and persistent (Olsen, 1965; Hacker and Pierson, 2014). Newell built and maintained a coalition that worked together for six years.

The second instance of complexity in the policy process stems from having to navigate the multitude of political actors at various institutional venues. As it is not always clear which venue has ownership over an issue, policy entrepreneurs need to be persistent in continuing to broker their ideas to decision makers (Baumgartner and Jones, [1993]2009). The complexity here was overcome by delegating coalition members to canvass decision makers. This was an important task that relied on the dedication of the coalition members. Newell had inspired his team with stories about a vision of what was possible. The dedication of Task Force member

Robert Taylor to the policy objectives can be perceived by his story of wearing the “shoe leather off [his] shoes” (Taylor, 2011: 22).

Newell’s status as an expert and his honed social skills combined to be very effective in gaining access to political actors and in brokering his ideas. As Kingdon noted, the combination of “technical expertise with political savvy…created much more influence than either of the two qualities taken separately” (1984, p. 190). Newell formed relationships with political actors who he convinced to adopt his policy proposals. This was a long process, and Newell’s grit and 97 perseverance is evident from a 1995 newspaper article where he said that “We’re going to keep slogging away,” referring to his advocacy efforts in Ottawa (Boras, 1995: C4).

Limited Attention Span The policy process is further complicated by challenges at the individual level. Simply put, people’s attention span is limited (Simon, 1985; Baumgartner and Jones, [1993]2009;

Hacker and Pierson, 2014). It takes time to find, contact, and persuade all relevant decision makers to support a policy proposal. In this process, some decision makers may lose interest as other issues come on the agenda (Kingdon, 1984). Over time, it is difficult to retain a sense of relevancy for a policy proposal. Advocates of a policy proposal must work to maintain the links coupling political problems with their proposed solution.

To overcome this obstacle, Newell crafted persuasive narratives. Newell told stories about how growth in the oil sands industry would solve specific political problems. The problems that Newell referred to were issues that both levels of government were already concerned about: the decline of conventional oil, energy security, unemployment, government debt, and socio-economic conditions. The way Newell framed these narratives demonstrates his awareness of the political importance of telling compelling stories (Stone, 1989). He experimentally crafted stories, as he searched for ones that people found captivating and persuasive. He was persistent in reinforcing his narrative over seven years that the oil sands industry would solve a host of problems that the governments were already focused on.

To keep his policy proposals relevant, Newell broadcast his policy images tirelessly.

With support from members of his coalition, such as Hyndman and Taylor, Newell and his team introduced and explained their policy proposals to the federal and provincial governments.

Beyond political actors, Newell expanded his focus and made speeches to the general public. By taking efforts to reach a wider audience, he mobilized public opinion in favour of his policy 98 proposals (Kingdon, 1984; Roberts and King, 1991). The increase in news coverage in newspapers across Canada points to the success of Newell’s efforts to make his policy proposals into public issues. This strategy helped him overcome policy makers’ limited attention span.

Resource Intensive Process To accomplish all of the above tasks, Newell required ample resources (Kindgon 1984;

Baumgartner and Jones, [1993]2009). In the six years from the time he proposed the Task Force to the time he achieved the policy changes, he needed sufficient funds as well as the time of his coalition members to contact the relevant stakeholders. Individually, resources such as time, energy, and money are quickly exhausted. Newell, Taylor, Hyndman and Yildirim repeatedly traveled across the country to meet with decision makers to broker ideas to them. To pay for these expenses, and the wages of the 40 Task Force members, Newell had to convince oil sands companies to invest great sums of money, and convince their skilled employees to adopt his vision. His success in this depended on his ability to convince the once disparate companies to work together and engage in collective action (Fligstein, 2001; Boasson and Wettestad 2014;

Olsen, 1965).

In summary, Eric Newell used the above strategies (developing new ideas, specifying policy solutions, framing problems and solutions, creating a narrative, forming a coalition, brokering ideas to political actors, and mobilizing public opinion) to overcome obstacles inherent in the policy process. In addition to executing these strategies, Newell embodied the three essential attributes of a successful policy entrepreneur: he was an expert, displayed persistence, and had excellent social skills.

Together these strategies and attributes account for Newell’s success as a policy entrepreneur. As such, they are the necessary and collectively sufficient conditions for Newell’s success as a policy entrepreneur in the 1995/96 policy change. 99

Why did the Governments Collaborate? To return to the research question, the governments changed their fiscal policies because they were convinced that it was in their best interest to do so. Newell crafted a persuasive narrative about how the policy objectives would resolve existing political problems that Ottawa and Alberta each faced. Klein’s Alberta government was convinced by Newell’s vision of wealth that would come to the province through increased investor confidence from a standardized royalty regime. The federal government was convinced that the benefits from increased investment in the oil sands industry would reach beyond Alberta and would economically benefit

Ontario and Quebec. This narrative was strengthened by Lynch and the Canadian Manufacturers’

Association’s economic study of the oil sands which showed that 40% of the wealth from the industry would go to Ontario and Quebec (Newell, 2018). This story was persuasive as the majority of Chrétien’s electoral basis was in Ontario. The Liberal party won 98 of the 99 seats in

Ontario in the 1993 election. The federal government was persuaded to change their fiscal policies by Newell’s stories that emphasized how Ontario would benefit.

Newell created a broad, dedicated coalition to help him tell these stories. This coalition was expansive, and included support from a vast array of industry partners as well as non- governmental associations. The coalition brought together in the Task Force increased Newell’s capacity in terms of time, energy, and resources. The additional capacity enabled him to overcome the complexity of politics and gain a wide basis of support for his policy proposals.

Newell was able to form such an expansive coalition because he deliberately reached out to people early, established common ground with them, and fostered relationships. Newell went beyond government and industry and reached out to the broader Canadian public. The associations he involved, such as the Canadian Chamber of Commerce, the Federation of

Canadian Municipalities, and the Building Trades of Alberta Union, became interested in his 100 objectives and consequently lobbied on his behalf. These associations kept the policy images topical and reinforced the narrative links coupling current political problems with the proposed policy solutions.

As a result of the oil sands industry’s low public profile, there was little public opposition to the industry and Newell was able to control the policy images. Ultimately, the policies changed because Newell “developed a vision of what was possible” and he used this to create a dedicated coalition that believed in his stories (Newell, 2018). The narrative that animated the policy proposals and the expansive coalition overcame the complexities in the policy process and persuaded two levels of governments to change their policies.

This thesis is a reassessment of why fiscal policies for the oil sands changed in 1995 and

1996. While some studies pointed to the importance of industry associations such as the Alberta

Chamber of Resources, and the Task Force as playing an important role, they did not inquire as to why the Task Force started when it did, or how it was effective when previous task forces were not. By shifting this analysis to the level of the individual, and examining a particular individual’s specific actions, this thesis can account for the creation of the new Task Force and for its success. Theoretically, this thesis contributes to understanding how policy entrepreneurs are successful.

Implications As emphasized by much of the literature on these policy changes, political factors, such as the election of high-level politicians, were also significant in creating the opportunity for these changes (Taft, 2017; Urquhart, 2018; Steward, 2017; Steinmann, 2005; Chastko, 2004; Hoberg and Phillips, 2011). These studies mainly focus on electoral politics as understood as the vote- seeking incentives of politicians to explain policy (Hacker and Pierson, 2014). While electoral politics play an important role in the policy process, and other theories of policy change, 101 including Kingdon’s three streams approach (1984), encompass this, it is not a complete explanation for why the fiscal policies changed in 1995/96. This study contributes to this body of work by demonstrating how a non-governmental actor took advantage of a window of opportunity and deliberately influenced policy.

One of the implications of this study concerns how we understand the role that non- governmental actors play in influencing policy change. There is a valid concern that powerful, wealthy business interests led by a single, strategic actor erode civil society and are detrimental to democracy (Clancy, 2008; Hoberg and Phillips, 2011). Some fear organized, wealthy business interests because they are seen to have enough power to “rival and even predominate over state systems” (Clancy, 2008: 57). Their concern is that the state passes policies that reward the interests of the wealthy few, while ignoring the interests of the many, less wealthy (Laundry,

1990; Taft, 2017; Urquhart, 2018). This appears to be a valid concern, as the 1995/96 policy changes were coordinated by a well-funded CEO of a major oil company and the policy changes contributed to a dramatic profit increase for his company.

However, financially wealthy advocates are not necessarily bad for democracy. As

Baumgartner et al. demonstrate, while financial means are important to policy advocates, there is a low correlation between wealth and policy outcomes (2009). One of the reasons for this is that other factors matter more than wealth. Policy advocates do not operate alone, but usually in diverse coalitions (Baumgartner et al., 2009). Diverse allies are essential to gain sufficient support for a policy proposal. The effect of bringing together a diverse group of allies, is that it ensures that advocacy groups have to collaborate and compromise in order to create a policy proposal that is viable for the group. Building diverse coalitions effectively ensures that groups with a few very wealthy members will lobby for changes that suit the diverse interests of its 102 coalition, instead of the pet interests of the wealthy few (Baumgartner et al., 2009). Another reason why the wealth of one advocate may matter little is that there is often an equally wealthy opposition to balance them.

In this case, Newell’s efforts were well-funded and there was no active opposition.

However, his coalition was diverse and the negotiation and collaboration period was long. While organized opposition did not moderate the financial power of the Task Force, the broad coalition and resulting compromises likely did to a degree. Newell’s coalition was diverse, as it included both business organizations such as the Canadian Chamber of Commerce, as well as labour organizations such as the Building Trades of Alberta Union. It is likely that Newell had to make concessions to gain the support of trade unions. The Task Force sustained genuine debate as not all of the members shared the same interests. Erdal Yildirim, Chairman of the Task Force said that “towards the end we had some very major disagreements” (Yildirim, 2011: 14). If the oil sands industry had a higher profile in the early 1990s, it is likely that they would have had organized opposition, either from another industry, or from environmental lobbyists as we see today. As the Task Force did not have a wealthy opposition to balance them, it is possible that these policy changes were detrimental to civil society insofar as there was little public debate over the merits and flaws of the policy proposals. While it is difficult to know how much compromise and negotiation occurred within the Task Force, the lack of public debate and organized opposition gave the appearance that the process was not as democratic as it could have been (Steward, 2017; Urquhart, 2018; Taft, 2017).

Another implication is that a broad, dedicated coalition was centrally important to

Newell’s ability to overcome so many obstacles in the policy process. The diverse coalition that persisted for six years was made possible by Newell’s great social skills. He invested a great deal 103 of time in fostering relationships. He created bonds of trust and loyalty with people who in return wanted to work with him. Trust facilitates cooperation and can lead to reciprocity (Putnam,

1993). Trust can also be used to gain political power (Schabert, 2002). This finding reaffirms a classic Aristotelean insight that friendship is central to politics.

Newell took time to get to know and form relationships with people. Personal relationships, real friendship, are central to forming networks and coalitions (von Heyking,

2016). And as such, it was Newell’s social skills and ability to foster friendships with others that led to his success.39 In summary, an “isolated politician is a failed politician” (von Heyking,

2016: 7).

Newell brought people into his coalition by telling stories about the policy proposals. He tailored these stories, or policy images, to his audience. His efforts to tell stories that would be engaging to different audiences indicates Newell’s social awareness. He imagined other people’s perspectives and endeavored to think his way into their concerns and interests. These varying policy images were aimed at a vision of what he thought was possible, and he deliberately made efforts to inspire people with this vision. The implications of this is that storytelling plays a chief role in politics (von Heyking, 2016; Arendt, [1954]2006; Polletta, 2006). Arendt wrote how public speech is the only real political action (1958). For it is through speaking, and subsequently telling stories that people create a common narrative that leads to political action (Arendt, 1958).

Individuals can innovate and create new stories, and if these stories captivate and unite others, they can create novel political action.

39 For more on the political importance of friendship see Tilo Schabert, How World Politics is Made: France and the Reunification of Germany (2002), and John von Heyking, The Form of Politics: Aristotle and Plato on Friendship (2017). 104

Future Research As one of the strengths of a single case study is its capacity to develop a novel hypothesis, a corresponding weakness is that the generalizability of the hypothesis may be limited. Comparative studies would be useful to further evaluate and generalize from these findings. One such case could be the approval of the offshore oil platform Hibernia. As Newell himself suggested, the approval of this project could have been a result of the efforts of policy entrepreneurs. This would be an interesting comparison, as it occurred in a similar time period, and was also a natural resource project supported by a wealthy oil industry. This policy change would also have included both the federal and provincial governments, making it an interesting most-similar systems comparative study. If a policy entrepreneur did play a role in convincing the governments to change their policies and incentivize oil drilling in Hibernia, this comparative study would enable a comparison of the strategies used in Alberta compared to Newfoundland.

By studying similar case studies, it is possible to gain further knowledge into the strategies and attributes of a successful policy entrepreneur. It could also demonstrate how the different provincial context affected the agency of the policy entrepreneur.

In addition, this research would also be enriched by investigating situations where policy entrepreneurs were not successful. An example of this may be the unsuccessful bid in 2012 for a

First Nations-run oil refinery in Alberta. Eric Newell had partnered with the project and sat as chair for the Alberta First Nations Energy Centre (Tait, 2012). After more than a year of negotiations between the province and the Alberta First Nations Energy Centre, the Alberta government decided not to proceed with the project. As Newell had experience as a successful policy entrepreneur, it would be interesting to study why the results were different in 2012. Did

Newell perform different actions in this case? Or did the structural conditions and context 105 sufficiently differ to frustrate his attempts to change policy despite carrying out the same strategic actions?

Conclusion Return to June 3rd 1996, to where federal and provincial politicians stood on stage, holding hands with CEOs from eighteen competing companies. They triumphantly stood on stage together because they were part of a broad, diverse coalition that had achieved policy changes. They had formed relationships with unlikely allies, and achieved common ground. This was accomplished by persistence, expertise, and great social acuity. Eric Newell told stories about how a bolstered oil sands industry would benefit Alberta and Canada numerous different ways. His stories were experimental, and he persisted in telling them until people were persuaded.

106

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Appendix A – Timeline of Key Dates

1778 – Peter Pond recorded tar like bitumen sands along the Athabasca river in what is now northern Alberta.

1882 – Ottawa sends geologist to verify the Athabasca tar sands.

1905 – Alberta and Saskatchewan become provinces.

1930 – Natural Resources Transfer Act hands over control over the majority of natural resources to Alberta and Saskatchewan, excluding a 2,000 square mile area of known oil sands deposits.

1945 – Alberta gains control over last 2,000 square miles of natural resources from the federal government.

1962 – The Alberta government, led by Premier Manning, developed an oil sands policy and royalty structure that would allow for limited development. – The Oil and Gas Conservation Board (forerunner to the Energy, Resources and Conservation Board, and later the Alberta Energy Regulator) approves the oil sands plant The Great Canadian Oil Sands (GCOS – later Suncor Energy Inc.).

1963 – When Sun Oil Co. took ownership of GCOS with a $250 million investment it was the then-biggest private investment in Canadian history.

1967 – GCOS begins operating.

1968 – Pierre Trudeau (Liberal Party) elected Prime Minister.

1969 – The Oil and Gas Conservation Board approves the Syncrude project.

1971 – Peter Lougheed (Progressive Conservative Party) elected as Premier of Alberta, ending 35 years of Social Credit rule.

1973 – Oil shock from the Fourth Arab-Israeli War results in oil prices tripling.

1975 – the Atlantic Richfield Company withdraws its funding from the Syncrude project, leaving a 30% gap in investment. This leads to the Winnipeg Agreement, where investors met in a hotel in Winnipeg to find a new arrangement. The federal government, represented in part by Jean Chrétien as President of the Treasury Board, took a 15% interest, Alberta 10% and the Ontario government 5%.

1977 – Supreme Court of Canada rules against Saskatchewan in CIGOL v. Saskatchewan. Alberta had intervened to support Saskatchewan. The ruling was a setback for provincial jurisdiction over natural resource development and taxation.

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1978 – Syncrude starts production. – Supreme Court of Canada rules against Saskatchewan in Central Canada Potash v. Saskatchewan. Alberta had intervened to support Saskatchewan. The ruling was a setback for provincial jurisdiction over natural resource development and taxation.

1979 – Oil shock from the Iranian revolution lead oil prices to nearly triple. – ERCB (Energy, Resources and Conservation Board) approves Imperial’s Cold Lake project, and Shell’s Alsands project (consisting of 9 partners: Shell Canada [25%], Shell Explorer Limited [20%], Amoco Canada [10%], Petro-Canada [9%], Chevron Standard [8%], Gulf Canada [8%], Hudson’s Bay Oil and Gas [8%], Petrofina Canada [8%], Dome Petroleum [4%]).

1980 – Prime Minister Trudeau’s government introduces the National Energy Program. – Premier Lougheed retaliates by cutting back oil production and stalling the development of proposed oil projects Alsands and Cold Lake.

1981 – Alsands and Cold Lake projects are cancelled.

1982 – The Constitution Act, 1982 is proclaimed adding section 92(A) reversing jurisdictional losses in CIGOL and Potash.

1983 – The ERCB approves Imperial’s Cold Lake project.

1984 – Brian Mulroney (Progressive Conservative Party) elected Prime Minister. – The ERCB approves additions to oil sands projects in Fort McMurray, Cold Lake and Peace River.

1985 – The Western Accord signed by Prime Minister Mulroney and the Premiers of Alberta and Saskatchewan. – Don Getty (Alberta Progressive Conservative Party) elected as Premier of Alberta.

1986 – Prime Minister Mulroney formally repeals the National Energy Program

1987 – The federal government phases out Earned Depletion for the oil sands industry, a setback for the industry.

1990 – Federal Mulroney government withdraws funding for the Other Six Lease Operators (OSLO) project.

1991 – Newell and other Syncrude executives proposed the idea of starting a national task force for the oil sands at a federal Energy and Mines Ministers meeting.

1992 – Ralph Klein (Alberta Progressive Conservative Party) elected Premier of Alberta

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1993 – The Alberta Chamber of Resources formally establishes the National Oil Sands Task Force. – Jean Chretien (Liberal Party) elected Prime Minister.

1995 – May - The National Oil Sands Task Force releases its Final Report. – November - the Klein government announces changes to the provincial royalty regime.

1996 – January – Kevin Lynch and the Canadian Manufacturers’ Association release their study about the economic benefits of further oil sands development to the rest of Canada. – March – the federal government announces changes to the income tax regime for the oil sands aimed to incentivize investment.

1996 - 2004 – $29 billion was invested in new oil sands projects, and an additional $4.8 billion was invested in existing ventures.

1997 – December – the Canadian government signs the Kyoto Protocol.