Oilpatch funds balloon for pro-Smith political group after she supports royalty break

Alberta Premier Danielle Smith speaks to members of the media during a press conference in Ottawa, on Tuesday, Feb. 7, 2023. THE CANADIAN PRESS/Spencer Colby

EDMONTON -

Oilpatch support for Alberta Premier Danielle Smith's agenda ballooned after she won her party's leadership and put the so-called RStar program — a plan to give tax breaks to energy companies for fulfilling cleanup work they are already obliged to do — high on the government agenda. 

Elections Alberta records and an analysis by The Canadian Press suggest donations to the Alberta First Initiative, a pro-Smith advocacy group, increased eightfold from companies associated with the energy industry after Smith became premier. While the Initiative says it does not support RStar, its founder previously worked with a group that promoted it. 

The Initiative also appears to have participated in Smith's successful campaign to win the United Conservative Party leadership, which she sought after leaving Alberta Enterprise Group, a business group that lobbied in favour of RStar. The Initiative is now funding attack ads against the New Democrat Opposition and supporting Smith as the province gears up for a spring election.

"Alberta, we can't afford the NDP," says one of the ads on the Initiative's website.

"Danielle Smith will make Alberta better for me and my family," says another.

It's an index of how close the governing party is to the province's dominant industry — a relationship that also carries risks, said University of Alberta political science professor Jared Wesley. 

"Entitlement is kind of the Conservatives' kryptonite in Alberta," he said. 

"To the extent that oil and gas gets seen as putting their finger on the scale in this election, the UCP runs the risk of losing votes." 

The founder of Alberta First said the group is exercising its rights.

"(Alberta First) has a mission to promote policies, educate activists and engage Albertans to participate in democracy," Mackenzie Lee said in an emailed response to a series of questions from The Canadian Press.

The RStar proposal, developed by an industry group, has been criticized by legal experts, energy economists and some of the province’s own internal analysts. It's been called a violation of the polluter pay principle, an incentive for companies to not fulfil their obligations and a reward for those who haven't.

For more than a year, Smith and her cabinet have been outspoken advocates of the plan, which would enable companies to use reclamation spending to gain credits against future royalty payments, despite that reclamation being a condition of their original drilling licence.

“I love it,” Smith said on a 2021 YouTube broadcast, when she was a lobbyist for the Alberta Enterprise Group. She also wrote a supportive letter that July as group president to then-energy minister Sonya Savage.

On May 19, 2022, Smith announced she would leave her job as president of the Alberta Enterprise Group and run for the UCP leadership. The Alberta First Initiative was incorporated six days later, timing Lee called "coincidental."   

Lee is also the co-founder with Kris Kinnear of Sustaining Alberta's Energy Network, which has long pushed RStar. 

Lee said he left the Network in late 2021 and hasn't spoken regularly with Kinnear since last spring. The Initiative does not promote RStar, he said.

"RStar is not a policy that Alberta First has ever or will ever advocate," he said. 

However, the Initiative supports Smith and Smith supports RStar.

Elections Alberta public reports show the Initiative received donations of $37,500 in the third quarter of 2022, which would have arrived during Smith's UCP leadership campaign. An analysis by The Canadian Press using public websites as well as corporate records searched  by the NDP suggest about two-thirds of that came from energy sector firms or firms providing services to them. 

Text messages sent by someone saying they represent the Initiative, captured by the NDP, suggest the group was active in Smith's campaign.

"Hi! This is Ann from Alberta First Initiative," reads one Aug. 12 text. "Alberta has a rare opportunity to select a premier who will put Alberta First. Only Danielle Smith has shown a willingness to stand up to Ottawa." 

"Alberta First!" was one of Smith's campaign slogans. Kinnear's LinkedIn profile also lists him as Smith's campaign co-ordinator.

Lee said the Initiative's work during that campaign was limited to general policy surveys "that had nothing to do with any candidate running at the time."

Smith became premier on Oct. 11 and soon after wrote RStar into the job description of her first energy minister. 

Oilpatch donations subsequently poured in to the Initiative. 

Compared to the $37,500 the Initiative received in July through September of last year, Elections Alberta records show the group picked up $330,000 in the last three months of 2022. Of that, $200,000 was from energy companies or those providing services to them. 

Maximum allowable donations to third-party groups such as the Initiative are almost seven times higher than limits for political parties or leadership contests. As well, corporations are allowed to donate.

Nearly one-third of the Initiative's donations were for the $30,000 maximum. No donation was smaller than $5,000. 

Smith's office did not answer a request for comment. 

Lee said no UCP officials are involved with the Initiative, nor does he meet with government staff.

The Initiative may now be the wealthiest of registered third-party groups opposing the NDP.

Elections Alberta says the next wealthiest groups at the end of 2022 were Shaping Alberta's Future, which collected just over $224,000, Alberta Proud with almost $29,000 and Take Back Alberta with $22,300.

Meanwhile, Kinnear works in Smith's office with unspecified duties. And Energy Minister Peter Guthrie has announced a pilot program based on RStar called the Liability Management Incentive Program that would distribute $100 million in royalty credits.

Smith has said the program is needed to clean up wells left by companies that no longer exist.

Scotiabank recently concluded the four companies best placed to take advantage of the program were Canadian Natural Resources, Cenovus, Paramount Resources and Whitecap Resources. Those companies reported about $5 billion in net income in the last quarter. 

"We also believe the program goes against the core capitalist principle that private companies should take full responsibility for the liabilities they willingly accept," Scotiabank said. 

Wesley said it's unprecedented to have a former lobbyist such as Smith running the provincial government and installing programs she used to advocate after a campaign assisted by those who would benefit from them. He said Smith and her industry supporters may find that's used against them in the coming election.

"These (political action committees) have to be careful of not crossing that line into being part of a narrative that there are these corporate forces at work and they're not in it for you."  

This report by The Canadian Press was first published Feb. 27, 2023.