A recent report by ARC Financial Corporation notes that investment spending in the oil and gas sector has been reduced to “legacy spending,” with nominal capital expenditures for conventional oil producers as low as it was in the mid-1990s, while capital expenditures in the oilsands sector are driven by several late-stage projects expected to be completed by 2018.

Statistics Canada also has gloomy news about investment intentions for the coming year in the oil and gas sector, reporting that capital spending is expected to decline by 12 per cent in 2018, the fourth consecutive annual decline since 2014. The largest impact of that decline in spending is expected to be in Alberta, where it is also expected to decline by 12 per cent or $22.5 billion.

Coming soon after the Kinder Morgan threat of ending the Trans Mountain expansion project, Imperial’s announcement signals the continued flight of capital from what is increasingly seen as an unattractive country for investment. Any effort to restore investment might best begin in areas that deter such investment. According to the Fraser Institute’s Global Petroleum Survey, which shows that Alberta and British Columbia are the least attractive provinces for investment in oil and gas exploration and development in Canada, Alberta’s tax regime was seen as a deterrent by more than 50 per cent of survey respondents. (The chart below spotlights the Policy Perception Index or PPI score of each province.)

Regulatory issues were also a concern in Alberta, with 68 per cent of survey respondents expressing some level of deterrence due to uncertainties regarding environmental regulations. And 70 per cent of survey respondents expressed some deterrence due to the cost of regulatory compliance in Alberta.

Restoring Alberta’s attractiveness to investment will require tax reforms, and the reestablishment of trust regarding regulatory barriers to operation in the province. The province will also need some help from the federal government, which has imposed an escalating carbon tax, and which has restructured the environmental assessment process in ways will make it more difficult, costly and time-consuming to get projects approved.

With oil prices going up, such reforms are needed now more than ever to allow Alberta’s oil patch to regain some of the ground it’s lost over the last four years of low oil prices and regulatory expansion.