Photographer: Daniel Acker/Bloomberg

Alberta Trying More Booze to Ease the Pain of Oil Price Slump

  • Canadian province to aid distilleries using local barley crops
  • Government already providing subsidies for its craft breweries

The energy-rich Canadian province of Alberta is looking to ease the financial pain of the worst oil and gas slump in decades -- with more booze.

In addition to its vast underground deposits of petroleum -- the third-largest in the world -- Alberta is the nation’s top supplier of barley used in beer and spirits. Last week, the government in Edmonton said it will encourage development of more craft distillers in the province under an assistance program similar to one already in place for local breweries.

“If you are looking for diversification, this was an easy win for the government,” said David Farran, owner of the Eau Claire Distillery in Turner Valley about an hour’s drive from Calgary. He makes gin, vodka and whisky from local grains and runs a tasting room inside a converted 1920s-era movie theater frequented by tourists traveling the Cowboy Trail, a series of highways through small towns in the foothills of the Canadian Rockies. “This is a major step for the industry.”

The collapse in oil prices three years ago led to a slump in the provincial economy, one-fifth of which is tied to hydrocarbons. Oil and gas sales generate about 8 percent of government revenue. Crude futures traded at under $48 a barrel Thursday, less than half the price reached in 2014. To ease its dependence on energy income, the government is trying to stimulate other industries with things like royalty credits for new petrochemical plants and loans for small and mid-size businesses, up for a second straight year.

Promoting more local booze production probably won’t close the budget hole, but it may help by promoting another domestic resource. The province produced 4.4 million metric tons of barley last year, accounting for about half of the country’s output, according to Statistics Canada. The grain is a key ingredient for spirits, and Alberta’s supplies are shipped all over the world, from the U.S. to Japan to Europe.

“Alberta barley has a beautifully sweet flavor,” said Farran, who is also president of the Alberta Craft Distillers Association. “When you taste a good malt whisky, that sweetness comes from the barley. Alberta is considered to be one of the best, if not the best, barley producers in the world.”

Details about the distiller subsidies are still being worked out, according to Mike Berezowsky, a spokesman for the finance ministry of Joe Ceci, who announced the program last week. The goal is to encourage existing distillers to expand and to attract new ones. A new distiller might spend more than C$1.5 million ($1.1 million) for equipment, according to Farran.

The new incentives may mimic those already in place for local craft beer that the government says are creating jobs and driving new investment. Last August, the government began the Alberta Small Brewers Development Program, which offers grants of as much as C$1.15 per liter sold to small manufacturers. That program is included as part of C$135 million earmarked in the 2017-18 fiscal budget to “support ongoing efforts to expand existing and open new markets for Alberta’s agriculture products,” according to budget documents.

Albertans drank 8 liters of distilled beverages per adult last year, second among Canadian provinces behind only Newfoundland and Labrador, according to Spirits Canada, a trade organization representing the country’s distillers. But local products are only a tiny portion of a market dominated by international brands like Diageo Plc’s J&B whiskies and Smirnoff vodka.

Calgary-based Alberta Distillers Ltd., a unit of Suntory Holdings Ltd., is among the largest local producers, according to Jan Westcott, president of Spirits Canada.

While encouraging more craft distillers is a “great thing,” the potential downside is that government support could unfairly disadvantage the larger, more-established distillers, and discourage international investment, Westcott said.

Fledgling Industry

There are fewer than a dozen small distillers operating in Alberta’s “fledgling” industry, employing about 100 people and selling just a few hundred cases a year, according to Farran. But there’s room to grow.

About 40 percent of Alberta barley seeded in 2015 was of malt varieties, most commonly used for alcohol purposes, according to Alberta Barley. Alberta exported 323,339 tons of unroasted malt globally last year, valued at more than C$241 million ($181 million). A total of 131,614 tons went to the U.S. and another 120,189 tons went to Japan.

At the Eau Claire Distillery, founded in 2014, Farran uses about 15 to 20 tons of grain a month to make gin, vodka, single-malt and rye whiskey. All of the barley and rye used at the distillery come from Alberta, some grown on the distillery’s farm, where horses pull the plows just as farming was done a century ago.

“One of the reasons we started was we really felt, of all places in North America, we should have craft distillers,” Farran said. “It really does have a wide economic impact.”

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