A pair of well-travelled news stories
Monday shine a better light on Alberta's current fiscal mess than the
government would have us realize.
Folks, it's not the civil service
that's causing our province's budget problems. In fact, of all
provinces, Alberta spends the least of total budget spending on
public services. That's according to an information sheet mailed out
by the province's public service labour unions. You probably got one
in the mail yourself.
Rather, it's the way the province has
virtually given away our share of the wealth from our energy
resources (mostly to foreign-owned companies), and the way the
government refused to save its windfall earnings.
One story, which was repeated on a
variety of news clipping services, originated with the CBC. Titled
Norway's sovereign fund holds lessons for Canada, the story
contrasts how Norway is coping with the downturn in oil prices,
versus the Alberta experience.
Norway and Alberta have roughly the
same population. Both have energy resources located in the far north
that are expensive, even dangerous to produce. Both have the same
international exploration and development companies working their
oilfields.
Both are suffering massive job layoffs
since the oil price plunge.
But if you read the front page of the
Advocate on Monday, Alberta sits under a dark cloud of gloom
and projected debt. How can that be, when business and public
confidence in Norway's economy remains so high?
That's because Norway's people paid their own way
as they went. Norway saved 100 per cent of its royalties in a fund that
now tops a trillion dollars. It's spinning its mandated maximum of
four per cent interest yearly into the country's general income
account.
What's four per cent of a trillion?
It's $40 billion, last time I counted that many zeroes. Every year, and rising.
Norway's royalty rate is 78 per cent
of net profits.
At today's prices, what's Alberta's
royalty rate? A provincial chart on oilsands royalties (which produce
two-thirds of all our royalty payments) is — wait for it —one big
fat per cent of the daily bitumen price.
The province also takes 25 per cent of
net profits. At $48 oil, what are the net profits? Roughly zero, if
you believe the producers.
A provincial graph also says Alberta
produces about 8,600 barrels a day of conventional oil. At that rate
of production, what's the royalty? At today's prices, it's about 10
per cent.
In other words, Albertans pretty well
settled for squat for our resources. The bitumen keeps flowing from
under our feet, low price be damned, and we get almost nothing for
it.
How much royalty money has Alberta
saved in the Heritage Fund in the last 20 years? Roughly bugger all.
When times are good, Alberta gets a
semblance of prosperity in the form of high-paid exploration and
development jobs. But it only lasts during the building phase. Once
the plants are built and flowing, most of the high-paid jobs will
end, and the workers will take their wages back to their homes out of
province. Locally, a lot of big trucks will get repossessed.
We won't even have gotten the benefit
of a sales tax on the wages they spent here, while they were here.
That's all gone.
As will be the profits as the bitumen
is piped or sent by train out of province— gone.
Executives from Texas who work here
will tell you they would not be here except for Alberta's low tax and
royalty regime.
But a Texas farmer is guaranteed an
average of 20 per cent of the value of everything that comes out from
under his ranch.
What does an Alberta farmer get? Most
only get surface disturbance money. And provincial law actually makes
it illegal for a farmer to hire a lawyer to negotiate for anything
more.
This situation will be extremely
difficult to reverse. How do you tell Norway's Statoil — which has
investments in around 200 Canadian companies — that the rules are
changing on its multi-billion-dollar investments?
So Albertans will be tarred as
producers of “dirty oil” while the state-owned oil companies of
socialist countries continue to make more money from our oilsands
than we do.
Albertans do need to look in the
mirror. They need to ask themselves why they were so stupid as to
shout down anyone who said we were getting a raw deal here. Albertans
need to ask why the the province did not save royalties in a wealth
fund on our behalf. They need to ask why we did not pay for public
services the same way everyone else does.
Premier Jim Prentice wants to blame
anyone but his 40-year-old government for our current situation. I
say greater shame on him for knowing past Tory governments — from
Ralph Klein on down — gave away the store, but that he will do
nothing to change that.
Follow Greg Neiman's blog at
Readersadvocate.blogspot.ca
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