A pair of well-travelled news stories ON 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 from the government’s refusal to save even pennies of 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 paid its own way as it went. Norway saved 100 per cent of its royalties in a fund that now tops $1 trillion. 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 OIL 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 multibillion-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 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 Conservative governments — from Ralph Klein on down — gave away the store, but that he will do nothing to change that.
Greg Neiman is a retired Advocate editor. Follow his blog at readersadvocate.blogspot.ca or email email@example.com.