Two challenges Alberta keeps ducking

It is said that anyone can make a mistake once, but only a fool makes the same mistake twice. So what word, then, describes a mistake repeated three, four or five times?

To be specific in a Canadian context, how many times does Alberta, so heavily dependent on fossil-fuel royalties, have to experience a hole in its budget when oil prices tumble?

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When prices slump, as they have once again, Alberta’s budget plunges from black to red, the government scrambles to cut programs or raids what is now a depleted stabilization fund.

It’s a yo-yo process that defies common sense, sound budgeting and, critically, experience. History ought to have drilled (a good Alberta verb) into the heads of people in that otherwise wonderfully talented and creative place that Oil Prices Go Up and Down.

It is said, very expansively and very foolishly, that Canada and Alberta are “energy superpowers.” Superpowers control their destiny; Canada and Alberta do not. They are price-takers, not price-setters. The world dictates the price and they adapt.

What Alberta needs – and this has been repeated by many commissions, task forces, experts, learned economists and not-so-learned columnists – is a steady revenue stream to protect the province from the vagaries of oil prices set elsewhere.

Which means, of course, a sales tax – a steady, reliable, fair revenue source used by almost every other jurisdiction in the advanced industrial world.

Ideally, what Alberta should do, if its political culture allowed it, would be to implement a sales tax and put much more of the royalties from fossil fuel into savings for tomorrow, as in building up the pitifully small Heritage Fund.

This sensible move would require political leadership of a high order; leadership in the sense of careful explanation, detailed facts, an appeal to reason and to the better judgment of the people, something no premier or opposition leader has dared. And it would appear nothing will change under the new premier, Jim Prentice, who said recently that “We won’t be introducing a sales tax.”

Mr. Prentice is a smart, honourable man. He must know better, intellectually, but he has obviously put his finger in the political wind and parked reason in a place where common sense goes to die.

Instead, he has pulled out the old dream of long-ago premier Peter Lougheed, who preached diversification of Alberta’s economy away from fossil fuels. How Mr. Lougheed envisaged that happening has been betrayed, and is still being betrayed.

Mr. Lougheed dreamed of putting large sums from fossil-fuel royalties into the Heritage Fund so that it would grow sufficiently large to be invested in ventures outside fossil fuel. Exactly this recommendation was made by a commission into Alberta’s future established by premier Ed Stelmach, with David Emerson as president. The recommendation died on arrival in Edmonton.

To make this approach work, Alberta has to be less reliant for ongoing operating expenses on fossil fuel revenues, which account from between a quarter and a third of its annual budget. Which means that it must become more reliant on other sources of revenue, the most obvious and steadiest of which is – wait for it – a sales tax.

Otherwise, promises to diversify the Alberta economy are so much hot air, of the kind now surrounding these pronouncements from the new premier.

Getting Alberta’s fiscal structure right has been a challenge all premiers have ducked, just as they have ducked the province’s other huge challenge: reducing greenhouse gas emissions.

As long as the bitumen industry belches more and more GHGs into the atmosphere as the industry grows, the industry and the province will be under attack at home and abroad. Yes, reductions have occurred from a “business as usual” case. And yes, companies have agreed to share best practices.

Alberta’s own, modest GHG-limitation plans are failing, as the province’s Auditor-General noted in a devastating report last July. Said the AG, “the total emissions reductions are expected to be less than 10 per cent of what was originally anticipated.” Less than 10 per cent! Whom do the government and industry think they are kidding?

More stable finances based on a sales tax and a much better environmental record have been Alberta’s two biggest challenges for a long time. And so they remain.

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