By Stephen Murgatroyd
This article was published by the Murgatroyd Blog on Oct. 23, 2019.
One feature of psychological illness is this: “if only everyone else were different, I could be the person I have always wanted to be”. When I was in practice as psychologist (many years ago), I heard this implicitly all the time. The situation these people were in was hopeless, but not serious – we could change their situation by changing how people thought about themselves and others.
Many in Alberta have this illness, except its focused on our economy and politics.
The fantasy is this: oil and gas could be “back” as the engine of the Alberta economy at the level it was when oil was over $100 a barrel and jobs were plentiful and jobs would be back at the level they once were. We have lost over 100,000 jobs (with more losses to come) and oil is trading at an average of $43.10 throughout August 2019.
What is getting in the way, the story goes, is the lack of pipeline capacity, environmental and climate change preoccupations, immigration, and transfer payments intended to ensure all Canadians share in the wealth of the nation.
Oil and Gas
The “blame” for the fact that oil and gas sector is experiencing a severe recession and that the key pipelines are not yet built is placed on the Alberta NDP government and the Federal Liberal government plus climate change activists (allegedly “funded” by foreign money). Also to blame are Quebec (recipients of significant transfer payments) and BC who oppose new pipelines and foreign funded organizations whose preoccupation is ending the use of fossil fuels. Also involved is Saudi Arabian oil, which Canada has been importing since the 1970’s – oil that is cheaper than Alberta oil.
The non “sense” here is complicated but important.
Oil prices reflect global market conditions and the fact that most oil producers are seen to produce oil that can easily get to market. Alberta’s major oil is either mined (bitumen mining) or produced through a steam assisted gravity process. While a lot of work has gone into “greening” this oil sands product (CO2 intensity is down as are the volumes of water needed to produce it), there are still a lot of environmental issues associated with its production. These are being systematically worked on, but they are still issues.
As companies like TOTAL, Shell and BP exit the oil sands sector to pursue a greener energy strategy and as investors look at the future and switch their investments to green energy and less problematic oil, then the oil sands have experienced a reduction in foreign funded direct investment. Indeed, we have gone from an oil sands sector dominated by foreign ownership to one which stronger Canadian ownership, funded by foreign backed debt.
What is important to understand here is that big players like Conoco-Phillips and others exited Alberta not because of the NDP or Liberal governments – having worked with them they take a 50 – 75 year view of the markets and return on capital – but because their strategic priorities shifted. They saw shifts in global market conditions and decided that return on capital here was less attractive than elsewhere. Welcome to the real world of investment and corporate decision making. They are not loyal to place, but to shareholders.
Also, the investment landscape changed. A significant group of investors have decided, following the Paris Climate Change Accord, not to invest in fossil fuels new sites and reduce their investment in fossil fuel old sites. Some $6 trillion in fossil fuel investment has been “switched” over the last five years with major investors de-carbonizing their portfolios. What these investors are also looking at are models which suggests that demand for fossil fuels could drop by as much as 40 per cent by 2050 as electric cars and other technologies become more widely affordable and available. Many jurisdictions are banning the sale of fossil-fuel cars by 2030.
What oil and gas companies are doing is investing in smart technologies which dramatically improve productivity with less labour. In Texas, for example, 231,500 jobs were lost when the 2008-9 recession hit and oil prices collapsed, profits are back but only 50,000 people were hired. This is what we will see in Alberta – increased productivity and profitability with fewer people employed. The forecast is that 17,000 direct jobs will return in Alberta but production will rise by 800,000 b/day. Jobless capitalism.
Green energy – wind, solar, nuclear, hydrogen – is gaining ground. More people work in this sector than in oil and gas (conventional and unconventional) in Canada and investments in this sector globally is growing. Wind energy is now the lowest cost source of new electricity in Canada and capacity is growing quickly. Even in Alberta, wind energy will account for 750 MGW by 2030 and investments in green energy in Alberta are also substantial.
Energy companies – the large players which employ the most people – are pushing for climate change policies and environmental regulations so as to create the social license to sell which they need for international markets. Oil companies were key to Alberta’s carbon levy, now scrapped by the UCP government and were key to the Federal Governments carbon tax strategy. Economists see carbon levies as a significant ingredient in public policies aiming to reduce CO2 emissions. The Alberta emissions regulations still apply ($30 barrel), but for how long.
Part of the concern is that the Trans Mountain Pipeline, now owned by the Federal Government (because the private sector was about to walk away from building it) will never get built because the Liberals, it is said, will back away so as to curry favour with the NDP. First, the Conservative party had years to build this pipeline and didn’t. The Trudeau government approved it TWICE, but had the first decision upturned by the courts due to flawed public consultations which took place in part under the Harper Government (and under Harper Government regulations and law) and in part under Trudeau. Trudeau improved the legislation, re did the consultation and approved the pipeline a second time and it is now being built. Any challenge to this would secure a majority in the House of Commons (PC’s + Trudeau Liberals).
Another concern is that the Trudeau Government passed legislation relating to tanker activity off the BC coast (Bill C-48). The legislation stops tankers carrying more than 12,500 metric tonnes of crude or persistent oil products from stopping, loading or unloading north of Port Hardy. It does permit tanker loading in the Port of Vancouver but not at Port Rupert or Kitimat. Despite claims that this will spook foreign investors and profoundly impact oil tanker movement, the ban puts into law a voluntary agreement which has been in place since 1971. This is worth repeating. There has been NO loading, unloading or stopping of oil tankers in this area for over forty years.
(This law also prohibits the offshore exploration for oil and gas in this region – something that has been in place since 1972).
Another controversial bill introduced by Trudeau is the “pipeline killer” bill – C-69.
Actually called the Impact Assessment Act (it is now law), the legislation sought to clean up the process for environmental impact assessment of new infrastructure projects, which include pipelines. The argument is that it will be tougher to secure approval for new projects and therefore investors will not even bother to put their money on the table. A part of the reason for this is the requirement for impact assessments to now include the likely impact on climate as well as the water table, soils and air.
This is another piece of nonsense. The Act puts back into force many of the regulations and legal requirements that were in place in 2012 which Stephen Harper repealed. The Act also requires enhanced consultation – a way of reducing the amount of litigation about the consultation process seen as a result of Harper’s changes to the law. Lawyers suggest that the changes introduced in C-69 are minor and represent a return to “normal” for this kind of legislation around the world. Many specialists also think C-69 will increase certainty rather than uncertainty – a great many investments were made in oil and gas pre the 2012 changes made by Harper when the legislation in place closely resembled C-69.
Then there is the issue of equalization payments – moneys paid from the Federal Governments general revenues to ensure all Canadians have relatively equal access to services and support and a decent standard of living. The argument of the Wexiteers is that Alberta subsidizes provinces like Quebec who then oppose the economic requests of Alberta – e.g. a pipeline. In 2019-20 Quebec will receive $13 billion in equalization payments, some $11 billion of which “comes” (sic) from Alberta. The increase in Quebec’s payments came as a direct result of Stephen Harper’s decision to change the basis on which these payments are made (Jason Kenney was a cabinet Minister who signed off in these changes, which he now seems to oppose). Kenney has promised a referendum on equalization for Alberta in 2021 – largely a piece of theatre, since the idea that seven of ten provinces would agree to remove the equalization from the constitution are zero.
This issue is complicated. There are three transfer programs – health, social transfer and equalization. The first two are per capita funds – $X/person. 75 per cent of all transfer funds are based on population. Only the equalization payments are based on equity estimates – what would it take to ensure equity of service for all Canadians. The formula itself asks what a province’s revenue would be if all its tax rates equalled the national average. Alberta would raise $12,327 per person, more than any other province, followed by B.C. at $11,052. Quebec is far behind, at $8,123, and Prince Edward Island lags even further, at $6,648, according to Finance Canada calculations. Equalization tops up provinces below the national average, which is why a province as populous as Quebec receives payments.
Albertan’s pay a lot more into the Federal government because they earn more. Per capita GDP in Alberta is around $77,500 as compared to a national average of $58,000 – Alberta is amongst the richest places on the planet. We also spend more per person, so the Federal government collects more sales taxes ($400 per person) than anywhere else and collects more income taxes ($2,500 more). It is not because we live in Alberta – we earn more, are worth more and spend more.
Immigrants strengthen an economy by both working in it and creating enterprises. Indeed, it is the case that a great deal of Canada’s GDP growth is as a direct result of immigration. Yet there are many in Alberta who see immigrants as “job takers” (where do they think we all come from – those who are not indigenous people’s)? This is a component of some of the more extreme “Alberta nationalists” who also oppose same sex marriage, gender equality, abortion and women’s rights and transgender rights.
Alberta’s New Policy Group – The Wexiteers
It seems Alberta has a growing group of people that sees the past as so wonderful that we must return to it as quickly as possible. These individuals – those behind the Western Canada separation movement (Wexit) – are also against big government and against a variety of social policies. Their basic propositions are:
Economic Liberty: We will achieve an overall personal income tax rate of 15 per cent -19 per cent by:
- Abolishing all special interest spending.
- Removing non-value added government services.
- Abolishing Federal Income Tax and GST.
- Delivering essential government services only.
- End public investment in unreliable energy technology, such as wind and solar.
- Robust surface and subsurface land owner and property rights.
We will ensure that Alberta remains friendly, open, and attractive to businesses by:
- Reducing corporate taxes to 7 per cent, while maintaining current royalty formula.
- Abolishing speculative and non-value added industrial regulations.
- Ensure that regulations imposed directly and objectively relate to employee safety; and prevention and reclamation of any air, soil, and water pollution.
- Offer further incentives for maintaining a 100 per cent Alberta resident work-force.
- Offer further incentives for the relocation of manufacturing operations to Alberta.
- Offer further incentives for the development of shale and nuclear technology.
- Taking punitive measures against jurisdictions blocking Alberta’s economic progress.
We can see these positions as “red neck” conservatives – low tax, low spend government, limited regulation yet creating incentives to “pick winners”. Yet their social policies suggest that these minimum tax levels have to go a long way:
- Ensure mandatory and available addictions and mental health treatment for Alberta’s homeless and other at-risk populations.
- Protect Seniors through a stable and portable Alberta Pension Plan; Explore solutions to lower cost of living and support in-home care; Choice in healthcare.
- Invest in communities through subsidy of dental care, non-generic prescriptions, youth sport, conditional student loan forgiveness, and qualified higher education via resource royalty revenue.
- Alleviate courtroom backlogs and prioritize serious criminal cases through de-regulating divorce and matrimonial property disputes. Removing judicial prejudice against men in family court.
- Promote immigration in accordance with economic and social need.
- Impose severe penalties for murder, terrorism, sexual assault, and drug trafficking.
- Assist Alberta First Nations in compensation claims against the Federal Government and institutional partners for genocide and other abuses.
- Protecting Albertans from discriminatory on-line censorship.
- Ensuring that publicly funded schools teach the importance of Alberta’s energy industry, while protecting the rights of parents in matters regarding sexuality or religion.
- Outlawing groups whose primary objective or effect is racial agitation, or social chaos.
This is not a costed platform, but is an expensive one with health privatization, subsidies and new costs for government who will have much lower levels of revenue.
The policy platform also continues to rely on royalty revenues to fund the operations of government (highlighted above). This has long been seen as a problem (oil and gas have always been cyclical revenue sources) but this “platform” seeks to perpetuate this.
So this is where we are. A growing group of “alienated” Albertans are promoting the idea of Wexit based on no serious analysis, no serious thinking about consequences and a lot of poor understanding of some key issues. They have bought into some rhetoric about Alberta being a victim and a lot of “gut”, evidence free thinking.
What Alberta needs is less rhetoric and more analysis; less policy based evidence and more evidence based policy; less buying of bullshit and more understanding that most problems are complex and wicked and do not have simple solutions.
I am not optimistic.