ENERGY ROYALTIES: “THINK LIKE AN OWNER” by ALVIN FINKEL

Nothing about the new NDP government frightens the oil company lobbyists and their supporters in the corporate media and corporate-funded research institutes more than the promise to review energy royalties.

 

So they are trying to steer the process. The Globe and Mail, the newspaper whose primary owner, David Thomson, is Canada’s richest person, commented grumpily on May 14: “An independent commission, staffed by experts in the economics of the industry, would almost certainly find that measures to force or incent greater processing of crude in Alberta would carry greater costs than benefits. As for the question of where royalty rates should be set, that is trickier. But any honest accounting of the hoped-for windfall from higher rates would also weigh the quantifiable downsides in terms of investment, employment and wages. There’s no gusher of free money.”

 

Well, there is. But that money has been going into the bank vaults of Big Oil. Jim Roy, the senior advisor for Royalty Policy for Alberta Energy from 1985 to 1993, noted recently in a Parkland Institute Research Fact Sheet, that energy royalties collected by the people of Alberta through their government fell from $48.4 billion for the period from 2005 to 2009 to $35 billion for the period from 2010 to 2014. Average annual production for the former period was $83 billion a year, and $82 billion a year for the latter period. So declining production explains almost nothing about the falling revenues for Albertans for their oil and gas.

 

Ironically it was during the earlier of these two periods that the Alberta Auditor-General questioned whether Albertans were getting sufficient revenue from their energy resources. They were only receiving 11.6 percent of the annual revenue generated from exploitation of energy resources in the province; in the late 1970s with Premier Peter Lougheed in charge, the parallel figure was 33.1 percent. Premier Ed Stelmach appointed a Royalty Review Panel to investigate the AG’s concerns. Despite the conservative orientation of the appointees, they concluded, “Albertans do not receive their fair share from energy development. The royalty rates and formulas have not kept pace with changes in the resource base and world energy markets. Albertans own the resources. The onus is on their government to re-balance the royalty and tax systems so that a fair share is collected.” In the view of the panel, an increase of $2 billion a year in the total take of government from oil revenues would provide that rebalancing.

 

The powerful oil companies denounced the panel’s conclusions. But after the provincial Liberal opposition announced that if elected they would implement the panel’s recommendation and the NDP proclaimed that an NDP government would raise annual royalties by 7 billion dollars, Stelmach agreed to raise oil and gas royalties by a billion a year. He won re-election but within months, the energy companies had moved their fund-raising from the Progressive Conservatives to a new social conservative party, the Wildrose Alliance, which had failed to win a single seat in the 2008 election. They bankrolled a dynamic leader for that party, Danielle Smith, and their threats of a capital strike (moving their capital outside the province) scared many energy industry workers. Stelmach buckled and produced a royalty formula that resulted in Alberta receiving  23 billion dollars less in five years than it would have had the royalty panel’s financial goals been met. That was on average $4.6 billion a year lost, enough to have avoided all the budget cuts of the Stelmach, Redford, and Prentice periods. Albertans’ revenues from the energy resources that they owned had fallen to 8.5 percent of total product, almost a third less than it had been at the end of the Social Credit period when Alberta had the lowest share of energy revenues of any owner in the world.

 

But even the 2007 royalty panel’s recommendations would not have restored a full restoration to Albertans of their share of their resources. When he was premier and again late in his life as he watched the firesale of Alberta energy by his successors, Peter Lougheed had encouraged Albertans to “think like an owner.” The energy resources belonged to all of them, not to individual capitalists or to vertically integrated multi-national energy corporations looking to make a quick buck. But only people well to the left of Lougheed’s  old party, which had become completely captive by energy interests, heeded his advice.

 

Despised by Premier Klein, who had asked the University of Alberta to drive them off the campus for their constant criticism of his government’s policies, the Parkland Institute suggested that Lougheed’s target of a 35 percent royalty on conventional oil and 25 percent on the oilsands would have yielded $17 billion extra for the provincial treasury in 2012-13 and $19 billion in 2014-15. If we just use the 33.1 percent overall royalty figure from the 1970s, the five-year yield for 2010-14 would have been $25.42 billion per year or  $18.42 billion more than it actually was.

 

That much extra money may seem suspicious to some. But remember that since 1991, Norway, which produces less oil annually than Alberta, has accumulated $1.1 trillion Canadian in its sovereign wealth fund. The Norwegian government has been the developer of between 67 percent and 100 percent of the oil during that period. Alberta could have followed the Norwegian model as well and instead of having a Heritage Savings Trust Fund with only $17 billion—barely a penny has been added since 1987 and the interest earned on the fund has been mostly appropriated for general revenues–, it could have a fund as rich as the Norwegian fund. Or perhaps, as a compromise, we could be setting aside $5 billion on average a year to add to current programming, $5 billion to be set aside to fund ongoing programs when energy prices are low, and $10 billion a year plus to a combination of the Heritage Savings Trust Fund and a fund for the development of alternative energy. The latter would allow Alberta to contribute to a reduction in climate change over the long term, while diversifying the economy, and help to alleviate criticism of our having an economy that currently helps to feed the world’s appetite for a resource that it needs to reduce its dependency upon in order to save the planet.

 

As for the upgraders and refineries that The Globe and Mail believes no “independent” expert would support, independent engineering consultant Mike Priaro and a number of other engineers  have made clear their support of upgrading. Priaro wrote in the Calgary Herald on May 14 that partially upgraded unconventional crude “eliminates exports of economically and environmentally unacceptable raw bitumen as dilbit.” Partial upgrading “provides domestic jobs, improves economics of domestic refining, and reduces transport costs, greenhouse gas (GHG) emissions, and environmental risk and liability incurred by transporting dilbit diluent.”

 

And would all of this drive private investment away, as the lobbyists are already predicting in their fright-wing campaign? That’s not likely. In 2008, corporate profits in Alberta made up 22.8 percent of the provincial GDP compared with 12 percent in the rest of Canada, according to Kevin Taft in his book, Follow the Money. There’s lots of profit in the energy industry and the shaving off of about 18 billion a year from those profits in a good year and adding it to government coffers would still leave corporate profits over 17 percent of provincial GDP.  Adding almost 6 percent to the treasury would bump up the provincial government’s share of provincial GDP to 20 percent, which is three percent less than it was in 1989 and 2 percent less than the current average for Canadian provinces. The oil companies might cut some jobs to compensate for some of their losses but many of those jobs would be jobs that have been filled in the recent past by temporary foreign workers and fly-in workers from other provinces. The new jobs that the government can create as education, health, and social services all expand will more than make up for any lost jobs.

 

In short, what Big Oil will call a program of expropriation or a socialist revolution is really simply a turning back to the fiscal policies of the late 1970s before the PC party became a puppet of Big Oil and the revenues that should have been going to the people of Alberta went disproportionately instead to a small number of companies and their shareholders.

 

The problem for the new government will not be to persuade themselves or Albertans generally that we have been ripped off. It is what most people believe. Instead the challenge will be to counter the inevitable Big Oil campaign to scare Albertans into accepting a status quo in which the oil that we own collectively becomes a means for making excessive profits for the few. That will be a Herculean task and may result in the Notley government deciding to ask for less than fair value for the oil.

 

What can we as citizens do? Well, share this information with as many people as you can. Write your MLA, regardless of party, to let them know that the people of Alberta demand a just return for the oil that we collectively own and that the Lougheed period, not the Klein and after periods, provide the numbers that tell us what a just return looks like. Write to the media as well, both conventional and social media. And write to the oil companies as well, letting them know that you don’t appreciate their scare tactics or their pleas of poverty.

 

Alvin Finkel is chief editor for Change Alberta and professor emeritus of History at Athabasca University.

Make Jimmy Pay

Jim Prentice’s decision not to serve as MLA for Foothills will cost Albertans about $275,000, the price tag for a by-election. But he knew before election day that he did not intend to serve and failed to withdraw his candidacy. Either he or his party should cough up that dough to taxpayers or they should belatedly withdraw his candidacy and allow NDP runner-up Anne Wilson to become the MLA for Calgary-Foothills.

It appeared to many people on election night that former Premier Prentice was having a snit about his party being rejected by the voters and therefore not only quitting as PC leader (which was quite appropriate) but also as MLA for Foothills, a position that the voters of that constituency had just bestowed on him for a second time.

But Prentice knew well before election day that his party was going to be humiliated on election night. After all, the PC party is wealthy and had personal polling provided to them throughout the election. Is it possible that the professional pollsters whom they employed were providing a different version of the likely election results than all the public polls were providing or that the pollsters for Wildrose were providing (you’ll recall that Brian Jean revealed their findings a day or two before the election). No. Parties do not hire pollsters to massage their egoes but to give them the unvarnished truth about where a campaign is going and what it needs to do to turn things around when they are not going well.

There can be little doubt that Mr. Prentice, in the dying days of the campaign, was receiving the news that his party’s campaign could not be pulled out of the flames and that in his own seat, where he might earlier have expected to win by a landslide, that he would only have a plurality of votes. He could have then decided that he would serve the people of Calgary-Foothills, should they elect him as their MLA, even though he would not stay on as premier. Or he could have announced to Foothills voters that he would only serve as their MLA if his party formed government or perhaps official opposition. In the latter case they likely would have chosen not to vote for him in order to spare themselves the necessity of a by-election and to spare Albertans as a whole the costs of a by-election.

Forcing by-elections for personal reasons–other than death–seems a selfish decision for any elected politician to take, given the costs incurred. It seems ironic that right-wing politicians, who claim that they want to cut waste, are generally the biggest culprits. Strangely, during the election, no one appears to have questioned Brian Jean’s decision to quit his federal seat in mid-term, forcing a by-election, only to re-emerge a year later as a provincial politician. The Canadian Taxpayers Federation, a small, secretive corporate group with whom Change Alberta rarely agrees about anything, has suggested that Mr. Prentice pay for the costs of a by-election that he knowingly has forced upon the voters of Calgary-Foothills and the taxpayers of Alberta. We agree. The alternative, if it is legal, would be for the former premier and his party to cancel Mr. Prentice’s candidacy after the fact and allow second-place candidate, Anne Wilson, to become the Foothills MLA. But no doubt many voters in Calgary-Foothills would not be happy to have someone named their MLA on a technicality.

Jim Prentice, Albertans do owe you a debt perhaps for wasting about $6 million in calling an election one year early (if elections cost us about $24 million, then that is $6 million per year). As Sidney Green, a member of the first NDP Cabinet in Manitoba, commented when that province’s Conservatives called an election in 1969 a year before necessary, “anytime you have a Conservative government is a good time to have an election because you have an opportunity to elect someone else.” But your decision to add $275,000 to that cost is simply not justifiable.

A NEW ERA BEGINS by Alvin Finkel

Congratulations Premier-elect Rachel Notley!!! And to all the members of her majority NDP caucus, who include many fine individuals from whom the new premier can cobble together the most progressive Cabinet that Alberta has experienced to date. Congratulations also to acting Liberal leader David Swann and Alberta Party leader Greg Clark who won hard-fought battles for their own seats; you also will have input, we trust, from a progressive perspective, on the policies followed by the Notley government over the next four years.

And who won tonight? How about 16,000 low-income diabetics whom the Tories were going to deprive of funds for necessary medical supplies? How about all those kids who were going to be shoved into huge classrooms because Jim Prentice did not want to tax corporations and the wealthy? How about university students and professors and staff whose institutions were being diminished by cuts? How about the children in provincial care for whom Rachel Notley has been a staunch defender in the legislature for 7 years? How about everyone who requires decent and affordable long-term care or homecare?  In short, almost all Albertans who are not part of the selfish one percent with most of the money. Even many of them will realize after a while that having a well-educated, healthy population and proper infrastructure is helpful to the economy of this province, as is economic diversification.

But there will no doubt be a continuous scaremongering campaign by the corporate sector and their trained seal “research institutes” and media outlets to try to prevent the Notley government from fulfilling its promises. Certainly their counterparts in Ontario in the early 1990s caused the Bob Rae NDP government to break election promises and disillusion voters by embracing policies of austerity. Rachel Notley has made clear that Albertans require the same level of health, education, and social services when the price of oil is low as they require when it is high. She has made pledges regarding the environment, Aboriginal peoples, and the rights of working people in the public and private
sectors to have decent wages and safe, healthy workplaces. We believe that she means what she says and that her MLAs will also want to implement the promises that they made to the people of Alberta.

Congratulations not only to the NDP but to the voters of Alberta who demonstrated that they could unite behind one progressive party and break the cycle demonstrated in the 2004 and 2008 elections of giving four in ten votes to progressive parties but in such a way that it resulted in few seats going to progressives. The Alberta Democratic Renewal Project, created after the 2008 election, hoped to unite those votes by lobbying the political parties of the centre-left to nominate only one candidate per riding between them. The Liberals were interested in the idea; the NDP were not. So Change Alberta was launched in an effort to encourage strategic voting by progressive voters. In the 2012 election, we recommended the most winnable centre-left candidate in 42
seats that seemed within reach of the progressive parties. More of our choices were Liberal than NDP if only because the latter party had no recognizable heartbeat in Calgary at the time.  And 93 percent of our recommendations proved correct in practice. In that election, however, about half of progressive voters naively but understandably chose to vote for Alison Redford’s bogus progressive Tory platform in order to stave off the wingnuts of the Wildrose Party.

As the 2015 election began, Change Alberta continued to see its role as non-partisan. Its active members included members of both the NDP and Liberal parties and many people who are non-partisan. But it quickly became clear that, among progressive parties, the NDP had the leader who was inspiring Albertans, and a degree of organization and financial resources that easily surpassed that of the other three progressive parties. The Liberals were leaderless and imploding, and the Alberta Party lacked traction outside Calgary-Elbow while the Greens were simply not in the race. So, we largely recommended that our readers vote NDP in their constituencies, only departing from that viewpoint in seats where another party was overwhelmingly better organized than the NDP and was not being obliterated in the polls by the NDP. That caused many candidates and activists in the Liberal and Alberta parties to accuse us of being an “NDP front.” The election results demonstrate the absurdity of that claim. The only seats where we incorrectly predicted the leading progressive were four seats in which we gave the nod to the Liberals
rather than the NDP. The other progressive parties generally had a tiny fraction of the vote that the NDP enjoyed on election night.

Part of the problem is that while our legislature is composed of the winners of races constituency by constituency, a large majority of voters do not care one whit about local campaigns and local candidates. They are voting for a leader, or a party, or a particular party’s platform. The way people vote and the first-past-the-post individual constituency system are simply not in sync. We need political reform that provides at least a measure of proportional representation (PR) of parties according to their province-wide strength or that indeed bases the whole legislature on PR. The Alberta NDP has long been a supporter of PR but it will be interesting to see, now that they have benefited from FPTP, whether PR still looks attractive to them. For old-timers like myself, it seems remarkable that a progressive government has been elected in Alberta. I certainly did not believe that in my lifetime either an NDP government or a progressive Liberal government (of the kind that Kevin Taft offered in 2004 and 2008 as opposed to the reactionary type that Lawrence Decore offered in 1993)
would be elected in Alberta. I am pleasantly shocked that the carefully cultivated Tory ideology that seemed to equate the Progressive Conservative Party with the province and its oil riches (we were made to almost believe that the Tories had put the oil in the ground) has been sufficiently dispelled to allow an NDP government to form in Alberta. I believe that I speak for everyone in Change Alberta when I say that we not only wish them well but that we trust and indeed insist that they stay true to their promises. If they do, Alberta, which is currently the province with the most inequality in Canada, the worst environmental record, the worst record in occupational safety, a huge backload in needed infrastructure, and only so-so public services despite all the Tory propaganda that says otherwise, can reinvent itself.

Hooray Rachel Notley and the Alberta NDP! Longstanding progressive Albertans and recent converts are elated by your victory. So many of our hopes rest upon you. Good luck as you roll up your sleeves for all Albertans.

Alvin Finkel is chair of Change Alberta and professor emeritus of
History at Athabasca University

A Strategic Confession by Alvin Finkel

“I really want to vote for the NDP in my constituency, someone who will sit in the Notley caucus. Are you sure that I will cause a right-winger to be elected if I don’t vote for the Liberal or the Alberta Party candidate you recommend?” In this wave election, we’ve heard this from a number of people who have written to us. Earlier in the election, our answer in every case was “yes, you will risk electing a right-winger, thereby reducing the progressive component in the legislature.” That’s still what we believe to be true in Calgary-Elbow and Calgary-McCall. In Elbow, the race is really between Tory (Mis)Education Minister Gordon Dirks and Alberta Party leader Greg Clark. The NDP is likely running a respectable third but mostly they are not visible in Elbow. Their vote is purely a Notley vote, not a vote for their generic candidate. In many constituencies, that is enough to make them the strategic candidate. But look at the Clark campaign with its 150 workers, $100,000 or so of expenditure, and bazillion lawn signs, and it is clear that he is the real threat to Dirks. Polls have them running even. So why not vote NDP anyway and not worry if a right-winger gets in? Well, what if the NDP does not have a majority of seats and needs a little help from its friends? Clark will almost certainly step up to the plate. But Gordon Dirks?

Similarly, in Calgary McCall, the real race is between the Liberal candidate, the chosen successor to Darshan Kang, and a Wildrose candidate. The NDP candidate may be the most progressive but he is a longshot. A strategic voter will want to insure that this seat elects a progressive, someone who would be available to a Premier Notley should she need them.

Edmonton-Centre, Calgary-Mountain View, and Calgary-Buffalo are different. Change Alberta has recommended the three Liberal candidates as most winnable among progressives and most people would agree that they are also the most distinguished candidates in their constituencies–Laurie Blakeman, David Swann, and David Khan. They are all running strong campaigns. Their NDP opponents, whatever their merits or demerits, are really just proxies for their leaders. Surely that is not enough to be elected? Well, frankly it may be! And what’s interesting in all 3 ridings is that threehundredeight.com claims the NDP is leading -a bit in the two Calgary seats, a lot in Edmonton–and that the Liberals are running a strong second. That means that the Tories and Wildrose cannot win these seats even if the progressive vote is split. Almost all the seats where the NDP is ahead are seats with strong right-wing challengers—the Liberals are a poor third or fourth or fifth in almost all of those seats, except Edmonton-Meadowlark, where it is also unnecessary to vote strategically as between the NDP and Liberals. A vote for the Liberals or Alberta Party in those NDP-led seats helps the right-wing by taking a vote from the leading centre-left candidate. But unfortunately for the Liberal candidates in the three above-named seats, a vote for the NDP does not risk giving the seat to a  right-winger. It seems rather unfair to tell Liberal and AP voters that they have responsibilities as voters to change their preferences in many seats while the NDP voters really only have to do this in two constituencies. But the math of this election explains why this peculiar circumstance has arisen.

We remain non-partisan. But we are not idiots who have to parrot the line of deluded  Liberals and AP that polls do not mean anything, blah, blah blah. Of course they do. The NDP moved into the big leagues this time around, and the other progressive parties moved to the bottom of the juniors. AP and Liberal candidates projected to win 4 or 5 percent of the vote are squawking at us for recommending NDP candidates who are projected to win 35 percent of the vote and allegedly are not working so hard to win voters as the now-junior parties are working. Why, they ask, would we calling on their voters to shift their votes to the NDP when they, the junior parties, are campaigning so hard? Answer: Because this time you have no traction and the NDP does. Maybe things will be  different next time and we’ll be pleading with people who prefer the NDP to give it up to you. But in this election, outside a small number of ridings, those who want Rachel Notley as their premier do have to vote for her candidates.

Alvin Finkel is chair of Change Alberta.