Borrowing from the future to spend on delusion

Ideology, not economics, behind Alberta's financial woes

As always, crawling over the hump into the new year is a time to reflect, and the first week of 2013 is no different. So what’s the most important (and grossly under-reported) story of the past 12 months?

It would be nice to celebrate how the Alberta government not only talked about, but implemented a world-class monitoring program in the oilsands, as it keeps promising it will. Or that oil industry CEOs, basking in the glow of record profits, have decided to voluntarily implement best-available technologies to limit greenhouse gas emissions and render toxic tailings ponds obsolete in the oilsands — even though the Alberta government refuses to regulate them to do so.

Alas, in a province so dangerously wedded to a fantastical ideology, such ruminations are simply wished-for fictions, Peter Pan-like flights of fancy reserved for quieter moments around the Christmas tree. Instead, we are left to ponder an even more unbelievable reality: How a democracy run by Conservatives who claim to be fiscally responsible, and who oversee the world’s second-largest reserve of oil, could be borrowing money to pay for such societal essentials as roads, schools and health-care clinics.

On the surface, at least, it seems impossible that Albertans should have to dip into their savings and/or pay interest on borrowed money to provide their children with the high-quality education they deserve, and to maintain and expand the transportation infrastructure required of a growing economy. After all, we’ve allowed the oil industry to pretty much drill and dig as much oil and gas from the ground as it can, a minimum of 750 million barrels of oil equivalent over the last 12 months alone. You’d think we’d have enough money to paint the walls with gold.

And yet, the perverse reality of our fiscal health is considerably different: Alberta will usher in the new year with a budget deficit somewhere around $3 billion, and we will spend about $500 million a year to service our debt. Meanwhile, the rich get richer and the rest of us increasingly lose out. Add to all these dismal statistics the growing, multibillion-dollar environmental debt we continue to ignore (more than $30 billion at last count), and Alberta’s moral and economic tragedy becomes Shakespearean in its incompetence.

Of course, Alberta’s Conservatives blame Alberta’s financial mess on fluctuations in the price of oil, which is lower today than they would like. And it is lower in Alberta in particular, they claim, because those damn environmentalists keep delaying the construction of more pipelines to get our crude to more lucrative Asian markets. In other words, it’s not our fault. We just need to allow Big Oil to do its thing at breakneck speed. Everything else will take care of itself.

Not so fast, Tories. Let’s not forget that the Alberta government has chosen to limit or expunge revenue streams enjoyed by most other capitalist democracies. Alberta, remember, has the lowest personal income tax in Canada, a 10 per cent flat tax that puts a higher burden on the middle class than the richest Albertans. It also has low corporate taxes, the lowest fuel taxes in the country, no capital tax, no payroll tax, no health premiums and no sales tax. According to the Alberta government website, if we had implemented the tax regime of the second-least taxed province, Saskatchewan, we could have raised an extra $12 billion or so this year. In other words, we would have a budget surplus.

And then there’s royalties. Premier Peter Lougheed, as close to a saint as exists in Alberta, came to power on a “behave like an owner” platform that saw royalties on all non-renewable resource revenue increase to 40 per cent from 17 per cent. This revolutionary act increased government revenues by $10 billion a year, 30 per cent of which went into savings. Today, the free-market extremists in power collect less than 15 per cent of available non-renewable resource revenue on behalf of the people they are supposed to represent, one of the lowest rates in the world.

So what kind of long-term solutions is the Alberta government considering to address our ridiculous fiscal crisis? It’s already proven incapable or unwilling to raise royalties, and Alberta Finance Minister Doug Horner has made it explicitly clear that new or higher taxes are not on the table. Instead, he’s going to dig into Ralph “We Had No Plan” Klein’s bag of tricks and gut the programs and services Albertans rely on. Inevitably, it will be the poorest who will suffer the greatest consequences.

And yet, anyone who has been keeping a close eye on the hydrocarbon industry over the last decade could have predicted potential deficiencies in oil revenues, and incorporated them into last year’s budget and whatever long-term economic plans we have for ourselves. Even Conservative economists have been warning Albertans that running an economy so heavily dependent on oil revenues — and so ideologically opposed to reasonable taxes — is dangerously stupid.

Indeed, economists warn that the proposed austerity is itself a problem, a slippery slope leading ever-closer to the dangers of recession. Besides, there is nothing wrong — at least from an economic perspective — with taxing citizens and corporations at a more reasonable rate, or demanding more of the revenue from our oil.

The only thing standing in the way of a common sense solution to Alberta’s economic woes is ideology. Alberta has become the poster child of neo-liberal economic philosophy run amuck, and it is failing as miserably as one would expect, even — especially! — in a province as wealthy as ours.

How about this for a New Year’s resolution? Let’s base Alberta’s public policy on facts rather than beliefs, on small-c conservatism rather than neo-liberal greed, on a sustainable long-term future for the whole rather than short-term benefits for the few and the rich.

Wouldn’t it be nice to write about that next year?

 

 


Comments: 4

cyberclark wrote:

Next year is going to be a total disaster! Our single customer; the US market has matured! Its all downhill from now on.

Alberta’s Conservatives’ short sited, bordering ignorant administration is leaving Alberta somewhere between the outhouse and the woodshed holding a candle for light! We are so totally screwed.

We have no money to fall back on; all royalty and profits from the petroleum industry has been shipped off to the oil companies; the heritage Trust fund has been plundered for over 70 billions of dollars belonging to you, your children and their children. Never to be seen again! We have the highest cost of living in North America.
Our conventional oil is beyond peak. This province has absolutely nothing to show for it! The production will be down to half within 5 years unless the industry can use carbon/water injection combined to recover a great deal more oil out of the formation. This is old technology tried and true.

All the carbon capture programs are directed at collecting carbon dioxide for this purpose an and this alone! The only art is how to invent stories to get the taxpayer to give up their gold to pay for everything leaving oil to the discounted markets. In reality, it is your savings that are going down the pipeline! Down the tubes!

They say there is some high number of millions “set aside” for developing a technology that is 50 years old! Considering they have no reserves of any kind and are into milking pensions, and bilking the Heritage Fund setting anything aside is an outright lie. Think here of the nonexistent sustainability fund. No such thing on the books until they tapped into pension funds.

I won’t even touch AIMCO here and the 7 billion absconded from municipal pensions. It is peanuts when compared to the trillion missing from treasury because of their policy or outright collusion with the oil industry to rip the province off.

Our major market, the US has matured. The market place has changed and not very fast and the Conservatives in all their glory have ignored it until it is too late their energies being spent on how to get the taxpayers to pay for all the infrastructure required to meet new, emerging markets
And, they were not surprised by anything in the market place. Quite the contrary they planned to be exactly where we are now.

In the first part of April in 2009 the Forbes Brother was a guest to an oil talk show. Forbes didn't blink an eye and said “More than all the middle east put together”
The US Geological Service issued a report in April 2008. It was a revision of a 1995 report on how much oil was in the Western 2/3 of North Dakota, Western South Dakota and extreme Eastern Montana.

The numbers are astounding. They concluded the Bakken is the largest domestic oil discovery since Prudhoe Bay and has the potential to eliminate all American dependence on foreign oil!
The EIA (US Energy Information Administration) puts their estimate at 503 billion barrels! Even if just 10% of that oil is recoverable at 100.00 per barrel, that 10% is worth 5.3 trillion dollars to the US! They also estimate because it is light, sweet crude it will cost Americans only 16 dollars per barrel to produce it.
“This sizable find is now the highest-producing onshore oil field found in the past 56 Years” reports the Pittsburgh Post Gazette. It is known as the Willison Basin but more commonly referred to as the Bakken.

The Stansberry Report Online 4/20/2006
Reads:
Hidden 1,000 feet beneath the surface of the rocky Mountains lies the largest untapped oil reserve in the world! It is more than 2 trillion barrels. On August 8,2005 President Bush mandated its extraction. In 3 ½ years of high oil prices none has been extracted.
http://www.usgs.gov/newsroom/article.asp?ID=1911

The market for natural gas is also come and gone and you have nothing to show for it because you were stuck on Conservatives!

In 2008 Texas reported a new find; more than 75 Trillion Cubic Feet shallow, easy to produce. There is less than 50 TCF in the Western Canadian Sedimentary basin.
In the high years, gas was a 15.00 a Gj. It is presently about 3.25 and I predict will be below 1.50 this summer. Oil companies are saying they can make money if the prices are up to 3.40 (and they do not have to pay for any of the infrastructure to transport it)
Alberta, BC and Saskatchewan need a pipeline to the west coast to meet Asian markets.

Without this access we will fail as provinces. Whether it is oil or LNG or both, the taxpayers are going to be the ones who pay for the lines, not the oil industry.
The Conservatives are joined at the hip with the US Republicans and oil and the Republicans are running the show in Canada even though they were rejected soundly by the American people.

Get rid of these guys You simply cannot afford to vote for them any longer.


http://albertathedetails.blogspot.com/2012/08/alberta-losses-billion-due-to.html

on Jan 3rd, 2013 at 9:29am Report Abuse

Just Jonathan wrote:

Well put CyberClark & Jeff !

on Jan 3rd, 2013 at 6:15pm Report Abuse

officematt2002 wrote:

You applaud cyberclark and his grade 9 level essay? Nice 'facts'. Fuck that!

on Jan 3rd, 2013 at 10:19pm Report Abuse

G wrote:

Mr. Gailus' article pretty much nails it. Ar least for me. Alberta's in some trouble with this current government.

officematt takes the easy way out (much like the Alberta PCs) and bashes cyberclark's submission, but offers nothing of his own. Troll.

on Jan 5th, 2013 at 2:01pm Report Abuse


Post comment: (Login or Register)


Content © Fast Forward Weekly | Great West Newspapers LP | Glacier Community Media

About Us Contact Us Careers Privacy Policy Terms of Use