[BRIEF NOTE] An Albertan disadvantage
Jun. 12th, 2008 06:21 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
rfmcdonaldFrom the Calgary Herald:
I wrote back in January about Norway's prudence in establishing a well-regulated sovereign wealth fund that holds nearly twenty-five times as much money as Alberta's Heritage Fund. As beneficial to Alberta's future as this switch might be, as outlined in Mark Anielski's 2002 op-ed in the Edmonton Journal, the Albertan government has chosen to make this objective difficult to achieve by charging some of the lowest royalties in the world on oil production in Alberta, even--as a recent panel argued--failing to collect on some of the royalties. This royalty policy, in turn, is part of an effort to attract international oil companies to Alberta's tar sands as a consequence of the choice of the small- and large-c Conservative government not to create a provincial oil company under local control--a 2007 proposal to increase royalties was met with hostility from the companies in question, with hints on their part of possible disinvestment. Similarly, establishing a strictly regulated fund that provincial governments couldn't raid at will, as in Norway, is a non-starter in an Alberta where successive governments have chosen to use the oil to subsidize consumption in the short term and government operations in a province that chose not to have a provincial sales tax. For all these reasons, then, and despite a long history of criticism in Alberta of Albertan policy in this regard, the Norway model doesn't seem likely to be imitated, regardless the consequences of this choice for Alberta and all of Canada.
Alberta found itself in the world's crosshairs Wednesday over its economic and environmental policies after the OECD advised the province to sock away more of its energy wealth and slash its carbon footprint.
But the new report from the Organization for Economic Co-operation and Development was panned in part by Alberta Finance Minister Iris Evans, who said it would be irresponsible for the province to save its oil and gas riches if it meant ignoring pressing infrastructure needs.
The OECD's biennial report card on the Canadian economy said inflation and a soaring loonie could be corralled if Alberta and Ottawa established a savings fund -- similar to Norway's $400-billion account -- to collect the windfall from soaring oil prices and then invest those funds in foreign currencies.
The savings fund would cushion against a fall in energy prices or the future depletion of the resources, and help prevent so-called Dutch disease -- the hollowing out of the country's manufacturing sector -- particularly in Central Canada.
The report was especially critical of the Alberta government's lack of overall spending restraint and absence of rules for payments into and spending withdrawals from its $16.4-billion Heritage Fund.
"Fiscal policy in Alberta should be more prudent," the report said, noting other countries have "shown much more restraint and foresight in managing their resource revenues to mitigate boom and bust cycles."
I wrote back in January about Norway's prudence in establishing a well-regulated sovereign wealth fund that holds nearly twenty-five times as much money as Alberta's Heritage Fund. As beneficial to Alberta's future as this switch might be, as outlined in Mark Anielski's 2002 op-ed in the Edmonton Journal, the Albertan government has chosen to make this objective difficult to achieve by charging some of the lowest royalties in the world on oil production in Alberta, even--as a recent panel argued--failing to collect on some of the royalties. This royalty policy, in turn, is part of an effort to attract international oil companies to Alberta's tar sands as a consequence of the choice of the small- and large-c Conservative government not to create a provincial oil company under local control--a 2007 proposal to increase royalties was met with hostility from the companies in question, with hints on their part of possible disinvestment. Similarly, establishing a strictly regulated fund that provincial governments couldn't raid at will, as in Norway, is a non-starter in an Alberta where successive governments have chosen to use the oil to subsidize consumption in the short term and government operations in a province that chose not to have a provincial sales tax. For all these reasons, then, and despite a long history of criticism in Alberta of Albertan policy in this regard, the Norway model doesn't seem likely to be imitated, regardless the consequences of this choice for Alberta and all of Canada.
