Wednesday, April 15, 2015

Wednesday Morning Links

Miscellaneous material for your mid-week reading.

- Eric Morath points out that a job (or even multiple jobs) can't be taken as an assurance that a person can avoid relying on income supports and other social programs. PressProgress offers some important takeaways from the Canadian Labour Congress' study of the low-wage workers. Angella MacEwen writes about the spread of the $15 minimum wage movement in Canada.

- Meanwhile, Carol Goar writes that while we should be looking to improve our social safety net, we need to do so while taking into account the real experience of the people relying upon it.

- Jason Warick reports on Eric Howe's findings that Saskatchewan is severely limiting its own future by failing to boost aboriginal participation in our economy. And Mitchell Anderson reminds us that Alberta (among other Canadian jurisdictions) has turned resource development into little long-term gain:
Which place is doing a better job of capturing public value from a public resource? Dividing resource revenues by production reveals some shocking figures. Norway realized revenues of $87.69 per barrel in 2013. Alaska managed $38.54. And Alberta? Just $4.38 -- one-twentieth what our Norwegian cousins managed to rake in.
Alberta has already produced 15 per cent more conventional oil and gas than Norway, and didn't have to go 200 kilometres out in the North Sea to get it. Even at current depressed prices, Alberta oil, gas and bitumen production to 2013 would have a combined market value of $1.7 trillion. So where did the money go?

The answer is not economic nor political. It is cultural. Albertans have accepted a consistent and repeated message from a number of vested interests that taxation is bad, government is inept, and public resources should be privatized. Once voters believe that, effective government oversight is politically impossible and industry gets to keep a larger portion of Canada's resource pie -- estimated to be worth some $33 trillion based only on our inventory of petroleum and timber.
So what does Norway do to ensure their private sector partners don't walk away with most of the resource wealth?

• Norway acts like an owner. Companies doing business in Norway are under no illusions about who is in charge. Misleading or lying to Norwegian authorities can lead to forfeited tenures or even jail time.

• Norway taxes to the max and makes no apologies about it. Taxation on oil profits is currently close to 80 per cent. One former energy minister even chewed out his bureaucrats in full view of enraged oil executives when they threatened to pull out of the country after taxes were raised. Noting that none had actually walked away, he told his underlings "we should have taken more!"

• Norway taxes profits, not extraction. Alberta instead sells oil and bitumen by the barrel, creating virtually zero incentives for efficiencies or value added. The Norwegian government wants companies to make money because for every dollar they make, Norway makes four. With such clearly aligned interests, companies are lining up to do business there.

• Norway captures and distributes wealth. Petroleum helps finance some of the most generous social programs in the world and every Norwegian knows it. With public buy-in like that, companies have certainty their investments are welcome and their product can get to market. Companies spending billions in the oilsands have no such assurance given the pitched battles around resource policy here in Canada. No public buy-in, no certainty. Sorry fellas, there's no free lunch on that one.

• Norway stashed the cash. All petroleum revenues go into a stand-alone oil fund administered by the Norwegian Central Bank -- not their government. This firewall prevents elected officials from getting lazy about budgeting since they can only access four per cent each fiscal year. This now-massive pot of money is also only invested outside of the country to avoid inflating the currency.

• Norway put public players on the field. One of the first things Norway did was start Statoil, the first of their two state-owned oil companies. They now own about 40 per cent of its production and 50 per cent of its reserves. These investments and risks have richly paid off and typically now bring in as much revenue as taxation. What stake does Alberta own in its production? Zero, and the balance sheet shows it.
- Finally, L. Ian MacDonald writes that the Cons' environmental irresponsibility looms as a leading cause of the death of pipeline expansions. And Barbara Yaffe slams the ineffective response to the English Bay oil spill by multiple levels of government.

No comments:

Post a Comment