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Environment, Federal Politics

Feature: No significant ‘rainy day fund’ for Alberta’s natural resource wealth

Image Courtesy of SunNews

With the massive natural resource wealth that Alberta continues to enjoy as an accident of geography and an industrial system that craves what it has to sell, the Alberta government has long been in the enviable position of unimaginable wealth that seems – quite falsely – to be bottomless. Large volumes of oil and natural gas deposits and the hugely destructive infrastructure needed to extract and process these resources are in place in Alberta, and Premiers have enjoyed decades of pillaging the earth for provincial gain.

But wait – hear me out. This is not an argument to stop the Oilsands, because I have argued that elsewhere. This is to say that if the development of the Oilsands has to continue, and I don’t believe it does, we at least have a responsibility to be intelligent, far-sighted, and ethical in how we spend that money now.

One of the best ways to positively capitalize on such natural resource wealth would be to set a portion of the money Alberta makes on the sale of their resources aside for a day when the times may not be so lucrative. A giant rainy day fund, essentially. And in case you missed Jeffrey Simpson’s interesting article in the Globe and Mail on Alberta’s decision to forgo responsible stewardship of their economic future as it pertains to their natural resources, you can find the link to it here.

Quite simply, this is madness. One of the only ways to make what is happening in the Oilsands worse is the knowledge that the Alberta government is failing to set any significant amount of money aside for the day when the well runs dry. Because, quite simply, they don’t believe it will ever happen.

In Norway, a nation with similar natural resource attributes to Alberta, a massive Heritage Fund has been created to set aside billions of dollars for future generations. A way of paying back those not yet born for the damage we are wreaking upon the earth now. Alaska has a similar fund, in addition to Alberta. According to William Marsden in Stupid to the Last Drop, Alberta began a Heritage Fund in 1976, the same year as Alaska. As of 2006, Alberta had set aside $15.4B, compared to Alaska’s $37B. Think those are impressive? Marsden notes that Norway’s fund, begun only in 1996, twenty years after Alberta and Alaska, contained $306B as of 2006. They set aside $306B in only ten years. It as, as Marsden notes, a “massive pension fund for future generations.”

And as Simpson pointed out in his article relating the experience in Alberta with that in Norway, “[Alberta’s] energy minister, [when] asked about Norway’s multi-hundred-billion-dollar savings and investment fund from oil revenues sniffed that Alberta had nothing whatsoever to learn from Norway.”

Really? Not a thing? Nothing whatsoever?

This all stems from a report Simpson discusses by former Conservative and Liberal cabinet minister David Emerson, and the report he drafted entitled Shaping Alberta’s Future in which Emerson and co. suggest what is undoubtedly political suicide in Alberta.

The report states that “Alberta’s prosperity currently depends on the sale of energy to the U.S., and increasingly on oil sands as the source of that energy. The province is vulnerable as a result.” He goes on to say that “in relying largely on one sector and one market, Alberta has yet to seize opportunities to build a more resilient economy.”

Sounds good so far. Emphasizing the importance of diversification, seizing new opportunities, putting their resource wealth to work in new areas, etc. I’m with you.

But here is where Emerson loses the ear of any government in Alberta, according to Simpson. “Developing profitable new revenue streams will be essential to sustaining prosperity over three decades and beyond. This is too important to be left to chance,” he writes. “We need the discipline to execute plans to broaden the economic base over the long term, starting now and staying the course consistently over many years.”

Oh. Long term thinking. Would that be the kind of thing whereby I will be penalized now, and have to work harder, and impose restrictions upon myself, in order to do good down the line for generations not yet born? If so, then Alberta is good without it. Especially if this is the kind of thing whereby government would need to be bigger, or raise taxes to pay for things that oil money is currently paying for, or take a more active role in the economy. They don’t like that in Alberta.

This is what it comes down to: any Conservative government in Edmonton knows, quite rightly, that the voters will never swallow the bitter pill of setting money aside for the future by paying more now. This short-sighted approach to Alberta’s future will be devastating. Just not right now.

Here is the crux of the Emerson report:

We think it critical to realign the province’s fiscal regime such that capital received from the sale of these assets is invested in shaping the future and sustaining prosperity for generations to come. This does not mean turning Alberta into a high-tax regime… or instituting draconian measures that prevent this generation of Albertans from enjoying quality public services. It does mean following some fundamental principles of sound financial planning: cover day-to-day operating expenses from regular income (in the case of a government, this means individual/corporate taxes and user fees); treat money received from the sale of assets as capital to be put to work strategically to create greater income in the future.

In other words, the wealth generated today should not be blown on the luxuries and expenses of today only. We have a responsibility to set money aside not only as a “massive pension fund for future generations” as Marsden has claimed, but as a way of ensuring that the wealth we generate today can be enjoyed by more than those simply lucky enough to be alive while the getting was good.

It’s a shame the Emerson report is “dead on arrival,” as Simpson claims. Because with great power and wealth comes great responsibility. And Alberta is showing little interest in accepting theirs.

About awreeves

Editor-in-chief at Alternatives Journal. Author of 'Overrun: Dispatches from the Asian carp Crisis'.


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