Tag Archives: Price of Oil

Sharpen Your Pencils, Alberta. Slash-and-burn is back.

Premier Jim Prentice Alberta PC leadership race

Jim Prentice celebrates his victory in the PC Party leadership contest on September 6, 2014.

Living in the land of the lowest taxation rates in Canada allows many personal benefits but long-term government stability has not been one of them. Relying heavily on natural resource revenues, our political leaders continue to stumble from embarrassment of riches to poverty and never appear to learn from our past.

Robin Campbell Alberta Finance Yellowhead

Robin Campbell

And here we go again. Progressive Conservative Finance Minister Robin Campbell announced plans yesterday for a 9% across the board funding cut in the 2015/2016 provincial budget, which is expected to tabled near the end of March.

Two years ago, we were told that funding for colleges and universities needed to be slashed in order to survive Alison Redford‘s “Bitumen Bubble.” Twenty years ago, many Albertans accepted the deep funding cuts imposed by former Premier Ralph Klein and then watched with cynicism as the government spent the next two decades trying to repair the damage done to our public infrastructure and health and education systems.

Premier Alison Redford

Alison Redford

While claiming “all options” are on the table, the PCs have already ruled out increases to corporate taxes or resource royalties, and likely also the introduction of a provincial sales tax or a return to a progressive taxation system. Rather than looking at alternative revenue sources, Mr. Campbell and Premier Jim Prentice appear to be on an unfortunate course towards drastically cutting public service funding.

Four months ago, Mr. Prentice said he found low morale and high turnover in the public service “shocking.” But with the Finance Minister warning of deep funding cuts across the government, it is difficult to see how he plans to change this situation.

Alberta is now facing a crisis not caused by low oil prices but by decades of poor planning.

As a province with decades worth of dependence on revenues from natural resource royalties, it should not be a shock that we need to be smarter about how we plan and finance our government spending. Maybe our only problem is not our over reliance on cyclical natural resources revenues, but that the Progressive Conservatives are just bad fiscal managers.

One dull pencil

Genia Leskiw MLA Bonnyville Cold Lake

Genia Leskiw

Bonnyville-Cold Lake MLA Genia Leskiw fumbled embarrassingly this week when she tried to explain why the Standing Committee on Legislative Offices, which is controlled by PC MLAs, voted to reject a request from Child and Youth Advocate Del Graff to restore $275,000 in funding that the committee voted to cut in December 2014.

I don’t really believe they’ve sharpened their pencils as sharp as they could have,” Ms. Leskiw told CBC reporter John Archer when asked why the advocate’s request was denied. When pressed for details about why the funding was denied, Ms. Leskiw responded that she was not an accountant.

This is not the first time Ms. Leskiw has used the ‘I’m not an accountant’ defence. In 2012, she pleaded ignorance when asked about the extra money she was collecting from the infamous ‘no-meet committee,’ telling the CBC that “I don’t even look at my paycheque.

Mr. Graff asked for the funds in order to continue investigations into the deaths of children who are in the province’s care or who are supported by the province. In 2014, the PC Government faced harsh criticism when a Calgary Herald-Edmonton Journal investigation revealed the government had dramatically under-reported the number of child welfare deaths over the previous decade.

Mr. Prentice defended the funding cut and ordered the MLA committee to revoke the $500,000 in additional funding it had just granted this week to the Auditor General. The Premier’s heavy-handed move raises the question of why legislative committees exist if he can unilaterally overrule their decisions. Will any of the PC MLAs on the committee have the backbone to stand up for their decision when they meet again next Tuesday? Or will they simply bow to the whim of their party leader?

The cuts in funding for the Child and Youth Advocate and the Auditor General take place as the provincial government provides $18 million to rebuild the Kananaskis Country Golf Course, which was damaged in the 2013 floods. Public funding for the golf course has not been revoked, but plans for other critical projects, like the long promised new Cancer Centre in Calgary, have now been delayed.

Keystone XL, Alberta Oil Sands and International Travel in 2014

Alberta MLA Redford Prentice Travel

A Google Map tracking international travel by Alberta cabinet ministers and PC MLAs since November 2011. Scroll down to find the interactive map.

As the TransCanada Keystone XL Pipeline dominates political debate in Washington D.C., Alberta Premier Jim Prentice announced that he will soon travel to the American capital to lobby in favour of the pipeline.

Although most politicians in the capital appear to support the pipeline’s construction, United States President Barack Obama has not made public whether he supports or opposes the project, and his final approval will be needed to allow the pipeline to cross the American border.

Demonized by Republicans to the south of the border and Conservatives to the north for not sharing their enthusiasm for the pipeline, Mr. Obama made clear that he would wait until a Nebraska Supreme Court ruling before making a final decision.

The future of the TransCanada corporation’s new pipeline has become enveloped in the larger debate around climate change, the environment and the economic expansion in Canada’s oil sands. While most politicians in Western Canada support the Alberta-to-Texas pipeline, the recent decline in the price of oil has raised some questions about its viability.

Jim Prentice Rob Merrifield Washington DC

Premier Jim Prentice and former Conservative MP Rob Merrifield, now Alberta’s voice in Washington D.C.

Pipelines and oil sands are a big reason Alberta MLAs and cabinet ministers have made at least 16 official trips to Washington D.C. since November 2011. Housed in the Canadian Embassy, Alberta has a paid representative whose main focus appears to be lobbying for the oil sands and pipelines. in the U.S. capital Former Conservative MP Rob Merrifield now holds the position, which was previously filled by retired Tory cabinet ministers Gary MarMurray Smith and former Calgary Mayor Dave Bronconnier.

According to publicly available travel itineraries, Progressive Conservative cabinet ministers and MLAs logged a hefty amount of air mileage in 2014, travelling to 13 countries (down from 18 countries visited in 2013).

Alison Redford Golden Temple India

Premier Alison Redford visits the Golden Temple in India.

In 2014, Alberta politicians made a flurry of official trips to the United States, China, Japan, India, Switzerland, Malaysia, Singapore, the United Kingdom, Germany, Australia, New Zealand, the Netherlands and Peru.

Four cabinet ministers visited Singapore last year, where the Government of Alberta opened a new trade office. China remained a popular destination for international trade missions by Alberta’s politicians.

The discovery that Premier Alison Redford hired an international travel scout caused considerable controversy in Alberta, as did her $131,000 around-the-world adventure to India and Switzerland (minus a secretly planned trip to Afghanistan, which was cancelled due to security concerns). But it was a trip to former South African President Nelson Mandela’s funeral in December 2013 that triggered a career-ending controversy for Ms. Redford when the $45,000 cost was made public in early 2014.

The whirlwind of international travel slowed to a trickle when Mr. Prentice entered the Premier’s Office in September 2014, with only a handful of MLA trips to the United States and a trip to Peru by Environment Minister Kyle Fawcett, being released on the public itinerary.

Here is a Google Map tracking international travel by Alberta cabinet ministers and PC MLAs since November 2011:

Alberta is always in Tough Economic Times

“They don’t know what to do with tough economic times. It was easy enough to govern when the money was flowing in, when things were going well. They took all the credit for it at that time. It’s much harder to govern, and the mark of a good government is how they handle it, when times get difficult.” – Ray Martin, Leader of the Official Opposition (June 13, 1986)

Jim Prentice Premier Alberta

Jim Prentice

Despite Alberta’s prosperity, Premier Jim Prentice is warning we could be heading into tough economic times. The decline in the world price of oil has spooked the 43-year governing Progressive Conservative establishment and the corporate elites in downtown Calgary.

The perilous “price trough” has led Mr. Prentice to warn of a potential $7 billion revenue shortfall if oil prices remain at lower than expected levels for the entire 2015/2016 fiscal year. According to a government spokesperson, some of the missing $7 billion could come from revenue streams such as land leases, but at this point the number is largely based in speculation and politically spin.

Mr. Prentice’s prophetic $7 billion shortfall becomes more startling when learning the Alberta Government is projected to collect only $7.5 billion in crude oil and bitumen royalty revenue in the 2014/2015 budget year. This projected revenue is based on the price of Western Canada Select (WCS) oil remaining at $77.18 per barrel. Although the yearly average price is $84.02 per barrel the current price of WCS  has dropped to $48.44 per barrel.

Ray Martin NDP MLA School Trustee Edmonton Alberta

Ray Martin

If the “tough economics times” message sounds vaguely familiar, that is because it is. In oil-rich Alberta, we hear a lot from our political leaders about tough economic times, even when times are prosperous. In most cases, our politicians are managing voters’ expectations and positioning themselves to take credit as ‘prudent fiscal managers’ when the world-wide price of oil inevitably increases.

Meeting the Challenge of Tough Times” was the name of the three-year economic plan launched by Premier Ed Stelmach’s PC government in 2009.

Bitumen Bubble Alberta

Bitumen Bubble

The sharp decline of natural gas royalty revenue and that year’s world-wide recession, which felt more like a mild economic pause in Alberta, even convinced the Tories to amend the Klein-era Fiscal Responsibility Act to allow the government to pass deficit budgets.

And in January 2013, Premier Alison Redford used a televised address to warn Albertans that a $8 billion shortfall in the provincial budget was being caused by an ominous “bitumen bubble.” Ms. Redford’s bubble was then used as justification to slash funding to colleges and universities by 7% in that year’s budget.

Alberta Finance Minister Ron Liepert

Ron Liepert

But the PCs have not always predicted “tough economic times.” In 2012, then-finance minister Ron Liepert told the Calgary Chamber of Commerce to expect $16 billion in projected resource revenues by 2015. A huge jump in revenue would certainly increase the likelihood of Mr. Prentice calling a provincial election in early 2015.

Alberta’s government has heavily depended on revenue from cyclically priced resource commodities for decades. After years of unrestrained growth, no one should be surprised that Alberta’s economy could slow down.

The question is how we respond to actual tough economic times in Alberta. Was NDP Official Opposition Leader Ray Martin correct in 1986 when he said that “they don’t know what to do with tough economic times”?

While some right-wing think tanks call for a return to brutal slash and burn fiscal policies, the implementation of real long-term financial planning would probably be a more mature solution.

Alberta Norway Oil Fund Money Savings

Comparing Alberta’s Heritage Fund and Norway’s Petroleum Savings Fund.

Norway, a country with 5.1 million people, invests oil revenues into the Government Pension Fund Global and contains more than $857 billion. The fund was established in 1990 to smooth out the disruptive effects of highly fluctuating oil prices. Oil-rich jurisdictions like Norway prove that economies can be both economically prosperous and environmentally green.

Alberta Premier Peter Lougheed

Peter Lougheed

Alberta, a province of 3.6 million people, launched the Alberta Heritage Savings Trust Fund in 1976. Under the leadership of Peter Lougheed, the Heritage Fund initially received 30% of government resource revenues and was worth $12.7 billion in 1986. The Heritage Fund is now worth only $17.4 billion.

Facing tough economic times in 1987, the PC government of Don Getty halted all transfers to the Heritage Fund. Zero deposits were made between 1987 and 2004.

This week, PC MLAs passed Bill 11: Savings Management Repeal Act, which repealed the Savings Management Act, which was enthusiastically passed by the same group of PC MLAs in March 2014. The earlier bill would have diverted resource revenue to the newly created Alberta Future Fund, Social Innovation Endowment account and Agriculture and Food Innovation Endowment. The bill passed this week eliminates those new funds.

Kevin Taft Liberal Party MLA Alberta

Kevin Taft

Despite talk of revenue diversification, it is questionable whether the governing PCs would seriously consider increasing resource royalties, reinstating a progressive taxation system or introducing a provincial sales tax.

While many politicians view tax increases as politically unpalatable, a slight tax increase would not destroy the our province’s economy. “If Alberta increased its tax rates by $11 billion our province would still have the lowest tax rate in Canada,” Kevin Taft wrote in his 2012 book, Follow the Money.

Dr. Taft’s book breaks down government spending patterns over the past 30 years and details how corporate profits have skyrocketed in Alberta at the same time the PC Government has struggled with deficit budgets.

As a province with decades worth of dependence on revenues from natural resource royalties, it should not be a shock that we need to be smarter about how we plan and finance our government spending. Maybe our only problem is not our over reliance on cyclical natural resources revenues, but that the Progressive Conservatives are just bad fiscal managers.


Primetime Politics this week…
On this week’s Alberta Primetime politics panel, I joined Rob Breakenridge, Roberto Noce and host Michael Higgins to discuss the Gay-Straight Alliance debate, Moe Amery‘s texting-while-driving-demerits bill, and Bill 2: Alberta Accountability Act.