Alberta Politics

7 Conservatives scandals that still haunt Alberta politics

After forty-four years of Progressive Conservative government in Alberta, it still feels surreal to believe that another party has been elected into government. Two and a half months after the NDP victory, Premier Rachel Notley is putting her stamp on Alberta politics. But Alberta’s new government is left to deal with some of the more unhelpful legacies created by the previous government. Here is a look at a few of the Progressive Conservative scandals that continue to haunt Alberta politics.

Funeral Homes

CBC reports that it has obtained documents showing how the Alberta Funeral Service Association pressured former minister Jonathan Denis and the Department of Justice to reopen a contract and abandon earlier efforts to control spending. CBC reports the contract was reopened and revised against the advice of a government lawyer and chief medical examiner Dr. Anny Sauvageau.

Kananaskis Golf Course

Alberta’s auditor general is reviewing a controversial contract between the government and a private company operating a publicly-owned Kananaskis golf course. During this year’s election, NDP MLA Brian Mason asked the auditor general to investigate why the government paid $9.3 million to the company, which is known to have connections to the PC Party. The golf course has been closed since the 2013 floods in southern Alberta.

Wildrose MLA Derek Fildebrandt, who chairs the Standing Committee on Public Accounts, has said he hopes to compel former PC cabinet ministers, including Diana McQueen, to appear at a committee meeting. Critics have criticized the 1983 contract as a “sweetheart deal.”

Airplane sale

The rushed sale of the government’s fleet of airplanes led to a $5 million loss for Albertans. This contradicts claims by former PC premier Jim Prentice that the sale of the planes netted $6.1 million for the government. The planes were sold after Ms. Redford and PC MLAs faced harsh criticism for alleged misuse of the government air fleet for personal and partisan activities.

Public Sector Pensions

Alberta public sector pension liabilities dropped by more than $400 million last year, suggesting evidence that changes planned to the funds by former premier Alison Redford and finance minister Doug Horner were not necessary. The attacks on public sector pensions alienated thousands of public sector workers in Alberta, many who voted for Ms. Redford’s PC Party in the 2012 election. The PC government’s planned changes to the pension plan were scrapped after Ms. Redford resigned as premier in early 2014.

Cowboy welfare

The auditor general reported that the government has been forgoing an estimated $25 million in annual revenue by not limiting surface rights compensation paid by the energy companies to holders of provincial grazing leases. The report states the province does not track which leases have oil and gas activity on them or how much was paid to the leaseholders for access to the natural resources.

“Current legislation allows an unquantified amount of personal financial benefit to some leaseholders over and above the benefits of grazing livestock on public land,” the report says.

Previous attempts to change the law governing the leases met fierce opposition from rural leaseholders, including a posse of sixty cowboys on horseback who tried to block premier Ralph Klein from visiting the Royal Tyrrell Museum in 1999.

Carbon Capture and Storage

The government’s large investments in carbon capture and storage development has not paid off, according to a July 2014 report from the auditor general. Marketed as a key piece of the PC government’s climate change plan, the auditor general reported that “with only two carbon capture and storage projects planned, the total emissions reductions are expected to be less than 10% of what was originally anticipated.”

The NDP pledged to end the carbon capture contracts and instead reinvest hundreds of millions of dollars into public transit programs, but high cost of cancelling binding contracts with private sector corporations developing the projects could solidify this PC legacy.

Heritage Fund

When premier Peter Lougheed created the Heritage Savings Trust Fund in 1976, the government dedicated 30% of annual revenues into the rainy day fund “to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans.” The PC government halted non-renewable resource transfers to the fund in 1987, when it was worth $12.7 billion. Investments into the fund were only started again in 2004.

Despite Alberta’s immense natural wealth, the fund is now only worth an estimated $17.4 billion.

11 replies on “7 Conservatives scandals that still haunt Alberta politics”

re: PCs failure re: heritage fund.

Below Mark Anielski documents and analyzes the key history of the declining royalty rates subsequent to Lougheed, which seems to me the primary factor in the PCs failure re: heritage fund.

After Lougheed the PCs decided their survival depended on catering to industry. Only Stelmach made the attempt to emulate Lougheed, and hence BigOil/Calgary elite/RW media decided he had to go, and generated the narrative fuel and $$ to catalyze the WRP. PCs were happy to make Stelmach walk the plank to save the marriage with industry and thus hang on to power.

I doubt the citizenry of any Western jurisdiction has ever been fleeced to this degree of their natural resource wealth.

PCs (after Lougheed) actually increased the boom-bust vulnerability of the AB economy. AB is now also rich in foodbank stories.

excerpt: The year 1977 was the peak in royalty collections reaching 37.7% of the value of oil and gas production at a time when oil was trading at US$14 per barrel. During Ralph Klein’s tenure (1992-2006) an average 15.2% of the value of production was collected in net royalties when oil prices averaged US$25.52 per barrel.


Alberta continues to have a revenue problem

Mark Anielski
Published on April 3, 2015 as “Jim Prentice missed a golden opportunity with this year’s budget”
excerpt: The historical evidence shows that despite enormous market growth, the percentage of total revenue getting kicked back to the Alberta Government has been decreasing since the peak in royalty collection in 1977-1979 under Peter Lougheed.

excerpt: …Prentice missed an important opportunity to open a new chapter in Alberta’s economic future by being as bold as Peter Lougheed was in the 1970s when he brought in a oil and gas royalty regime that collected a fair share of industry revenues while at the same time saving 30% of more of those revenues in Alberta’s Heritage Savings Fund.

excerpt: Most oil-rich nations of the world collect a royalty tax on the percentage of the market value of oil and gas produced. I’ve run the numbers for Alberta using the Canadian Association of Petroleum Producer statistics for the ratio of oil and gas royalties (net of credits) collected by the Alberta Government to the total value of oil and gas producer sales between 1962 and 2014.

During the Socred era (1962-1971) Alberta collected an average of 17.8% of the value of oil and gas produced when oil prices averaged $3.15 per barrel. During Lougheed’s tenure (1971-1985) an average of 27.0% of the value of oil and gas was collected in royalties when oil averaged US$20.52 per barrel. The year 1977 was the peak in royalty collections reaching 37.7% of the value of oil and gas production at a time when oil was trading at US$14 per barrel.

During Ralph Klein’s tenure (1992-2006) an average 15.2% of the value of production was collected in net royalties when oil prices averaged US$25.52 per barrel.

Under Premier Alison Redford the lowest royalty return on oil and gas produced in Alberta’s history was reached in 2012 with a mere 9.1% of the value of Alberta’s oil and gas sales collected. This was at a time when oil was trading at record highs of US$92 per barrel and the total value of oil and gas production was $83.6 billion. The numbers aren’t available yet for 2014 but they are likely to be at or below a 10% capture rate. Estimated net royalties collected by the Alberta Government for 2014 are forecast to be $9.6 billion collected with an estimated 2.6 million barrels per day (972.7 million barrels) of conventional and bitumen (oilsands) production.

By contrast Norway in 2012 collected US$68 billion in royalties and other taxes or 72.4% of the total of Norway’s oil and gas sales of US$94.2 billion. The majority of these revenues were in turn invested in Norway’s Government Pension Fund that in 2014 was estimated at US$857 billion). In contrast Alberta’s Heritage Fund, which was founded by Lougheed in the late 1970s, many years before Norway’s fund, was worth only $17.4 billion in 2014.

The historical evidence shows that despite enormous market growth, the percentage of total revenue getting kicked back to the Alberta Government has been decreasing since the peak in royalty collection in 1977-1979 under Peter Lougheed. This decline is in part owing to the updated oilsands royalty regime of 1997.

This generous royalty regime requires oilsands producers to pay a base production royalty of only 1% of oil and gas production revenues while granting a capital cost allowance or write off of close to 100% of new oilsands capital investment, against total revenue.

This generous oilsands royalty regime has actually resulted in a significant 300% inflation in operating and capital costs per barrel of oilsands production between 1997 and 2012 (or 11.2% per annum increase). What was originally rationalized by economists as necessary to stimulate capital investment in Alberta’s oilsands may have actually done Albertans a disservice resulting in real inflation throughout the economy.

Alberta oil sands production cost graph

Had Premier Prentice the political courage of Peter Lougheed, he might have negotiated a new royalty agreement with industry while oil prices are lower with a royalty capture rate of 25% charged to the petroleum industry on the total value of Alberta’s oil and gas production. This would still be a lower royalty capture than during Lougheed’s entire political tenure, when he average 27% returns during a time when oilsands was a far riskier and costly venture.

Anyone else notice to total Wildrose Party silence on grazing leases? Hello, Fildebrandt. Are you there?

Funny how Rusnell reports on the funeral home issue (dead file?) but omits that Sauvageau dropped the case against Denis, for lack of evidence.

Yes, Derek Fildebrandt’s silence on the grazing leases has been deafening! Perhaps the comments from rancher (and his fellow Wild Rosie) Drew Barnes were more telling…….essentially to leave the leases alone!!

Talk about double standards!!

Heritage Fund scandal:

View of Allan Warrack, an ‘architect’ of the Heritage Fund on PCs failure (after Lougheed):

excerpt: ” Alberta’s Oil Wealth and the Big Question for Harper

PM’s favourite province squandered its petro profits like a ‘banana republic.’ Is this any way to run an economy?”

excerpt: “Warrack, one of the architects of the iconic Alberta Heritage Fund, told the Tyee earlier this year that the province is being run like a “banana republic” for failing to collect fair rents for non-renewable resources like the oil sands.

Warrack is a professor emeritus of business economics at the University of Alberta and former minister of lands and forests in then-premier Peter Lougheed’s cabinet in the early 1970s. Warrack then served as utilities minister and on the energy cabinet committee. He also authored a detailed history on the Heritage Savings Trust Fund and was a key player when the province famously revamped the royalty regime and set up the arm’s length oil wealth fund to benefit future generations.

“Since time immemorial, the use of other people’s property has been on a two thirds, one third split,” said Warrack. “The owner gets a third and the operator gets two thirds… If you interpret that in terms of oil or natural gas or oil sands, there should be a third of the value to the owners and in the case of oil sands that is 100 per cent owned by the public.”

The royalty rate collected on oil sands projects before “payout” is currently one per cent, which according to Warrack is so low it is “like a rounding error from zero.”

Alberta food banks under strain as rural towns bear brunt of oil slump
ALLAN MAKI CALGARY — The Globe and Mail Published Tuesday, Jul. 21, 2015 9:12PM EDT


Fire-sale royalties induced too much tarsands boom.
Lougheed urged that one major project at a time was sufficient, sensible economic growth.

Heresy for the oilsands promoters.

…remember Doug Griffiths getting fried for simply mentioning that the boom times in AB from massive oilsands expansion did not make it easy for all businesses.

@Conrad… Actually, according to press reports, Dr Sauvageau’s lawyer withdrew the part of the lawsuit that was against Mr Denis because he was claiming parliamentary immunity, and so there was no reasonable likelihood they would ever get him before the courts. The remainder of the action remains active. The only reason for a lack of evidence is that Mr Denis won’t talk.

What I find interesting is that the NDP is defending a PC contract. The real issue here seems to be Sauvageau, not the NDP or PC.

Clearly there was no case against Denis, or Sauvageau wouldn’t have dropped him out of the law suit in the first place.

7 scandals so far, it’s likely there will be more. It is high time that this information becomes public. Unfortunately, the new NDP government must deal with the fall-out and ultimately will be blamed if the changes they promised can’t be fully implemented due to lack of money.

Conservative Scandal #8
The approval of the high power transmission lines.

Albertan power consumers under deregulation are not responsible for export lines. This project has us paying for long distance transmission lines to facilitate export of electrical power to the US. These lines are too inefficient for electrical transport for provincial needs. Albertans are in fact being set up to subsidize electrical costs in the US.

I think this just proves why the PCs needed to be voted out. We need a new government, with a fresh perspective, that will hopefully end this backroom deal making, secretive governance of the PCs.

@Maria You are sadly correct. Any new government will unfortunately be seen as responsible for any new scandals that come out.

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