Alberta’s new Premier has any number of important decisions to make. Depending upon the decisions themselves, Albertans may interpret some of them as overdue acts of redemption on behalf of a government that has not served Albertans well in recent years.
Resource royalties represent a vital early decision, since the government’s decisions have cost Albertans billions of dollars and cost additional billions (literally) with every month that goes by.
Consider Alberta’s record
Sources: Canadian Association of Petroleum Producers, Statistical Handbook, 2012; Norwegian Petroleum Directorate / Ministry of Petroleum and Energy. Norwegian Public Accounts.
Slide #1 illustrates the royalties paid by Alberta’s oil and gas industry, as a percentage of the value of petroleum product sales, from 1962 to 2012).
The initial, basically flat aspect of the line covers the final years of the Social Credit Government (1962 – 1971). Note the spike in the owners’ (Albertans) share (from 12.5% to 33.1%) when the Progressive Conservative government, then led by Premier Peter Lougheed, took office. (By 1985, the year that Premier Lougheed retired, the owners’ share had fallen to 22.3%) Note that, in 2012, the owners’ (Albertans) share was 4.3%.
Slide #2 illustrates Alberta’s returns on petroleum wealth. In 1974, on production valued at $4,287,000,000, the government kept 44.9% for the benefit of Alberta’s citizens. In 2012, on production valued at $83,360,600,000, the government kept 4.3% for the benefit of Alberta’s citizens.
Slide #3 illustrates the outcome of Norwegian policy. In 2012, Norway kept 72.4% of the export value of its petroleum (compared to 4.3% in the case of Alberta).
Slide #5 illustrates what would have been the size of the Alberta Heritege Savings Trust Fund ($865 billion) if the provincial government had collected 33% of the value of oil and gas extracted from Crown lands since 1978, and invested the money at 5% interest. To-day, the value of the comparable Norwegian sovereign fund is $783 billion.
What share of energy value should be kept for Albertans? How far away from that target is Alberta? What urgency is there to remedy the longstanding situation? What important work is not being done — what important investments are not being made — in Alberta because we are selling our inheritance for a comparative pittance? In a global market, why is Alberta getting so little from the sale of energy resources compared to Norway?
It is timely for Albertans to consider what they might expect from the new Leader of an old government. Is Mr. Prentice inclined to claim more for Albertans than his immediate predecessors have done? Is his victory enough to quiet the opposition of his caucus? Does Mr. Prentice consider the issue one that must be addressed as a matter of urgency, or will it sit on the back burner as Albertans continue to sell at a very low price?