I just finished watching a bit of Alberta Primetime, where Alberta Federation of Labour President Gil McGowan was debating former Klein-era Energy Minister Murray Smith. The topic was oil royalties in Alberta. For any newcomers to this debate, here are the basics. Natural resources in Canada are owned by the people of the province in which the resources are located. Thus, the oil in the ground in Alberta is owned by all Albertans, collectively. Oil companies extract oil from the ground, but the oil does not belong to them. The oil companies must first purchase the oil from Albertans before they can sell it to their customers. The Alberta government sets the price of the oil, and it is always a debate to decide what that price should be.
McGowan was making the case that Albertans are not getting a fair share of the profits from the oil resources they own. Instead, those profits are going straight to the CEOs of the big oil companies. Smith was arguing that Alberta's oil industry would start to collapse with an increase in royalties, and it would result in Albertans losing jobs.
There are a few different angles this debate can be looked at from:
First, what do these two men represent? McGowan heads an umbrella labour organization that represents about 140,000 workers in the province. His interest, it would seem, would lie in providing good, quality jobs to as many Albertans as possible. Smith was a top player in a political party (the Alberta PCs) that is funded by the oil industry. Today, according to my official sources at Wikipedia, he is "a current member of Energy Advisory Board of TD Securities Inc. He serves on various energy related corporate boards, and is President of a private consulting company, Murray Smith and Associates." It would seem that Smith's interests lay in seeing the big oil corporations making as much money as possible. In fact, it is difficult to see why Smith would have any interest in good jobs for Albertans, aside from the fuzzy feeling I'm sure it would give him.
Now, we can't conclude that Smith's ideas are bad for Albertans just because he has interests that run in the opposite direction (though some would say we could stop there). Luckily, the Parkland Institute has just done some great research on exactly this topic in their report titled "Misplaced Generosity" (http://parklandinstitute.ca/research/summary/misplaced_generosity/).
The formula used to calculate royalty rates is public, but it is not as easy as picking a percentage and going with it. The forumulas are quite complex. Actually, I had no idea how complex until I recently looked it up for myself on the Alberta government's website. Check it out here: http://www.energy.alberta.ca/Org/pdfs/OILFormulas2010.pdf
The Alberta government sets target ranges for how much royalty revenue they would like to collect each year. It almost never meets even the bottom of the target range. The Parkland report details that if the government was to pull in royalty revenues at the top of their own target range, our province would have had an extra $14 billion in revenue in 2008.
It is very clear that the large majority of Albertans are missing out on the profits of the resources we own. At a time when the Alberta government is making cuts to everything because it is spending more money than it is taking in, it is giving away billions of dollars worth of oil profits to their corporate friends at the tops of the office towers.
We can do better. Instead of rising tuition rates every year and obscene wait times in our hospital emergency rooms, we should be using the money from our resources to invest in educating people for the future of this province. We should be investing in medical staff to keep Albertans healthy. We should be putting money into public transit to make it easier to get around our cities and to clean up our environment. There are many things our province should be investing in, but we do not have a government that is fiscally smart.
So what are our options? After the last election, the Stelmach government committed to adopting a slight increase to oil royalties after the committee he set up to explore it came to the conclusion that our current rates were not smart. The big oil corporations had a hissy fit. They had funded the PCs for many years and always relied on them as allies. Almost overnight, the oil CEOs bought up a new political party called the Wild Rose Alliance. The first issue the now well-funded Wild Rose brought up was oil royalties. Coincidence? Definitely not. They began putting the pressure on the government to change its mind. And they did. The Stelmach Conservatives quickly put through a reversal of their decision to raise royalty rates.
Did anyone else support that decision? It may be a surprise to some, but the Alberta Liberal Party voted with the PCs and the Wild Rose to reduce royalty rates. Maybe it should be a surprise because the Liberals also receive truckloads of money from big oil execs. You think the Liberals are a sinking ship now? Their ship would have sunk a long time ago without the support of big oil. It will actually be interesting to see if that oil money follows all of the Liberals who are jumping ship to the Alberta Party, which is essentially a new incarnation of the same thing.
The only party that opposed the decrease to the royalty rates was the Alberta NDP, the only party that does not accept donations from big corporations. However, the party does receive money from labour organizations.
So what does that say about where interests lay? Well, just like the difference between AFL President Gil McGowan and Klein-Minister Murray Smith, one side has interests in keeping the corporate CEOs happy, and the other has interests in seeing more quality, well-paid jobs for Albertans. The PCs, the Wild Rose, and the Alberta Liberals are all in the pockets of big oil. The evidence is clear, and a look at the interests of all sides points to the same conclusion.
Albertans are not getting a fair price for the oil we own. And the only political party in our province saying that right now is Brian Mason's NDP.