Until now Western Canadians have been very patient with the rest of Canada (ROC). Western Canadians even though, underrepresented in the country have been paying more than their fair share. Alberta, British Columbia and Saskatchewan have quietly sat still while multiple billions of dollars every year flow east.
How long can this situation last before the West takes action? Separatist movements are being motivated by current events and have already started organizing themselves. The West has been tolerant with the Prime Minister in the hopes that he can fix Canada, unfortunately the current government does not have a majority and therefore is catering to the socialists and extremists in Canada.
If Central and Eastern Canada continue to insist on implementing Kyoto Carbon Taxes, Cap and Trade system, the West will be forced to retaliate. The West can not afford to be manhandled and pay the bills at the same time. If you think this comment is just a rant, you may be surprised. Quebec only threatens to separate to receive perks and benefits from the rest of Canada, however when Westerners get serious about separating its not going to be a threat, its going to be a reality.
One of the best commentaries written deserves to be included on this site:
Alberta is already spreading the wealth
Any discussion of ‘redistributing’ the province’s petrodollars to correct fiscal imbalances is misguided
PRESTON MANNING AND FRED KERR
As the premiers and the federal government discuss fiscal imbalances and equalization, one hears increasing references to Alberta’s burgeoning petroleum revenues and suggestions that Ottawa should somehow involve itself in “redistributing” such revenues more equitably across the country.
In 1980 — the last time the federal government acted on such advice after the OPEC-engineered oil price hike — the results were politically and economically disastrous. Confiscatory taxes imposed on the industry in Canada almost killed the goose that was laying the golden egg. Oil-patch investment and jobs fled the country. Western alienation came within a hair of being transformed into full-blown western separatism.
And the Liberal government responsible for the so-called national energy program destroyed its electoral prospects in much of the West for more than two decades.
The Harper government obviously has no intention of repeating such mistakes. And there would be less misguided pressure for it to do so, if the public were to better understand the following facts:
1. Albertans’ per capita contribution to equalization is by far the highest in the country.
The federal government collects consumption, income and other taxes from individuals and corporations across Canada. Naturally, it collects more revenue in provinces whose economies are vigorous than it does in provinces whose economies are weak. Ottawa then redistributes significant revenues to the governments of less affluent provinces through the equalization program, to enable them to provide social services to their people roughly equivalent to those available in the rest of the country.
Ontario Premier Dalton McGuinty cites the $23-billion net federal fiscal contribution made by the people of Ontario, and argues that this is excessive. But, for 40 years (even when oil prices have been low), Albertans’ net federal fiscal contribution per person per year has been more than triple that of Ontarians.
Any suggestion that Albertans have not been contributing their fair share to equalization and should be contributing an even higher percentage is itself unfair.
2. The benefits of the current boom in the petroleum sector are already distributed far more broadly than most people think.
In 2006, $108-billion in revenue will flow into the petroleum sector in Canada as a result of record high oil prices.
The portion of this revenue that is most visible to the public — because it is most frequently mentioned by the media and the politicians — is the portion that flows into the coffers of the Alberta government. In 2006, this will amount to almost $20-billion — about $14-billion in royalties, $3-billion in taxes, and $3-billion from the sale of drilling rights.
But what about the other $88-billion? The Canadian petroleum industry will send about $5-billion to Ottawa in federal income taxes in 2006 and another $2-billion to $3-billion to the treasuries of other hydrocarbon-producing provinces such as British Columbia, Saskatchewan, Nova Scotia and Newfoundland. It will spend $11-billion on debt and equity financing charges, and another $23-billion on administrative and operating expenses.
And then there is the big ticket item — capital expenditures.
Conventional oil and gas wells start declining from the moment they come on stream. Typically, a new gas well’s production declines around 30 per cent in the first year. As a result, the industry must drill an ever-increasing number of wells just to keep production flat, let alone grow it. Oil-sands plants are even more capital intensive. This means that much of the capital generated by conventional and oil-sands production must be reinvested in further development. Thus, in 2006, the industry will commit more than $40-billion to capital expenditures — everything from rigs and mining equipment to chemicals and pipes — much of which is made outside Alberta, notably in Ontario.
Finally, there is the stream of dividends and distributions paid to investors in Canada’s petroleum sector — about $6-billion in 2006. The ownership of today’s industry is structured quite differently than it was in the 1980s — with many energy producers having organized themselves into royalty and income trusts. The majority of these are owned by individuals, mutual funds, and pension funds based in Central Canada. When the Liberal government mused about rejigging the tax rules for royalty and income trusts, it was no coincidence that the loudest and most immediate protests came not from Calgary but from Toronto.
And then there are the capital gains recently enjoyed by Canadian energy investors, most of whom live outside Alberta. The energy sector, which, during the Nortel glory days of the high-tech boom, represented less than 10 per cent of the TSX index, today represents about 30 per cent. That’s a lot of wealth generation for a large number of Canadians right across the country.
The bottom line? While $20-billion of the $108-billion generated by the petroleum industry in 2006 will end up in the hands of the Alberta government, the remaining $88-billion is much more broadly distributed than most media commentators, politicians and Canadians think.
3. The investment of $100-billion in the oil sands will generate more tax dollars for the federal government than the Alberta government, and almost as many person years of employment outside Alberta as within the province.
A recent study by the Canadian Energy Research Institute highlighted the following facts: Conventional oil production in Canada is declining, underscoring the importance of oil sands as a vital source of North American supplies. In 2004, Alberta’s oil sands were recognized by the International Energy Agency, for the first time, as part of global oil reserves. This established Canada’s reserves as second only to Saudi Arabia’s, justifying Prime Minister Stephen Harper’s assertion that Canada is becoming an energy superpower.
But oil-sands development requires massive capital investment before anyone sees a dime of revenue. Producers need to delineate ore bodies, build processing facilities, and buy trucks and loaders or inject steam to coax the gooey stuff out of the ground.
The need for massive capital investment creates opportunities for investors across Canada and around the world. And all this capital investment creates thousands of jobs, for which Alberta alone cannot hope to supply the labour. Trades people, engineers and labourers are flocking to Fort McMurray from across Canada, including a large contingent from Newfoundland. Most of those workers pay Canadian taxes.
Many send a portion of their oil wages home to Corner Brook, Barrie or Moncton.
The CERI study estimated the impacts of $100-billion invested in oil-sands development over a 20-year period through to 2020.
Even if oil prices were to level off at half their current level, this investment will lead to:
6.6-million person years of employment, 44 per cent of it outside of Alberta. Of the 1.7-million person years of employment generated in Canada outside of Alberta, 1 million would be in Ontario alone.
Federal government tax revenues of $51-billion, making Ottawa (not Alberta) the largest recipient of government revenues generated by oil-sands development.
An interesting future study would be to compare the national distribution of benefits, including tax revenues generated for the federal government, from the development of an oil-sands plant in Alberta versus a hydro-power project in Quebec or a nuclear-power plant in Ontario. And if such a study showed — as it would — that the benefits from the hydro and nuclear projects were much more narrowly distributed than those of the oil-sands project, would the political and business establishments of Ontario and Quebec support federal intervention in the name of equalization to ensure a more equitable distribution? Not likely.
The above facts concerning the current and future distribution of benefits from the development of Alberta’s petroleum resources are not widely known. They are rarely even mentioned, let alone taken into account, in the debate on how to correct fiscal imbalances and reform equalization. It is high time they were.
Preston Manning, a former federal leader of the Official Opposition, is president of the Manning Centre for Building Democracy and a senior fellow of the Fraser Institute. Fred Kerr is a Calgary-based commentator and former institutional stockbroker specializing in the energy sector.
Source; Globe & Mail.
