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Wednesday, December 31, 2008

Alberta’s energy sector could face more problems as Tories investigate Norway’s socialist approach to resource management

Finance and Enterprise Minister Iris Evans will be on a mission to Norway, the Netherlands, and Ireland from January 5 to 16.

Evans will be meeting with the finance communities in all three countries to look at “best practices” in sovereign and pension fund management, and to discuss recent events in world financial markets and their potential impact on Alberta’s growth.

“As we work to strengthen Alberta’s fiscal position, it is to our benefit to learn from others,” said Evans. “Norway and the Netherlands have experience in managing mature, resource-based economies.”

Norway’s experience, in particular, has been one of state ownership of resource companies with oil and gas royalties as much as five times higher than Alberta’s. In “The Norway Advantage” published in the Edmonton Journal in 2002, Mark Anielski writes:

In 2001-02 Norwegians may realize more than five times more revenue per barrel of oil and gas produced than Alberta: Cdn. $19.65 for every Norwegian barrel of oil and gas produced versus $3.88 per barrel of Alberta oil and gas produced. If Albertans received the Norwegian rate of return on their oilsands and natural gas production, $29.2 billion in oil and gas revenues would be flowing to government coffers in 2001-02 or $23.4 billion more than is budgeted.

Anielski likes the socialist Norway model because it shifts money from private hands to government coffers, which is precisely why Alberta should stay away from this approach to resource management. In the long run and on the whole, a bloated public sector destroys wealth and invariably encroaches on private enterprises across all industries.

Since introducing its New Royalty Framework tax increases in October 2007, perhaps inspired by “The Norway Advantage,” the Tories have been forced to overhaul the new tax scheme twice in order to undo the damage their government has caused to Alberta’s oil and gas economy...damage that might only be undone with a change of government and the restoration of investor confidence in the overall stability of Alberta’s tax environment.

Evan’s trip is expected to cost taxpayers a modest $35,000 -- but if the Alberta government intends to follow the socialist Norway model for resource management, the cost could be devastating to the working people and private investors who make up the province’s already struggling energy sector.

Posted by Matthew Johnston

Posted by westernstandard on December 31, 2008 | Permalink

Comments

On the bright side, she's also visiting Ireland where they threw off the shackles of socialism and realized unprecedented economic growth....

Posted by: Richard Evans | 2008-12-31 8:22:26 PM


Good point. Ireland ranks #3 in the world in economic freedom. But they don't have a resource economy Alberta can emulate.

Posted by: Matthew Johnston | 2008-12-31 8:53:50 PM


I've known for a couple of years that my days are numbered in the oilpatch. All this government is doing is moving the date a little closer.

BTW Matthew, why should Alberta need to emulate anybody? We're the new benchmark, after all.

Posted by: dp | 2008-12-31 11:29:22 PM


Socialism is the best way to kill the economy, but our greedy statists just never learn from history it seems.

Posted by: Alain | 2008-12-31 11:47:35 PM


On the bright side, she's also visiting Ireland where they threw off the shackles of socialism and realized unprecedented economic growth....
Posted by: Richard Evans | 2008-12-31 8:22:26 PM

The growth of the Irish economy is largely the result of large subsidies and tax breaks from the EU.

Posted by: The Stig | 2009-01-01 5:47:27 AM


Now, now Stig, don't go contaminating those carefully constructed rightwing fantasies with pesky facts.

Posted by: tvoyu | 2009-01-01 1:45:02 PM


don't go contaminating those carefully constructed rightwing fantasies with pesky facts.

Posted by: tvoyu | 2009-01-01 1:45:02 PM

The subsidies should be banished as a way of doing business or governing, they overlap so much its hard to tell them apart anymore. And tax breaks? Well that's just a good start towards economic freedom isn't it?

Posted by: JC | 2009-01-01 9:19:53 PM


So wait. Ireland gave up massive public works projects in 1987 (it had unemployment of 20% and was the poorest nation in Europe) for fiscal retrenchment. It then cut corporate and personal income taxes to extremely low levels. It then benefited from free trade in the EU. How are any of these things left wing ideas? What is the left championing these days to cure the economy? Furthermore, since when do subsidies create wealth? We've been susidizing Africa for 4 decades ...

Posted by: Charles | 2009-01-02 8:08:59 AM


It makes me sick, but don't think Alberta is so much more conservative than anywhere else.

Remember the place used to be run by the Social Credit party, and the Conservatives may win all riding FEDERALLY (except for poor Old Strathcona) but they don't dominate provincially and the margins aren't that great.

The Alberta government is insanely bloated and inefficient.

Almost 50% of my extended family works either directly or almost directly for the government, one family member estimated that 50% of the people in her office only work for about an hour a day.

Another family member charted that the size of their branch of government administration (so management not other workers) over the last 20 years has grown by about 7% per year regardless of economy or usage of their office.

I even hear solid separatists, who vote Conservative saying Alberta should separate and share the wealth through socialism. WTF?!

It comes down to greed I guess, everyone wants the oil riches but nobody wants to get dirty and socialism looks good when it's not you getting robbed.

Posted by: Pete | 2009-01-02 10:17:51 AM


Matthew, I hear Albertan's say "it's our oil" and therefore are often in support of higher royalties. Especially if unprocessed bitumen is shipped south of the border. One problem with this, is that "our" oil is really the government's oil and the royalties are spent in ways free people might not.

I don't believe there should be any royalties. Instead there should be property and mineral rights.

Posted by: TM | 2009-01-02 1:00:26 PM


TM:

It is our oil and that's a constitutionally proven fact.

Our elected representatives are there to look after the interest of the individual voter, not the oil companies.

Of course, looking after the interests of the oil companies was a trademark of Ralphie, a guy I voted for every time.

The influx of population means Alberta needs roads, schools, police, recreational facilities ... among other things.

Can you give an example of how property and mineral rights would be able to cover the entire cost or how it would be fair?

If one company got lucky and had production out of their land10 times as much as another company, how would you balance that disaprity?

If you could not raise enough money through property and mineral rights, what would you give up?

I understand bureaucracies are by nature inefficient and it would not hurt to look for efficiencies, but beyond understanding the weaknesses, what are the solutions?

Posted by: set you free | 2009-01-02 2:22:15 PM


I don't believe there should be any royalties. Instead there should be property and mineral rights.

Posted by: TM | 2009-01-02 1:00:26 PM


Dead on TM !! :)

Posted by: JC | 2009-01-02 2:26:10 PM


The solutions? How about the free market deliver of services, SYF?

Besides, the Alberta government has grown much faster than its population.

It's better to keep this resource wealth in the private sector. When the opposite happens, the people always suffer.

Posted by: Matthew Johnston | 2009-01-02 2:56:16 PM


Matt:

Private police forces? Nyet.

Private schools? OK, fine. I like internet schools.

Private recreations facilities? Would that be something like playgrounds for the rich?

Bureaucracy too big? Yep. Made that point already.

Private road builders? Seems to me we already have that. Somebody has to pay the bill, though. Toll roads your solution?

Posted by: set you free | 2009-01-02 3:26:22 PM


Ironically... Norway based their 'Pension Fund' on Peter Lougheed's visionary 'Heritage Fund' plan.

Posted by: Kurt | 2009-02-10 4:38:16 PM


Some facts for those who think Alberta is a free market economy.

The tax revenue per capita in Alberta is 43 % higher than Ontario.
The spending per capita is 34% higher per capita higher than Ontario.
Without the oil dollars Alberta would be comparable to the maritimes as an economic basketcase, and for the same tax and spend socialistic reasons.
Numbers are from StatsCan and are for 2007.
McGuinty is trying real hard to catch Ontario up; but the tax and spend socialists in Alberta have a huge head start over the tax and spend socialists here.
Vote Libertaarian - your only choice for less government.

Posted by: John Shaw | 2009-05-26 7:07:52 AM



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