Albertans freeze in the dark

A cold, expensive winter for oil province's residents, high profits for industry, as NAFTA chickens come home to roost

By: Linda McQuaig

  Ever since Mike Harris redefined the expression "common sense" to mean the underfunding of every service the public wants and needs, there's been a difficulty using that term in a meaningful way.
  But I heard one example of a true "common sense" approach recently when the CBC radio program This Morning ran clips of ordinary people trying to make sense of the huge run-up in energy prices. One Alberta woman said she didn't understand why she should have to pay so much for natural gas when the stuff is produced right in her own province.
 

Ottawa's finally capitulation came when the Mulroney Tories signed NAFTA, giving up any future possibility an energy policy that favoured Canadians

  Now that is a common-sense question, crying out for a common-sense answer. Unfortunately, This Morning had lined up two economists to respond. The economists, a private consultant and an analyst at an industry-sponsored research institute in Calgary, were quick to make things sound complicated and somehow related to unstoppable global economic forces.
  In fact, the reason Albertans can't have reasonable energy prices has nothing to do with the complexity of energy production or the global economy, and everything to do with politics.
  Specifically, right now, it has to do with the fact that Canada signed NAFTA (the North American Free Trade Agreement), and NAFTA prohibits Canada from offering lower energy prices to Canadian consumers than it does to consumers in the U.S. So as energy prices have shot up recently in the U.S., Canadians have been obliged to pay those higher energy prices too.
  NAFTA (specifically, section 605) also prevents Canada from reducing energy supplies to the U.S., unless it reduces them by a proportionate amount in Canada.
 

The Alberta government has proved astonishingly pliant and submissive with the energy industry - even by previous Alberta standards - Peter Lougheed drove a much tougher bargain

  In other words, Canada is not allowed to favour Canadians - including Albertans - when it comes to access to our own resources. In terms of price and supply, those resources might as well be located in the U.S. Now, I would imagine that if this had been clearly stated by the economists interviewed on This Morning, the Alberta woman - not to mention tens of thousands of Canadians listening - would have asked themselves common-sense questions like: Why would our government sign such a stupid deal? Why would Ottawa agree to a treaty that makes it illegal for us to properly defend our own interests in the crucial area of energy policy?
  Ottawa wasn't always so willing to offer up its citizens to the whims of the marketplace.
  Things were very different in the 1960s and '70s. Back then, the US was keenly trying to win guaranteed access to Canada's energy resources. But the Trudeau government resisted and, in 1980, introduced the National Energy Policy, with the aim of doing the opposite - ensuring Canadians would have preferential access to their own energy. The plan was designed to protect Canadian consumers from surging energy prices, and to ensure Canadian oil and gas reserves would be available well into the future for Canadian economic development.
 

If Alberta had collected royalties at the same rate as the Lougheed government, it would have collected an extra $20 billion between 1992 and 1997 alone

  Alberta strongly resented Ottawa's encroachment into the energy field. The province's fierce resistance forced Ottawa to back down. Ottawa's final capitulation came when the Mulroney Tories signed NAFTA, giving up any future possibility of having an energy policy that favoured Canadians. The Americans had finally achieved their long-cherished dream of guaranteed access to Canadian energy resources; indeed, achieving that was one of the main reasons they were interested in NAFTA in the first place.
  In prairie populist lore, the story is typically presented with Alberta as the tough guy, kicking sand in the face of Ottawa. And it's true that Alberta is all muscle and brawn against Ottawa. But all that macho firmness, oddly enough, turns to jelly, when Alberta deals with the oil companies. In recent years, the Alberta government has proved astonishingly pliant and submissive with the energy industry - even by previous Alberta standards. Former premier Peter Lougheed drove a much tougher bargain, forcing the industry to pay substantial royalties that were then used to invest in the economic infrastructure of the province.
  Since then, the regimes of Don Getty and Ralph Klein have allowed royalty rates to decline significantly. Even so, Alberta's finances have been fine. That's because it doesn't take a rocket scientist or even a particularly competent government to balance a budget when you're sitting on massive reserves of one of the most valuable commodities in the world. Even oil skeiks who spend most of their time managing their harems can also look like sound fiscal managers.
  What's interesting is to imagine how much better things could have been for Albertans if their recent governments had driven a harder bargain with the energy companies.
  The Parkland Institute, a think tank affiliated with the University of Alberta, has shown that if Alberta had simply collected royalties at the same rate as the Lougheed government did, the province would have collected an extra $20 billion between 1992 and 1997. If its royalty rates had been the same as Norway's, Alberta would have collected an extra $36 billion in those years.
  That's not socialism, just common sense. But it takes politicians tough enough to kick sand in the face of the private sector too.

Linda McQuaig is an author and journalist. This column, reposted with permission, appeared in the National Post.

Posted: February 05, 2001

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