Will the approach to oil economy change any time soon?

Whether last week’s highly theatrical announcement by Premier Jim Prentice about him and his cabinet colleagues

Whether last week’s highly theatrical announcement by Premier Jim Prentice about him and his cabinet colleagues taking five a per cent pay cut in view of the province’s budget shortfalls was an act of desperation or a successful public relations maneuver, probably time will tell.

But what is certain is that the move is by no means even close to addressing the problems caused by the decline in revenues from the royalties of oil and gas production in Alberta. Provincial media made a rough calculation estimating that cabinet’s total pay cut would amount to only about $600,000 a year, a ridiculously small figure to help address the problem of projected deficit. Even if MLAs agree to a similar pay cut, it is highly unlikely that resulting figure could be a solution to the problem.

But what is suggested with the pay cut is somewhat disturbing: The premier and the cabinet might have wanted to signal to the public and the public employees that, now that they have taken the lead, public sector employees might need to step up to the plate and take some pay cut of their own as well; an idea which has received immediate and categorical rejections from public sector unions. That is probably not going to happen unless the provincial government takes some forceful measures at the expense of ruining their chances at the early provincial elections, which are all but certain to be announced probably within weeks.

But here, there should be other questions asked as to whether our provincial government (and the federal government, for that matter) has been showing due diligence in collecting what is due to the province from the energy sector.

A 2014 report, which was largely ignored by Canadian media, calculates that this country provides a total of $34 billion in direct and indirect subsidies on an annual basis to the energy sector, that is oil, gas and coal production.

The source of the report is not a left-wing organization or an environmental vigilante group, it is the International Monetary Fund, the global watchdog of capitalist economic system. And the report makes clear that the figure is calculated by taking into account all the economic, environmental and social factors involved in the production processes.

According to the report, the subsidies include uncollected taxes, waiving of payments for the use of resources and habitat, and in some cases providing financial entitlements.

Take for instance the taxation; if a construction worker purchases steel-toed boots, an indispensable piece of work equipment, s/he is taxed on that purchase, but an oil company has the leeway to deduct its purchase of drilling equipment from taxable spending.

We, living in the cities or smaller communities, pay garbage collection fees, but companies operating in the oil sands regions not only do not pay for the water they use, but also they use the environment as dumping ground for their waste without paying any fees.

Given that Alberta has the most oil-dependent economy in the country, it is only natural to conclude that this province probably provides most of these subsidies.

Now, at a time of declining oil prices, and just before an election campaign during which a lot of funding will be needed, no one can realistically expect the government of Jim Prentice to antagonize oil companies by even hinting that what has not been collected so far might have to be in the future.

The question is whether one will be far too optimistic to hope that the PC leadership and the provincial bureaucracy might have learnt a lesson that will allow them to collect and use the royalty revenues more carefully and productively by the time the next boom cycle arrives.

 

 

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