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The Goose and It’s Golden Eggs – An Election Does Not Change How Important the Energy Industry is to Canada

by Phil Harris

Prior to the just concluded federal election that nobody wanted, one that cost Canadian taxpayers $600+ Bln, the Liberal Government pushed forward policies to limit the growth of the oil and gas sector in Alberta. Bill C-69 delayed and damaged the ability of new projects to get started in Alberta, while foreign investment in Alberta’s oil patch continued to exit the country. The Senate pushed through with Bill C-48 – the oil tanker moratorium – a bill specifically targeted at Alberta and the ability of Alberta and Canada to ship oil to overseas markets. Meanwhile, pre-Covid and post-Covid, cruise ships burning oil will continue to harbor in B.C. ports and B.C. will continue to ship coal to China and India. There has been no mention of curtailing these activities. The fact that these industries have not been targeted in a province that still has potential for Liberal votes is no coincidence.

To “help out”, the oil and gas sector, the Liberals recently pledged $2 billion for a “Futures Fund” for Alberta, Saskatchewan, and Newfoundland and Labrador to “support local and regional economic diversification” and develop clean energy opportunities in the coming decade. This is to transition oil and gas workers away from the energy industry. The government wants to spend $2 billion to reduce work in an industry that employs over 500,000 people nationwide and one that represents 10% of Canada’s GDP (Gross Domestic Product), 20 % of our exports, and contributes $10 to 20 billion a year to the governments coffers.  How does that make any sense?

How important is the oil and gas sector to Canada’s balance of trade and gross exports?  In 2020, it represented almost 20% of Canadian Exports – which was the worst year ever for the oil and gas industry.  No other industry contributes as much to the Canadian economy and trade.

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Alberta also contributes more to confederation than any other province. In 2017, in the harshest downturn in the Alberta oil patch had seen in at least the last 30 years if not in history, Alberta was the largest contributor to the Federal tax coffers per capita. Albertans pay almost twice as much per capita in taxes as Quebec does, 33% more than Ontario or BC, and about 45 % more than the national average if Alberta wasn’t included in it. Even during Covid, Alberta was the largest contributor per capita to GDP and to government revenue, although detailed statistics have not yet been supplied by our woefully inadequate Liberal government.

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But this isn’t new… it is not like this is a recent event. In fact, it has been like this for years. On average, Albertans pay twice as much in taxes as anyone else in Canada. And Albertans haven’t complained. Alberta is a province of hard-working individuals who want to excel, grow, lead, and produce. Alberta cautiously produces its resources in an environmentally friendly fashion that sets the international standards for safety, stewardship, and compliance. Alberta also freely gives some of the wealth generated back to the Federal economy for the patronage, safety, and lifestyle that Canada offers, to the benefit of all Canadians. Or it has until now.

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One should look at what Alberta gets back for those contributions. After all, the Federal government does spend on programs to increase research, support business, provide access to healthcare, support entrepreneurs, etc. Look at the help they have given the auto industry in Ontario, Bombardier in Quebec, the Irvings in the Maritimes. Despite recent scandals,  the current government still gives projects to SNC Lavalin! How about Alberta? Surely it must get its fair share? Apparently not.

The table below illustrates where the government uses its money to buy goods and services. This covers basic government activities – the salaries of public servants, the day‑to‑day operation of government departments, and military installations and operations. It also includes the purchase of supplies and materials. Alberta has the least amount per capita spend of any province. Obviously, the Government prefers to do business elsewhere than Alberta.

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Well, I am sure they give it back equally to the people though, right? After all, aren’t Canadians all equal under the Charter of Rights and Freedoms. Since Alberta had the worst unemployment in its history and Calgary has the highest unemployment of all the large cities in Canada with the recent oil downturn, surely this is when Alberta would get some back, isn’t it? These transfers to persons are federal transfers to persons, comprising payments under federal programs, such as Employment Insurance, the Canada Pension Plan and Old Age Security. Hmmm it seems like more of that money goes to other provinces too.

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Well then… where do those BILLIONS of extra tax dollars go? They go to the “have-not” provinces. In the case of some of those provinces, they have been getting billions of dollars in equalization for years so you think they would be grateful regarding where that money comes from. Quebec has received over $55 Billion in the last five years. Even almighty Ontario, with all the government support for autos and  government offices, has received more than $6 B in the last 5 years. Anyone see Alberta in that chart? No, Alberta hasn’t seen an equalization payment in about 40 years. Now if you look at the charts above and realize that one province pays a lot more than everyone else, and receives a lot less, it shouldn’t be hard to figure out where that money is coming form.

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One would also think if the federal government is taking and spending Alberta’s money, they would also give Alberta a fair say at the federal level when it comes to politics- that only seems to make sense – right?

Not so. Alberta is the least represented province in Confederation, by a long shot. It can be seen from the readily published data – Alberta is poorly represented compared to its population and even more so compared to its contributions to GDP in this country. I particularly stressed the four largest provinces in the figure below – no slight is meant to our other friends and neighbors. Alberta contributes more per capita to Canada’s GDP than any other province – and gets the least representation in parliament. For ever Billion $ of GDP, Alberta gets half the seats of Quebec and the fewest seats. For every million people, Alberta gets fewest seats of any province in Canada. Alberta is under-represented on every account.  Can anyone justify why Quebec gets 9.3 seats per million people while Alberta only gets 7.9? That is almost a 20% difference in representation, and it is going to the largest population center in Canada, and the largest “taker” of transfer payments.

As it sits, Alberta is almost 12 % of the population of Canada but only gets 10% of the seats in parliament. What are the implications if Ontario and Quebec each got as many seats per capita as Alberta?  Ontario would lose 8 seats and Quebec would lose 12.  Twenty seats lost from the dominant east whose votes drive the results of federal elections.  Consider how that would change election results and policies across this country.   If  the number of seats was determined by provincial GDP, with Alberta as the norm, Ontario would lose 45 seats and Quebec would lose 40 – with the result being that Alberta’s 34 seats would almost match the 38 that Quebec would get.  An electoral reform based on contributions to GDP would move the balance of power away from the east. Currently, eastern Canada represents about 69% of the seats in the House of Commons, a GDP based reform would reduce that to about 62% and result in representation based on economic contribution to the country.

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Just how economically powerful is the west? Were Alberta, Saskatchewan, and Manitoba (the prairie provinces) to secede from Confederation – The newly formed union would be the 5th largest oil and gas producer in the world.  Alberta produces 80% of all the crude oil in Canada, and 70 % of all the natural gas. By far, the majority of this is used by the rest of Canada – although exports of oil and gas is one of the revenue generators federally. Between Alberta and Saskatchewan, it is 90 % of all the crude oil. While becoming one of the richest countries per capita in the world, the rest of Canada would slip to about 30th place on the list of oil producing countries, somewhere between Romania and the Democratic Republic of Congo. The trade balance of the rest of Canada would drop dramatically as we shipped oil to them, our export and their import.

Canada is the 6th largest wheat producer in the world, and 90% of it comes from Saskatchewan, Alberta, and Manitoba.  The prairie provinces also have huge uranium and potash resources, other major exports. Canada ranks highest of all the top 10 oil exporting countries, having the lowest levels of corruption, the highest ethics, and the most environmental production.

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The recent election has determined that Canada will basically have the same federal government it had 6 weeks ago. Canadians want the current government to be held in check and not have a majority. Despite what the current government wants, the reality is, once the world emerges from Covid, oil and gas consumption in the world will be on the rise once again. The IEA foresees peak oil demand in 2040, although the rate of increase is expected to slow by 2030.

Canada can provide energy to the world cost effectively, ethically and under the strictest of environmental regulations. Canada can lead the world in emissions reductions – we already have the lowest flare gas emissions and have dramatically reduced the emissions from the oil sands. This is not being done by carbon taxes; it is done by incentivizing industry to grow in an environmentally conscious manner. Canada can employ the wealth of its resources to drive research and development (the oil and as industry is already the largest private sector contributor to R&D) into carbon sequestration, alternative energy, and energy efficiency. Even with the same election results, it’s time Canadians demand more growth rather than more governance,  more value rather more virtue signalling and for more conscience and more common sense rather than more control.

Phil Harris is the President at Insight Analytical Solutions Inc, a Calgary, Alberta based supplier of measurement solutions to industry. He holds a Bachelors of Science in in Physics, a Masters of Science in Chemistry and has been involved in the energy industry, from nuclear to fuel cells to oil and gas, for 35 years.

LinkedIn: Phil Harris
LinkedIn: Insight Analytical

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