This is an interview between Max Fawcett, editor-in-chief of Vancouver Magazine, and Kai Nagata, energy and democracy director at the Dogwood Initiative. The interview originally appeared on Vancouver Magazine. 

Max Fawcett: What are your thoughts on B.C. saying no to Trans Mountain? Is that game, set, and match for the project?

Kai Nagata: It’s actually entirely consistent with what they said in 2013 about Enbridge, which is basically if you want to come and build a heavy oil project in B.C. you have to follow the campsite rule — you have to leave the province at least as well-off as you find it. It’s actually pretty hard for anyone who proposes to ship dilbit [diluted bitumen, the stuff that’s produced in the Alberta oil sands] to either convince the province that they can clean it up if it spills in the ocean or that it will deliver a financial reward with commensurate with that risk.

Based on those criteria, Trans Mountain and Enbridge are not that different in terms of the characteristics of their projects, so it’s not that surprising to see the environment minister [Mary Polak] say they haven’t met the five conditions.

MF: Do you think the proponents understand this yet, or do they think the province was — and is — bluffing with the conditions it’s laid down?

KN: That would be a question for the companies, I guess. But so far, the general pattern that we’ve seen from Kinder Morgan is that they don’t take the Canadian regulatory process overly seriously. In the conference call in December with investors, I believe Steve Kean actually referenced the province’s conditions and the progress that he believed they were making towards meeting them. 

The tone of that call would suggest that they didn’t really see the province as an obstacle. But the reality now is that, with the B.C. Liberals putting some clarity around their position, there’s no party left in B.C. that sees any political upside to supporting the project. It begs the question: if the B.C. Liberals, the B.C. Conservatives, the B.C. Greens and the B.C. NDP oppose this project, where does it leave the federal parties?

MF: Is this another win for you when it comes to resisting pipeline activity on the coast?

KN: It’s been an interesting few months. The basic principle behind our work is that we think decisions should be moved closer to the people who have to live with them. The current decision making process, and the current NEB review, really don’t make a lot of room for any kind of decisive or meaningful input from those people and those First Nations and communities along the path.

I think for the province to step up and assert its position kind of moves the needle a little bit towards the west coast and away from Ottawa. Overall, that’s a good thing. But I wouldn’t say it’s in the bag. The response by the federal government is really going to tell the tale of what this debate is going to look like over the next couple of years.

MF: That’s a lot of pressure on Justin Trudeau’s shoulders, given that he’s supported Trans Mountain in the past and said he’d support it if it met all of the relevant regulatory approvals. That puts him in an interesting box, doesn’t it?

KN: I’d say it puts him in the same box as the provincial government. In the statement today, they said they support in principle the idea of moving inland resources to international markets, and that’s what Trudeau has said in the past about Kinder Morgan. But it’s a question of how you do it, and how you get buy-in for a project like that.

I think we’ve seen a lot of examples recently of how to go about that very, very poorly. Trudeau, right now, is saddled with an NEB that was stacked by Stephen Harper on the way out, and it doesn’t allow the Liberals to make an appointment until 2020 — after the next election. He’s really got all the political cover he could ask for, in terms of bringing in a major shakeup at the energy board. But so far, the Liberals have held their fire.

Read the rest of this interview on Vancouver Magazine.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Think of Norway and your mind likely conjures up a Narnia-like folklore: vikings, salmon, fjords, Svalbard reindeer.

But there’s another element — albeit slightly less fabled — that’s been added to the list recently: the Government Pension Fund Global. It’s also known as the “most successful sovereign wealth fund in the world,” according to a February 2015 report from the MacDonald-Laurier Institute.

It might not be popular enough to inspire a cable television show, but it’s prominent nonetheless.

“There’s almost this myth about Norway,” acknowledges Andrew Leach, energy policy professor at University of Alberta, referring to Norway’s sovereign wealth fund.

The investment fund, created in 1990, now houses $1 trillion (it’s not a typo) in savings from non-renewable resource revenue. As oil prices have plummeted, comparisons between the Norwegian reserve and Alberta’s Heritage Savings Trust Fund have spiked. Alberta Oil editor Max Fawcett jested that a CBC News feature from late March was “probably the 429th time in last year” that a Canadian news outlet had compared the two.

And with the increase in the number of comparisons has come a surge in the number of critiques of that comparison — complete with a new term born in the Twitterverse: "Norwailing."

On March 26, Fawcett published his piece Why we're not like Norway, which looks at the country's different tax regimes (as in, in Norway citizens pay enough taxes to cover program spending), the subsidized history of extracting oil from the oilsands and the differences between Alberta as a province and Norway as a country.

A few days later, the National Post published an argument by Stephen Gordon, an economics prof at Laval, that the proposition ignored the sheer amount of oil left in Alberta compared to Norway and oversimplified the unique fiscal responsibilities of a province (think: transfer payments to the feds).

Also hopping on the bandwagon with provocative swagger was Maclean's writer Colby Cosh, who wrote “The case for blowing Alberta’s oil riches."

What to make of all of this? Well, first off let's look at why the Alberta vs. Norway makes sense. Both are industrialized places with social-democratic values. Both rely on resource revenues for a decent chunk of revenue (22.6 per cent in 2014 for Norway, almost 18 per cent for Alberta). Comparing Alberta to Norway certainly makes mores sense than comparing Alberta to Saudi Arabia or Venezuela.

Alberta’s Heritage Savings Trust Fund was created almost 40 years ago by former premier Peter Lougheed with a one-time investment of $1.5 billion. Since then, the fund has dwindled in priority. At last count, it held $17.4 billion in oil and gas revenue. That’s less than two per cent of the amount in Norway’s savings account. (That makes 430 comparisons this year so far.)

Getting trapped in the saving vs. spending debate is a red herring, argues Mitchell Anderson for The Tyee: "What is missing from these arguments is that you can't save what you don't have. Alberta has done such a wretched job of capturing public wealth from a globally significant public resource that arguing about savings versus government spending is an exercise in red-herring hair-splitting."

He also breaks down which place is doing a better job of capturing public value from a public resource.

"Dividing resource revenues by production reveals some shocking figures. Norway realized revenues of $87.69 per barrel in 2013. Alaska managed $38.54. And Alberta? Just $4.38 — one-twentieth what our Norwegian cousins managed to rake in," Anderson writes.

Back in Alberta, that money has flowed into corporate coffers instead of into the public bank account.

“They chose, rather than putting a torch to the money, to transfer into another form of capital — from a natural resource into one that accumulates interest for them in perpetuity,” explains Greg Poelzer, professor of political studies at University of Saskatchewan and author of the MacDonald-Laurier Institute report. “Sometimes it’s seen that this is a social-democratic orientation that Norway’s taken. Quite the opposite. They’re ruthless capitalists and understand fiscal conservatism and capital finance.”

On the flip side of the coin, Leach says that the comparison to Norway just doesn’t recognize the history of the resource. Back in Lougheed’s day, Leach points out, there was an incredible amount of excess revenue due to oil embargoes. There was too much money not to invest. But then came the oil glut of 1986. Investments in the fund plummeted with the returns. But by 1999, revenues had bounced back.

“If you look at Alberta, as far back as the 2000s and such times, we’ve always had the view that our future revenues are going to be greater than our current revenues,” Leach says. “This, from an economics perspective, is not good motivation for savings: it’s the equivalent of taking someone in their first job and saying ‘you should save now so you have time to spend when you’re a well-paid executive.’ ”

As Anderson notes, the royalties game is at the heart of the issue. Remember when former premier Ed Stelmach introduced a 20 per cent hike in the royalty rate back in 2007? That didn’t even last 1,000 days. Leach emphasizes that while another royalty hike wouldn’t pressure companies out that have already enormously invested infrastructure, it certainly wouldn’t encourage future prospectors.

That said, everyone from the Fraser Institute to the Canadian Centre for Policy Alternatives can agree that Alberta shouldn't be relying on non-renewable resource revenue to fund its operating expenses, so something has got to change.

Amin Asadollahi — oilsands program director at Pembina Institute — argues that growing the savings fund would serve to protect the economy from the boom-and-bust cycles the province is currently experiencing. Eventually, those dollars could be invested in sectors that are less prone to uncertainty and high levels of emissions.

“If the capital investments are targeted appropriately, they can also support sectors that might be disadvantaged as a result of the resource boom,” he says. “There’s the focus on one sector, the governments can use these kinds of capital investments to incentivize growth in other sectors. I think you can guess which sectors I’m talking about here: renewable and low-carbon pathways.”

Poelzer defends the Norway comparison for similar reasons: namely, that the amount in the Norwegian fund extracted for general revenue serves as a buffer for supply shocks like the one Alberta is current undergoing. Added to its glory is that the principal is never touched, only the interest. Poelzer compares the outcomes — massive and predictable investments in roads, schools, welfare — as the golden eggs of a white goose, boosting competitiveness, education and well-being.

But he’s not naive about the significance of social consensus. Albertans aren’t exactly well-trained in delayed gratification. Some simply work here for a few years before moving somewhere with a better view of the ocean. Norway sports heavily regulated immigration and taxation. Most Albertans are incredibly averse to the latter, making it difficult to fill the gap that investments in the fund would require.

“The interprovincial migration in Lougheed’s day was nothing like once the expansion of the oilsands took place. Then, there were greater political values and heterogeneity and a weaker social consensus," Poelzer says. "When we ran into fiscal trouble in declining oil commodity prices during Getty and his successors, there wasn’t the political consensus to stay the course. That’s where the wheels came off. And they’re very difficult to put back on.”

In Alberta’s greatly anticipated budget, released on March 26, the provincial government committed to halving its reliance on non-renewable resource revenue for budgeting by 2020, from its current level of 100 per cent. The remainder will pay off debt and get invested in the fund.

Asadollahi says that's a good sign. But how the gap left by resource revenues will be filled is yet to be determined.

“If it’s just a question of, ‘Would you like to have a trillion dollar sovereign fund,’ the answer is, ‘Yeah, sure, I would love to,’” Leach says. “But are we prepared to reduce government expenditures and/or increase government take?”

Image Credit: Fjordtravel.no

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

When you cover energy and environment issues day in and day out, you’re prone to having some pretty geeky fantasies.

Case in point: over the holidays, my mind wandered to considering what advancements in Canadian energy policy I’d put on my wish list for 2015. I could have rattled off five or 10 things, but one kept rising to the top.

If I could wave my magic wand and make just one thing happen on the energy and environment front, what would it be? I’d like Alberta to start managing its oil wealth more responsibly.

The context: as 2014 draws to a close, Calgary public-school officials are asking the province to cough up the funding required to complete eight new schools and two modernization projects on time.

Right now, one-third of Calgary’s schools are running at more than 90 per cent capacity. All of the projects that require funding have been announced by Alberta Premier Jim Prentice since he took office in September.

“With the recent fluctuation in oil prices, we’re concerned,” Calgary Board of Education trustee Amber Stewart told Metro Calgary.

Let’s take a pause and reflect on how totally absurd this is for a moment.

Alberta has been developing one of the world’s largest sources of oil for more than 40 years and yet Calgary’s schools are nearly overflowing and the province doesn’t know if it’ll be able to locate the cash to build new ones because — surprise! — the price of oil changed.

So what’s wrong here? For starters, new infrastructure shouldn’t be tied to the price of oil. Even the Fraser Institute and the Canadian Centre for Policy Alternatives can agree that the Alberta government shouldn’t rely on non-renewable resource revenue to fund its operating expenses. (For the best run-down on this topic, read Money for Nothing: The Province vs. Non-Renewable Resource Revenue by Alberta Oil editor Max Fawcett.)

Fawcett references a 2013 Fraser Institute report that said to treat oil revenues as “analogous to sales tax receipts, and to spend them on projects that provide a flow of present services, would be to engage in unwise capital consumption, a drawing down of principal. Intuitively, the present generation would be selfishly eating away at a finite stock pile of wealth, rather than acting as custodians of ­nature’s gifts on behalf of all future generations.”

Another report by former Premier Ed Stelmach’s Council for Economic Strategy noted: “The true Alberta advantage is not the ability to create a low-tax environment by underwriting a significant proportion of government services with funds received from the sale of energy assets.”

Despite generating almost $190 billion in non-renewable resource revenues since 1980, the value of Alberta’s Heritage Fund was just $17.3 billion at the end of 2013 — paling in comparison to both Norway and Alaska’s non-renewable resource savings.

So here we are digging up two millions barrels of oilsands per day, and Prentice is warning that tough times could lie ahead as oil prices plunge below $75 U.S. per barrel. The province has projected that there could be a $7 billion shortfall in revenues next year as a result of the price crash.

Could these fiscal woes offer the window of opportunity needed for Albertans to wake up and see how poorly their oil wealth is being managed?

It took millions of years for all of that oil to end up trapped in sand in northern Alberta. We only get one shot at digging it up. It’s high time we start getting that right (and getting that right would inevitably mean going slower and collecting higher royalties).

The first step in changing the way Alberta manages (or mismanages) the oilsands is to untether government spending from oil revenues, thus starting to dismantle the government’s reluctance to fairly regulate industry. Right now you have a situation in which the Alberta government is reluctant to bite the hand that feeds it.

As an added bonus, keeping one-time resource wealth out of the province’s operating budget could weaken the government’s chokehold over its citizens (pretty easy to stay in power when you’re dishing out $400 “prosperity cheques”) — not to mention actually creating a savings fund for the future.

In an interview with The Tyee, Terry Lynn Karl, one of North America's foremost experts on the politics of oil, offered some wise words on the impact of oil revenue on governments. 

"Let me be clear: the commodity itself is neither good nor bad,” she said. “But the excessive profit involved from what Adam Smith called 'reaping what has not been sown' has led to a concentration of power and influence that makes it exceptionally difficult to fight the negative consequences of hydrocarbon dependence.”

The first step to breaking up that concentration of power and influence? Stop borrowing from the future and spending oil revenue like it's going out of style.

So here’s a little new year’s resolution suggestion for Prentice and the Alberta government: show your commitment to managing the oilsands responsibly by weaning yourselves off relying on one-time oil revenues to provide government services. If you showed that kind of courage, there may be short-term pain, but Albertans 50 years from now would still be clinking their glasses in your honour.

Photo: Jim Prentice by Connect 2 Canada

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.