Alberta is a province renown for its political dynasties.

Since its founding in 1905, only five parties have ruled, with the Progressive Conservatives reigning for a staggering 44 years between 1971 and 2015.

But when it comes to oilsands policy, the province’s compass has been set by two premiers: Peter Lougheed and Ralph Klein. Both took distinct approaches, with Lougheed emphasizing managed development assisted by public funding, while Klein allowed industry to largely set the terms of engagement (including far lower royalties and the fast tracking of environmental reviews).

It might seem like ancient history. But it arguably matters more than ever given the complex politics of the current Alberta NDP government, which is juggling a cap on oilsands emissions while also advocating for increased production.

Enter “Betting on Bitumen: Alberta’s Energy Policies from Lougheed to Klein.” It’s a brief 36-page report written by Gillian Steward, a Calgary-based columnist for the Toronto Star, and published via the Parkland Institute and the Canadian Centre for Policy Alternatives (CCPA). In it, Steward explores the distinct approaches to oilsands development of Lougheed and Klein, helping to contextualize the ongoing actions by the Alberta NDP government.

DeSmog Canada talked to Steward about the report and her findings.

What compelled you to write this report?

I think there’s a lot out there about the current situation regarding energy policy, the NDP government, what they have to do or what they shouldn’t do. But I think people, in many ways, have lost track of how we got where we are. It’s kind of a long and windy road, but it’s really interesting and I just think it’s part of the history and it puts into context what’s happening now.

A key part of the report concerns Peter Lougheed’s legacy, something which many Albertan politicians will harken back to. Do you sense that politicians who talk about Lougheed necessarily recognize the true legacy of Lougheed?

I don’t think people recognize how much government intervention there was in terms of really kickstarting the development of the oilsands. The government put in a lot of public money, a lot of organization, and not just a one-shot deal: it went on for a long time. I think the fact the oilsands then became so valuable and so much of the technology became so important, particularly the in-situ, is really because of all the public money that was spent during the Lougheed era. That was basically all money that the corporate sector didn’t have to pay. Not that they didn’t pay anything, but they were in many ways subsidized by the government of the time.

With that in mind, do you still think it’s fair to characterize Lougheed’s legacy compared to later premiers as more adversarial — or at least not quite as friendly — with the oil and gas industry?

I think that’s true. He was certainly not an enemy of the industry or anything like that, but I think he knew how to assert his authority over the sector. He raised royalties significantly early on in his tenure and he basically said ‘this is what we’re going to do and this is how we’re going to do it.’ It wasn’t that he didn’t cooperate with the industry, but he certainly let them know who was in charge. At one point, the industry was so mad with him that they revoked his membership in the Calgary Petroleum Club. They were not necessarily happy, particularly with his position on royalties.

I think because he came from that world, he understood it and was in a better position to advocate for the people of Alberta as opposed to always advocating for the industry.

Do you have any sense of why Lougheed was able to do that? Was it because of really firm convictions or economic conditions? Is there something you attribute his decisions to?

I think there’s a couple of things there. One is I think he was actually quite visionary. I think he thought in terms of the big picture, as well as being someone who was pragmatic enough to know how to get to the big picture. Also, it was a different time in the sense where government intervention in various programs was more accepted than it is now: that really fell off in the ’80s. It was a more accepted economic or public policy practice then than it is now.

One of Ralph Klein’s first moves was to sell off the Alberta Energy Company, which was a big part of Lougheed’s legacy. What motivated that decision?

Again, I think there were a couple of things there. One is that compared to Lougheed, the Klein government had really swung more to the right. They saw Lougheed as almost being too pink for them, too socialist, in the sense that he did use government money to subsidize business. They believed that government should get out of the business of business.

The other reason was they needed the money. Klein was faced with debt and they didn’t want to raise taxes. They were looking to raise revenues. That was one way to do it.

Is it strange to you that companies and associations don’t acknowledge the role that government intervention has played over the years?

There’s no question that through the Alberta Oil Sands Technology and Research Authority, which was funded by the Lougheed government, really pushed the technology along in many ways. In-situ development was one of the main products of that: what it meant was that corporations didn’t have to spend all that money developing it. Public money went into developing it.

We don’t ever hear much about them acknowledging public money for that. When the report from the National Task Force on Oil Sands Strategies was released, they used the in-situ technology as a reason to really move ahead fast. But they don’t acknowledge where it came from or why it had become so important.

You point to the National Task Force and its final report as a watershed moment for the direction of how oilsands was managed by the government. Yet we rarely hear about it. Why do you think that specific task force and report was so significant in Alberta’s history?

Basically, it coincided with Klein’s first years in power and it outlined a way to move forward on oilsands development that allowed for the government to pump up the economy, which meant they could increase government revenues. That’s what they were looking for. They were looking for some kind of plan where they could increase government revenues but not through taxes. By heating up the economy, they were assuming they get more taxpayers even though they hadn’t raised taxes.

It just came at the right time for them. They were in debt, we’d just come out of a recession, all that kind of thing. By accepting what the task force recommended, which is basically ‘let us push ahead, don’t put too many obstacles in front of us, there will be lots and lots of investments’ and then at the same time the oil price started to go up. I don’t think anybody could have predicted it at the time that it would go as high as it did. But it was a nice coincidence given they had really unleashed the development in the sense that they allowed the industry to do it the way they wanted to do it. By taking away a lot of environmental regulations, by making a lot of the oilsands royalties so low, they encouraged development. But then at the same time, the price went up.

You also identified how the news media helped spread the findings of that, especially the legitimization of the panel even though it was very industry-stacked. Why did that happen? And do you sense that has changed since in terms of how the media reports on oilsands?

I was really surprised when we did that survey of the coverage at how rarely the news reports explained what this task force even was. It was called a government-industry task force, which lent it credibility which to my mind it didn’t really have because it was 85 per cent industry. And only a few reporters bothered to examine what the source of this report was and where it came from and who put it together. It just gave it a credibility by saying it’s a government-industry task force. It just sounded like they got together and agreed on this.

I think so much of the reporting on the oilsands today is basically business reporting. Industry would argue that it’s mostly about the environment, and there’s so much coverage about environmental issues. But really, it’s mostly business reporting about the oilsands. Even when you look at the sources that reporters are relying on, they’re very often industry sources like CAPP or the various companies. Even with environmental stories, the sources inside them are still very often industry or government sources.

I was involved with doing some research a few years ago on journalists that were covering the oilsands: we were looking at their use of sources. And the most trusted sources were academic sources. But it was also clear that reporters depended on the industry a lot. And CAPP is organized to provide a whole bunch of data. That’s what they do.

This is obviously written within the context of the new Alberta NDP government. You conclude the report by identifying that Premier Rachel Notley has an outlook that is closer to Lougheed than it is to Klein. She had the chance to raise royalties, which she effectively passed on and has publicly pushed for new pipelines and oilsands expansion. Why did you conclude that Lougheed was more of her muse than Klein?

I think in some ways because she’s trying to separate herself out from the industry. Not completely, for sure. I think the fact she’s using revenue from the carbon tax and putting it into renewable energy projects is a way to subsidize the start-up of an industry, much as Lougheed did with the oilsands. She doesn’t have the kind of revenue that he was dealing with in those days. But she is trying to use public money for that.

She also has a working relationship with the industry to a certain extent in that she had them on the stage when she announced the Climate Leadership Plan, and they were mostly Canadian companies. They were homegrown companies, except for Shell. Which is something that Lougheed also tried to do: he really wanted to make oilsands development Alberta-centric. I think she’s trying to do that too.

I think the other thing she is doing that he didn’t do is she’s consulting much more in a general way with a wide variety of stakeholders, which Lougheed didn’t really do at all and Klein only consulted the industry stakeholders. She’s trying to widen that, I think, and make it more diverse.

Is there anything you wanted to add?

I just think it’s important to know the history and context so people understand why we are where we are. That it didn’t just spring up overnight, that it’s complicated and the politics of it are really complicated. In many ways, you can’t expect a new government to undo everything that’s been done in the last four decades when it comes to energy policy.

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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

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