Selling your citizens short is bad public policy
By Bruce A Stewart
Here’s how it’s supposed to work: government sets down the rules of engagement, businesses make decisions about how to work within them most effectively for them.
Here’s how it actually works: government fails to use the rules of engagement out of fear that the businesses won’t like them.
If you live in Alberta, the thought of the backlash if any royalty policy changes are applied is legendary. “They’ll pack up and go elsewhere” is the cry.
Perhaps in the 1970s or 1980s that threat had meaning. They could go to the North Sea or to Alaska.
Today? The North Sea is played out, and Alaska’s almost there. All oil fields have what they have: after you’ve produced half of it, the field’s output must decline.
Sure, there are century-old fields — think of Murphy Oil’s operations right in downtown Los Angeles — pumping a barrel or two an hour. Simple cheap production, almost fully automated, high quality product (even if there’s not much of it left). But you wouldn’t drill there now, and you probably wouldn’t make heavy investment.
Let’s get real about the situation now. Most of the world’s oil resources are now government-owned and in the hands of national oil companies. If the private sector companies get to participate, it’s very much as a junior partner, without control or investment security.
The largest remaining development opportunity open to private enterprise where long-term investment makes sense? Take a trip up Highway 63 to Fort Mac.
So if Alberta was to insist on, say, a differential royalty — highest if you’re just exporting raw bitumen, lower as you create more refining and processing work, lowest if you go all the way to build products from the refined products in an integrated supply chain — it can be done.
Sure, there’ll be screaming, ranting, and threats.
But there isn’t a real option any more. Big Oil knows it.
Alberta should want to set rules that sequester carbon, clean the water that’s used, restore landscapes … even better than today.
Alberta should want to set policies that encourage job creation, diversify the economy, do more than just “find it, extract it, ship it”.
Alberta should want to do as the Norwegians did, and turn the much-strip-mined Heritage Fund into a real fund — a sovereign wealth fund — and create a payday for Alberta’s children, grandchildren and beyond.
After all, it’s a non-renewable resource. Each barrel can only create a royalty once.
Instead, Alberta — its citizens and its government — would rather cower in fear of Big Oil.
The net effect is that Alberta gives its bounty away. Yes, royalties are cheapest in Alberta — right around the world.
I call that highway robbery. I also call it rank cowardice.
When you’ve got the best global opportunities, a planet hungry to buy the final products (which would move better through existing infrastructure), and room to come up at least to the mid-point?
Why does Alberta want to be so poor?
Bruce Stewart is a consultant, educator and philosopher with a passion for public affairs currently located in Toronto. He is well known across the Internet for his blogs on management (Getting Value from IT) and social affairs (Just a Jump to the Left, then a Step to the Right) and for his daily stream of commentary on Facebook, Twitter and Google+. You can reach him at firstname.lastname@example.org.