Ottawa is the reason Albertans can’t have nice things

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Gerald Butts recently repeated a common but misguided refrain when he posted a photo of the growth in Norway’s pension fund with the comment that, “Every time I’m in Norway I think this could have been Alberta.” Albertans who are used to such outbursts call this “Norwailing.”

You’d think someone who spent so many years as a senior adviser to the prime minister would understand the three large differences between these two oil-rich jurisdictions.

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First, Alberta’s lack of pipeline access to tidewater discounts the price our oil, which means less money going to the government compared with other places; second, Alberta has chosen to be a low-tax jurisdiction; and third, Albertans pay the majority of their taxes to Ottawa, where $15-$20 billion is used yearly to subsidize federal spending across Canada.

Norway’s oil is drilled from the sea, so getting global prices is a given. Alberta’s oilsands saw major investments starting roughly 25 years ago, but Canada has been unable to build enough pipeline capacity to the coast (although the long-delayed and overpriced Trans Mountain pipeline expansion is finally close).

All that added production was thus sold at a large discount to American refiners. In a 2018 interview, Frank McKenna, deputy chairman of TD Bank, said that, according to work done by his bank, being captive to U.S. buyers had cost the country $117 billion over the previous seven years.

The second notable difference is that Alberta, unlike Norway, has chosen to use its resource wealth to keep taxes low. Alberta’s budget documents estimate that roughly $20 billion more would be raised annually if its tax rates matched British Columbia and Ontario’s. Alberta also doesn’t have a provincial sales tax, unlike Norway, where value added taxes reach as high as 25 per cent.

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With a debt-to-GDP level at the low end of the Canadian provinces, Alberta has obviously been able to afford this choice. The province could have instead chosen to raise taxes to levels that are comparable to other jurisdictions and made sizable deposits to the Alberta Heritage Savings Trust Fund, but losing our tax advantage would have had negative effects on our economy.

The third factor differentiating Alberta from Norway, which a veteran of federal politics like Butts should be well aware of, is that Norway is a sovereign country. Albertans, on the other hand, pay taxes to Ottawa, and a large portion of that money is used to subsidize federal spending in the eastern third of the country.

Based on my calculations, using numbers from a 2020 University of Calgary research paper and supplemented with data from Statistics Canada, since 1996, the first year Norway made a deposit into its fund, Albertans have paid $462 billion more in taxes to Ottawa than was spent in Alberta.

Many wave this away as simply a result of Albertans having higher wages and a younger workforce, but Norway faces no such need to subsidize lower-productivity European nations.

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Had those dollars instead stayed with Alberta’s government, and the equivalent (from royalties and resulting surpluses) put each year into an Alberta fund, based on my calculations using the Heritage Fund’s actual annual returns, it would be worth $1.6 trillion today. In other words, the opportunity cost for Albertans of subsidizing Canada’s federal government since 1996 is roughly equivalent to Norway’s much-heralded fund.

Instead, those dollars subsidized federal programs in other provinces. Many of those dollars went directly to other provincial governments through programs like equalization, the Canada Health Transfer and Canada Social Transfer. As the federal government vastly expands its spending in provincial jurisdictions (dental care, pharmacare, child care), this gap between what Albertans pay and what they get back is likely to grow.

What has Alberta got in return for these contributions? Not thanks, or even recognition. When we brought unanimous support from the provinces to the federal finance minister to overhaul the fiscal stabilization program, it was largely ignored.

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When we voted yes on a referendum to renegotiate equalization, it was dismissed. When we argued that the federal Impact Assessment Act was unconstitutionally intrusive and onerous, we were rejected — until the Supreme Court eventually forced the government to address it.

Alberta has got no reasonable accommodation from Canada on any of these critical files. Instead, Alberta got provincial leaders in British Columbia and Quebec refusing to help us get our products to tidewater. More recently, we got federal climate policies like net-zero electricity and a special emissions target for the oil and gas sector that will cause far more damage to Alberta’s economy than any other province.

Federal unity is more at risk today than at any time since 1995. If influential Laurentian elites like Butts care about keeping this country together, it is past time to replace ill-informed finger wagging with the reasonable accommodations that Albertans deserve.

National Post

Bill Bewick is the executive director of Fairness Alberta, a non-profit group making Canadians aware of the federal barriers facing Alberta.

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