National Post - Financial Post Magazine
Alberta’s NDP party is about to find out economics is never fair.
Alberta’s ruling NDP is about to find out that economics is complicated and never fair
If your parents were wise, they prepared you for the cruel reality that, alas, life isn’t fair. If they were a touch philosophical, they might have explained that, really, “fair” is a phony, juvenile concept. A selfish one, too: code for wishing the world were organized exactly as our personal preferences want it.
That certainly explains why politicians seize the word with such gusto. Pandering to notions of fairer taxes, fairer laws, fairer sentences, fairer incomes and fairer outcomes lets voters project all their grievances about the world’s unfairness onto whatever vague remedies politicians claim to have. Things only get messy when they’re asked to deliver.
Like in Alberta, where the NDP has complained for so long about the province not getting its fair share of oil and gas royalties that it has no choice but to raise them now that it’s in power. What, exactly, is fair? That only exists in the minds of each Albertan. The panel of the last royalty review — conducted in 2007 by mandate of a premier who had also got the job promising to decree fairness — admitted the term “fair share” was a fiction, “a value judgment ... that can neither be refuted nor proven.”
Ah, well, a bit late now for Premier Rachel Notley to use that excuse. Not after she railed that the Tories “squandered our wealth with the fire sale of our resources and with royalties that have not earned fair and full value … for the people of Alberta.” That was during the first week of her election campaign when a barrel of WTI hovered above US$50. Meanwhile, some of her future cabinet ministers spoke of a coming royalty-spending windfall much the way that children speak of sundae bars.
A few days before Notley’s royalty review panel was appointed in August, that same barrel was below US$40 and her government was no longer slavering over the jackpot it had envisioned. Panel chairman Dave Mowat indicated “this is a royalty review, not a royalty increase.” Any hikes would not arrive until nearly 2017 and would be saved in the Heritage Fund, not spent. The government sought “to be a reliable partner in supporting the success of our oil and gas industry,” Notley’s energy minister added. All grouching over the fleecing of a fair share had, remarkably, vanished.
That’s understandable. The province is having trouble hanging onto investment as it is. Oilpatch capital spending was down 20% in the first half of 2015, compared to a year earlier, according to the Daily Oil Bulletin. Statistics Canada predicts such spending will be slashed 25% for the full year.
Alberta’s last royalty-raising populist premier, Ed Stelmach, paid for his fair share resentment when fleet-footed capital gutted royalty revenues by $13.5 billion, and the ensuing political storm drove him from office. The NDP, without anything as helpful as the US$80 oil Stelmach had when he sheepishly revoked his rate hike in 2010, has cornered itself far worse.
Having promised to save its new haul, it’s stuck spending what it has — or introducing more debt or taxes — while still layering on expenses in an energy jurisdiction already costlier than most. Either that or Notley can try dismantling the folklore that Big Oil is bamboozling Albertans out of their birthright.
But with revenue-grasping politicians having spent years building a wide royaltyhike cult with their fair share chants, it will take intensive deprogramming to convince Albertans that the existing system has its merits and — get this — maybe isn’t rigged to rob taxpayers of a lifetime bounty of free lunches. Notley might just have to start by explaining that economics are complicated. And, sadly, never fair.
SOME OF RACHEL NOTLEY’S FUTURE CABINET MINISTERS SPOKE OF A COMING ROYALTY-SPENDING WINDFALL MUCH THE WAY THAT CHILDREN SPEAK OF SUNDAE BARS