Alberta Finance Minister Ted Morton speaks to members of The Globe and Mail editorial board, Oct. 14, 2010. (Moe Doiron/The Globe and Mail)Moe Doiron/The Globe and Mail
Alberta Finance Minister Ted Morton visited The Globe and Mail editorial board on Thursday, October 14. The following are some excerpts from that conversation, which touched on the environment and energy, health care, Alberta's finances, and provincial and federal politics.
On the environment, and Alberta's oil sands
17 per cent of the imported oil that comes in from the U.S. today comes from Alberta; about half of that from the oil sands. That's projected to rise to 36 per cent by 2030. While we ... support a transition away from an economy that's overly-carbon dependent, I think the romanticism of the Kyoto era has passed. People are in a new reality of environmental strategy ... a bridging strategy ... carbon reduction that doesn't destroy jobs in the process. And in that transition, there's going to be a continued need for oil, also of course natural gas.
The natural gas connection between western Canada and the U.S. that looked so large and growing only five or six years ago has shrunk tremendously, with the explosion of shale gas supplies in the U.S. Gas exports to the U.S. are way down and are going to stay down ... Having said that, natural gas is going to be an important part of this bridging strategy ... Gas produces half the CO2 that coal or oil does.
On the environmental side, we ran through everything we do in terms of ... successful examples of land reclamation ... We just reclaimed the first tailing ponds, which are the sort of poster-child for the anti-oil sands campaign. Are they ugly? Yeah, they're ugly. [But]they all have to be reclaimed.
On emissions, the anti-oil sands campaigners put a big emphasis that because the extraction of bitumen is energy intensive, it produces a lot of CO2, compared to so-called light Texas crude. Looked at just from production, that's true. But if you look at the full life cycle of how oil is used, from production to refining to transportation and to final use, what's called wells-to-wheel lifetime cycle, the oil from the oil sands ends up being about 5-6 per cent more CO2 than the average of the rest of the oils used in the U.S. market ... So oil sands oil from Western Canada is not a major new contributor to CO2.
If you take a barrel of oil, doesn't matter where it comes from, the total CO2 that is produced of that barrel: 80 per cent of it is going to come out of the tailpipe of a car or truck. If you're concerned that the number one issue facing humanity today is man-made global warming caused by CO2 ... the biggest threat is the automobile or truck, the internal combustion engine.
In the Fort McMurray area, the amount of CO2 produced is one-tenth of one per cent of global CO2 emissions per day ...
Alberta is the only jurisdiction in North America that has not only put a cap on CO2 intensity, but has penalties that are applied if that cap is missed. To day, $180-million in penalties have been assessed, and that goes into a new technology fund ...
I think people thought there was a quick and easy fix to CO2, and that if we set a target of reduction of 6 per cent, that somehow there was no economic pain associated with that ... This is a longer, slower, more difficult transition ... the term I've heard is bridging, from where we are today to where we want to be ... It's a little uncertain whether that period is 30-year, 60-year, or 90-year. Alberta has an important role to play, and oil and gas, including oil sands oil, will be an important part of the energy mix.
But the net CO2 trajectory out of the oil sands is still going to be going up.
Quantity-wise, yes.
And yet nationally, we still have this 15 per cent target reduction by 2020. So, how is Alberta part of that solution?
The majority of our CO2 reduction is from coal-fired power plants, not from the oil sands. I think we fit more or less comfortably ... within [Environment]Minister [Jim]Prentice's phasing out of coal plants over the economic life of the plant, and replacing that with natural gas ... You achieve an immediate 50 per cent in CO2 from coal to gas.
On Alberta's finances
I had the dubious distinction of tabling the budget with the largest deficit in the history of the province. That's the bad news. The good news it's part of a three-year plan to get us back to a balanced budget by 2012. We're on target for that and committed to that. I would say that the two days I spent in New York discussing the U.S. economic situation and the recovery there has made me a little more pessimistic about the shape of the U.S. economic recovery. We may not have the double-dip, but we may have a prolonged U-shaped recovery ... When I return to Edmonton, I'm going to back with a message that ... we will not and cannot repeat the mistakes of Alberta made in the 1980s of hoping the recovery will come and solve our problems - we have to have a realistic view of the depth of the recession that hit the world and particularly the United States, and the slowness with which the recovery from is going to happen.
Do think the three-year plan to get out of the deficit by 2012 is going to work, then?
We're committed to it ... The alternative is just hoping that things get better faster. And I don't think that's a very responsible attitude either in personal finance or government finance ... In the mid-80s, the economy tanked. "Well, we'll run deficits for a few years, good times will come back." ... and pretty soon we had 9 deficits in a row and $23-billion of accumulated debt. Something like 20 per cent of our revenues went to pay interest on the debt. That's when you have a crisis.
What cuts are you making?
In terms of go forward, we don't have to cut, we just have to live within the targets we've set for ourselves ... 1 per cent total budget in 2011 over 2010, and a 2.5 per cent increase in 2012. Those increases are smaller than actual costs, and ... the pain isn't spread even in the 23 departments.
Come 2013, there's another hole coming, the expiry of federal health transfers. We know there'll be something in its place, but how are you approaching that issue, and what's Alberta's strategy, in concert perhaps with other provinces?
I'm a big fan of Stephen Harper's; I'm a big fan of the federal Conservative Party; I hope they form a majority in the next federal election. But I have to say that the Canada Health Transfer is a sore point, not just with the government of Alberta but with Albertans right now. For every other province except Alberta, the value of the per-person transfer is something like $740. And Alberta's getting $520 a person. That works out to a $750-million shortfall for Alberta ... if you look at our net transfer to the federal government ... all federal money that left the province versus all the money that came back - we ended up $21-billion down. And if you look at the cost of the Canada Health Transfer, it's around $25-billion. Take out the $2-billion Alberta receives. Of the $23-billion that goes elsewhere, you could say we pay 90 per cent of it ... it doesn't seem fair to us that a contributes that much gets short-changed.
We've heard other provinces tell similar stories about more money leaving than coming in. You seem to be saying that this something that has to be rectified between Alberta and the federal government. Is there a common front that could be developing on this issue more generally, or are you just focused on getting Alberta's fair share?
The principle of equalization is entrenched in the constitution now, but the size of equalization is up for negotiation. The program is much much larger than it started out to be. Everybody that's looked at it - not just the Fraser Institute, Canada West, but C. D. Howe, a good Toronto institution - there's not much of a question that it does undermine Canada's overall productivity and competitiveness, because it rewards provinces that spend more, run up debts, raise taxes, and therefore lower their ... capacity ... it also incents labour to stay where there are no jobs. And labour mobility is an important part of an efficient economy.
We've made it clear to [Finance]Minister [Jim]Flaherty and the Prime Minister that approaching the 2014 renewal of all these equalization programs, that we think there has to be some discussion, but not just whining from Alberta and B.C., or Ontario, where there's a different story than there was two years ago - Ontario was in the same position as Alberta, and that was fixed. And so now Ontario is being quiet. But still on balance Ontario, like Alberta, has fewer doctors per capita, fewer nurses per capita, and fewer teachers per capita, few hospital per capita than not all, but most of the receiving provinces. So I think there's some problems there that need to be addressed, and not in terms of regional advantage, but what Canada needs to do as a country to stay competitive by keeping its productivity higher.
More to come. This interview has been condensed and edited.