Alberta Premier Jason Kenney wasn’t happy with the federal government’s Throne Speech last week, and it was easy to see why. Ottawa did nothing to dig him out of the hole he and his government dug for themselves with their 2019 budget – a hole that has been deepened, and then some, by the COVID-19 pandemic.
The Throne Speech "was a fantasy plan for a mythical country that only exists apparently in the minds of Ottawa Liberals and like-minded Laurentian elites,” Mr. Kenney said.
That typically combative response no doubt resonates with his voters. It also has a bit of truth to it.
Crude oil is by far Canada’s biggest single export, and the industry that produces it is being crushed by low demand and low prices.
The Organization for Economic Co-operation and Development says Canadian crude oil exports dropped 57.1 per cent in April. Combined with a roughly 20-per-cent drop since the start of the year in the price of Western Canada Select crude, the impact has been devastating.
Statistics Canada estimates that a 10-per-cent drop in crude production and a 40-per-cent drop in investment would cost the country more than 220,000 direct, indirect and “induced” jobs, mostly in Alberta. The province now faces a $24.2-billion deficit this fiscal year.
So it would not have been out of place for the Trudeau government to have stuck a few words into the Throne Speech about the particular plight of Alberta – where the labour force shrank in August, even as recovery took hold in the rest of the country.
Because Alberta has seen a surge in separatist sentiment lately, even a passing mention of the province’s current travails would have been welcome.
Or, as Mr. Kenney says, a recognition of reality. But in scripting a jab about a “fantasy plan for a mythical country,” the Alberta Premier has exposed himself to similar criticism for his first budget, tabled back in October, 2019, when the oil industry was enjoying a rise in prices.
Like so many of his predecessors, Mr. Kenney placed his bets on new investments in the oil patch, and rising oil and gas royalties to pay for a cut in corporate taxes and elimination of the consumer carbon tax.
That bet has failed to pay off, just as it eventually did for every previous Alberta government that refused to blaze a more reliable and sustainable fiscal path.
This page has long argued that, when oil prices were high, Alberta should have been saving more of its non-renewable resource revenues. It also should have brought in a provincial sales tax, to deliver steady revenues, even in a recession. Of course, both ideas have long been political no-go zones in a province that has long been a high-spending, low-tax jurisdiction that prospers during booms and suffers badly when the price of crude plummets, as it did in the 1980s, in the late 1990s, in 2001, in 2008, in 2015 and this year.
Alberta’s deliberate choice has been to lash its fiscal balance to a commodity that undergoes frequent price shocks, and demand for which is expected to peak this decade, as countries struggle to reduce their greenhouse gas emissions.
There is little, if anything, the federal government can do to mitigate these factors, other than sending more money to the province to help it with its budgetary shortfalls, or supporting the construction of new pipeline capacity, as it is doing with the Trans Mountain pipeline expansion project.
Mr. Kenney may be right that, in the years to come, Alberta will once again be gifted another period of prosperity thanks to higher oil prices, even if climate change could spell no investment in new oil sands mines.
Demand may peak but it could remain high, including in the United States, our biggest market. Alberta’s existing mines are long-term projects with sunk costs that can produce millions of barrels of crude a day, and the Trans Mountain expansion should come online within three years.
But it has for too long been the fantasy of Alberta premiers that they can avoid imposing new taxes on their citizens, leaving it to oil to pay the bills. And it is mythical thinking to believe the province’s problems would disappear if Ottawa didn’t exist, or if the PM wasn’t one of those Laurentian elites.
A recession is obviously not the moment to introduce a sales tax in hard-struck Alberta. But it is time for its government to face the reality that, though oil will for long be part of Alberta’s future, the past’s royalty windfalls may not be.
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