Kenney should be careful what he wishes for

Alberta Premier Jason Kenney wants Canada’s equalization formula adjusted to be fairer to Albertans.

image: Macleans

When it comes to equalization payments to provinces, Albertans think that there must be a mistake. They see themselves as contributors to Quebec at a time when Quebec’s economy is on a roll and Alberta is in the dumps.

Kenney is being disingenuous when he claims that the current formula is unfair. His government was the author of the current formula in 2009 when he was a cabinet minister under the Harper Conservatives.

Kenney surely knows that one of the reasons Alberta pays more into equalization is that the province has more high-income earners. While only eleven per cent of Canadians live in Alberta, 21 per cent of Canada’s $100,000-plus earners live there.

Of course, high-income earners mean little if you are unemployed.  In October, 2019, Alberta’s seasonally adjusted unemployment rate was 6.7 per cent compared to Quebec at 4.7 per cent.

Income is just one factor in determining equalization says business reporter Konrad Yakabuski:

“The basis for determining whether any province qualifies for equalization payments is whether its fiscal capacity – the amount of revenue it could raise if it applied average tax rates, combined with its natural resource royalties – is below the national average. Despite a recession in Alberta following the 2014 crash in oil prices, and a slow recovery since, that province’s fiscal capacity remains far above the national average (Globe and Mail, Nov. 27, 2019).”

Kenny would like to see Alberta’s natural resources removed from this calculation, presumably so that Quebec would receive less. That plan would backfire because Quebec, too, has vast hydroelectric resources. Quebec would actually receive more according to calculations prepared by University of Calgary economics professor Trevor Tombe.  Kenney’s plan would have seen Quebec receive $10.1 billion more in equalization payments over the past decade.

Kenney argues that unlike Quebec, Alberta’s resources are non-renewable and should be an exempt. Yet it was Kenney’s government that decided it would be unfair to distinguish between renewable and non-renewable resources.

Quebec is a convenient straw man for Kenney, deflecting attention from the fact that Alberta’s riches were used in averting a provincial sales tax and not saved for a rainy day. Oil production was unwisely increased without the infrastructure to deliver it to market –a remedy my pipeline, the “people’s pipeline,” is about to resolve with construction under way.

Quebec’s budget surplus has to do with taxes –Quebec’s tax rates are 30 per cent higher than the Canadian average, whereas Alberta’s are 30 per cent lower. Kenny doesn’t have the courage to address Alberta’s real tax problem: no provincial sales tax.

Alberta’s wealth is, in part, the result of my tax dollars being pumped into the oil and gas industry. The feds recently announced a federal aid package for Canada’s oil and gas industry amounting to $1.6-billion.

As an author of the current formula, Kenney knows that the equalization is fair and yet he prefers to whip Albertans into a frenzy of retaliation and separation.

Empty pipelines spill no oil

The Kinder Morgan pipeline should be built for the same reason as the pyramids –as a national monument.

The pyramids employed workers but served no practical purpose other than an grand burial site for the pharaohs. The humble graves of the workers would have served the pharaohs just as well.

   Composite: David Charbonneau

Construction of the People’s pipeline will employ well-paid union workers. It’s supposed to carry crude oil to Asia but that market doesn’t exist. Therefore, it will serve as a wonderful monument to the “National Interest.”

The pipeline should be built because it serves political interests. Premier Notley’s hopes to be re-elected depend on completion of the pipeline. In her letter to Maclean’s, she said:

“And together, we are building this pipeline — with B.C. workers, using steel made in Saskatchewan, from ore mined in Quebec. Now, it’s time to pick those tools back up, folks. We’ve got a pipeline to build.”

While I’m less optimistic about the future of fossil fuels than Notley, I would rather see her re-elected than Jason Kenney, leader of United Conservative party of Alberta. A progressive premier with delusions about the future of oil sands is better than a retrograde one with similar delusions.

The People’s pipeline will bring the feuding NDP family members back into the fold where they can return to civility. This spat has been an embarrassment for the NDP for the new leader Jagmeet Singh.  Until recently, the NDP was one big happy family; unlike other parties, there is only one party provincially and federally.

The pipeline should be built to strengthen our federation. Prime Minister Trudeau is correct in asserting the nation’s right to move goods to market over the objections of provinces. One province should not have the ability to stop the national transport of commodities.

While the symbolism of the pipeline is strong, the financial rationale for the pipeline hinges on flawed logic. Finance Minister Morneau claims the pipeline is required to get oil to “tidewater” so it can be sold at higher prices than in the U.S.  Economist Robyn Allan is not so sure:

“The facts don’t support the argument. The economics aren’t there. This project is financially compromised and not commercially viable (Globe and Mail, June 2, 2018).”

The fantasy is that Asia will pay more for the goop than it could be sold for in North America. However, in recent years, heavy crude has consistently sold for significantly less in Asia than the U.S.  Refineries in Texas, Louisiana and Mississippi are ready; they have been re-engineered to process the heavy crude of the oil sands.

Just one per cent of the oil in the existing pipeline flows to Asia. Another pipeline won’t change that fraction. Most oil goes to California and Washington State where it is refined and sold back to Canada as expensive automotive fuel.

The financial reality is that TransCanada’s Keystone XL pipeline to the U.S. is a better bet in getting crude oil to market. The off again/on again pipeline is breathing new life under the Trump administration.

The pipeline should be built and remain empty. Everyone will be happy, workers and environmentalists alike.