Alberta PST discussion

[polak]

Originally Posted by Frequitude

Or we exploit it as hard as possible to generate wealth now that can be reinvested over longer periods of time (into other industries for example). Time value of money.

As for referring to O&G jobs as high paying and cushy, get over yourself. Albertans in this industry work their ass off to both get here and stay here.

Hah. So we're going to rely on proper allocation of funds in the future? What if Oil drops out before we can save up enough? One tech innovation that reduces the demand for oil and our sand in the north becomes worthless. If you look at the exponential development of human technology since the industrial revolution, it's not outrageous to think that this could happen in a matter of decades.

Pfft. I've worked in and out of the patch. You work no harder than any other industry but you have many more perks. It's the definition of cushy. Show me any other industry in Calgary where admin assistants make 60K a year.

It's selfish view point. It is human nature, I'll give you that. We have a hard time caring about people who don't exist yet over ourselfs. That doesn't change the fact that it's extremely short sighted.

[Slava]

Originally Posted by polak

Hah. So we're going to rely on proper allocation of funds in the future? What if Oil drops out before we can save up enough? One tech innovation that reduces the demand for oil and our sand in the north becomes worthless. If you look at the exponential development of human technology since the industrial revolution, it's not outrageous to think that this could happen in a matter of decades.

Pfft. I've worked in and out of the patch. You work no harder than any other industry but you have many more perks. It's the definition of cushy. Show me any other industry in Calgary where admin assistants make 60K a year.

It's selfish view point. It is human nature, I'll give you that. We have a hard time caring about people who don't exist yet over ourselfs. That doesn't change the fact that it's extremely short sighted.

Financial Services, Medicine, the list goes on. You know what's just as short sighted? The belief that we can just take less money from oil and gas and everything else is totally unaffected and just keeps rolling on. There seems to be this idea that the move from oil to whatever the next technology (or form of energy) is will be seamless and easy. Maybe its not. Maybe the reality is that we are so reliant on oil that there isn't really anything to bridge the gap for decades.

[DownhillGoat]

Originally Posted by polak

I meant no company is leaving the oil sand market.

Sunshine. Grizzly. Brion. I haven't followed any of them in a few months, but as of last summer anything backed by Chinese money was in extreme trouble once China got bearish on the oil sands. I'd be more comfortable wagering that they will be leaving the market vs. not.

MEG and CNRL might not be closing up shop but they've put indefinite* holds on projects when oil was still at $80. And while they're not shuttering the doors on current producers, they're not expanding. Suncor is making their own cuts on production. While it's not a mass exodous, not expanding or replacing lost production is pretty damn close to leaving the oil sands market, IMO.

[Frequitude]

Originally Posted by polak

One tech innovation that reduces the demand for oil and our sand in the north becomes worthless. If you look at the exponential development of human technology since the industrial revolution, it's not outrageous to think that this could happen in a matter of decades.

Don't disagree. So shouldn't we get as much of it as possible before that happens?

Originally Posted by polak

Pfft. I've worked in and out of the patch. You work no harder than any other industry but you have many more perks. It's the definition of cushy. Show me any other industry in Calgary where admin assistants make 60K a year.

That's not the definition of cushy (undemanding, easy), that's the definition of well-compensated. I agree, this industry is well-compensated and as a result so is everyone else in this city relative to what they could make doing the same thing elsewhere. But it is not cushy.

[polak]

Alright Cushy was the wrong word choice. How about unsustainable compensation? Since this is a Flames forum, that seems like a good choice

We're all on the same team here. We want the province to stay healthy so that we can continue to enjoy it's beauty and all that it has to offer. I'm just suggesting that we simply risk a more balanced job market for the sake of our long term health.

[CliffFletcher]

Originally Posted by killer_carlson

Brewmaster is being awfully polite about the NEP. Devastating. Investment pulled out rather than have a the feds steal... er... I mean nationalize the resource. Tens of thousands of families lost their jobs, their homes, their livelihoods.

I was here too. Thing is, the global crash in oil prices happened on the heels of the NEP, and in the minds of Albertans the whole economic crash in blamed on the NEP. I'm not suggesting the NEP was good policy - it wasn't. But politicizing the cyclical nature of the energy industry is delusional.

The energy industry, and Albertans in general, have a tough time admitting that our fortunes are tied to a global commodity with massive swings that are out of our control. Instead, we look for villains. The NEP. Ed Stelmach. The federal government. Now it's the Saudis. Whenever the industry is booming we pat ourselves on the back for our industry and hard work, and whenever it crashes we look for villains who ruined everything. I suppose that's human nature.

[Bunk]

So, some handy info from the Province - from someone over at SSP:

http://www.finance.alberta.ca/public...-Situation.pdf





Belt tighten to be sure, but we could easily close a $6-$7 billion revenue gap and still be by far the lowest taxed jurisdiction. We could then use royalties and other non-renewable resource revenue for what it should be - paying down any debt, savings, advancing capital projects strategically, and investing in long term economic diversification.

Also of note:

Other tid bits from the document:

it is estimated that a $4 billion reduction in government spending would reduce Alberta’s real economic growth by over 1%.

And whether Alberta's public sector compensation is disproportionate:

In 2013, private sector average weekly earnings in Alberta were 26% higher than the national private sector average. In provincial public administration, average earnings in Alberta were 12% above the national average for provincial public administration employees

[CliffFletcher]

Originally Posted by Slava

Financial Services, Medicine, the list goes on. You know what's just as short sighted? The belief that we can just take less money from oil and gas and everything else is totally unaffected and just keeps rolling on. There seems to be this idea that the move from oil to whatever the next technology (or form of energy) is will be seamless and easy. Maybe its not. Maybe the reality is that we are so reliant on oil that there isn't really anything to bridge the gap for decades.

That may be true, but it's scary. There are places in this world that used to do very well from coal and steel. And they're awful now.

That's why using the royalties from oil and gas for day-to-day financing of government services today is so foolish. It allows Albertans to have extraordinarily low taxes and buy nice cars and go on trips to Hawaii. But it does nothing to prepare us for the time when taps run dry. Twenty years from now I don't want my kids to drive on broken down roads, have crappy hospitals, and send their kids to crumbling schools because Alberta is a depressed backwater.

The money generated from oil and gas revenues should go to providing public infrastructure and services 20-40 years from now, not subsidizing consumption in one of the most high-spending jurisdictions in the world. That was the whole idea when Lougheed came up with the Heritage fund. And we've pissed it all away so every middle-class home can have a new SUV in the garage and eat out at Earl's twice a month.

[Slava]

Originally Posted by CliffFletcher

That may be true, but it's scary. There are places in this world that used to do very well from coal and steel. And they're awful now.

That's why using the royalties from oil and gas for day-to-day financing of government services today is so foolish. It allows Albertans to have extraordinarily low taxes and buy nice cars and go on trips to Hawaii. But it does nothing to prepare us for the time when taps run dry. Twenty years from now I don't want my kids to drive on broken down roads, have crappy hospitals, and send their kids to crumbling schools because Alberta is a depressed backwater.

The money generated from oil and gas revenues should go to providing public infrastructure and services 20-40 years from now, not subsidizing consumption in one of the most high-spending jurisdictions in the world. That was the whole idea when Lougheed came up with the Heritage fund. And we've pissed it all away so every middle-class home can have a new SUV in the garage and eat out at Earl's twice a month.

I don't think we should subsidize the operating budget with these royalties, and I think that we should pay more taxes with a consumption tax. I've argued that point in many threads here on CP, and never said otherwise.

[darklord700]

Two book Horner (or was it three) resigned. How I wish he was still the finance minister so that we'll never face a defecit, always have operational surpluse and need these PST talk?

http://www.cbc.ca/news/canada/edmont...uary-1.2928071

[CliffFletcher]

Originally Posted by Slava

I don't think we should subsidize the operating budget with these royalties, and I think that we should pay more taxes with a consumption tax. I've argued that point in many threads here on CP, and never said otherwise.

Sorry, didn't mean to imply you did. Just using the comment about the reliance on the energy sector to launch a rant about how the royalties are used.

[ken0042]

Originally Posted by polak

Show me any other industry in Calgary where admin assistants make 60K a year.

http://www.cssd.ab.ca/careers/curren...onal-services/

[Jacks]

Originally Posted by Bunk

Belt tighten to be sure, but we could easily close a $6-$7 billion revenue gap and still be by far the lowest taxed jurisdiction. We could then use royalties and other non-renewable resource revenue for what it should be - paying down any debt, savings, advancing capital projects strategically, and investing in long term economic diversification.

The PC's have given us no reason to believe that if they get more money that they will save it rather than spend it. We had a savings (sustainablility) fund recently which they completely mowed through when they were bringing in record revenues. If resource revenues were being directly funneled into the Heritage Fund I would have no problem with paying more in taxes, problem is I don't trust them to be fiscally responsible. Clean up the spending first, bring forward a solid saving plan, make it a law requiring a referendum to spend any savings, I don't even mind if they funnel off a portion of the returns to general revenue. After that I'll whole heartedly support increased taxes if needed.

[Flash Walken]

How Alberta blew it

Alberta and Norway obviously have very different ideological bents, and 40 years ago you could have a spirited argument on which worldview would come out on top. But such esoteric speculation is no longer necessary given the hard facts in full view on their respective balance sheets.

The laissez-faire approach to resource management in Alberta has been a fiscal disaster compared to what might have been. In 2012, the province collected a mere $4.04 in royalties per barrel of oil equivalent. That same year, the Norwegian taxpayer raked in $46.29 on their petroleum production -- more than 10 times as much. How did they achieve such vastly better results? By embracing a profitable public involvement and oversight in their resource economy that would be abhorrent to the Fraser Institute worldview that has taken root in Alberta.

While it is true that Norway's Brent crude is worth much more than the low-grade bitumen currently wrung out of the oilsands, Alberta has also produced enormous amounts of conventional crude since oil was discovered in the Turner Valley southwest of Calgary 100 years ago.

Ignoring the oilsands altogether, Alberta has produced 18 per cent more conventional crude and natural gas than has Norway, and the province didn't have to venture hundreds of kilometres into the North Sea to get it.

Admitting the problem

For now the latest Alberta bender is over, and it's time to take stock of certain destructive lifestyle choices. The budgetary cupboards are bare, yet Canada's allegedly "richest" province has an unfunded municipal infrastructure deficit of up to $24 billion. A badly needed new cancer treatment facility has just been delayed past 2020. The long-overdue plan to build or modernize over 230 schools by 2018 is threatened by an $11-billion "fiscal hole" in provincial finances.

According to the Alberta Urban Municipalities Association, "Alberta continues to have the lowest overall tax system in Canada, with the lowest fuel taxes, no sales tax, no health premiums, no capital or payroll taxes, and low personal and corporate income taxes. Albertans and Alberta businesses would pay at least $10.6 billion more in taxes each year if Alberta had the tax system of any other province."

While provincial finances are grim and real estate values are about to fall off a cliff, the real deficit is not economic but intellectual. Some observers have made the case that the free-market mindset that got us in this mess is actually a long-term project of powerful outside forces eager to acquire Canada's treasure trove of resources at rock bottom prices.

If so, this audacious endgame has been a stunning success. The anti-tax sentiment has intruded so far into the collective psyche of Alberta voters that they almost have Stockholm Syndrome, punishing any politician that threatens to raise resource rents. The last Alberta election almost saw a Fraser Institute alumna become premier. If there is an upside to the most recent downturn in Alberta, it is bringing into crystal clear focus the abject fiscal failure of decades of "free market" resource policies promoted by well-funded think tanks.

http://thetyee.ca/Opinion/2015/01/19...ta-Oil-Bender/

[GP_Matt]

And yet we keep voting the same guys in with huge majorities.

They are giving us low taxes in exchange for giving them control of the government.

On a side note, the PC's have been in power longer than most of the authoritarian governments that were thrown out during the Arab Spring.

[Brewmaster]

There are a few issues with comparing Alberta to Norway. First one is that Norway is a Nation and is not subject to equalization payments like the province of Alberta. The fact is over $16 billion in equalization were directed to Quebec, Ontario, Manitoba, New Brunswick, Nova Scotia and PEI in the 2013-2014 year. The majority of this money is coming from Alberta.

Another difference is freehold mineral rights. ~20% of the mineral rights in Alberta belong to individuals, companies, reserves or parks. The province does not own these minerals and therefore receives limited revenue from freehold production.

Finally, as is shown in the graph posted by GP_Matt, oil sands is some of the most costly oil in the world to produce. The projects require huge upfront capital commitment years before seeing any return on investment. If Alberta had high royalties and taxes on the early development of these projects, very few of them ever would have gotten off the ground. The statistic that Norway received $46.23/bbl in royalties in 2012 tells me that the economics on their production is not even close to most of what we have in Alberta. There wouldn't be a single viable project in the oil sands if they were paying $46/bbl to the province.

[MarchHare]

Originally Posted by Brewmaster

There are a few issues with comparing Alberta to Norway. First one is that Norway is a Nation and is not subject to equalization payments like the province of Alberta. The fact is over $16 billion in equalization were directed to Quebec, Ontario, Manitoba, New Brunswick, Nova Scotia and PEI in the 2013-2014 year. The majority of this money is coming from Alberta.

That's not how equalization works.

[Tinordi]

Larf equalization is the reason Alberta mishandled its resource revenue...

Self serving nonsense

[Flash Walken]

Originally Posted by Brewmaster

There are a few issues with comparing Alberta to Norway. First one is that Norway is a Nation and is not subject to equalization payments like the province of Alberta. The fact is over $16 billion in equalization were directed to Quebec, Ontario, Manitoba, New Brunswick, Nova Scotia and PEI in the 2013-2014 year. The majority of this money is coming from Alberta.

Another difference is freehold mineral rights. ~20% of the mineral rights in Alberta belong to individuals, companies, reserves or parks. The province does not own these minerals and therefore receives limited revenue from freehold production.

Finally, as is shown in the graph posted by GP_Matt, oil sands is some of the most costly oil in the world to produce. The projects require huge upfront capital commitment years before seeing any return on investment. If Alberta had high royalties and taxes on the early development of these projects, very few of them ever would have gotten off the ground. The statistic that Norway received $46.23/bbl in royalties in 2012 tells me that the economics on their production is not even close to most of what we have in Alberta. There wouldn't be a single viable project in the oil sands if they were paying $46/bbl to the province.

Originally Posted by MarchHare

That's not how equalization works.

Originally Posted by Tinordi

Larf equalization is the reason Alberta mishandled its resource revenue...

Self serving nonsense

Until this year, Ontario would have received about $640 million from Ottawa under a program that protected provinces from seeing transfers drop in any one year — but that option was scrapped by then finance minister Jim Flaherty in December.

Meanwhile, Alberta — Canada's richest province — will see its total rise to $5.2 billion this year from $4.1 billion in 2013-14, a 26.8 per cent increase mostly due to Ottawa moving to a per-capita funding under the Canada Health Transfer program.

The only other province that comes close to Alberta's windfall is Quebec, which will see its total intake from Ottawa rise to $19.6 billion, or 9.9 per cent.

The Liberal government of Ontario has been one of the staunchest critics of the changes, complaining that it is being short-changed on equalization. But the federal government responded it is only applying the formula as adopted.
Both are right, says Mostafa Askari, the assistant PBO, although the federal government is responsible for setting the rules.

“The bottom line is the equalization program has moved away from being an equalization program to being another transfer program, because the way it is designed now it does not equalize to any national standard,” said Askari.
For have-not provinces, “their entitlement will be less, so obviously the larger have-not provinces (like Ontario) will be hit by a larger amount because of their size.”

The PBO looked into the controversial program after a request from Liberal MP Judy Sgro.

Askari said there was little point in examining the bottom line numbers since they are published in the budget each year. Total transfers this year will rise to $62.6 billion from $60.5 billion last year.

But what will surprise many Canadians is how changes introduced by Ottawa has diminished the “progressivity” of the equalization system.

http://www.thestar.com/news/canada/2...hdog_says.html

THE WEST WANTS IN!

[Brewmaster]

Originally Posted by MarchHare

That's not how equalization works.

Well can you explain how it works then?