There will be some national sharing of Canada's national petroleum wealth, or there wil be no Canadian\
nation. Without some means to share the rewards of selling low-cost oil and gas at high prices, non-Albertans are each going to wind up paying more than $300 per year in unearned tribute to the government of Alberta. That’s an annual payment of more than $1,000 by every non-
Alberta family. The massive transfer of wealth could give Premier Peter Lougheed’s government ownership of half the industry in Canada.
Forget the election campaign. No matter which party wins, we will either pay close to the world price for Canadian oil, or we will import more world oil—because there is no other choice. There isn’t enough conventionally produced, low-cost oil and gas to meet all our needs, so we have to pay higher prices to stop wasting what we’ve got and to develop far more expensive supplies, like the Athabasca oil sands. But there is enough low-cost oil which, sold at the high prices, will yield massive economic rents. The real debate is going to be about how to share that economic rent. How it is resolved will determine if Canada endures.
We have, as Lougheed says, been paying a lot less for Alberta oil than it is worth. Canadians should pay what it’s worth. We should also all share in the revenues. Through royalties and
lease payments, the government of Alberta collects 40 cents out of every dollar paid for Alberta crude oil and natural gas. If Alberta sold its present rate of oil and gas production at the equivalent of $20 per barrel—or 20 per cent less than the present world oil price—Alberta would collect in excess of $7 billion per year, some $3,500 each year for each Albertan.
But Alberta has just about exhausted its supplies of conventionally produced, low-cost oil and gas. Right? Well, Alberta’s own Energy Resources Conservation Board estimates Alberta’s present and future reserves of conventional oil and gas at a volume that would be worth nearly three-quarters of $1 trillion if sold at the present world price for oil. If Alberta charges 80 per cent of today’s world oil price and continues to collect 40 cents out of every dollar, its conventional oil and gas supplies will eventually provide the Alberta government with more than $200 billion. In rounded figures, that would be a charge of $10,000 against each non-Albertan, and a receipt of $100,000 for every Albertan.
Albertans pay the lowest taxes in Canada, the lowest energy prices, and have the largest pool of investment capital, the Alberta Heritage Savings Trust Fund. That fund is likely to top $50 billion by the end of the ’80s, which is more than the Canadian assets of all the foreign-owned companies that operate here. This means that more than the combined Canadian assets of General Motors, Ford, Exxon, Gulf, Shell, Texaco, Chrysler, IBM and dozens of others would be owned and controlled by one provincial government.
But Alberta is really a small part of the problem. The fact is that most of the reserves of conventional oil and gas that remain to be developed in Canada lie outside of Alberta—in the Arctic, and off-shore from the Atlantic provinces. In a “community of communities,” each community with oil could prosper, and too bad for the rest. Five prov-
inces now have, or are expected to have, significant petroleum resources. The other five contain more than 70 per cent of the Canadian population.
If Alberta oil belongs to Alberta, and Newfoundland oil belongs to Newfoundland, what happens to the “federal” oil and gas in the Arctic which we had thought belonged to all Canadians? How could we deny them what we don’t deny others blessed with oil under their feet? But on a per capita basis, the discovered and potential oil and gas resources of the Northwest Territories are at least 100 times as great as those in Alberta, and might be several hundred times as great.
Lougheed suffers a distorted historical perspective when he argues that any tampering with Alberta’s right to own, control and profit from Alberta oil would sabotage the concept of Confederation. Canada’s founding fathers gave the original four provinces ownership of their mineral rights in the 1867 BN A Act because they thought this would give them
“adequate revenue for performing their limited functions,” according to Alberta constitutional authority Gerard V. La Forest, writing in Natural Resources and Public Property Under the Canadian Constitution. When Canada purchased what is now most of Western Canada from the Hudson’s Bay Company in 1870, it was “clearly envisaged that the resources of the area would pass to Canada to be administered for the benefit of the whole country,” La Forest' wrote. The 1905 acts creating Alberta and Saskatchewan reaffirmed this, stating that the mineral rights were to be “administered by the Government of Canada for the purposes of the Dominion.” Not until 1930 did the three Prairie provinces acquire ownership of the mineral rights, and the oil and gas, from Ottawa.
Canada is the only large oil-producing nation where the rewards of public ownership of petroleum are not widely shared on a national basis. If public revenues from all of Canada’s oil and gas—in Alberta, the Arctic, the Atlantic—were shared nationally, it would take the sting out of world oil prices, and provide a massive transfusion of economic and political well-being. Not even René Lévesque would be able to pull Quebec out of Confederation and forgo such benefits. If we haven’t got the spirit to do this, then we haven’t got the spirit to hold Canada together.
Former editor of Oilweek Magazine, Earle Gray is the author of three books dealing with the Canadian petroleum industry, including the recently published Super Pipe.
*The money should he spent to lower the crushing taxes of all’
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.