Alberta Canada’s Cycle of Abuse with Big Oil

Big oil hurts Alberta, Alberta hurts Canada, rinse and repeat.

In the classic cycle of abuse, today’s abuse victim can easily grow up to become tomorrow’s abuser. Unable to wreak vengeance upon their own abuser, the pent up rage and frustration from their own suffering is unleashed upon a different convenient target, and the cycle perpetuates. Since the fundamental lesson learned from powerful abusers is that apparently it’s okay to be brutal towards those who are easy targets, the abusee tends to focus on finding easy targets that won’t or can’t easily defend themselves. This is a component in the societal problem of populations experiencing hardship tending to punch down at those whose circumstances are even more precarious than their own rather than directing their ire upwards at the true source of their woes. The province of Alberta’s dysfunctional relationship with the rest of Canada and the fossil fuel industry is a perfect example. Every blow the province feels from big oil is one it turns around to deliver twofold to the nation it is a part of.

Big oil dishes Alberta a surprising amount of crap.

During a few boom times while big oil was king, resource revenues temporarily afforded Alberta plenty of spending money while maintaining a minimalist tax regime. It remains the only Canadian province without a sales tax, and even when the Business Council of Alberta — hardly a bunch of Marxist lefties — calls upon the province to implement one, the right wing politics that have dominated the province for almost all of the last half century immediately rejects the idea out of hand. After all, when faced with record deficits, why consider bringing in more revenue? It feels easier to angrily insist that yet another boom time for big oil will once more turn the tables, and the fact that the entire global economy is moving away from their product can’t possibly be relevant. As a result, Alberta’s strategy for coping with collapsing global demand for their product has consisted of spending public money on things like embarrassingly bad efforts to promote climate denial and attacking environmentalists.

The narrative that the province’s well being is inextricably tied to fossil fuels has been repeated so consistently for decades that it really should be no surprise that the province is ground zero for climate denial in Canada, but even a cursory glance at the province’s relationship with the oil giants readily belies that reflexive claim. Fossil fuel corporations can earn enormous revenues, although their profit margins are dwindling in the age of growing climate awareness, slowly pushing these one-time kings of the hill out of the centres of economic power. Big wealthy corporations can pay big dividends to shareholders, but those dividends mostly aren’t flowing into Albertan or even Canadian pockets. 70% of ownership in Alberta’s bitumen sands development is foreign, so the profits consistently flow out of the province, leaving little in the local economy.

Industries pay royalties to places where they extract resources, but Alberta’s royalty rates are embarrassingly, laughably puny. On the world stage, no one else on the planet comes nearly as close to simply giving their resources away for free than Alberta does. That’s why Norway has amassed a sovereign wealth fund worth more than $200,000 USD for every single citizen from the sale of its oil reserves — exactly the sort of thing that comes in handy when a crisis like Covid comes along — while Alberta has sold 45% more oil than Norway did over the same time period and still managed to end up nearly $100 Billion in debt. That’s a predictable outcome when Norway collects $46.29 in royalties per barrel compared to Alberta’s meagre $9, less than 20% as much. So much for royalties from bitumen sales opening the gateway to prosperity.

What’s next? Well, industries pay taxes, don’t they? Surely the province and the municipalities within it collect a lot of taxes from these oil giants, right? Not so much. Provincially, Alberta brags about having the lowest corporate tax rate in Canada by far, which is really bragging about how much you like to leave money on the table and keep your income as low as possible. But even more telling is the relationship the oil industry has with counties and townships inside the province where they operate. Big oil has starved Alberta municipalities of $173 million in unpaid taxes. Why don’t they pay their taxes? Because they can get away with it. Municipalities have no power to make them pay. The province has no willpower to make them pay. So they aren’t paying, because of course they’re not.

But how about all of those fabulous jobs they keep crowing about? Surely the way Alberta is reaping the benefits of being big oil’s bitch is through a steady legion of fabulous jobs to help citizens put dinner on the family table. Once again, the narrative doesn’t hold true. Fossil fuel jobs in the province pay well, but have been steadily vanishing for years, during both boom and bust times. It’s more profitable for corporations to eliminate jobs with automation at every opportunity, so the oil sands have been at the cutting edge of incorporating new driverless trucks and other technologies designed to slash payroll costs. Even though the political talk implies that big oil is Alberta’s biggest economic driver, oil and gas don’t even make the list of the top 10 industries which together represent more than 83% of Alberta’s revenue. Big oil has gaslit the province very effectively.

The other elephant in the room is the fact that the most environmentally destructive project on the planet involves creating a giant mess, and messes eventually have to be cleaned up. The Alberta Energy Regulator estimates the cost to clean up after Alberta’s fossil fuel industry at $260 Billion. Big oil has put up only $1.6 Billion in security to date, only 0.6% of what’s needed. Presumably that’s because the province doesn’t want to inconvenience the industry with a bill right away, but only plans to present one once the big players have folded up and have even less incentive to pay. What could go wrong?

There are at least 2,752 orphaned wells and oil facilities that require cleanup. The Alberta government buried a report that those orphaned wells aren’t being reclaimed. Less than 1% of them. The overwhelming majority are never even assessed before they are declared to be remediated. Financial liabilities held by the province have also been wildly underestimated. The silence on hundreds of billions in debt is deafening.

It is also well established that the industry is seriously polluting groundwater resources, also without effective oversight or consequences. When fossil fuel mining pollutes rivers, the government response is to cut pollution monitoring in rivers.

So to sum up, what exactly is Alberta getting from its cozy relationship with fossil fuels?

1. Almost none of the revenue

2. The barest pittance in royalties

3. A rapidly shrinking number of jobs

4. Budget crippling tax evasion

5. A giant mess the public will have to pay to clean up

6. Global laughing stock status as the very last place to acknowledge a changing economic reality

Oh, and of course 7. A more hostile climate

That’s a lot of hits. The likelihood of Alberta’s ruling party raising a peep of public concern about any of these things is nonexistent. They’re strictly here to cheerlead for their bully’s reputation, even to the extent of declaring war against their own concerned citizens. But all of the aggrievement and aggression taking those punches engenders has to go somewhere, doesn’t it? Of course it does. And oil-bullied Alberta chose its favourite punching bag long ago: the federal government of the country of which it is a part. Attacking Ottawa as somehow an enemy of Alberta is so inherent to Alberta politics that it has become the political equivalent of clearing your throat.

Alberta directs its misplaced rage at Canada every time.

Particularly on the right, which has held an effective stranglehold on provincial power for about as long as I’ve been alive, I don’t think you can even become an Alberta politician in the first place without getting red faced that the rest of the country is somehow shafting Alberta. You get the impression that “Ottawa screws Alberta” were premier Jason Kenney’s first words as a toddler. This narrative, every bit as pernicious and untrue as “oil and gas is the root of Alberta’s prosperity” has also been repeated so consistently that it’s been swallowed whole by western voters without any rumination whatsoever. There is even a growing movement, cultivated by the right wing outrage generation machine, calling for WEXIT, a proposed secession of western Canadian provinces named for the British Brexit.

It takes a special kind of chutzpa to look at the train wreck of Brexit, which began as a claim that surely the UK would get a better deal from the EU than it currently had merely by giving them the finger, and turned into a nightmare that is brutalizing the UK hard now that the trigger’s been pulled, and feel that the takeaway is “Wow, we’ve got to get some of that for ourselves!” It’s like learning that your neighbour burned his house down by smoking in bed and making a mental note to buy more cigarettes and install a bedside ashtray. But never let it be said that Alberta lacks chutzpa. I think their surfeit of it fills whatever place the rest of us reserve for rational responses to scientific evidence. So let’s take a minute looking at how hard done by the province is by the nation which contains it, shall we?

The UCP government’s own budget for 2020 is quite plain that the mean old federal government that supposedly hates Alberta provides more than twice as much revenue to the province’s coffers than all of the resource extraction royalties they’re willing to roast everyone’s grandchildren over (it’s on page 16), and that’s before Covid. Albertan conservatives somehow still seem to imagine that the country’s never done anything for the province, a powerful testament to the effectiveness of endless vilification.

Alberta wants to be more equal than other provinces.

The loudest and most oft repeated argument raised by angry Albertans involves Canada’s system of equalization payments, which redistributes some of the money collected through federal income taxes to “have not” provinces to help maintain a base level of government services for every Canadian citizen. Most of Canada calls this patriotism: we prefer seeing a decent quality of life for our fellow citizens. Equalization means a kid in the Yukon can get a quality education the same way that a kid in Toronto can, and only 5% or so of federal expenditures seems a fairly reasonable price to make that possible. If we simplistically glance only at the total dollar amounts, we can see the Alberta, with its young population and highest average incomes, contributes more to this program than it receives in transfer payments. That’s exactly how the system is supposed to work. Anger that equalization payments effectively redistribute some money from wealthy parts of the country to those having trouble affording basic citizen needs instead of the other way around is like being confused that food banks take donations from millionaires in order to feed poor families instead of taking from the poor to give handouts to CEOs instead. It indicates that you don’t grasp the basic concept of what it’s there for.

Every single Canadian with an income pays federal income tax on it. Those tax rates are the same everywhere in the country for every single citizen. Out of every dollar of federal income tax that is collected, 6.2 cents currently goes towards equalization payments. If your income is $50,000 a year, you pay $5,160 in federal income tax, and $319.92 of it goes to equalization. For any citizen making $50k/y, anywhere in the country, the math is the same. If your income is $250,000, you pay $59,262 in federal income tax, and $3674.24 goes towards equalization. Again, that’s equally true of every single Canadian who makes $250k (at least, if they are honest with the tax man). This means that every taxpayer in Alberta makes exactly the same donation towards federal equalization payments that any other citizen anywhere else in the country with the same income also makes, and not a penny more nor a penny less. Albertans are conditioned to see this as the most gross unfairness imaginable, and manage to be the only Canadians who throw regular temper tantrums about it.

This cannot be stressed enough: Albertans proclaim that their province pays into equalization and that it’s unfair, but the simple truth is that all individual taxpayers pay at the same rate into the federal government’s general revenue fund, from which equalization is only one of many programs that get funded.

Meanwhile, Alberta’s reliance on a one-trick-pony economy has had real negative impacts on the rest of the nation’s economy. By effectively tying the value of the national currency to fluctuations in the value of a commodity, doubling down on oil has created instability in the trading value of Canada’s dollar. This results in what economists call “Dutch disease,” (first so named during an economic crisis in the Netherlands). Dutch disease occurs when a resource boom causes a country’s real exchange rate to rise to the point where other traded products, notably manufactured ones, become too expensive to export. If it suddenly costs your overseas customers a lot more to keep buying the things you produce, they tend to buy less of them, and that can have devastating impacts on manufacturing sectors. One study by international economists found that between the years 2002 and 2007 alone, Dutch disease was responsible for between 33–39% of all employment losses in the Canadian manufacturing sector as manufacturing revenues fell.

Predictably, when this was mentioned in parliament, Albertan politicians launched a firestorm of strident attacks at the other provinces they were habituated to already giving the finger to. It is of course dishonest to pretend that the national economy isn’t interconnected, but the same voices that want to blame the rest of Canada for every drop in Albertan fortunes just can’t muster the same concern when evidence shows that their decisions adversely impact their neighbours.

Out of the same misplaced desire to “build unity” with the bully who’s busy taking swings at you that we shake our heads at in US Democrats, Canada’s federal government also regularly bends over backwards trying to accommodate Alberta, and that works just as well north of the 49th parallel as it does below it. Perhaps in hope of even a brief cessation of hostilities, Canadian Prime Minister Justin Trudeau burned bridges with a lot of voters who supported him by announcing that the country would invest billions in building a new pipeline for Alberta that the private sector had already written off as an economically bad investment. Valued at only $550 million by the Texas based oil company that owned it, Ottawa nevertheless paid a full $4.5 billion for the Trans Mountain pipeline, with plans to spend $7.4 billion more (since adjusted to $12.6 billion and still climbing). Never mind that it’s pretty much only Albertans that are really interested in new pipelines, while most of the country is eager to move on from them to more important things like climate action. Those new pipelines are angrily insisted upon based on claims of Asian markets that theoretically want to pay top dollar for Alberta’s fossil fuels, although there’s no real evidence that such a market really exists.

Could spending the equivalent of Jamaica’s total annual GDP to give Alberta something it wants slow the barrage of anti-Ottawa sentiments spewing from Alberta? Not for a moment. It really doesn’t matter that Canada provides more direct and indirect aid to the fossil fuel industry in Canada than any other major nation does by a huge margin. No handout to big oil will ever be good enough to get the provincial legislature based in Edmonton to call off the dogs. When we say that Canada’s oil subsidies are bigger than other nations, we’re really underselling it. What I mean is that Canada’s subsidies are a full 10 times bigger than the G20 average. Subsidies to big oil in Canada amount to a staggering $1650 for every man, woman and child in the country, drawn from every corner of the second biggest country on Earth.

If we acknowledge that there is functionally no bottom-line difference between direct subsidies (“Here’s $20”) and indirect subsidies (“We’re not going to ask you for that $20 you owe us”), the extent to which Ottawa is subsidizing Alberta’s bully industry is truly astonishing. The International Monetary Fund, an organization of 189 countries with 74 years of economic experience, calculates the actual total of Canada’s direct and indirect subsidies (in 2016 US dollars) at $43 billion. That’s roughly one dollar for every five that the federal government took in that year. How Alberta politics can remain a never-ending pity party about how Ottawa doesn’t treat their oil and gas fairly enough is really beyond me at this point.

When Covid-19 came along, we once again heard right away that Ottawa hates and is mean to Alberta. Glancing at the national effort to deal with the pandemic, we see that Alberta actually got $1200 more in federal Covid aid per capita than any other province, while choosing to spend the least per capita on the provincial level to help their citizens than any other part of the country. Where federal aid to workers was offered, Alberta left the most grants not applied for and the most federal transfers un-accessed of any province. Premier Jason Kenney did, however, seize the opportunity to fire tens of thousands of public employees in the largest public sector layoff in Canadian history to avoid paying the salaries they had contracted for in good faith, knowing that federal emergency programs would pick up the slack to keep their families fed while simultaneously improving his already dismal provincial budget.

These various efforts to cater to the persistent outrage of Albertans at the federal level in hopes of creating a little bit of national peace are doomed to fail, precisely because they fail to understand how the cycle of abuse works. As long as the oil industry continues to effectively bully Alberta, Alberta will continue to turn around and try to bully the rest of Canada. The hits just keep coming, and as the oil industry continues to implode, we can expect the trickle-down lashing out to keep ramping up.

It’s misplaced anger all the way. Does the world’s most prominent climate scientist plainly say that your fossil fuel plans mean “game over for the climate?” Blame Ottawa. Did an unprecedented pandemic temporarily drop the value of a barrel of oil to less than nothing? Blame Ottawa. Did the newly elected president of a neighbouring country follow through on a campaign promise to cancel a pipeline? Blame Ottawa. See how easy that is? Once you have 71% of your population convinced their province is getting a raw deal, you can distract from pretty much anything by reminding them of that anger. They’ll salivate as reliably as a lab rat stomping on a button to get a food pellet. It’s reflexive.

What all of this really costs

Apart from the obvious damage to national unity, there’s one or two things worth noting on the subject of climate change here. The problem isn’t just that a lot of Albertans’s default behaviour whenever the subject comes up is to simply yell the word “libtard” as loudly as possible. While the rest of Canada has collectively reduced its climate pollution by 15 per cent since 2005, Alberta and Saskatchewan have collectively increased their pollution by a similar amount, erasing national gains from leadership shown elsewhere in the country. Alberta’s climate plan is that to meet Canada’s international emissions targets – already the weakest in the industrial world –Canadians not living in Alberta will have to cut their emissions by 50% in the next fifteen years so that Alberta’s emissions from oil and gas can continue to climb for another couple of decades. Does this sound fair to you? It seems so to Albertans. Heck, if we look at the potential climate impact of their fossil fuel reserves, Alberta is effectively insisting that it feels entitled to one third of the entire planet’s remaining carbon budget.

As the world moves towards a renewable future, this strategy is all about being left behind. The World Bank estimates that as the cost of climate disasters continues to increase, the world is currently on a path towards $158 trillion dollars in losses — roughly double the total annual output of the entire global economy — by 2050. The Global Commission on Climate and the Economy tells us that taking climate change seriously instead could contribute an extra $26 Trillion to the global economy. Renewable energy is already creating jobs twelve times faster than the rest of the economy. That’s a lot of opportunity to forego just because of one region’s ideology. With fossil fuel assets already becoming stranded, Canada’s current level of dependence on fossil fuels could cost 20% of national GDP and 8% of employment by 2030, and that estimate was made before Covid sped the transition up. Don’t take my word for it. Here’s the complete peer reviewed scientific study of the macroeconomic effects in the prestigious scientific journal Nature. Up to $4 trillion in global oil investments will evaporate as the world transitions to a low carbon future. Bitumen is particularly vulnerable to major shifts in the oil and gas market because production is expensive when compared to extraction techniques used in the Middle East. That means bitumen markets will be the first to collapse when demand slows significantly, making Canada particularly vulnerable.

But climate change isn’t just a matter of calculating emissions, it’s a cavalcade of real world daily news events and increasingly extreme weather disasters that we cannot continue to ignore. Alberta’s got a disproportionate role there as well. Eight out of the 11 most expensive natural catastrophes to hit Canada since 1983 happened in Al­berta. Of the approximately $9 billion that the prop­erty and casualty insurance industry paid out in catastrophe claims over the past nine years, 63% of those losses have happened in Alberta. “If I bring it back to the basics, the basics of in­surance is that the premiums of the many pay for the losses of the few,” the CEO of SCOR Canada Reinsurance tells us. “So, for the time being, it’s a fact that the premiums of all Canadians are paying for the losses of Albertans.” This is what we might call the bitumen mining industry’s birds coming home to roost, and something that Albertans may need to be reminded of. The rest of the country is paying for Alberta’s losses, just as everyone on the planet is going to pay the price of their worsening climate change.

80% of the fossil fuel industry is about to be wiped out, and not even big oil itself believes that expanding investment in Alberta’s bitumen is worth it. Alberta still seems to think that they can revive the dead horse of what their economy looked like thirty years ago if they just flog it hard enough, like trying to revive the VHS industry (satire alert). It isn’t happening. It cannot happen. And the province will continue to be angry about it as long as that reality pummels them.

I know a few Albertans personally, so I can separate the ones who have personally provided about half of all the hate mail I have ever received since I first started publicly talking about climate change from the decent rational human beings who aren’t trapped within the dominant ideology of Canada’s most troublesome province. To be honest, I tend to think of them like World War Two Germans who tried to save fleeing jews by hiding them in their basements rather than supporting genocide, except that instead of trying to protect endangered individuals on their doorsteps they are fighting against long odds for the well being of the entire planet. I hope it can be clear that I’m talking about the province as a collective rather than targeting individuals with this article. There’s a lot to recommend in that part of my country, and if this particular ideology can get out of their way I’m sure that they could bring a lot to the table to make Canada stronger rather than weaker, which would be a fabulous thing. Heck, their expertise in drilling could spark a powerful geothermal power industry. But the short term reality is this: the demise of oil’s dominance will continue to hit the province hard until they take steps to transition away from dependence on it, and for the foreseeable future, Alberta seems determined to count every ounce of hardship the market doles out to them and then turn around to lash out at the rest of Canada twice over. And there is absolutely nothing on any level that makes me more worried for the well being of the proud nation where I was born and will eventually die than that inescapable fact.

Researching a road map from our imperilled world into one with a livable future with as much good humour as I can muster along the way.

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