Rethinking Lifestyle

One of the arguments used over and over when the question of environmental protection comes up, is that protection of the Canadian natural environment must not impede our use of natural resources, because they are an important part of our economy. They are assumed to add value.

How true is that assumption?

Data from Statistics Canada for 2015 shows that mining, quarrying, oil and gas extraction together account for 8% of Canadian Gross Domestic Product (GDP); and agriculture, forestry, fishing and hunting together account for <2%. Resource extraction ranks 3rd and agriculture and forestry rank 18th. The top two generators of GDP are real estate activity (excluding construction) at 13% and manufacturing at 11%.

Canada exported $611 billion worth of products in 2015. Motor vehicles and parts was the largest sector, metal and minerals second, energy products 4th, and forestry products 6th, and food products 9th.

Could we do better?

I’ve been reading about Norway. Norway has invested profits from oil extraction to save for future generations. By 2014 this investment was $905 billion USD or $177,000 USD per Norwegian. Norway has no government debt and education is free from kindergarten to post-graduate university. This fund was established because Norwegians recognized that they need to protect future generations – after all the oil was gone.

So where is Canada’s wealth, given that we produce more than double what Norway produces?

Well here’s the difference. Norway established a government owned oil company, Statoil, which was granted 50% of the licences. Plus it put up 50% of the equity for the costs of exploration by the private oil companies, keeping 50% of the profits. Norway has also adopted a responsible long-term management plan, which limits extraction so that as the price rises with demand, the value of the resource grows.

Compare this with Canada. Here the oil extracted is owned by the oil companies. In Alberta, a Heritage Savings Trust Fund was established in 1976, but nothing has been added since 1987 and it currently stands at $17.5 billion. Alberta applies the lowest royalties in the world on its oil extraction (approximately 7%). Alberta is $11.9 billion in debt (2015) and the government has had to implement multiple tax hikes. This is not what we expect for a resource rich province. We could blame this situation on the world oil price, and the high production of other countries, but that doesn’t help Canada (or Albertans).

What could Canada do?

1. Refine on site – Alberta produces a poor quality product. Adding value to it, locally, rather than paying the high costs of transporting a low value product, whether by road, rail, or pipeline, makes the most sense for Alberta.
2. Take an equity position on a local refinery – raise revenue from the resource.
3. Restore the Heritage Savings Trust Fund – follow the example of Norway in keeping the revenue from oil for the future when the oil has gone.
4. Reduce the import of more expensive oil, and support the use of Canadian Oil in Canada.

What would the benefits be?

A Canadian refining industry would create jobs, and revenue in Canada. It would also give us more energy security, and the capacity to manage the oil resources we have left.