If I were sitting with Premier-designate Rachel Notley this morning advising her on the economy and the next budget, I would first recommend that she base her decisions on historical evidence. But to accomplish this, she must start by gathering the facts.
Notley would have to first start with a comprehensive audit of the long-term sustainability of the provinces natural assets (oil, gas, minerals, timber, agricultural land). The audit would examine the reserves and the remaining years of production of oil, gas, coal and other minerals that remain in the ground.
Alberta’s oil sands reserves contain roughly 168 billion barrels that would be valued at $8.2 trillion based on a conservative US$50 per barrel of oil. At 2013 rates of oil production (2.1 million barrels per day) Alberta’s oil sands should last 215 years.
Second, Notley needs to take a lesson from former Premier Peter Lougheed, who was able to negotiate a higher economic return on oil and gas sales from Alberta’s energy industry. The oil sector currently pays less than a dime on the dollar in royalty payments, whereas during the Lougheed era it paid an average 27 cents and as high as 37.7 cents in 1977.Based on current oil prices at or below $50/bbl the projected royalty payments for 2015 are expected to reach their lowest level in 55 years at below $0.05 p
er dollar of oil and gas sale. If Notley were able to increase the royalty rate as a percentage of the value of oil and gas sales to 20 cents, still less than during the Lougheed era, our schools and healthcare system could be properly funded without a sales tax, an increase in healthcare premiums or even an increase in corporate taxes.
Third, Notley needs to conduct an assessment of the renewable energy capacity available for development, including solar, wind, geothermal, biofuels, and other renewable energy options. Alberta has an abundance of sunshine, yet we have the lowest installed solar PV capacity in Canada. Why not consider creating the conditions for a flourishing renewable sector that is as healthy as our petroleum sector?
Fourth, Notley needs to implement a new accounting system for the province. A proper balance sheet for Alberta would include a full cost accounting of the environmental liabilities that Alberta currently imposes on the planet. This would include a proper accounting of the social costs of Alberta’s greenhouse gas emissions that contribute over 35 per cent of Canada’s total emissions, much of it attributed to Alberta’s oil and gas production. Preliminary estimates suggest Alberta’s carbon liability at over $500 million per year.
Included in the new accounting system would be a full cost accounting of unfunded ecological liabilities, including the real costs of cleaning up the tailings ponds in the Fort McMurray oil sands development area. These liabilities do not currently appear either on Alberta’s balance sheet or on the balance sheet of oil sands producers.
Fifth, Notley needs to comprehensively assess the skills, capabilities, aspirations, and hopes of all Albertans. In short, the government would call for a human well-being and happiness audit. The assessment would seek to know what Albertans love about Alberta, why they came here, and why they choose to stay. It would want to know whether Albertans actually enjoys their work and whether it brings meaning to their lives.
Included in the assessment would be a well-being benefit analysis of the impacts of raising the wages of the roughly 30 per cent of working Albertans earning less than a $15/hour, the living wage level. By paying a living wage, the province would save an estimated $7 to $9 billion in the societal costs of poverty, increase its revenue and increase the sense of well-being of so many workers that struggle with low income.
By addressing these recommendations, Premier-designate Rachel Notley would be leading the province to a genuine Alberta Advantage while becoming a pioneer in the development of a practical operating model for the new economy of well-being.
And if left unaddressed, these recommendations could dog the party as it sets its stamp on the province.