Alberta fumes over Chretien's promise to ratify Kyoto

[notyoueither]

Originally posted by Tingkai
True, but we are talking about a finite resource. If production continues at its current pace we run out of the oil in X years. If production decreases then the oil industry will exist for a longer period.

Of course, how oil should be taken out of the ground is a question for Albertans. My point is that a decrease in production does not result in an absolute loss, but rather defers the benefits to a later date.

IIRC, Norway is now facing the problem of its oil supplies running out. Their economy will go through a massive upheaval.

That's a good question. My money would be on the value of oil declines permanently below the cost to produce from the oil sands long before it runs out. Then the tap is shut by economics. That is expensive oil, it is not like drilling for light sweet crude.

I don't know. The oil has enriched all of Canada, not just Alberta. Do we want to cut back on health care in New Brunswick?

If however our hydro credits and forest credits and good citizen credits outweigh the penalties of the oil patch in Alberta and the Maritimes (let's not forget them) then there should be no problem.

The problem right now is that no one seems to have a clue how Chretien aims to abide by the treaty. That has some backs up out here. Industry does not like uncertainty. Albertans like Ottawa even less.

[Asher]

Originally posted by Tingkai
So now this is the only problem.

Intra-national and international agreements are never perfect. There is always compromise. This is no reason to get rid of the entire thing.

It certainly is! Natural gas exports are HUGE, and they refuse to recognize them. Screw Kyoto and implement something domestically, why does it have to be completely identical?

Investors prefer places where governments obey the rule of law, unless of course the governments can be bribed.

Investors prefer places where they can make money, Tingkai. They do not like places who implement things like Kyoto, particularly when they deal in the oil business. I think it might raise Alberta's profile in the industry actually, since they know the Alberta government makes a lot of sense.

You're always telling us that the Albertan economy is becoming more diversified, but now, all you care about is protecting one industry.

It's a MAJOR industry. Why should I not care about protecting it?

Instead of saying that you need to protect the wealthy oil companies, Albertans should be looking to develop new industries.

This is a cop-out argument if I've ever seen one. Alberta's oil and gas industry is huge. Albertans are looking into developing new industries, but this does not happen overnight, and it certainly doesn't help when your economy bites the dust...

You mean the one where he admits the oil industry can improve its pollution controls?

Or how about his actual proposal that he put forth at numerous Premier's meetings?

Equalization payments come from the federal governments coffers. To say that most of the money comes Alberta's resource revenues is simply incorrect.

HAH.
How do you think that equalization payments *GET* into the federal government coffers? They don't just magically appear there, they come from someone.

In fact, the majority Alberta's share comes from the federal government's share in Alberta's resource revenue. Alberta collects the revenue and gives the federal government the agreed-to rate.

[Tingkai]

Originally posted by notyoueither
That's a good question. My money would be on the value of oil declines permanently below the cost to produce from the oil sands long before it runs out. Then the tap is shut by economics. That is expensive oil, it is not like drilling for light sweet crude.

That could happen if the machines we use become more and more efficient, but it is also possible, and maybe more likely, that as other cheaper sources of oil run out, the oil sands become more desirable.

Originally posted by notyoueither
I don't know. The oil has enriched all of Canada, not just Alberta. Do we want to cut back on health care in New Brunswick?

And this is the big question. How much oil should we be taking out of the ground each year? What is the optimal amount for Alberta/NS/NFLD, and indirectly Canada, in the long run.

The free market can't solve this question because it operates on current demand. The faster we burn through oil today, the sooner we deprive future generations of the benefits.

Originally posted by notyoueither
The problem right now is that no one seems to have a clue how Chretien aims to abide by the treaty. That has some backs up out here. Industry does not like uncertainty. Albertans like Ottawa even less.

But one of the points of the Kyoto agreement is that each nation is left to devise its own strategy for achieving the targets. Those strategies are less likely to be implemented unless there is some type of binding international agreement.

The agreement creates the political will to act.

I think there are many ways of achieving the target that achieve a balanced contribution throughout the country.

For example, we could set a pollution tax on vehicles that do not achieve specific gas mileage levels. That would encourage more people to drive fuel efficient vehicles and that in turn would reduce GHGs.

[Asher]

Here's more on the equalization thing:

http://cbc.ca/news/indepth/background/equalization.html

Currently, the federal government takes back 70 cents in equalization for every dollar in energy royalties.

Notice the wording "take back"? Alberta collects the money from the oil companies, and then returns Ottawa's share to Ottawa afterwards.

Alberta could very well decline to do that, and pocket the money, if Ottawa threatens to cut transfer payments. Alberta would probably end up with more money sitting around afterwards, and the rest of Canada less.

[Tingkai]

Originally posted by Asher
It certainly is! Natural gas exports are HUGE, and they refuse to recognize them. Screw Kyoto and implement something domestically, why does it have to be completely identical?

You want credit for natural gas exports, but you want a made-in-Canada solution. And exactly how would these credits work in a made-in-Canada solution?

Originally posted by Asher
Investors prefer places where they can make money, Tingkai.

Have you never heard of risk factor? A country that does not abide by the rule of law is a more risky place to invest.

Originally posted by Asher
They do not like places who implement things like Kyoto, particularly when they deal in the oil business. I think it might raise Alberta's profile in the industry actually, since they know the Alberta government makes a lot of sense.

In some sense you are correct. Businesses would much prefer to operate in a country that has no pollution control laws. But do we want to destroy the environment for the sake of jobs.

We know that businesses always claim that pollution laws will scare away investors and destroy the economy. We also know that economies keep growing after these laws are enacted.

Originally posted by Asher
It's a MAJOR industry. Why should I not care about protecting it?

Because Alberta would be better off with a diversified economy where the oil industry was not a major industry.

Originally posted by Asher
This is a cop-out argument if I've ever seen one. Alberta's oil and gas industry is huge. Albertans are looking into developing new industries, but this does not happen overnight, and it certainly doesn't help when your economy bites the dust...

Albertans have been talking about diversifying their economy for 20 years. It's still not diversified enough.

The economy will not bite the dust. That's just propaganda from oil interests.

Originally posted by Asher
They don't just magically appear there, they come from someone.

No sh1t. That's why I mentioned income taxes before.

[notyoueither]

Asher, are you (and that article) saying that Ottawa takes 70 cents out of every royalty buck from provincial royalties directly from the Province of Alberta?

I think it is more complicated than that and involves Federal taxation and the way it is given back to the Provinces. Which would be why we get back almost nothing from the Fed.

[Asher]

Originally posted by Tingkai
You want credit for natural gas exports, but you want a made-in-Canada solution. And exactly how would these credits work in a made-in-Canada solution?

You don't need to work it like that. You can just reduce emissions by giving tax breaks to people who buy more efficient cars, by subsidizing business costs for upgrading machinery, by encouraging Hydro/Wind/Solar powered energy, whatever. You don't need to do Kyoto.

Have you never heard of risk factor? A country that does not abide by the rule of law is a more risky place to invest.

Alberta's not about to go into Anarchy or a revolution, Tingkai. I think investors know that too.

We also know that economies keep growing after these laws are enacted.

No, we don't. I'll need links of "pollution controls" set up like Kyoto, which as it's currently set up right now will do nothing but drive pollution elsewhere for the most part, if you're gonna continue spewing this.

Because Alberta would be better off with a diversified economy where the oil industry was not a major industry.

You still don't hurt the major industry. The oil industry isn't preventing the other industries from taking off, there's absolutely no harm in it being around. If you hurt the oil industry though, you do hurt Alberta's economy, which in turn hits every other industry trying to grow...

Albertans have been talking about diversifying their economy for 20 years. It's still not diversified enough.

It's diversified tons since then, but the problem is oil development has also increased tons since then.

The economy will not bite the dust. That's just propaganda from oil interests.

You don't think it will? Why is it propaganda?
Just look at Kyoto. Production will have to be scaled back extensively for Alberta to meet its quota. Less production, less businesses, less jobs, less income, higher unemployment, crappy economy.

Where am I going wrong?
Or are you still living in a dream world where we can magically reduce emissions by a huge percentage without touching production?

No sh1t. That's why I mentioned income taxes before.

Income taxes are a SMALL portion to Alberta's contribution to equalization payments. A much larger portion is RESOURCE REVENUE, for which Ottawa skims 70 cents off every buck in royalties for, which Alberta could simply stop giving back to Ottawa...

[Tingkai]

Originally posted by Asher
Here's more on the equalization thing:

http://cbc.ca/news/indepth/background/equalization.html

Notice the wording "take back"? Alberta collects the money from the oil companies, and then returns Ottawa's share to Ottawa afterwards.

Alberta could very well decline to do that, and pocket the money, if Ottawa threatens to cut transfer payments. Alberta would probably end up with more money sitting around afterwards, and the rest of Canada less.

I honestly don't know if I have the energy to drive this simple concept through your thick skull again.

You have set idea, and an incorrect one at that, about equalization payments and no matter how much I try to explain this to you, I doubt you will be able to understand it.

With regards to the take back. It has nothing to do with Alberta collecting money and then giving it to Ottawa.

The quote you cited refers to provincial royalties kept by the provincial government.

For every dollar in oil revenue that a provincial government takes in (for its own use), the federal government reduces equalization payments by 70 cents.

This is something like the clawback system used for welfare payments. People on welfare are allowed to earn money up to a set amount. If they earn more then this amount, the government takes back part of their welfare payments.

This does not affect Alberta because it does not receive equalization payments.

It does affect Nova Scotia and NFLD.

Prior to 1964, oil revenues were not used in the calculation of equalization payments. As a result Alberta received these payments. N.S. and NFLD want to have this old system put back in place. In other words, NS and NFLD want to eliminate the claw-back.

EDIT: I need to leave. See ya later.

[Asher]

Originally posted by notyoueither
Asher, are you (and that article) saying that Ottawa takes 70 cents out of every royalty buck from provincial royalties directly from the Province of Alberta?

I think it is more complicated than that and involves Federal taxation and the way it is given back to the Provinces. Which would be why we get back almost nothing from the Fed.

It is more complicated than that, yeah. We give 70 cents for every royalty buck to them, but we end up getting most of it back (not all) in the form of stuff like blackice was talking about earlier with a "730M" grant to oil explorations. 730M is a tiny fraction of 70% of Alberta's resource royalties though.

[notyoueither]

Originally posted by Tingkai
Because Alberta would be better off with a diversified economy where the oil industry was not a major industry.


Albertans have been talking about diversifying their economy for 20 years. It's still not diversified enough.

The economy will not bite the dust. That's just propaganda from oil interests.

You cannot enact a diversification of our economy by fiat from Ottawa. Believe me, we've tried the same from Edmonton. It don't work.

What does work is patient encouragement. That is proving effective.

In the mean time, if Ottawa decides that 'we' do not need 'our' oil industry, Alberta will most likely decide that 'we' don't need Canada.

No, most around here are not willing to endure our economy biting the dust, sorry.

[Asher]

Tingkai, how sure are you about all of that stuff? So for the billions of dollars Alberta collects in royalties, we lose billions of dollars in equalization payments. Hmm.

Seems a bit stupid to me. For all of the money we collect in royalties we only actually get a 30% overall gain over what we would have had in transfers? While the rest of Canada benefits at our expense?

Either way that's fishy.

Alberta has a HUGE net contribution rate to equalization payments (what is it, $3000 per capita?). This is obviously not completely from income tax. Especially considering the average salary in Alberta is the average salary in Canada, give or take...

And I still think you're underestimating Alberta's discontent with Ottawa, and I assure you -- government strongarming of Alberta to implement Kyoto will be the straw that broke the camel's back. Frustration has been building up steadily over the past 25 years, and is getting steadily worse these days.

If Ottawa sticks its hands into Alberta's pants again, threatening to screw up our oil & gas industry, how much do you want to bet the movement to join the US will get a huge boost?

It will give many oldtimers flashbacks to the 80s, and youngun's like me will just see more of the same with how we grew up -- an Ottawa which simply doesn't care about us.

[notyoueither]

Originally posted by Asher

It is more complicated than that, yeah. We give 70 cents for every royalty buck to them, but we end up getting most of it back (not all) in the form of stuff like blackice was talking about earlier with a "730M" grant to oil explorations. 730M is a tiny fraction of 70% of Alberta's resource royalties though.

I think it is more like returns to provincial governments from Federal taxation is effected by resource revenues of the provinces. Doesn't sound that bad to me. Did you or I really need that last buck?

What bites though, is other Canadians thinking we are just a bunch of b!tching, whining, free loaders. That's the wound, and the salt added to it.

[Dinner]

Originally posted by Tingkai


Your comments don't make sense. You start by claiming that economies in the developing world will be damaged (although you provide no reason for this), then you say manufacturing jobs will move to developing countries and then you say these developing countries will lose jobs.

You need to take some time and reread the post my friend. The facilities will be closed down in the rich countries and will reopen in poor countries that have squat for environmental protection. Thus the economies in Rich countries will be harmed but the global environment will not improve.

It is very simple really all you have to do is take the time to honestly read what was written and you will understand it.

[Tingkai]

Originally posted by Asher
Tingkai, how sure are you about all of that stuff? So for the billions of dollars Alberta collects in royalties, we lose billions of dollars in equalization payments. Hmm.

Yes, I'm sure.

We went over this for days a couple of months ago. I'm not sure why you're not getting this.

Equalization payments are designed to make sure that every province has a basic level of tax revenues to provide services to which all Canadians are entitled.

If a province takes in below a certain amount, it receives a payment from the Federal coffers. If a province takes in more than the set amount, then it does not receive any money.

Oil revenues are just like any other source of revenue so yes, because Alberta is rich with oil, it doesn't get an equalization payment from Ottawa.

Originally posted by Asher
Seems a bit stupid to me. For all of the money we collect in royalties we only actually get a 30% overall gain over what we would have had in transfers? While the rest of Canada benefits at our expense?

No. Ottawa doesn't touch the Alberta's oil revenue wrt equalization payments because Alberta doesn't receive equalization payments. Make sense?

Alberta keeps all of its lovely oil money.

Originally posted by Asher
Alberta has a HUGE net contribution rate to equalization payments (what is it, $3000 per capita?).

No. The equalization system cost about 10.8 billion last year, according to your CBC site. That money comes from Ottawa's tax collection. Assuming half the population pays taxes, the per capita cost is about $720 ($10.8 billion cost divided by 15 million taxpayers).

The cost of the program is shared by all Canadians, even if not all Canadians benefit directly.

Originally posted by Asher
And I still think you're underestimating Alberta's discontent with Ottawa, and I assure you -- government strongarming of Alberta to implement Kyoto will be the straw that broke the camel's back.

I know many Albertans hate Ottawa (How could I not after reading stuff from you, NYE, and others), but there is a hell of a jump from hating the Liberals to seperating from Canada.

Originally posted by Asher
If Ottawa sticks its hands into Alberta's pants again, threatening to screw up our oil & gas industry, how much do you want to bet the movement to join the US will get a huge boost?

I think you under-estimate the fact that most Albertans are proud Canadians. Just because you hate Canada and want to move to the US doesn't mean that the rest of Albertans share your view. Most Albertans are proud of their country.

Originally posted by Asher
It will give many oldtimers flashbacks to the 80s, and youngun's like me will just see more of the same with how we grew up -- an Ottawa which simply doesn't care about us.

Ah yes, the bad ol'80s when the Conservatives were in power. Sends a shiver down me spine.

[Tingkai]

Originally posted by Asher

Is this supposed to rationalize ANYTHING?!

It is not a question of rationalizing something.

The fact that oil is a finite resource makes it different from other products.

With a normal good, if a business stops producing this good then there is lost production that can never be recovered. With a finite resource, doubling production today simply speeds up the depletion of the resource. Cutting production delays the depletion. So if Alberta cuts back on its production of oil, this creates benefits for future generations who might otherwise have been deprived of the resource.