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I was reading the below article, and the usual array of ridiculous comments, and I'm starting to wonder if when the Liberals get re-elected (especially under someone as stupid as Dion), how soon until they make a play to nationalize Alberta's massive oil resources?
And secondly, if and when another NEP comes, would/should Alberta and/or Saskatchewan and/or BC high-tail it out of there? Especially as the current trends are going to virtually the whole of the east being "have not" provinces while the Western provinces are expected to pay billions of dollars in equalization payments...
Canada urged to amass oil wealth
OTTAWA — The Organization for Economic Co-operation and Development is pushing Canada to adopt Norway's model for managing oil wealth, an approach Alberta has rejected.
The Paris-based OECD, which represents 30 of the world's richest countries, yesterday urged Ottawa and Alberta to create asset funds with stringent rules to direct energy wealth into foreign investment.
In a wide-ranging report on Canada's economy, it recommends the funds as a way of combatting the negative effects of a rising dollar and the emerging threat of inflation.
The recommendation comes as sovereign wealth funds gather impetus in global markets and high-level authorities in Ottawa look at how setting up such a fund would benefit Canada's economy.
In addition to a federal fund, the report suggests changes to Alberta's Heritage Fund, which has emphasized lowering taxes with oil wealth rather than investing and saving.
“Alberta should implement allocation and withdrawal rules for its Heritage Fund; preferably it should save all its oil revenues in a foreign asset fund, as Norway does,” the OECD recommends.
“The federal government should consider doing likewise for revenues resulting from transitory terms-of-trade gains.”
The idea that Alberta and Ottawa should take excess revenues from the energy boom and invest outside the country, Norway-style, has been bandied about for years. It's a concept that has gained credibility with intellectuals, but one largely dismissed by decision makers who would rather use the money here and now.
Although such a fund has not sparked much official interest until now, Finance Minister Jim Flaherty raised no major objections to its inclusion in the OECD report, according to sources. The report was reviewed by senior government officials who had the chance to comment before its release.
Norway's fund is worth almost $400-billion (U.S.), is expected to double in size within 10 years and is a major global investor. Alberta's fund was worth $16.6-billion (Canadian) at the end of last year, and focuses on investing in Alberta. Ottawa has no such fund.
A Norway-style fund, with rules for systematic and transparent investment of energy revenues outside the country, could solve many of Canada's problems, the OECD says.
Such a fund would dampen the rise of the Canadian dollar based on oil prices – a rise harmful to the manufacturing sector – and help stamp out some of the inflationary pressure in Alberta now hurting households and squeezing companies eyeing expansion.
It would also set aside some of the energy windfall for future generations at a time when Canada's population is aging and will likely need a big injection of government revenue to deal with rising health costs, the OECD said.
And it would make Alberta a major investor on the world stage at a time when many major projects are crying out for money from sovereign wealth funds.
“It's not [just] an exchange rate play. It's more of a fundamental issue,” said Angel Gurria, secretary-general of the OECD, who was in Ottawa yesterday to release the group's assessment of Canada. “It's mostly an intergenerational question.”
There are signs that Alberta is inspired by Norway, even though the province has officially said it has no interest in following Norway's model of investing almost all of its oil revenues abroad.
Provincial Finance Minister Iris Evans yesterday defended Alberta's model of using oil revenues to keep taxes low while spending interest from the fund. “Managing the pressures of a robust economy comes with a price tag,” Ms. Evans said. “We have to improve our infrastructure and get the capital in place to support the 103,000 people that moved here last year.”
But the Heritage Fund has recently changed its focus to favour rates of return instead of economic development within Alberta, said Don Drummond, chief economist at Toronto-Dominion Bank, who has a keen interest in creating such a fund in Canada.
The fund's management board has brought on two former TD executives who focus on finance and not the local economy. And there's a growing recognition that Alberta's excess of cash is overheating the economy and causing it harm, Mr. Drummond said.
Until now, governments have preferred to keep their energy windfalls close at hand, increasing spending or paying down debt. At the federal level, officials have resisted the Norway-style proposal, saying they can't really calculate how much Ottawa earns from energy due to so many spinoffs.
That's not an insurmountable problem, said Peter Jarrett, an OECD economist who wrote the assessment of Canada. It's just a matter of creating a model to estimate revenue flow, publishing it, and setting up the fund from there.
“I think there is scope for doing so,” he said.
A Norway-type fund is more suitable for Alberta than Ottawa, since the province owns the natural resources in question, said energy economist André Plourde, head of the University of Alberta's economics department.
“In Alberta there is more and more pressure for people to think of this more seriously,” he said. “Don't be surprised if that kind of messaging comes out from the Alberta government in the next while,” especially tied to messages about climate change, he added.
High oil prices are pulling Canada in disparate directions and, these days, creating more problems than they solve, the OECD assessment says.
Previously, the energy boom had led to job and wealth creation spread across the country – though not in manufacturing. Now, however, as oil and gas prices soar, the costs outweigh the benefits, the 160-page report says.
“With the gathering U.S. recession and depreciating U.S. dollar, the balance has been shifting,” it says.
OTTAWA — The Organization for Economic Co-operation and Development is pushing Canada to adopt Norway's model for managing oil wealth, an approach Alberta has rejected.
The Paris-based OECD, which represents 30 of the world's richest countries, yesterday urged Ottawa and Alberta to create asset funds with stringent rules to direct energy wealth into foreign investment.
In a wide-ranging report on Canada's economy, it recommends the funds as a way of combatting the negative effects of a rising dollar and the emerging threat of inflation.
The recommendation comes as sovereign wealth funds gather impetus in global markets and high-level authorities in Ottawa look at how setting up such a fund would benefit Canada's economy.
In addition to a federal fund, the report suggests changes to Alberta's Heritage Fund, which has emphasized lowering taxes with oil wealth rather than investing and saving.
“Alberta should implement allocation and withdrawal rules for its Heritage Fund; preferably it should save all its oil revenues in a foreign asset fund, as Norway does,” the OECD recommends.
“The federal government should consider doing likewise for revenues resulting from transitory terms-of-trade gains.”
The idea that Alberta and Ottawa should take excess revenues from the energy boom and invest outside the country, Norway-style, has been bandied about for years. It's a concept that has gained credibility with intellectuals, but one largely dismissed by decision makers who would rather use the money here and now.
Although such a fund has not sparked much official interest until now, Finance Minister Jim Flaherty raised no major objections to its inclusion in the OECD report, according to sources. The report was reviewed by senior government officials who had the chance to comment before its release.
Norway's fund is worth almost $400-billion (U.S.), is expected to double in size within 10 years and is a major global investor. Alberta's fund was worth $16.6-billion (Canadian) at the end of last year, and focuses on investing in Alberta. Ottawa has no such fund.
A Norway-style fund, with rules for systematic and transparent investment of energy revenues outside the country, could solve many of Canada's problems, the OECD says.
Such a fund would dampen the rise of the Canadian dollar based on oil prices – a rise harmful to the manufacturing sector – and help stamp out some of the inflationary pressure in Alberta now hurting households and squeezing companies eyeing expansion.
It would also set aside some of the energy windfall for future generations at a time when Canada's population is aging and will likely need a big injection of government revenue to deal with rising health costs, the OECD said.
And it would make Alberta a major investor on the world stage at a time when many major projects are crying out for money from sovereign wealth funds.
“It's not [just] an exchange rate play. It's more of a fundamental issue,” said Angel Gurria, secretary-general of the OECD, who was in Ottawa yesterday to release the group's assessment of Canada. “It's mostly an intergenerational question.”
There are signs that Alberta is inspired by Norway, even though the province has officially said it has no interest in following Norway's model of investing almost all of its oil revenues abroad.
Provincial Finance Minister Iris Evans yesterday defended Alberta's model of using oil revenues to keep taxes low while spending interest from the fund. “Managing the pressures of a robust economy comes with a price tag,” Ms. Evans said. “We have to improve our infrastructure and get the capital in place to support the 103,000 people that moved here last year.”
But the Heritage Fund has recently changed its focus to favour rates of return instead of economic development within Alberta, said Don Drummond, chief economist at Toronto-Dominion Bank, who has a keen interest in creating such a fund in Canada.
The fund's management board has brought on two former TD executives who focus on finance and not the local economy. And there's a growing recognition that Alberta's excess of cash is overheating the economy and causing it harm, Mr. Drummond said.
Until now, governments have preferred to keep their energy windfalls close at hand, increasing spending or paying down debt. At the federal level, officials have resisted the Norway-style proposal, saying they can't really calculate how much Ottawa earns from energy due to so many spinoffs.
That's not an insurmountable problem, said Peter Jarrett, an OECD economist who wrote the assessment of Canada. It's just a matter of creating a model to estimate revenue flow, publishing it, and setting up the fund from there.
“I think there is scope for doing so,” he said.
A Norway-type fund is more suitable for Alberta than Ottawa, since the province owns the natural resources in question, said energy economist André Plourde, head of the University of Alberta's economics department.
“In Alberta there is more and more pressure for people to think of this more seriously,” he said. “Don't be surprised if that kind of messaging comes out from the Alberta government in the next while,” especially tied to messages about climate change, he added.
High oil prices are pulling Canada in disparate directions and, these days, creating more problems than they solve, the OECD assessment says.
Previously, the energy boom had led to job and wealth creation spread across the country – though not in manufacturing. Now, however, as oil and gas prices soar, the costs outweigh the benefits, the 160-page report says.
“With the gathering U.S. recession and depreciating U.S. dollar, the balance has been shifting,” it says.
And secondly, if and when another NEP comes, would/should Alberta and/or Saskatchewan and/or BC high-tail it out of there? Especially as the current trends are going to virtually the whole of the east being "have not" provinces while the Western provinces are expected to pay billions of dollars in equalization payments...
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