One of the most telling points against the increasingly decrepit Alberta government of the late 1960s was that we were exporting raw coal to Japan and receiving only 10 cents per tonne in royalties. Peter Lougheed used this point to advantage to end 36 years of Social Credit rule and usher in his Progressive Conservative party. While there has been significant improvement in adding value in Alberta through, for example, development of a petro-chemical industry, far more could be done and it is to our embarrassment that we are still exporting huge quantities of crude oil and, yes, raw coal [2010 royalties amounted to 75 cents per produced tonne]. (1)
President Obama's scuttling of the Keystone XL pipeline could be a favour to Alberta if we respond to it as an opportunity to dramatically enhance our capacity to add value to our petroleum resources and end the short sighted policies of exporting our raw resources. [Canadian economic history is characterized by the over reliance on primary products: fish, fur, forest, and farm production exported in its raw form without consequent economic diversification and capital accumulation.] Alberta should respond with an immediate tax on crude oil exports to incentivize refinery and petro-chemical construction here, and encourage further tertiary production. The income from such a tax should be targeted to enhance our highways and streets, and reduce the provincial tax on diesel fuel and gasoline.
In the late 1960s, Albertans were proud to have the best highways in Canada. Bill Hawrelak swept into the mayor's chair in Edmonton on a promise to pave every street in Edmonton. [Exciting stuff to those of us who drove on the gravel trail through Jasper Place (today's 156 street)]. Today we are relieved if some of the major potholes have recently been patched, but we should be embarrassed it has come to this. We should also be embarrassed that more often than not gasoline can be bought in Toronto at a lower price than in Alberta (not to mention in Houston).
[As of this date Houston = 81.9 cents/liter vs Edmonton = 105.9 cents per liter]
These figures should cause us to ask why we should be so enthusiastic about supporting the Keystone XL pipeline which would export not only our crude oil but the consequent capital investment, job creation, and economic spin-offs to Houston rather than retaining all of these in Alberta.
It is surprising that the Wildrose has been such a vocal supporter of XL. A recent press release (2) claims that the XL pipeline somehow would reduce the gap between West Texas Intermediate and Brent crudes! [This is the implication of what is said, if one reads the press release. However, while there is a gap, the relevant gap is between the various spot prices in Western Canada, say Hardisty Heavy (3) and the imputed "world price" which traditionally has been considered the WTI price.]
As someone who grew up in the original Heavy Oil belt around Lloydminster, I know that there are many factors which contribute to the lower spot prices in Western Canada. These have more to do with the composition of the crude or blend, distance from markets, and so on. Thus, increased pipeline capacity is no more likely to increase the spot price for Lloydminster crude than did twinning the railroads (itself) result in increased spot grain prices for Lloydminster farmers.
The vision we should have is of an Alberta 10 years from now where we again have the best roadways in Canada, where Albertans pay the lowest prices in Canada for diesel and gasoline, where our export of unprocessed primary products has been eliminated, and Albertans have a reduced tax burden - all helping to make us truly "strong and free" - not just the most efficient exporters of our natural resources.
(1) http://www.energy.alberta.ca/coal/643.asp
(2) http://www.wildrose.ca/feature/keystone-delay-costs-alberta-treasury-billions
(3) http://www.lloydminsterheavyoil.com/
