Excluding non-renewable resources from equalisation is patently absurd
Alberta's Ralph Klein is again pushing for non-renewable resources to be kept out of Canada's equalisation formula. The notion that because a resource is non-renewable, it should not be included in equalisation, is ridiculous.
Let's examine the issue of equalisation right from its legal roots. Article 3 of the Canadian constitution reads, in whole:
EQUALIZATION AND REGIONAL DISPARITIES
Commitment to promote equal opportunities
36. (1) Without altering the legislative authority of Parliament or of the provincial legislatures, or the rights of any of them with respect to the exercise of their legislative authority, Parliament and the legislatures, together with the government of Canada and the provincial governments, are committed to
(a) promoting equal opportunities for the well-being of Canadians;
(b) furthering economic development to reduce disparity in opportunities; and
(c) providing essential public services of reasonable quality to all Canadians.
Commitment respecting public services
(2) Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.
I see no room for exceptions in this clause of our constitution. Equalisation must be provided to put all provincial governments on an even keel. When one government has more revenue than another, and can offer better services than another, it is that province's duty to share with the others, and the federal government's duty to enforce this sharing.
Alberta, particularly, is currently in an oil-induced economic boom on a massive scale. The economy is so strong that even Tim Horton's is being forced to pay people real wages. But the economy is built on top of the tarsands, and the tarsands are only seriously viable because the price of oil is extraordinarily high, hovering around $70 per barrel.
Tarsands require two barrels of oil and produce around 240 kilograms of greenhouse gasses for every three barrels of synthetic crude produced. Even with upwards of 1.5 trillion barrels of synthetic crude theoretically available, it represents a net gain of only 500 billion barrels over the amount needed to extract it. The remaining trillion barrels only replaces the oil that was used to produce those 500 billion barrels. That is assuming the ratio does not further deteriorate as development continues, and that all 1.5 trillion barrels of synthetic crude can be extracted from the tarsands.
The bigger the boom, the bigger the bust.
If the price of oil were to fall back to pre-Bush levels of $20-$25 a barrel, or the ratio of oil used to oil extracted in the tar sands approaches 1-to-1, Alberta would likely return to the economic devastation that it experienced in the mid-1980s, after the prices fell from the last energy crisis. This is part of Klein's argument against contributing oil revenues to equalisation, which doesn't make much sense as an argument.
Were Alberta's economy to be in the hole, Alberta would be screaming for equalisation payments from the federal government and demanding other provinces which have their own natural resources contribute to the program. If Alberta continues to refuse to contribute while their economy is the best in the country, they should not expect much when their economy does eventually, inevitably, tank.
Contributing revenues from non-renewable resources to the equalisation program now can only help strengthen the economies of other provinces, and when Alberta's economy does collapse, the other provinces who have benefited from this wealth will be both more inclined and more able to contribute back to its government services, softening the blow.
When Alberta sends $400 to every citizen of the province as an oil revenue bonus, pays off its entire provincial debt, and still has more revenue than it knows what to do with, and then spits in the face of the rest of Canada, "western alienation", as they so happily flaunt, is increased. Except it is the west that is alienating, not the west that is being alienated.
Non-renewable natural resources that power an economy must be included in any formula that accurately counts provincial government revenues. The elevated salaries and costs of the resulting economy must also be counted in the formula. There is no logic in not doing so. Resources being non-renewable does not mean that they do not have an effect on the economy, as is the implication of refusing to contribute.
The reality is that the federal government decides who contributes how much to who for equalisation. Alberta can merely posture and argue its position, but at the end of the day, it is a decision made in Ottawa. When the premiers all get together to make an agreement on equalisation, even if they manage, it is merely a recommendation to the federal government. There is nothing the provincial governments can do, from a legal standpoint, to challenge the federal government's position on equalisation.
I therefore call upon the federal government to calculate equalisation every year, as it does our income tax, and include all revenues from all provinces, no matter what their revenue sources, as well as the costs of providing public services in all provinces. This would be in line with both our constitution, and logical reason.
Posted at 11:11 on July 29, 2006
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