ALBERTA’S ENERGY LEGACY Ideas for the Future edited by Robert ROACH CANADA WEST FOUNDATION An Investing Wisely Project Publication About the Canada West Foundation Our Vision A dynamic and prosperous West in a strong Canada. Our Mission A leading source of strategic insight, conducting and communicating non- partisan economic and public policy research of importance to the four western provinces and all Canadians. Canada West Foundation is a registered Canadian charitable organization incorporated under federal charter (#11882 8698 RR 0001). In 1970, the One Prairie Province Conference was held in Lethbridge, Alberta. Sponsored by the University of Lethbridge and the Lethbridge Herald, the conference received considerable attention from concerned citizens and community leaders. The consensus at the time was that research on the West (including BC and the Canadian North) should be expanded by a new organization. To fill this need, the Canada West Foundation was created under letters patent on December 31, 1970. Since that time, the Canada West Foundation has established itself as one of Canada’s premier research institutes. Non-partisan, accessible research and active citizen engagement are hallmarks of the Foundation’s past, present and future endeavours. These efforts are rooted in the belief that a strong West makes for a strong Canada. More information can be found at www.cwf.ca. Alberta’s Energy Legacy Ideas for the Future edited by ROBERT ROACH Canada West Foundation Director of Research www.cwf.ca ALBERTA’S ENERGY LEGACY ALBERTA’S ENERGY LEGACY i Ideas for the Future Contents ii Contents This publication was edited by Canada West Foundation Director of Research Robert Roach and is part of the Canada West Foundation’s Investing Wisely Project. The Investing Acknowledgements iii Foreword by Robert Roach iv Wisely Project has explored two key issues: 1) the case for saving a larger portion of Contributors viii Alberta’s non-renewable natural resource revenue for future use; and 2) creative and strategic ways of using the earnings on the savings to transform the province in positive Chapter 1 Save Your Money! by Robert Roach 1 ways. The project has been funded by over 60 foundations, businesses and individuals Chapter 2 Alberta’s Money Jars by Brett Gartner 9 (see the Appendix). The Canada West Foundation expresses its sincere appreciation for this generous support. Chapter 3 The Butterfly Effect by Martha Piper 27 Chapter 4 All Aboard by Fred Stenson 43 The opinions expressed in this document are those of the authors and not necessarily Chapter 5 Metamorphosis by Deborah Yedlin 55 those of the Canada West Foundation’s Board of Directors, advisors, or funders. Permission to use or reproduce this document is granted for personal or classroom use Chapter 6 Whither a Heritage Fund Public Dividend Policy? by Allan Warrack 69 without fee and without formal request provided that it is properly cited. Copies may not Chapter 7 Alberta by Design by Lance Carlson 81 be made or distributed for profit or commercial advantage. A free electronic version of Chapter 8 An Apple a Day by Penny Hawe and Alan Shiell 95 this document can be downloaded from the Canada West Foundation website (www. Chapter 9 Alberta on the Environmental Cusp by Sydney Sharpe 111 cwf.ca). Chapter 10 Atelier Alberta by Aritha van Herk 121 Chapter 11 Green Cities Are Great Cities by Byron Miller 133 ISBN 1-897423-10-3 Chapter 12 A SURE Thing by Curtis Gillespie 155 Printed and bound in Canada. Conclusion by Roger Gibbins 165 Layout and design by Jason Azmier. Appendix: Investing Wisely Project Funders 171 © Canada West Foundation 2007 ALBERTA’S ENERGY LEGACY ALBERTA’S ENERGY LEGACY iii Acknowledgements Foreword iv Acknowledgements Foreword First and foremost, the Canada West Foundation wishes to thank the 11 individuals who Alberta is in a unique position in Canada. It is the only province with no debt, a large stash took on the task of coming up with answers to the question of how to transform Alberta of cash in the Heritage Fund, and enough energy revenue flowing into its coffers to keep using the revenue from a larger Heritage Fund. Their thoughtful responses form the taxes low, and—with just a little bit of discipline—double or triple the size of the Heritage heart of this volume and will serve Albertans well for many years to come. Fund in just a few years. We have our hands firmly around the financial brass ring. We would also like to thank Brett Gartner for his chapter on existing savings vehicles in At the risk of mixing too many metaphors, Alberta’s finances are like Tiger Woods two feet Alberta, Casey Vander Ploeg for his contributions to the Investing Wisely Project from its from the hole. We can’t miss. We have the chance to secure our financial future and make early days onward, the many funders of the project (see the Appendix), the numerous sure that the Alberta advantage lasts a long, long time. individuals who took time from their busy schedules to participate in the project’s various consultation exercises, and the staff of the Canada West Foundation for their hard work So why haven’t we taken the shot? Why aren’t we packing money into the Heritage on the project and for their ongoing encouragement. The Canada West Foundation also Fund while we are seeing record levels of energy revenue and posting multi-billion dollar greatly appreciates the support of the Calgary Herald and Edmonton Journal and would surpluses? What gives? like to thank both Al Rach and David Evans for their help. Thanks are also due to the contributors to the earlier Investing Wisely Project volume Seizing Today and Tomorrow The main reason given for why we have been timid when it comes to saving our energy (Loleen Berdahl, Bev Dahlby, Herbert Emery, Ronald Kneebone, Michael Robinson, and revenue in this province is that we need to spend the money now. A visit to the emergency Allan Warrack) and to Harvey Krahn for his work on the survey of Albertans that was room in Calgary or Edmonton gives a lot of credence to this argument. A pile of money in conducted in 2005. a bank account doesn’t do us much good when we have pressing needs in health care, education, social services, infrastructure and so on. If the money is for a rainy day, many Finally, thanks are due to Canada West Foundation Vice-Chair Brian Felesky for his are arguing that it’s coming down pretty darn good right now. tireless efforts to secure the funding for Phase III of the Investing Wisely Project. This still doesn’t mean that we shouldn’t be saving and here’s why. First, no one is suggesting that all resource revenue should be saved for future use. The Canada West Foundation has suggested that half be saved (averaged over good and bad years) and others have suggested more modest amounts such as 30%. If we do this, we will transform our dwindling stocks of oil and gas into a permanent financial asset and make sure that Albertans 5, 10, 20 and 50 years from now get their share of this bounty while leaving half or more for current consumption. ALBERTA’S ENERGY LEGACY ALBERTA’S ENERGY LEGACY v Foreword Foreword vi Second, and perhaps most importantly, saving does not mean that the money gets economists; and a summary report entitled Seizing Today and Tomorrow: An Investment stuffed in a mattress for a rainy day. On the contrary, the earnings generated by what Strategy for Alberta’s Future was published. is saved (after inflation-proofing the principal) are available for current use. If we grow the Heritage Fund, we also grow the annual cash flow it generates. We won’t have The first two phases of the project informed and increased debate about the option of quite as much to spend right away, but we will have lots to spend year after year after saving a portion of non-renewable natural resource revenue rather than spending all of year. Saving is actually about being able to spend—on a permanent basis rather than in it as it comes in. However, it was pointed out during the first two phases of the project one-off splurges. that the case for saving begs a critical question: saving for what? There was general consensus among consultation participants that saving makes sense because it reduces Indeed, if our luck holds and energy revenue stays high, we could have enough money revenue volatility, creates a permanent financial asset, and ensures that future Albertans saved in the Heritage Fund to do all sorts of things—from replacing the inevitable decline will benefit from the province’s bounty of non-renewable resources, but there was also in energy revenue or an permanent annual dividend cheque to massive investments in a strong sense that more work was needed to prepare a menu of options for using the post-secondary education or the environment. We have the chance to secure not only earnings generated by the proposed savings. Simply saving for a “rainy day” does not our financial future, but also to transform the province in positive ways. have broad appeal in Alberta. The third phase of the project was launched to provide a more detailed answer to the Investing Wisely Project Phase III question of how the earnings on the saved revenue could be used to improve the lives of Albertans and other Canadians. The goal was not to determine a single, definitive The first phase of the Investing Wisely Project involved background research on how answer, but to generate a short list of exciting and thoughtful options for consideration other jurisdictions such as Alaska and Norway manage their non-renewable natural by Albertans.