Albertan's Letter to Taft

Letter from a good friend, if you see fit to add to the blog – its particularly powerful, as he has no direct stake in the industry at all.

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From: XXXXXXXXXXXXXXXXXXXXXX
Sent: Tuesday, October 23, 2007 7:57 PM
To: Calgary MountainView
Subject: Disturbing news from Leader of the Liberal Party

Dr. David Swann,

I read today, straight from the mouth of your party leader Kevin Taft, that the Liberal Party of Alberta supports at least a 20% hike in royalties charged to Oil and Gas producers, per the recommendation of the flawed document from the Royalty Review Panel.

(Here is but one trifling question about their credibility... How can Alberta's royalty scheme be compared to Libya, Jordan and Ecuador in that document, and yet not BC or Saskatchewan? Because the recommendations were preconceived and supporting evidence only worked with those comparisons).

The position of your party is not at all in keeping with the carefully considered message you presented to me earlier this month. Now that I know where your party stands (populist, unreasonably misinformed and unapologetically anti-industry), may I ask if you broadly support the dangerous stand your party has taken? Generally I vote for the best candidate when I vote, as I loathe party politics, but the Liberal Party is showing itself to be out of touch with what government is supposed to be for and who it is supposed to serve. Sadly, so are the provincial Conservatives.

Apparently equality of opportunity, of which the provincial government is but one guarantor, is being pushed aside in favour of equality of outcome, with the government using punitive taxation and redistribution as a bludgeon to achieve "our fair share" (a euphemism for freeloading off of a successful industry). Yes, I suppose the government would like to have an extra $2 billion per year in its coffers. Too bad the government will never see the increased revenue as you cannot tax unrecovered Oil and Gas. Under this kind of royalty regime, the ground is exactly where marginal discoveries of Oil and Gas will stay. No new oil, no new gas, no extra money from royalties. Meanwhile, many of the clever business people in this province will catch the next plane to a more favourable place to work and build a company. Fortunately for them, it will not be that far - to BC or Saskatchewan - as incredible as that would have sounded just five years ago.

This royalty hike will have the perverse effect of being revenue neutral for Alberta, as lower production will offset higher royalties (almost immediately). Just as perversely, it will likely be revenue positive for BC and Sask, vis a vis higher income taxes and corporate taxes raised from the ensuing economic migration and, unsurprisingly, the improvement of the Oil and Gas industries in those jurisdictions.

I'm sure it all sounds good to the people who hate big businesses in particular and capitalism in general, but to the rest of us this policy is a disturbing and gross misstep. I'm not in any way involved in the Oil and Gas business, nor do I have any investments in companies that are, but I can see clearly that, for all Albertans, this is precisely the worst policy to apply at almost exactly the wrong time.

I'd like to say that I'm stunned speechless, but obviously I'm not. I am shaking my head in disbelief. I feel your party has played populist politics with this issue, and that disgusts me. It panders to the wrong mentality... the envious, the angry, the embittered, and those fatigued by the cost of everything in this province.

This bad policy is willing to throw a sizable minority of Albertans under the train, for the seeming (and small) benefit of a narrow majority of Albertans. It is no doubt popular to lay penalties on big, rich companies like Encana or Conoco Philips (who themselves directly employ something like 15,000 people in Alberta), but what about the thousands of small Alberta companies who are going to wake up and find that their successful business model is now completely obsolete and untenable, through no fault of their own? It will be the fault of their own government using the caprice of a hefty and ill-considered provincial tax increase.

As someone earning an income in the top quartile in this province, how would you feel if your income taxes received a 20% hike because Albertans in the lower three quartiles wanted their "fair share"? I'd probably have little choice but to leave, especially if current programs and spending is any indication of how that "fair share" will be used. And I proudly call myself an Albertan! My wife is a third-generation Albertan and my newborn son is the fourth generation!

Friendly BC, the province of my birth, is right next door, and it has recently ensured that its median income taxes are lower than Alberta's (it was shocking to read that last week). I've watched for three decades with quasi-amusement as that province mismanaged its relations with and impacts on multiple industries. Now, Alberta seems to want to join that party. BC has cleaned up its act in response to Alberta's overwhelming recent success, and Alberta is in danger of responding by capitulating to populist demands for excessive and destructive wealth redistribution.

Pluck the golden goose of its feathers if you must. It better be a spectacularly warm coat, duvet or pillow that is made with the feathers, and we better have a fabulous stockpile of golden eggs, because there won't be a lot of egg laying going on for quite a while.

Cheers,

XXXXXXXXXXXX

Calgary, Alberta