There are solutions to the fiscal woes if we can just move on them

Brian Zinchuk

As I write this, Canada is having a good day, economically. That is, if you consider we just dodged, by the skin of our teeth, getting trampled by Donald Trump on NAFTA 2.0, the United States Mexico Canada Agreement.

Also, within days, if not hours, the final go-ahead is expected to be announced for the first truly major liquefied natural gas (LNG) facility to be built at Kitimat. It’s expected to come in at $40 billion, which includes its associated (gasp!) pipeline. That is stupendous news.

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So after a summer of getting kicked in the teeth, particularly on the Trans Mountain Expansion Project and American aluminum and steel tariffs, maybe we have something to be thankful for. After all, that $40 billion is going to be a huge uplift to British Columbia. Maybe it will lead to more investments, and a whole new form of natural gas industry for Canada.

But lurking in the background is the spectre of subnational debt – i.e. provinces going increasingly into debt after years of deficit spending. New Brunswick is going down the tubes in a hurry. Newfoundland has been bankrupting itself with the Muskrat Falls hydroelectric project. Don’t get me started on Ontario.

One of the few provinces to see recent surpluses has been Quebec, but that’s only because they get $11 billion per year in equalization payments.

What is galling about all this is that many of these jurisdictions have the ability to help themselves a bit, if they just got their heads out of, well, you know.

New Brunswick, for instance, has natural gas. But in recent years, they have banned fracking. So instead of allowing a new natural gas industry to develop there, and do this thing called paying royalties and taxes, and creating jobs, they’d rather go down the whirlpool of bankruptcy.

Quebec, too, has said no to fracking for natural gas, despite having its own resources. I’ve spoken to the guy leading the company who wants to develop it. They’ve been patient, but it seems they are getting nowhere. Yet in the meantime, Alberta, which does allow fracking, is paying to subsidize Quebec each and every day, while its own fiscal ability has suffered.

Alberta is in a righteous fury over British Columbia and Quebec’s intransigence on pipelines. Northern Gateway was first. Then Energy East. Now it’s Trans Mountain. In the meantime, the price differential on Western Canadian Select compared to West Texas Intermediate, as of Oct. 1, is -US$35.75 per barrel, giving an implied price of US$37.50. In other words, most of Alberta’s oil (and a good chunk of Saskatchewan’s) is going for just over half of WTI.

I wish they sold vehicles that way. I could stand a new SUV at half off. Yet this is how we are selling our oil, every day.

When talking to Premier Scott Moe about this a month ago, I pointed out that the amount Saskatchewan is losing due to this differential, in taxes and royalties alone, would essentially wipe out our provincial deficit. He noted I was very astute, and correct. At the time, the number was $200 million per year. Since then, Moe has revised the lost revenue to $300 million per year.

If the provinces don’t get their fiscal houses in order, they run the risk of going through something similar to Saskatchewan’s near-death experience with bankruptcy in the early 1990s. Those effects are still felt, today. It impacted my wife. The year she graduated nursing, they laid off 600 nurses. It was a year before she found work in North Battleford. Shutting down the Plains Hospital 20 years ago has a big impact on hospital bed shortages today. Other provinces will soon feel this pain.

Much of Canada could fix its financial woes if they stopped fighting everything and actually let people move this country ahead. That means allowing fracking in New Brunswick and Quebec. It means building Energy East, Northern Gateway and Trans Mountain, allowing that differential to shrink. It means letting one $40 billion LNG investment become many. It means stopping scaring away investment in the oilsands. It means allowing all these pipelines to be filled, at prices that aren’t discounted because we’re selling our oil to India and China.

Many of the solutions are there. We just have to be willing to move on them.

 

Brian Zinchuk is editor of Pipeline News. He can be reached at brian.zinchuk@sasktel.net.

 

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The The Estevan Mercury welcomes your opinions and comments. We do not allow personal attacks, offensive language or unsubstantiated allegations. We reserve the right to edit comments for length, style, legality and taste and reproduce them in print, electronic or otherwise.

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