Who’s the Real Menace?

Barry Cooper
July 30, 2019
The Liberal government’s relentless assault on the West’s resource economy must have countless older Albertans (and Saskatchewanians) seething at Eastern Canada’s refusal to mature beyond its politics of envy and younger generations mystified that the careers they studied and worked hard to launch are pronounced destined for phase-out by our current prime minister. In this essay, C2C Journal pairs two veterans of the federal-provincial energy wars: oilpatch insider Dave Yager, author of a new book on Alberta’s resource sector and its immense contribution to Canada, and political scientist Barry Cooper, who reviews Yager’s From Miracle to Menace: Alberta, A Carbon Story.

Who’s the Real Menace?

Barry Cooper
July 30, 2019
The Liberal government’s relentless assault on the West’s resource economy must have countless older Albertans (and Saskatchewanians) seething at Eastern Canada’s refusal to mature beyond its politics of envy and younger generations mystified that the careers they studied and worked hard to launch are pronounced destined for phase-out by our current prime minister. In this essay, C2C Journal pairs two veterans of the federal-provincial energy wars: oilpatch insider Dave Yager, author of a new book on Alberta’s resource sector and its immense contribution to Canada, and political scientist Barry Cooper, who reviews Yager’s From Miracle to Menace: Alberta, A Carbon Story.
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Dave Yager has spent nearly half a century in Alberta’s oil and natural gas industry and 40 years in journalism, notably with the oilfield trade magazine, The Roughneck. His first book, From Miracle to Menace: Alberta, A Carbon Story, combines his extensive experience in a well-written and fact-centred analysis of the economics, politics and history of oil, coal, and natural gas in Alberta and its connection to the rest of the country and the world. It’s a big book at 473 pages, drawing together not only the expected but several themes usually considered separate topics.

Among the things typically overlooked, Yager emphasizes the importance of luck, as he puts it, or Fortuna as Machiavelli would say. Yager places luck even over what the Renaissance political philosopher called Virtù, which in Yager’s context would include the earth sciences – geology, geophysics and engineering – as well as political acumen, hard work, vision and courage. Just as in the Middle East they say oil is Allah’s gift to Muslims, Fortuna matters in Canada as well. Try to imagine how our country’s energy industry would look were oil found beneath the surface of Quebec. That, of course, defies geology.

Alberta Carbon, Ottawa, Menace
Dave Yager weaves some unexpected threads into his thorough history of Alberta’s energy industry.

So imagine instead if, in 1930, the Government of Canada knew what ceding subsurface rights to Alberta and Saskatchewan would mean just 20 years later. That it didn’t was more than merely good luck for the people of those provinces; it was the basis of their prosperity and success. More recently, Fortuna intervened with the 1973 Arab-Israeli Yom Kippur War and the OPEC oil embargo, trebling the value of Alberta crude. She smiled again in 1979 with the Iranian Revolution. By 1980 the price of oil was ten times what it had been. None of these events was remotely within Albertans’ Virtù.

Of course politicians in Edmonton and Ottawa had to respond, but there was little Virtù there either. The first move came from premier Peter Lougheed and his recently elected Progressive Conservatives. Unlike the previous Social Credit government, Lougheed’s PCs were more than managers of a resource: they also saw themselves as players. Lougheed introduced Alberta to big government – as a defensive move against Ottawa, to be sure. But he also jacked up royalty rates to pay for it, and the Alberta bureaucracy never diminished in size or reach. In the summer of 1973 Ottawa imposed the first levy on oil exports to the U.S.; then came the “national” oil company, Petro-Canada, and the vain dream of a made-in-Canada price for an international commodity. Lougheed responded with higher royalties on “old” oil, discovered before 1974, which Ottawa declared unfair, soon changing the tax rules. In 1976 Alberta established the Heritage Savings Trust Fund, which the rest of Canada saw as further unfairness.

Luck, Fortuna, Alberta, OPEC
Luck, or Fortuna as Machiavelli called it, helped Alberta far more than government policies ever did.

Following the brief Joe Clark interlude in 1979-1980, Pierre Trudeau returned and imposed the National Energy Program, which most now agree was an economic disaster. By the time the Conservative government of Brian Mulroney ended the NEP in 1985, oil’s price had peaked and the fought-over economic pie began to shrink. On the other hand, if the NEP’s political purpose was to remind Albertans of their proper, i.e., subordinate, place in the country, it was a resounding success. This is a recurring issue in Alberta’s history, especially after the oil sands began to come on-stream.

Once more the vagaries of Fortuna went unopposed by Virtù. Alberta’s economic diversification fiascos of the 1980s were tributary to the huge government structure Don Getty inherited from Lougheed – but without the gusher of cash to pay for it. The sensible deregulation of natural gas by Ottawa in 1985 helped, as did the Alberta royalty reductions of 1991. In 1992 Ralph Klein became premier and largely reversed Lougheed and Getty’s central planning in order to create the Alberta Advantage. Here, Virtù glimmered. As if in response, Fortuna smiled again and first gas, then oil prices rose. By 2005-06 the Alberta government’s carbon-based revenues topped $14 billion and Alberta’s politicians, as in Lougheed’s day, fell over one another in self-congratulation. They were just as deluded.

Premier Peter Lougheed, Alberta, Energy, Carbon
Premier Peter Lougheed introduced Albertans to big government – but also fought hard to defend the province against Liberal prime minister Pierre Trudeau.

Alberta’s stunning success and the growing weariness with being tough had not merely Klein’s critics but PC insiders and “Red Tories” demanding more government spending. After Klein retired and Ed Stelmach won the PC leadership in 2006, his first major act was to “review” the royalty regime. The zero-sum logic of socialists, cranks and others reeking with resentment was treated with respect: if profits were up, somebody must be getting screwed. The process not only elevated stupidity to policy-making authority but put Alberta’s government and its major industry at war for the first time. The seemingly never-ending inflow of investment dollars slowed worryingly, but Stelmach and the Red Tories remained oblivious. Fortuna frowned again with the global credit collapse and still Stelmach did nothing. The PC machine’s subsequent internal disintegration and the collapse of oil prices a few years later was but a prelude to the recent NDP follies and the virtual collapse of investment.

By Yager’s persuasive account, such Virtù as existed in Alberta had always lain with private-sector actors who had to deal with the intrinsic elusiveness of oil, natural gas, and coal and the vagaries of the financial, commodities and labour markets. Yager is speaking not only of geologists, geophysicists and finance people, but of front-line workers like the proverbial “rig pigs” who, as he says, toiled “in the middle of the night in the middle of winter in the middle of nowhere.” Consider the results.

Rig PIgs, Alberta, Saskatchewan, Oil and gas, energy, carbon
It’s the front-line workers like these “rig pigs” whom Yager really admires, and who were indispensable in driving Alberta’s growth.

Today, the Canadian carbon-resource economy is larger than agriculture, forestry, mining and automotives combined. Astoundingly, Alberta has the world’s highest per capita oil reserves, at 39,000 barrels per resident, and is “a global carbon warehouse by any measure.” Canada – effectively, Alberta and Saskatchewan –  is the world’s fifth in oil and gas production and third in proved reserves. Two of the many happy consequences mentioned by Yager are worth pondering. First, when Westcoast Transmission brought natural gas to the Lower Mainland, the people of Vancouver and Burnaby no longer had to heat their homes with wet sawdust or sulphurous coal. Nor were they compelled to breathe air as thick with smog as the deadly pea-soupers of contemporary London. I know; I lived there then and remember it well.

The same enormously beneficial transformations continue elsewhere to this day. If you consider poor countries, which constitute over 80 percent of the Earth’s population, the coming growth in carbon demand should be obvious. The 6.2 billion people living in non-OECD countries want access to electricity, food, shelter, transportation and clothing and they need cheap energy to get these things. Renewable energy simply cannot replace petrochemicals or transportation fuels for heavy vehicles. As Yager puts it: “Climate alarmists say if we don’t stop global warming, hundreds of thousands will suffer, starve, and die. These same people fail to understand that if the world is denied cheap energy or lose what energy they have because non-carbon alternatives are unaffordable, hundreds of thousands will suffer, starve, and die.” Yager’s being generous; the toll from unaffordable energy would likely be in the many millions.

In this country, Western carbon resources have also paid for the incredibly generous federal equalization program, so beloved of politicians east of Saskatchewan. As noted economist Jack Mintz points out in this Financial Post column, Alberta’s net contribution to Canada’s government finances was a cool $611 billion (in 2017 dollars) between 1961 and 2017. Ontario, with three-and-a-half times Alberta’s population, contributed slightly more overall but only one-quarter as much per person. And where did the almost unimaginably vast, $1.33 trillion pool of money go? Quebec: $476 billion; Nova Scotia, $306 billion; New Brunswick, $203 billion; Manitoba, $175 billion; Newfoundland and Labrador, $172 billion. The opponents of carbon never mention these numbers.

The attitude of “Laurentian Canadians” (residents of old Central Canada) also helps define what is unique about Alberta – and increasingly Saskatchewan. It is not simply that Westerners have been generous towards Laurentian Canada, but that the recipients’ “thanks” have mainly comprised criticism based on envy. Over the past 70 years, any other petroleum-producing area worldwide that experienced declining oil or natural gas production was running out of resources rather than the capacity to transport the resource. Not Canada. We’re the world’s only oil-producing country that’s punishing its own carbon-resource industries and the only place whose leader has publicly mused that his country must phase itself out of the carbon business.

A small part of the explanation for these bizarre twin phenomena lies in the great and ecumenic moral panic of our times: climate change. Yager is agnostic about the validity of so-called climate science, but he is surely correct to note that “whatever the science, or the allegation, or the cause, climate change is real if for no other reason than millions of people in Canada and hundreds of millions around the world believe it is.” This belief makes climate change primarily a political rather than a genuinely scientific issue.

Here Yager tries manfully to present facts and argue reasonably about the larger context of environmental pronouncements, aspirations and dreams. Whatever environmental computer models say: (1) there is no evidence carbon resource consumption is declining; (2) there is no workable plan to achieve carbon reduction; (3) all data and forecasts indicate increasing demand for fossil fuels; because (4) there are no practical substitutes for carbon-based products and energy sources.

Even the most determined opponents of fossil fuels are in the paradoxical business of demanding an end to the very products they depend upon. This has never, however, prompted an environmentalist to reflect on his or her predicament except, perhaps, as David Suzuki once said to the editorial board of the Calgary Herald, “This is a hypocrisy I can live with.” As Yager observes, perhaps with slight exaggeration, Alberta’s critics will buy oil from any other country in the world before they will park their car or forego their next airplane ride.

Stranger still, when governments announce their support for “renewables” or such exotic machines as electric cars, their policies have very weird consequences. In Ontario, for example, subsidizing electric cars qualified a new Tesla for a $14,000 rebate. Teslas cost somewhere above $90,000 in a province where the mean income is around $80,000, which meant the government used everyone’s tax dollars to make a Tesla more affordable to Ontario’s wealthier strata. This is akin to having Albertans with modest incomes subsidize day-care and university tuition for wealthy Quebeckers. We do that already, of course. Both are equally absurd and unjust.

Such policy paradoxes are sustained by contemporary environmentalism’s sheer mendacity. In response, Yager asks a common-sense question: Why the disconnect between climate alarmists’ predictions and their absence of effective action? The first reason is simply factual: Canada comprises 0.5 percent of the world’s population and emits 1.6 percent of so-called greenhouse gases. It is simply preposterous to believe that Canada – i.e., Alberta and Saskatchewan – could make the slightest difference in global CO2 emissions even if our entire carbon industry disappeared. And everyone knows it.

Which brings us to the Government of Canada’s carbon tax. We are told we must pay more now (and more still in future) for a long-term promise of doubtful validity, and do so on the basis of trusting the politicians and “experts” to tell the truth and do what they say, including on the issues of rates/costs, exemptions, revenue-neutrality and rebates. The chances of everything unfolding as claimed are, in other words, vanishingly small. And if you’re aiming to save the planet by reducing carbon use through carbon taxes, how can you allow any exemptions or rebates? Further, given that Canada is such a tiny emitter compared to the big three – the U.S., China, and India – why bother?

If you really believe CO2 threatens humanity itself, then you need to go after the main sources of greenhouse gas emissions: the downstream emitters. In Canada, that would mean shutting down Ontario and Quebec’s killer auto and airplane plants. If the Government of Canada ever mused about that it would show that it was misguided but consistent, and maybe even sincere. But we all know it will never happen. Eight-thousand auto-sector jobs being lost in eastern Canada last year caused a national uproar; twenty times that number of jobs lost in Alberta over a brutal multi-year downturn prompted only sneers and derision, when there was any reaction at all.

Alberta energy, Ontario, auto industry, energy
8,000 out-of-work eastern auto workers caused a national uproar, but 20 times that number in Alberta only sneers and derision.

The immense contribution of the West’s (again, mainly Alberta’s) carbon-based resource production to Canada’s long-term prosperity and stability has triggered not gratitude but a long train of abuse: the cancellation and infinite delays of pipeline construction, tanker bans on the West Coast (Bill C-48) concurrently with the encouragement of Saudi Arabian oil imports to Quebec refineries (to the added benefit of major Saudi contractors such as Quebec’s SNC-Lavalin) and the complete politicization of the regulatory process (Bill C-69), which promises to add further layers of political manipulation, mendacity and perhaps outright corruption. The most nauseating aspect is the sadistic moralizing of federal ministers, most notably the Minister of Environment and Climate Change, Catherine McKenna. Her words are deceptive, insulting and vicious expressions of a deep-seated contempt for her benefactors.

From long before the Prairie provinces were part of Canada, this region was a place to get stuff. First beaver and buffalo pelts, then wheat, and most recently carbon. All the while the humans living in the resource-extraction region had to be controlled by the Laurentians. First it was through the royal monopolies issued by the British Crown. Upon Canada’s creation came the National Policy of the first prime minister, Sir John A. Macdonald. Later it was done through prime minister Wilfrid Laurier’s creation in 1905 of three weak provinces rather than one large one. This was followed by Ottawa’s continued control of resources “for the purposes of the Dominion”. The return of mineral resources to the new provinces in 1930 was a rare exception – but came at the very start of the Great Depression.

Western resources, fur trade
From the beginning, the East saw the West mainly as a place to “get stuff” — while controlling the people who lived there.

Decades later, after the great Post-Second World War oil and gas discoveries and the West’s burgeoning prosperity at last threatened Laurentian Canada, came stifling regulation, taxation, confiscation, and additional regulatory strangulation. Sustaining the Laurentians’ selfish efforts to control the West are the corrosive emotions of envy, resentment, contempt and at times flat-out hatred. None of this can be admitted in Laurentian Canada. The latest version of ongoing anti-Alberta bigotry is clothed in environmental clichés and platitudes. What a happy coincidence! Destroy the Alberta economy and teach Albertans, once again, their proper place in Confederation; and oh, pretend to save the planet at the same time.

Yager reaches the same conclusion with less sarcasm: “Even if pipelines help alleviate Alberta’s problem of geography, the province will never truly be master of its own destiny so long as its hydrocarbon-delivery arteries pass through other political jurisdictions, or so long as other levels of government can interfere with its resources and economic future. Further, the concern that Alberta’s bread-and-butter carbon-resource industries are a menace to the world’s climate will not go away.”

We know beyond a reasonable doubt that the massive damage to Alberta has resulted in no reduction in global or national carbon emissions. We’re also all-but certain that it isn’t going to stop, for climate policy is driven by a quasi-religious impulse or at best an ideology rather than practical or empirical considerations, let alone pure science. It is anyone’s guess how long Albertans will put up with this assault on their interests and insult to their self-respect before they recover and act on the basis of their suppressed Virtù. In the closing chapter of The Prince, Machiavelli exhorts Italians to vindicate their liberties and rid their country of barbarians. From Miracle to Menace carries a similar message and gives me reason to think that a recovery of Albertan Virtù may happen sooner than we think.

Barry Cooper is a Professor of political science at the University of Calgary.

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