Stepping Back from the Brink – Maybe

Gwyn Morgan
August 29, 2020
“You don’t know what you’ve got ’till it’s gone” was penned long ago as an environmentalist, anti-establishment lament. These days, the environmentalists are the establishment, industry is the underdog, and the federal Liberals have come close to destroying the nation’s foremost generator of wealth and tax revenues. Some recent pronouncements by certain federal ministers, however, have Gwyn Morgan seeing glimmerings of reason, or at least pragmatism. If they do suspend their scorched-earth campaign against oil and gas, though, it won’t be for any love of the resource sector, let alone of Alberta. It will simply be because they need the money desperately. If that’s what it takes, writes Morgan, so be it.

Stepping Back from the Brink – Maybe

Gwyn Morgan
August 29, 2020
“You don’t know what you’ve got ’till it’s gone” was penned long ago as an environmentalist, anti-establishment lament. These days, the environmentalists are the establishment, industry is the underdog, and the federal Liberals have come close to destroying the nation’s foremost generator of wealth and tax revenues. Some recent pronouncements by certain federal ministers, however, have Gwyn Morgan seeing glimmerings of reason, or at least pragmatism. If they do suspend their scorched-earth campaign against oil and gas, though, it won’t be for any love of the resource sector, let alone of Alberta. It will simply be because they need the money desperately. If that’s what it takes, writes Morgan, so be it.
Share on facebook
Share on Facebook
Share on twitter
Share on Twitter

After five years of suffering in eco-zealot purgatory under the Trudeau Liberals, the half-million or so Canadians whose livelihood depends on the oil and natural gas industry finally got some good news: The oil sands are now part of the federal government’s green energy agenda! As Natural Resources Minister Seamus O’Regan told the Financial Times’ Derek Brower earlier this month, “There’s no way we are reaching [Canada’s 2050 greenhouse gas emissions target of] net-zero without Alberta.” O’Regan even went on to express support for new pipelines that would allow Western Canada’s crude oil output – and exports – to grow by over 1 million barrels per day next year and continue to rise after that. In stark contrast to the Liberal government’s previous vilification of the industry, O’Regan lauded the ingenuity of Albertans in finding ways to “draw oil out of sand”.

A glimmer of reality breaking through: Federal Natural Resources Minister Seamus O’Regan, seen here at the Prospectors & Developers Association of Canada conference in March, admits the oil and natural gas industry will be crucial to Canada’s future growth.

This is a stunning reversal from a government whose leader infamously mused about “phasing out the oil sands”. It could hardly have been imagined prior to the coronavirus crisis. Why now? The answer came in the minister’s own words: “Our prosperity and our economy are still highly dependent on [oil and natural gas production].” How dependent? This industry is by far the largest contributor to both Canada’s overall GDP and the nation’s net export revenue – each totalling over $100 billion per year. And Alberta has long been the largest net contributor to Ottawa’s coffers (meaning monies collected in Alberta minus federal funding dispersed in Alberta or to Albertans). The disparity amounted to a cumulative $95 billion from 2014-2018 – greater than that for all other provinces put together. And, keep in mind, Alberta was enduring a brutal economic downturn in all but the first of those five years.  

The Covid-induced economic recession has brought about a projected decline of $83 billion in federal revenue in the current fiscal year, according to former Finance Minister Bill Morneau’s July 8 “fiscal snapshot”. This shows why reversing course and once again growing Ottawa’s most important revenue source is so critical. The snapshot projected an astonishing $343 billion federal deficit this year. Two days later, the government announced changes to the employment insurance system that will cost a further $37 billion, taking the deficit to $380 billion.

A very favourable balance of trade: Between 2014 and 2018 Alberta contributed a net $95 billion to Ottawa’s coffers, thanks in large part to the resource sector.

Further spending escalation is certain, including help for stretched provincial health care budgets, cities unable to fund public transportation and aid to hard-hit business sectors. Indeed on August 26, Justin Trudeau announced that “Canada” would “give” the provinces $2 billion to help with the reopening of schools. It is now clear that by next year our national debt will exceed $1.2 trillion. This is twice the amount when the Liberals came to power in 2015 and will represent well over 50 percent of the country’s Covid-battered GDP. 

The last time Canada faced such an enormous financial challenge was after the Second World War. Back then, demographics came to the rescue: the post-war “baby boom”, combined with soldiers returning home to help produce desperately needed consumer goods, transformed the economic picture. Today, we have the complete reverse. Decades of deteriorating birth rates have created a baby-bust while those same baby-boomers are leaving the workforce and driving increased public spending for old-age security payments and eldercare.

The future of Alberta, and Canada's, social and welfare sectors is under threat from the increase in expenses from the pandemic.
The increase in public expenditures presents a risk for the future of Alberta, and Canada's, welfare system.
Massive new public expenditures in education and health care are occurring simultaneous with a dramatic reduction in private sector activity, particularly across the retail and real estate sectors. (Above Image source: Reuters)

And yet, as the song goes, “You ain’t seen nothin’ yet”. Covid-19 portends a massive restructuring of vital business sectors. Retail, which employs millions and occupies vast amounts of real estate from street-side shops to malls, faces profound uncertainty from the pandemic-driven shift to online shopping. The various lockdowns and near-lockdowns facilitated an array of new communication tools that allow many more to work remotely with reasonable efficiency and productivity, emptying office towers. It thus seems reasonable to expect the number of displaced workers to increase.

The potential impacts are staggering, including mass unemployment and devaluation of commercial real estate assets that represent key holdings for hundreds of companies as well as retirement nest-eggs for thousands of small businesspeople and that also, among other things, underlie public and private pension funds. The full effects of these and other post-Covid structural shifts are yet to be known, but it’s clear they will be broad, deep and in many cases devastating. Government tax revenues will fall, while the need for support and training will add still more costs.

A ‘green restructuring of the economy?’ Ask Ontario Hydro customers how that worked out.

It is an alarming picture, yet it seems the coronavirus has fostered escape to an ephemeral state in which reality is magically replaced by an imagined world that is whatever one wishes it to be. It is incomprehensible to hear our government declare the pandemic has created an “opportunity for public investment in green restructuring of the economy”, which translates into subsidizing windmill and solar power companies while further hobbling the proven traditional drivers of wealth. How will that work out? Ask Ontarians, who’ve seen residential and business electricity rates skyrocket to produce very expensive and completely unreliable power.

Navigating these shoal-riddled waters would be difficult enough if our economic outlook had been strong before the crisis. But alas, that wasn’t the case. Statistics Canada data shows that, since the election of the Trudeau government in 2015, investment in 10 of the 15 major business sectors has dropped by 17 percent as both Canadian and foreign investors fled. Over $185 billion in capital left the country as investors sold out and redeployed their funds. This mirrored a precipitous drop for Canada’s position in both the World Bank’s Ease of Doing Business ranking and the World Economic Forum Competitive Index. In reality, Canada’s strong employment rate over that period was driven by unsustainable deficit spending and not by private-sector investment and genuine economic performance.

The future of Alberta depends on what federal politicians decide to be their energy policy in the coming months.
What will be the future of Alberta? Depends on if federal politicians continue the scorched-earth campaign against Alberta's oil and gas sector.
Fuel for the economy: If Canada wants to recover quickly from the Covid-recession, Ottawa needs to support private sector job creation, and in particular the resource sector.

Reigniting private-sector investment that will generate rather than consume government revenues will require a profound and clear reversal of both attitude and action by the Trudeau Liberals. Minister O’Regan’s comments about the oil and natural gas industry are positive, but so far they are just talk. They must be followed by clear and prompt federal government action. Similar encouragement and action are needed for other natural resource sectors, including in mining where, for example, an Alberta coal mine expansion proposal has suffered recent federal action to stop it. 

Here’s a note to our new federal Finance Minister, Chrystia Freeland: Restarting private-sector investment and job creation is the only hope for keeping the good ship Canada from smashing on the post-Covid rocks and sinking a nation with such great potential. Dial back the ideology, tone down the woke attitude and focus on the national interest.

Gwyn Morgan is the retired founding CEO of EnCana Corp., formerly Canada’s largest producer of natural gas.

Love C2C Journal? Here's how you can help us grow.

More for you

The Fake News Fake-Out

The news business is at its least reliable when reporting on itself. Coverage of a media company’s own financial results, for example, is inevitably glowing and upbeat, whatever the actual figures might say. The same thing holds for concerns over “fake news”. Seizing on recent panic about the spread of misinformation, and thanks to a generous federal grant, Canada’s legacy newspapers have devised their own system for identifying fake news. But as Peter Shawn Taylor discovers, the criteria strangely celebrate their own product at the expense of their many online competitors. And much of it contradicts the basic rules of good journalism.

Hating Jordan Peterson

Who kicks a person when they’re down? Who dresses up their own resentment, spite or ideological fervour as analysis? One doesn’t need to agree with Jordan Peterson’s every idea to regard his recent comeback from the brink of death, destruction and oblivion as welcome, commendable and inspiring. At least worth a shred of empathy. But not from the more doctrinaire of his woke Left critics. As Janice Fiamengo finds, they aren’t just revelling in the popular author’s misfortune but are committing what they normally consider an unforgivable sin: blaming the victim.

George Orwell on the Myanmar Coup

“The whole aim of Newspeak is to narrow the range of thought”, George Orwell wrote in his famous novel Nineteen Eighty-Four. “In the end we shall make thoughtcrime literally impossible, because there will be no words in which to express it.” Orwell understood that whoever controls language controls political thought. And such an insight is as applicable to Myanmar in 2021 as it was to Oceania in 1984. Using Orwell as his guide, and relying on his extensive personal contacts throughout the country, C2C Journal associate editor Patrick Keeney takes a close look at reality and meaning in the recent coup in Myanmar.

More from this author

Main_Pandemic_Policy_covid_canada

Pandemic Follies: The Biggest Government Policy Mistakes

Canada’s economy was supposed to have been cruising along the road to recovery by late last year. Instead, the nation is once again shedding jobs, unemployment is high, companies continue to shrink or go under, entire industries are threatened and growth is almost nowhere to be seen. So why are governments seemingly doing everything in their power not only to hold back recovery but destroy much of what remains? Gwyn Morgan assesses several key areas of our nation’s battered economy and reviews the central role played by poorly thought-out, unneeded and avoidable government policies in each one.

A Practical Way for Canada to Reduce Greenhouse Gas Emissions

Carbon dioxide emissions are a globe-girdling phenomenon driven by industrialization, and atmospheric gases obviously don’t care about national boundaries. So it’s distinctly weird that some left-leaning governments, Canada’s Liberals among them, insist that recognized emissions reductions must take place right here at home! Isn’t the goal “saving the planet”? In fact Canada has a clean-burning energy resource that’s voluminously abundant and economically accessible with current technology – and which the world can’t get enough of. As Gwyn Morgan writes, jobs, wealth-creation, tax-revenue and environmental improvement on a global scale all await, if only governments dropped their ideological blinkers.

The Economics of Green Energy Ideology

Solar panels filling fields in cloudy northern countries. Wind turbines manufactured for export by the world’s largest builder of coal-fired power and worst emitter of greenhouse gases. Governments deliberately demolishing their country’s most valuable industry. It is increasingly clear that so-called green energy isn’t just another instance of youthful idealism going a little too far, much less a practical way to a clean future, but a nasty utopian ideology bent on impoverishing entire countries. Gwyn Morgan examines a slice of this destructive landscape and warns of the severe risk to Canada’s economic well-being.

Share This Story

Share on facebook
Share on twitter
Share on print

Donate

Subscribe to the C2C Weekly
It's Free!

* indicates required
Interests
By providing your email you consent to receive news and updates from C2C Journal. You may unsubscribe at any time.