DeSmog

Canada’s Bitumen Boosters Want Us to Forget About Norway

Alberta produces 70 percent more petroleum, but has only one percent of the savings. Equalization payments have nothing to do with it.
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Norway's energy minister Terje Aasland
Norway's energy minister Terje Aasland. Credit: Offshore Norge (CC BY-SA 2.0 DEED)

Why can’t Alberta have nice things, like the $2.23 trillion Norwegian sovereign wealth fund? Alberta bills itself as an energy superpower and produces about 70 percent more petroleum in total than Norway, which has roughly the same population and enjoys some of the most generous public services in the world. 

So why is Alberta billions in debt and many Albertans are struggling with basics like finding a family doctor? Both jurisdictions have been extracting petroleum for decades and both set up savings programs for their oil wealth. The Alberta Heritage Trust Fund was started fourteen earlier, and yet Norway’s oil fund is over a hundred times larger. What happened?

The main culprit (as usual) is Ottawa, according to a recent opinion piece in the National Post that blames federal transfer payments as the reason that Alberta’s Heritage Trust Fund only has one percent of what Norway has managed to save of their oil wealth. 

The rest of Canada has become a favorite straw man for why Alberta has so little to show for extracting 36 billion barrels of oil and bitumen and 190 trillion cubic feet of natural gas collectively worth about $2.7 trillion at current prices. Where did all the money go?

Let’s unpack this important question by first dispelling some cherished myths of Alberta politics. Petroleum like almost all other Canadian natural resources is owned and controlled by the provinces, not the federal government. Provincial governments set royalty rates and collect revenue for resource extraction based on local policies. 

The Alberta Heritage Trust Fund is puny compared to Norway’s savings because successive Alberta governments chose to stop investing any public petroleum revenue way back in 1987. They have also since withdrawn $42 billion in interest income into general revenue, leaving the per capita principal to wither by almost two thirds due to inflation and population growth. 

Equalization transfer payments have nothing to do with the management of the Heritage Fund, nor do they involve Alberta or any other provincial government sending money to Ottawa. The program is instead designed to redistribute wealth between provinces using personal income tax revenue collected from high-earning individuals, of which Alberta is fortunate to have more of proportionately. Further debunking this myth is the fact that Revenue Canada charges the same rates of income tax across the country. 

In 2023, Norway produced a mixture of oil and natural gas that can be approximated as around 1.4 billion barrels of oil equivalent (BOE), and collected about $123 billion CAN in revenues. Alberta’s production of bitumen, conventional crude and natural gas totaled about 2.4 billion BOE with $25.2 billion in public royalties. That means Norwegians realized $84 per barrel in public revenue compared to a mere $11 per barrel in Alberta. 

To be clear, low sulfur Brent crude extracted from the North Sea is significantly more valuable than the heavy bitumen blend predominantly extracted in Alberta. Norway also exports almost 100 percent of their natural gas while almost 30 percent of all gas consumed in Canada is instead used to extract bitumen.  

Lack of access to tidewater and international markets has been another stated reason why Alberta isn’t richer. However, the Trans Mountain pipeline to Vancouver paid for by the Canadian taxpayer to the tune of $35 billion is about to become operational. Will that be a game changer for Alberta? Not really. Almost all of the product moved by TMX is expected to still be sold to American refineries on the west coast since diluted bitumen is not profitable to ship across the Pacific Ocean in the smaller tankers able to access the port of Vancouver. 

“The priority here sometimes seems to have the oil industry like us, rather than pay us.”

There are other more fundamental reasons why Norway succeeded so spectacularly in managing their oil wealth while Alberta did not. Alberta taxes production through royalties, while Norway instead taxes oil profits — at a rate of about 80 percent. This means that the interests of the Norwegian government and oil companies operating there are lucratively aligned. 

For every dollar earned by oil companies, the Norwegian taxpayer earns four dollars. In turn, companies operating in Norway enjoy a high degree of certainty since Norwegian voters know their oil wealth funds some of the most generous public benefits in the world. Even at that high rate of taxation, oil executives surveyed by the Fraser Institute consistently ranked Norway above Alberta as a place where they would prefer to do business. 

Former premier Peter Lougheed urged Albertans to think like an owner of their resource wealth. That advice seems instead to have taken root in Norway where the government is an active participant in the oil sector through their publicly owned oil company Equinor, and by exercising equity ownership of about one third of their oil and natural gas reserves. These additional revenue streams contributed about $45 billion CAN on top of the $77 billion Norwegians raised last year in direct oil taxes. 

And what does Norway get for being more entrepreneurial in their resource management? They can afford 18.9 nurses per 1,000 people, or about 35 percent more compared to 12.3 in Alberta.  Albertans rate access to a family doctor as a top household concern. Norwegians have 

5.18 doctors per 1,000 people, more than double the number in Alberta. On education, Norway allocated the equivalent of $24,635 CAN per student in 2020, Alberta spent $11,601 per student — the lowest in Canada in 2020. Norway also has free university education and only this year started charging tuition for students outside of the EU. 

Policy minutia aside, the National Post piece did correctly identify a fundamental reason why Alberta has so little to show for extracting such a vast resource endowment: “Alberta has chosen to be a low-tax jurisdiction.” I recall trying to explain this ideological aversion to maximizing public resource revenue when I visited Norway in 2010 to research a series on their oil industry. An industry expert I spoke with was genuinely perplexed. We like money, don’t you like money? The priority here sometimes seems to have the oil industry like us, rather than pay us. And while individuals may choose to love the oil industry, there is little evidence that it will love you back. 

The narrative that Ottawa stole Alberta’s oil wealth might be a popular pitch in the oil patch but the simple truth is that Norwegians negotiated much more favourable terms with oil companies extracting their valuable natural resources. It’s nothing personal, it’s just business.

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Mitch Anderson is a Vancouver-based journalist covering climate and extraction industries.

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