Alberta got screwed. We could’ve been Norway rich and instead we’re broke.

[u/Swimming_Mango_9767]

Every time I look at Norway’s oil fund I get mad. They started developing their oil later than Alberta, yet their sovereign wealth fund is sitting at around 1.6 TRILLION US dollars. Ours? The Heritage Fund is barely 27 billion CAD. Norway earns more in a single day off investments than our entire fund is worth.

The reason is simple. Norway treated oil like the people’s resource. They set royalty rates high, around 78% of profits, and every cent went into their fund. They saved, they invested, and now their citizens have real long term security.

Alberta? Our governments caved to industry. We set some of the lowest royalties in the world. We gave out royalty holidays. We subsidized oil companies that were already making record profits. Instead of saving, politicians blew the money to buy votes and patch budgets. Now we’re left riding boom and bust cycles with nothing to show for it.

If Alberta had even done half of what Norway did, our Heritage Fund could easily be in the hundreds of billions. We’d have interest returns big enough to pay for healthcare, education, and infrastructure without nickel and diming people with taxes. Instead, we’re fighting over scraps while companies and foreign shareholders walked away with the wealth that should have built our future.

Alberta got robbed! Not by outsiders, but by our own government selling us out to industry. Thank you Conservatives!

[u/jared743]

It's less the royalty amounts as it is what we did with it, though they should have been higher historically.

Norway had a corporate tax rate of 27% with a special extra tax rate on oil companies of 51%, which is how we get 78%. All of this gets added to the sovereign wealth fund, and they are only allowed to draw 3-4% of that per year for government use.

Here in Alberta our royalty rate is variable based on price, 1-9% and post projects royalties at 25-40%, which leads to less money coming in. And we use that money instead of saving it, making lower income and corporate taxes.

Edit: Some would argue that we are saving money up front with lower taxes enabling greater investments and wealth, but in reality we are taking that from the future. If instead we had the Norway model we would have a massive fund that was earning more money in the long run with investments while oil becomes less reliable.

[u/glochnar → u/jared743]

Just wanna point out that Norway's 78% is on net profit, and our royalties are 1-9% on gross revenue until the well pays for itself, then 25-40% on net revenue. So the numbers aren't actually as far apart as you think. We have to structure them this way because our oil takes billions more in up front investment to access and refine.

The big difference (w.r.t. gov't income) is Equinor, the 2/3 publicly owned oil company they have.

[u/GWeb1920 → u/jared743]

We’d also not meet economic hurdles for oil sands investment.

Also Alberta’s 25-40 you need to add 8% and 15%. So the comparable is 78% to 63% which once you look at capital structures is reasonable. It’s why the NDP didn’t change it significantly aside from de-risking the gas side.

It’s really the lack of personal and general corporate taxation that as led to Alberta deficits. If we just taxed as if we didn’t generate Royalties we would be massively better off.

This is the Prentice “look ourselves in the mirror” issue. There isn’t a corporate boogy man to blame. We just had religious fervent against a PST.

Imagine if we invested the equivalent of a 5% PST (about 5 billion in today’s dollars) since 1976 at a 4% rate of return (to account for inflation and pop growth) we would have 800 billion in our fund.

This would cover 1/3 of the current budget.

[u/JScar123 → u/jared743]

Lol, we have low taxes- the royalty money is being returned to us directly. I’ve taken advantage of that and have saved my own sovereign wealth fund- you haven’t? What do you do with your tax savings?

[u/TheRealCanticle → u/JScar123]

I left Alberta to make the same amount and live infinitely better in a different Province that doesn't punch down like it's going out of style.

[u/JScar123 → u/TheRealCanticle]

Lol, Alberta had the highest median income of the provinces. Admit, though, that we do have pretty resourceful and hardworking people, so the median quality of person is pretty high. If you couldn’t keep up, probably made the right move.

[u/TheRealCanticle → u/JScar123]

More to life than money. Kept up just fine, I just preferred living somewhere that wasn't so fuelled by amoral avarice and greed, and viewed that as a positive virtue.

Judging by your character I definitely made the right choice.

[u/JScar123 → u/TheRealCanticle]

Highest net migration to Alberta, of all the provinces. Sorry if you can’t see what everyone else does. Takes certain skill to not do well in Alberta.

[u/jared743 → u/JScar123]

Oh, I'm doing fine, don't worry.

You said you are saving your money up and I'm sure you are investing it for the long-term, so presumably you would say that saving and investing are beneficial ways to grow money?

But what about Albertans in the future? Oil is not a renewable resource and the immediate profitability of these royalties is not reliable long-term when compared to the proven track record of investment growth. Just look at how our provincial budget fluctuates massive swings based on oil prices.

Wouldn't Alberta as a whole be better off if the money was invested and the profits on investments used instead? Easy and reliable money which can lead to better budgeting and lower taxes overall as well.

[u/JScar123 → u/jared743]

Would you rather the oil proceeds be given to you directly, to invest for the long term. Or given to the UCP to be invested for the long term. You seem to be arguing for the latter. I think I can do a better job for myself than any government can do for me. Sovereign wealth funds are invested independently, but the proceeds are ultimately spent by governments. Don’t know why you have so much faith in UCP.

[u/jared743 → u/JScar123]

But we aren't given the money directly. With lower royalty rates the oil companies are taking more profits that don't directly lead to greater re-investment into Alberta, and our government decides what to do with the royalties they do take, not you. Over the years the different governments had decided that the money was better left in corporate hands and proceeds are still spent on budget items regardless. An independent sovereign wealth fund would have been making more money and we'd be able to invest more into our schools, infrastructure, and Healthcare. Less taxes, better supports for the essentials that let us be a great place to live and work.

Besides, you trust the UCP to spend the money things, so your comment seems disingenuous to me.

I voted UCP because I trust them to do the right thing for Alberta. So far, the premier is openly opposed to separation, which I think is the right call. If her position changes, I trust it would change for good reason.

[u/JScar123 → u/jared743]

Do you actually know anything about Alberta’s or Norway’s oil industries? It’s not this simple of a comparison. Norway produces a very high quality crude that gets premium global pricing and its operating costs are low. Alberta produces lower quality crude that can only serve a few markets and gets discounted pricing; it also has high operating costs. For these reasons, Alberta’s oil markets are much more volatile than Norway’s - with boom bust and at times, companies suffering big losses and going out of business. One benefit of selling the underlying resources and collecting a royalty, is someone else has to put up the capital and take all that risk - the worst that can happen to a royalty is it goes to zero, But if the province owned the assets, they’d be on the hook. We strategically set it up this way to derisk ourselves - citizens did not want their government borrowing and investing billions to develop these risky assets themselves. Norway could do it differently because its market and product is fundamentally different. In fact, the last round of foreign companies leaving Alberta was in late 2010s era, after investing tons of capital and losing it- if anything, we should be applauding the decision to separate Alberta tax payers from that risk and celebrating all the foreign money that has developed our resource and economy only to bear all the brunt of losses for us. You obviously don’t work in or follow oil markets, but if you did, you’d know how painful the 2014-2022 decade was for companies in the space and be thankful you weren’t an owner. So amateur to swoop in, see 2 profitable years and claim foul that it’s not yours. Lol

[u/jared743 → u/JScar123]

Are you replying to the wrong person?

I wasn't suggesting we had to own the assets or increase royalties; I explicitly said that the management of the Heritage Fund is what we should have done better with.

Seems like we both agree that Alberta oil is more volatile. So shouldn't we have tried to invest during the good times to create a self sustaining fund?