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CALGARY - Alberta Premier Alison Redford says a sales tax isn't on the agenda, even though many of the panellists at an economic summit that her government convened Saturday said it could be one solution to the province's fiscal woes.

"Oh, I don't think we're anywhere near that at all. I think the fact that people are beginning to talk about it as an idea is a really important thing," Redford told reporters after the day-long event.

"Ideas are important, but no need to jump the gun on that."

By law, Albertans would need to vote on a provincial sales tax through a referendum.

Alberta has prided itself for decades on being the only province not to have a sales tax and Albertans were amongst the most angry when the Conservative government of Brian Mulroney brought in a federal sales tax in the 1990's; two Tory MPs from Alberta left the Conservative caucus in protest.

Redford's government has said it faces a $6-billion oil and gas revenue shortfall, mainly due to the inability for Alberta crude to access markets that will pay the best price.

Among the business people, economists and academics in favour of bringing a sales tax to Alberta were George Gosbee, CEO of investment firm AltaCorp Capital, and University of Calgary tax expert Jack Mintz.

"It's my view that we don't have a cost problem, we have a revenue problem," Gosbee, who said spending cuts would be "draconian."

Gosbee said he's also in favour of bringing back health care premiums.

Mintz said Alberta's challenge has more to do with spending than it does revenue, but that it has a "tax mix problem" as well.

He said the province relies too much on "harmful and volatile" sources of revenue.

Mintz advocates switching from income to consumption-based taxes, whether that's through user fees, excise taxes or a sales tax.

"Many Albertans believe that having no sales tax is a tax advantage. It is the opposite. Not having a sales tax is a disadvantage in today's global economy," he said.

He added U.S. state governments that have low income taxes but have a sales tax, such as Texas, are seeing stronger economic growth.

Danielle Smith, leader of the right-wing opposition Wildrose Party, said she was disappointed to see how much revenues dominated the day's discussion, whether it was through taxes or debt. Some panellists said low interests rates make borrowing money a good option.

"I'm very worried that what we're going to see is laying the table to try to soften the ground for tax increases in future years. I don't think that's what Albertans want," she said.

"I don't think that's what they voted for in the last election."

NDP Leader Brian Mason said the economic summit did little to address the underlying issues plaguing the province.

"We didn't learn what it was that created the dependence on royalty revenue in the first place, which was of course cuts to income tax for the wealthy and for corporations. That never really came up. We were just into a sales tax all of a sudden," he said.

"My sense from that was that those panels were stacked with people who wanted to have a sales tax. It was not unanimous but pretty close and nobody talked about a progressive income tax, nobody talked about making sure that the wealthiest in our society pay their fair share."

Derek Fildebrandt, Alberta director of the Canadian Taxpayers Federation, said spending has increased 25 per cent over the last decade, adjusted for inflation and population growth, even though revenues have increased 21 per cent over that same time period.

"It is precisely our unwillingness as a province to hold spending increases to a reasonable level that has resulted in expenditures outgrowing revenues," he said.

Tom Flanagan, a University of Calgary political science professor who led the Wildrose campaign in the last election, said spending cuts are something concrete that can be done today, and that revenue is more of a long-term matter.

In order to be politically palatable, those cuts would have to take place across the board, Flanagan said when panellists were pressed on what spending they'd target.

Alberta Federation of Labour leader Gil McGowan said Albertans would be willing to make sacrifices in tough times — but he's not convinced times are all that tough and that spending cuts are necessary.

"Allowing yourself to get punched in the face when it's not necessary is not brave and it's not noble, it's stupid," he said, asking if Alberta "learned anything at all" from spending cuts during the tenure of former premier Ralph Klein.

"We've seen this movie and it's a horror story."

The economic summit, Redford said, was not meant to deal with the upcoming March 7 budget, but have a more forward-looking view.

Victoria Times Colonist and The Canadian Presss, Saturday, Feb. 9, 2013
Byline: Lauren Krugel

Federation president to set the record straight on bitumen glut

Edmonton – AFL president Gil McGowan will be tackling Alberta’s revenue problem this Saturday at the Alberta Economic Summit.

The summit will bring together industry, not-for-profit leaders, academics and government members to discuss Alberta’s economic future in light of the current low price of bitumen. McGowan will use this opportunity to ensure revenue reform and oil royalties are part of the discussion on how to tackle the deficit.

“In the debate so far, we’ve heard a lot of misinformation, some obfuscation – and even outright lies,” McGowan said. “Our economy is red hot. Balancing the budget should not be difficult, unless you’re either being deliberately dishonest, or you’re just bad at math.”

McGowan noted that Alberta does not spend more than other provinces on services, and when looking at expenditures on public services as a percentage of the economy, actually ranks dead last in Canada.

“We need to make sure that revenue is part of the discussion,” McGowan said. “By the government’s own numbers, we could collect $10 billion more in taxes and still be the lowest taxed province in Canada. We could use that $10 billion to protect and strengthen public healthcare and education.”

The summit, which will be held at Mount Royal University in Calgary, will involve four moderated panels. McGowan has been asked to participate in the moderated panel on “Balancing Expectations on the Services Albertans Need.” He notes that the ‘Services Albertans Need’ are already understaffed — Alberta has nearly the fewest public employees per capita in the country.

“It’s childish to think that Alberta can maintain good public services without having a revenue base to pay for them,” McGowan said. “That means royalty reform and it means returning to a progressive income tax like Alberta had before 2001.”

AFL Factsheet:  “Revenue, spending, and public-sector wages”

MEDIA CONTACTS:

Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email [email protected].

2013 Fact Sheet_Revenue, spending and public sector wages

Alberta's current financial woes may offer a silver lining, says the Alberta Federation of Labour. Two weeks after Premier Alison Redford warned the province that resource royalties were expected to drop by $6 billion in the next fiscal year, AFL President Gil McGowan says Alberta's "bitumen bubble" could provide an opportunity for increased upgrading and refining jobs in Canada.

"The price of bitumen is low right now because we're flooding the market with bitumen," says McGowan.

"The solution they're proposing is building more pipelines to flood the market even further. That's just not how markets work," he said. "We need to refine the bitumen here, so that we're selling what the international markets want: synthetic crude."

McGowan justifies his arguments with a 2011 internal government report the labour group obtained through a Freedom of Information request. The report shows that the price difference between Alberta's heavy oil and the benchmark West Texas Intermediate grows, resource projects that both mine and upgrade bitumen locally become economically viable, while only mining becomes less economically beneficial.

"These documents paint a picture of a government that knows what needs to be done, but is afraid to act," said McGowan. "This 'bitumen bubble' has a silver lining, and the province knows it. They wrote the documents to prove it."

There are currently seven pipelines that carry oilsands crude to markets outside Alberta, with the majority heading to the U.S. Midwest.

The AFL, and several other Canadian labour groups, have argued against the proposed Keystone XL and Northern Gateway pipelines, instead favouring more domestic refining and upgrading operations. The AFL argues that building more refineries in Alberta, instead of relying on refineries in the U.S. and Asia, will create more long-term jobs and net better value for the oilsands, since the refined product garners a stronger price.

However, the day before the AFL released their documents, Suncor Energy announced its planned Voyageur upgrading project might not happen due to decreased demand for Canadian crude. A decision regarding the project will not be made until the end of March.

At the same time, North West Upgrading Inc. has partnered with Canadian Natural Resources Ltd. to build the $5.7-billion Sturgeon upgrader and refiner. The plan will provincially-owned bitumen to privately-owned refineries. The Sturgeon project will be the first refinery to be built in Alberta in approximately 30 years.

"By not requiring upgrading in Alberta, we're pumping out more of the wrong thing," McGowan said. "We're shipping good oilsands jobs elsewhere, when the economics of upgrading make a lot more sense."

Fort McMurray Today, Thursday, Feb. 7, 2013
Byline: Vincent McDermott

CALGARY - The inability to get western Canadian crude to the right markets is costing the country's economy dearly, according to a new report paid for by the Saskatchewan government.

Each stalled pipeline project means a loss to the Canadian economy of between $30 million and $70 million every day, said the report penned by the Canada West Foundation, a Calgary-based think-tank.

"The economic impact is just devastating," foundation CEO Dylan Jones said in an interview Thursday.

The Saskatchewan government paid $50,000 to commission the report.

Premier Brad Wall has been an outspoken supporter of new pipeline projects, most recently signing a letter, along with 10 U.S. governors, urging U.S. President Barack Obama to approve the Keystone XL pipeline.

Alberta's oilsands, the third-largest reserves on the planet, get most of the attention when it comes to the pipeline debate.

But Saskatchewan, which has considerable oil resources of its own, is affected by the pipeline pinch as well, Wall said in Regina.

"We hope that this helps get the message out, even to a greater degree than it is now, that we have a pipeline capacity issue in western North America and that's costing Saskatchewan people a lot of money," he said.

"Because of the pipeline capacity issue, we're losing up to 19 to 20 per cent return on the taxpayer's resource."

In recent months, oilsands crude has been trading at a painfully steep discount to both U.S. and global light crude benchmarks. It's a trend that has both eroded oilpatch profits and caused the Alberta government to warn of a $6 billion revenue shortfall this year.

At the heart of the problem is a lack of adequate pipeline capacity to get that crude to the markets that want it most. Proposals of eastbound, westbound and southbound pipelines are in varying stages of development, but environmental opposition and political wrangling makes their fates uncertain.

Most pipeline capacity out of Western Canada heads to the U.S. Midwest, which Jones calls "the worst place in the world to be selling oil" as booming production from areas like North Dakota floods the market.

The Canada West Foundation says new pipelines need to be built in the right directions.

A massive expansion to Trans Mountain and Enbridge's Northern Gateway proposal would enable crude to be transported to Asia via tankers from the West Coast, but they face stiff opposition within B.C. on environmental grounds.

TransCanada Corp. is awaiting final U.S. government approval for the northern leg of its Keystone XL pipeline, which would allow Canadian crude to flow to refineries on the Gulf Coast that are thirsty for heavy oil. Construction on the southern leg between Oklahoma and the Gulf is underway.

Refineries in eastern Canada and the U.S. Eastern Seaboard rely on pricey imported crude from overseas, which is hurting their economics. Both TransCanada and Enbridge have projects in the works to send western crude eastward through reconfigured pipes that are already in the ground. It's possible those lines could extend all the way to New Brunswick, home to Canada's largest refinery.

"If pipeline project proposals such as Trans Mountain, Keystone XL and Northern Gateway don't move forward, Canada will be foregoing $1.3 trillion in economic output, 7.4 million person-years of employment and $281 billion in tax revenue between now and 2035," said Michael Holden, the foundation's senior economist and author of the report.

While most of the benefits would accrue to Alberta, Holden said those three projects would add a combined $84 billion to economies elsewhere in Canada.

The report calls on provinces to work together to tackle the problem, the way Alberta Premier Alison Redford and New Brunswick Premier David Alward did earlier this week in touting an eastbound oil pipeline.

Keith Stewart, climate and energy campaign co-ordinator at Greenpeace, says the Canada West Foundation report "misses the point."

"If we want to avoid climate chaos, we have to stop building fossil fuel infrastructure like new tar sands pipelines," he said.

"Canada can, and should be a winner by building the climate-safe, green energy economy that our kids need and deserve."

The Alberta Federation of Labour also has a different view of the issue.

The group said in a report earlier this week that Alberta should require energy companies to upgrade oil in the province before they are allowed to ship it.

Federation president Gil McGowan said the Alberta government continues to approve in situ oilsands projects without requiring associated upgrading, which converts bitumen from the oilsands into light oil refineries can use. That's flooding the U.S. market and driving down the price.

Environmental opposition has been particularly strong to pipelines that would ship oilsands bitumen, the thick, tarry stuff that needs to be diluted in order to flow.

And that alone might force governments to take a hard look at upgrading and refining opportunities at home, said Wall.

"There's all manner of politics, some of it based on reality, some of it not," said Wall.

"If we can't get pipelines built because of it, we just have to start not moving bitumen, but moving a refined product."

Times Colonist, Thursday, Feb. 7, 2013
Byline: Lauren Krugel, The Canadian Press with files from Jennifer Graham in Regina

The Alberta Federation of Labour says documents obtained through Freedom of Information show that the provincial government has been told that upgrading bitumen in Alberta is a better financial option than sending it elswhere.

"The government's own experts, the government's own analysis, is showing clearly that it makes more sense to upgrade our bitumen rather than send it down the pipeline to places like the United States and China," said AFL president Gil McGowan.

However, multi-billion dollar price tags and labour shortages make upgraders challenging to build in Alberta and there are signs the industry doesn't believe they are economically viable.

Suncor has announced that it is reviewing and may consider indefinitely deferring or cancelling the Voyageur upgrader project in northern Alberta.

"If you want a canary in the mine shaft about the market incentives for upgrading, the decision by Suncor regarding Voyageur is that canary in the mine shaft," said University of Alberta business professor Mike Percy.

Percy thinks Suncor may be taking into account the effect of projects like the proposed East-West, Northern Gateway or Keystone XL pipelines.

He said that margins for upgrading may look good now, but he believes the price differential for western Canadian oil will return to historic levels over the next couple of years.

"It would make it very, very unlikely that an upgrader could be profitable," Percy said.

CBC Post, Wednesday, Feb. 6, 2013

AFL releases Energy Department analysis obtained under FOIP

Edmonton – In-province upgrading is highly economical according to secret government documents released by the Alberta Federation of Labour today.

The documents, obtained by the AFL under the Freedom of Information and Privacy Act, include a Department of Energy analysis that deals with the economics of the energy industry. This analysis of taxes, royalties and upgrading policy was deemed ‘secret’ by the Government of Alberta.

“These documents paint a picture of a Government that knows what needs to be done, but is afraid to act,” Alberta Federation of Labour president Gil McGowan said. “This ‘bitumen bubble’ has a silver lining, and the province knows it – they wrote the documents to prove it. Now they just need to have the courage to follow through on the evidence of their own research.”

The internal government documents show that as the light-heavy oil differential expands, integrated oil sands mining projects – those with upgraders – become hugely profitable. Integrated mining operations (bitumen extraction with upgrading to Synthetic Crude Oil) are realizing unprecedented returns under the current conditions.

“The economics of upgrading depends on who you ask,” McGowan said. “If you are asking the companies who want to rip and ship our raw resources, then the answer will always be ‘upgrading doesn’t make economic sense.’ But if you ask Alberta taxpayers, or energy-sector workers, or even integrated oil sands mining companies – then yes, upgrading is highly economic.”

The Government of Alberta continues to approve in situ oil sands projects without requiring associated upgrading, which is flooding the US market and driving down the price.

“These projects become less economically viable as the price difference between bitumen and crude expands,” McGowan said. “And yet these projects have mushroomed throughout the province. We’re flooding the market, and these documents show that the government knows it.”

The Alberta Federation of Labour has spent several months seeking to access these documents, and has spent thousands on government fees through the Freedom of Information and Privacy Act.

“There’s no reason other than politics to keep these documents secret,” McGowan said. “These documents are crucial to the debate over the budget, and it was a disservice to voters to keep them in the dark about this research.”

AFL Backgrounder:  “Secret Government Documents Show Bitumen Price Differential Makes Upgrading Highly Profitable”

MEDIA CONTACTS:

Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email [email protected].

EDMONTON - The Alberta Federation of Labour says the discounted price Alberta bitumen is fetching of the world market could provide an opportunity for more upgrading and additional jobs in the province.

About two weeks after Premier Alison Redford warned Albertans of a tough budget March 7, in which resource royalties are expected to plunge by $6-billion in the next fiscal year largely due to the lower price paid for the province's bitumen compared to other benchmark crudes, the AFL said there is a "silver lining" to the dismal fiscal projections.

Federation president Gil McGowan said a 2011 internal government report, obtained through a Freedom of Information request, shows that as the price differential between Alberta heavy oil and the benchmark West Texas Intermediate crude grows, mining projects that both extract and upgrade bitumen become more economically viable. Mines alone become less economically profitable, the data shows.

"The numbers do add up that there is a strong economic case for the type of development that Albertans want, which is upgrading and refining, and that the government knows that the economics are strong but has been telling us something else," McGowan said.

The AFL has long argued for more upgrading capacity in the province, saying it will create more long-term jobs and net better value for Alberta bitumen since the refined product garners a stronger price. However, on the same day as the AFL released its documents, Suncor Energy Inc. announced that a final decision on its planned multibillion dollar Voyageur upgrading project won't be made until the end of March due to a gush of higher quality light oil that has eroded the economic argument for the upgrader.

Alberta Energy Department spokesman Mike Deising said the private sector has the "paramount responsibility" to determine if building upgraders in the province is economically feasible.

"You don't make economic decisions on billion-dollar refineries or upgraders based on a price differential at one point in time," he said. "These are 30-year or longer assets and companies look 30 years out onto the horizon. Just because we're seeing a widening of the differential right now, that's not going to affect the business case that's going to be a 30-year asset, it's just going to be part of the decision-making process."

The differential between the two types of oil has been growing and spiked sharply in December. McGowan said it currently hovers in the range of 30 per cent. He called it an "incredible loss of value, an incredible loss of jobs and an incredible loss of opportunity" if the trend of refining less bitumen in the province continues.

The chairman of North West Upgrading Inc. spoke out this week about the benefits of refining more oil in Alberta.

The company is partnering with Canadian Natural Resources Ltd. to build the $5.7-billion Sturgeon upgrader and refiner through the province's bitumen-royalty-in-kind program. The scheme sends provincially owned bitumen to private sector refineries to be turned into higher-quality products. The Sturgeon facility is the only project that's coming to fruition through the program, which was started in 2010.

It is the first new refinery to be built in Alberta in 30 years.

McGowan said the bitumen royalty-in-kind program needs to be expanded.

Edmonton Journal, Wednesday, Feb. 6, 2013
Byline: Alexandra Zabjek with files from the Calgary Herald

Secret Government Documents Show Bitumen Price Differential Makes Upgrading Highly Profitable