"If ever there was a time for Alberta to pivot away from its historic dependence on oil to fuel its economy and embark on a completely new path towards diversification and fiscal maturity, it would be now."

Alberta Premier Jason Kenney before the tabling of the 2019 Budget at the Alberta Legislature Building in Edmonton, Alberta, on Thursday, Oct. 24, 2019. (Codie McLachlan/Star Edmonton)

It’s over. The great Alberta oil bonanza, which has allowed the province to prosper for decades with a combination of high government spending and low taxes, has crashed and isn’t coming back anytime soon.

The coronavirus and the oil price war between Saudi Arabia and Russia are just the latest manifestations of what’s been going on for years. Climate change is forcing the world to review its addiction to oil and when it comes time to ditch that habit, Alberta is poorly placed to respond.

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Alberta’s oil is relatively more expensive to produce, it’s far from tidewater and nobody is going to be awarding the oil sands any gold stars for environmental stewardship or low GHG emissions. It’s no wonder that multinational oil companies and global investors are staying away from the Alberta oil-patch like the plague. The failure of the Teck Frontier mine is the latest example of the problem.

Rather than be fixated on building new oil-sands facilities and pipelines, attention is soon going to focus on whether existing operations can keep operating if prices stay at low levels.

If ever there was a time for Alberta to pivot away from its historic dependence on oil to fuel its economy and embark on a completely new path towards diversification and fiscal maturity, it would be now. (By fiscal maturity, I mean taxing Albertans for the services they receive rather than betting that resource revenues will be the Sugar-Daddy that saves them from a sales tax and the kind of provincial income taxes most of us pay.)

So what’s the response to this economic tsunami been from the government of Jason Kenney, a smart guy who must be running one of Canada’s dumbest governments ever? In a nutshell, it’s the same formula we’ve seen from Alberta governments for decades when boom inevitably turns to bust. Pray for higher oil prices. Cut spending. Blame Ottawa. Keep taxes low. Never save for a rainy day. And don’t ever tell Alberta voters the truth.

That was the familiar, dumb formula set out in Finance Minister Travis Toews’s budget on Feb. 28, a budget that predicted increasing oil prices to an average of $58USD a barrel for 2020, which would miraculously hike the province’s stream of resources so much that the provincial budget deficit would disappear by 2022-23. Poof.

Toews claimed the projections were “credible” and “cautious.” They probably never were. Now, with oil prices at hovering around $33USD and a bit today, these projections are clearly a joke and Kenney, Toews and Co. should be looking for jobs as clowns with Cirque du Soleil.

The oil price may crawl back up in coming months as the coronavirus pandemic recedes, but don’t expect a quick end to the price war. The world is swimming in crude, while demand is likely to stay muted for a long time as the airline industry struggles to recover and nations and individuals learn to live with less of the commodity.

Kenney, belligerent as ever, has his list of demands for Ottawa — stabilization cash, more pipelines, cheap credit for energy firms, money to clean up orphan wells, etc. I understand the immediate crisis but once it subsides, it’s time for Ottawa to take some leadership on the bigger issue of over-dependence on a single industry and one that’s in decline. Alberta’s failure to diversify is a problem for all of us.

Here’s my suggestion. The federal government should propose establishment of an Alberta Tomorrow fund (perhaps Saskatchewan can join in too.) Ottawa could commit $10 billion to the fund over five years, conditional on matching contributions from the provincial government on a dollar-for-dollar basis. So a total of $20 billion over five years from the two governments, to be jointly managed.

The fund should be dedicated to weaning Alberta off oil and gas through massive retraining of oil workers, investment in green technologies and building on the province’s high-performing universities. Not a single cent from this fund should go to shoring up oil and gas firms, pipelines or the petrochemical industry. The Trans Mountain expansion project is enough of a commitment for Canadian taxpayers.

How does Alberta finance this new fund? Of course, that’s up to its government and legislature, but here’s an idea. A provincial sales tax would be a reasonable way to do so. Since Albertans seem allergic to the idea of taxation and think it’s some sort of eastern curse, call the tax a “levy” or something cute, like the Alberta Advantage Payment. Whatever. But you get the idea.

The tax can start small, at three or four per cent, and build up over time, to eventually reach the 6-per-cent provincial tax rate that’s in place in Saskatchewan. Still the lowest in the country. The federal government could agree to a sweetener as well, making a onetime contribution to the province for harmonization with the federal GST, using as precedent the $4.3 billion Ontario got from Ottawa for aligning the two taxes in 2008.

That means the hit on Albertans would ramp up slowly. If Kenney doesn’t want to match the federal funds, he can turn it down and stick to the old Alberta songbook of waiting for oil prices to magically rise.

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Of course, oversight of the diversification funds will be a challenge, as in making sure that money isn’t drained into misguided ventures as it has in previous efforts. Appointing seasoned pension fund managers and capital markets experts, divorced from political influence, would be one way to do it.

I know Kenney will scream bloody murder that this is policy imposed by the evil Justin Trudeau from Ottawa. Trudeau has nothing to worry about. He’s never going to win any seats in Alberta in any case so he has the freedom of simply doing the right thing.

And the right thing is to get Alberta off that crude oil freight train. Before it’s too late.

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