It’s mid-January 2015 and the price of oil is half what it was four months ago. In Alberta, the provincial government is panicking and threatening to cut social programs. In Ottawa, the federal government is nervously reassessing revenue projections.

And in Norway, where the economy is also based on oil and gas development?

It’s just another day at the office.

Norwegian Prime Minister Erna Solberg declares that the Norwegian economy will continue to thrive. Finance Minister Siv Jensen has already delivered a budget that features increased spending, tax cuts and a surplus.

How is this possible in a country of only five million people (Alberta has just over four million) that produces less oil than Alberta but also has to deal with the unpredictability of roller-coaster oil prices?

The Norwegians pay very high taxes, including a 25-per-cent sales tax, but they also have well-funded social programs — in Norway the term “welfare state” is not a pejorative. The government doesn’t resort to cutting health care, education and social service programs when the price of oil slides.

And they don’t run deficit budgets.

There is universal child care. Post-secondary education is free. Seniors receive generous pensions and there is abundant public housing

The Norwegians have also managed to save almost $900 billion (U.S.) — the largest sovereign wealth fund in the world — since offshore oil was discovered in their waters in the late 1960s. Norway doesn’t take a royalty share of its oil and gas production like Alberta. Instead, the government heavily taxes the petroleum producers’ profits, takes a substantial equity share in many projects and earns stock dividends from a government-controlled oil and gas company.

Tax revenue from the petroleum sector accounts for about 30 per cent of government revenues, but this revenue is not based on royalties (taxes) per barrel of oil produced and it is not tied to the fluctuating price of oil, as in Alberta. Instead, oil and gas companies operating in Norway pay a 28 per cent corporate tax plus a 50-per-cent petroleum tax on profits, for a total tax of 78 per cent.

According to the Norwegian government’s finance ministry, $81 billion was deposited into the country’s sovereign fund over the past three years.

Usually only 3 per cent of the savings fund goes to government coffers annually, the rest getting invested overseas. By law the government cannot take more than 4 per cent a year.

This year, the government upped the take to 3.5 per cent — about $26 billion, or 11 per cent of its annual state budget. That caused barely a ripple in Parliament or among voters from quietly wealthy Oslo to thriving Arctic towns like Hammerfest.

In Alberta, petroleum companies pay a royalty per barrel produced to the provincial government, a 10-per-cent corporate tax rate and a 15-per-cent federal corporate tax.

But oilsands developers pay only minimal royalties (as low as one per cent) until they have recovered capital costs. That can take up to 10 years, and if there are cost overruns and delays it can take even longer.

At this point, about 60 per cent of Alberta oilsands projects are paying the minimal royalty rate.

The Norwegian government recognizes their oil production has peaked and they are planning for Norway to become a powerhouse of renewable energy — hydro, wind, waves and solar.

In contrast, the Alberta government has only $17 billion in its savings fund, The Heritage Savings Trust Fund, which was established 20 years before the Norwegian fund. And transitioning to renewables is not a high priority for Alberta or the federal government.

Loading... Loading... Loading... Loading... Loading... Loading...

So instead of taming the impact of volatile oil prices like the Norwegians do, Canada rides the stomach-churning roller-coaster of unpredictable pricing that can shrink government revenues and knock the wind out of our dollar in a very short time.

In the early days, Norway’s petroleum activities were primarily carried out by foreign multinationals. But when the first major discovery — Ekofisk — was made in the North Sea in 1969, the government decided to play a much bigger role.

The oil company Statoil was established in 1972 with the state as sole owner. It would not only be an operator but would also be involved in all stages of production.

Statoil now produces 1.7 million barrels a day out of total Norwegian production of 2.1 million barrels.

The state also took 50-per-cent ownership in each petroleum licence granted, although that position was lowered to between 20 and 40 per cent in 1993.

In 2001, the government established Petoro, which represents its interests in projects where it has partnered with the private sector for exploration and development.

Generally, Petoro takes a 20-per-cent stake in leases, though the slice has been as hefty as 60 per cent in the past.

The government deposits Petoro’s net revenues into the savings fund and decides, as part of the federal budget, how much to invest in new projects.

All the cash flow from Petoro, the Statoil dividends and taxes on petroleum profits go into Norway’s sovereign fund. The government gets most of what it needs to pay for universal health care, free education through college, a generous pension system and other programs from heavy taxes on residents and businesses.

And yet, multinationals such as Conoco Phillips and Exxon Mobil have steadily invested in Norway’s offshore resources over the past 40 years and now account for about 30 per cent of offshore exploration and production.

These companies receive a sizeable government subsidy, introduced in 2005, that refunds 78 per cent of the exploration costs. In addition, taxes from onshore oil activities and from liquefied natural gas shipped overseas were reduced, which has attracted additional international investment.

Canada once had a state-owned oil company, Petro-Canada. Even in Alberta, premier Peter Lougheed established the Alberta Energy Company in 1973. But by the 1990s, after vocal opposition from the petroleum private sector and right-wing conservatives, both companies were privatized, leaving the Canadian and Alberta governments without a direct interest in oil and gas development.

The only state-owned companies operating in the oilsands are foreign. Norway’s’ Statoil had an interest in a multi-billion oilsands project until opposition at home to “dirty oil” projects caused them to quietly pull out. China’s state-owned oil company, CNOOC, took over oilsands player Nexen in 2013 and also has a stake in Syncrude and Brion Energy. Other countries with state-owned stakes in the oil sands include Abu Dhabi, Thailand and Korea.

Read more about: