Thursday, May 03, 2007

Stelmach the Perfect Strom



As I have said before our new Alberta CEO Ed Stelmach is haunted by the ghost of a Premier past; the lame duck Harry Strom.

Edmonton Sun columnist Neil Waugh knows this too and gloating with glee likes to rub it in;

Listen up on land

Last week Premier Ed Stelmach finally gave Albertans a peek under the tent flaps about his plans to stop the insanity of Ralph Klein's flawed oilsands policy, which sees energy companies pay a penny-on-the-dollar in royalties while at the same time shipping raw bitumen and jobs down the pipeline to Illinois and Texas and turning 48 townships of pristine boreal forest around Fort McMurray into a vast industrial zone.

"My government is committed to ensuring there will never again be a major downturn like we saw in the 1980s," Stelmach boomed to the Canadian Energy Research Institute.

He plans to thwart any National Energy Program rerun by "developing and diversifying" the energy industry.

During the Alberta PC leadership campaign last fall Stelmach compared pipelining raw bitumen to Texas as selling the "topsoil" from a farm.

"This includes encouraging more upgrading and value-added activities in the province," he told the oilmen. "Our government will encourage that to happen."

He has a strange way of doing it. The latest jobs-down-the-pipeline dust-up happens before the National Energy Board in Calgary on June 4 when TransCanada Pipelines pitches its ultra-controversial Keystone bitumen pipeline to the States.

Alberta Federation of Labour president Gil McGowan has already filed an intervention describing the dubious line as a "devil's bargain".

NEB documents reveal the Alberta government is intervening too. But instead of a blizzard of submissions backing up the premier's pledge, Alberta taxpayers will be represented by one lowly "regulatory analyst" who is only there to "monitor" the hearings on behalf of his Edmonton bosses.

Spare us any more goofy speeches, Ed.

Tories drop ball on housing problem

They recommended the premier consider "limited, short-term market intervention." In short, they proposed the province impose "rent stability guidelines" consisting of once-a-year rent increases of no more than 2% above inflation. Also proposed was a one-year notice for condo conversions with no lease-busting rent increases in the meantime.

The task force report described this recommendation as a "very difficult one."

The Alberta Tories obviously had a difficult time of it as well. Because when the smoke cleared and Housing Minister Ray Danyluk released his $285-million response this week, rent controls were mysteriously missing.

In their place were a series of half-hearted attempts to rein in runaway accommodation costs.

The proposed condo conversion restrictions have been accepted. But landlords can impose once-a-year hikes with no ceiling.

Instead of responding boldly and constructively to a problem that's creating economic hardship for large numbers of Albertans and employment problems for many Alberta businesses trying to compete with the oilsands developers for workers, the Tories tried to dodge the bullet. They're attempting to buy a little more time.

In the meantime, apartment owners will continue to record huge profits, the affordable housing crisis will continue and the whole problem will blow up again next spring.

This is not leadership.

Boom's deadly toll

The blood spilled and the body count wasn't as high as in the tragic Diversified 690 bus crash. Thank God for that. But the cause of the death of two Chinese temporary foreign workers at Canadian Natural Resources Ltd.'s Horizon oilsands plant this week can be traced back to same source.

And that's the Alberta Tories' botched - and now extremely deadly - oilsands policy, which triggered a massive oilsands building boom without first putting in place the necessary infrastructure.

The Tories then conspired with the developers to tear up the labour peace treaty that ruled the oilsands for more than a decade.

There followed the airlift of cheap foreign workers, while thousands of Alberta tradesmen and women sit on union dispatch lists.

The collapse of the tank roof structure that killed Genbao Ge and Hong Liang Liu and injured four others working for the Chinese-government-owned contractor was the culmination of this goofy policy.

It's the same one that allows oilsands developers to pay a penny-on-the-dollar royalty until the multi-billion-buck plants are paid out, while at the same time shipping raw bitumen and jobs down the pipeline to Illinois and Texas and leaving behind irreparable environmental damage in the pristine boreal bush north of Fort McMurray.

It wasn't until after the bus crash that killed six construction workers on the Syncrude job that the Alberta PCs finally admitted that Highway 63 was fundamentally dangerous. And they're now playing a desperate game of catch-up to twin the major route to the oilsands.

But only last week, Finance Minister Lyle Oberg was bragging in his budget speech about more offshore workers coming in.

"We will develop an immigration strategy to encourage more skilled workers to come to Alberta." Oberg boomed. Well, how do you like your strategy now, Lyle?

And just how panicked the Stelmach government is to control the damage and deflect the blame has been clearly evident since Tuesday's tragedy.

A limited internal investigation by government bureaucrats - and no public report, but simply a handover to the dubious Alberta Justice Department, which already has the worst record in Canada on bringing boardroom bad guys to justice. (They've yet to get the trucker who crashed into Bus 690 into court - an accident that happened way back on May 20, 2005.)

Worker error

Meanwhile, CNRL is being allowed to do a parallel "full investigation" of the incident, where worker error will be the inevitable conclusion.

Heck, Employment Minister Iris Evans didn't even bother to issue a press release acknowledging the latest oilpatch accident even happened.

Smoke and mirrors

"Alberta intends to borrow $300 million on behalf of its corporations this year," noted CIBC World Markets economist Avery Shenfeld. "With half of that raised in the public debt market."

Shenfeld added that the government-backed Alberta Capital Finance Authority and ATB Financial plan on floating paper worth $2 billion this year.

BMO Capital Markets economist Michael Gregory also determined that the Tories are back in the borrowing business "which will be subsequently lent to other provincial corporations to meet their funding requirements."

Things get even more murky when you dig deep into the budget documents to find the true meaning of P3 (public/private partnerships), like the Anthony Henday and Stoney Trail ring roads in Edmonton and Calgary.

P3 magic, we are told, is that it "allows the government to transfer certain risks that the private sector is better able to manage."

Without getting too specific.

But the background blurb also admits: "contribution of public financing to a P3 project should reduce total project cost."

And under a section called "debt servicing costs," Oberg's documents show a line identified as "financing costs for government-owned capital (P3s)" growing from $8 million this fiscal year to $22 million by 2009-10.

Yup, we're back in debt.

Except the budget book would prefer to call it "alternative financing" or "capital lease liability".

Of course, there's more debt on the books in "debt free" Alberta.

Another $166 million in medium term bonds comes due this year.

That leaves over $1.2 billion of old Don Getty debt on the books to be paid off from the debt retirement account when it comes due. Some of that won't be until 2013.

Sure, there's another $2.2 billion surplus in the forecast this year plus another $7.7 billion ticking over in the Sustainability Fund.

OTHER FUNDS

At the same time, the Tories will pull another $1.4 billion of investment income out of the Alberta Heritage Fund, while other funds will yield an additional $2.1 billion more.

But isn't the HTF supposed to be used for a rainy day?

Don't worry, it could be pouring soon.

The University of Calgary's Institute for Sustainability, Energy, Environment and Economy recently released a paper on Alberta's economic future.

The results of that study are suddenly showing up in government documents.

The "bulk" of the government resource revenue came from gas royalties in recent years.

In 2004, it hit over $8 billion. By 2013, the institute predicts gas royalty revenue will be only $3 billion.

While oilsands revenue is the next big thing, the way the Tories have screwed up the royalty regime with their goofy penny-on-the-dollar giveaway leads the institute to a grim conclusion.

"In general, one would expect significantly lower royalties as a percentage of revenues in the case of oil- sands compared to conventional oil," the paper warns. Expected royalties compared to recent years will be "substantially lower."

And the projected royalty revenues for 2013 are "just over $5 billion" - which the report points out are "about one-half the average levels" over the past five years.

Looks like Oberg is just getting warmed up for when Alberta is back aboard the debt and deficit wagon.

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1 comment:

Varand said...

What it all comes down to is that the people of Alberta are actually the ones paying for the "Price" of prosperity....and the large oil companies are the ones reaping the benefits. Damn, this blog post should make it to every headline in AB....if people of AB even read the papers that is.