Mapping the ‘Kleintastrophe’ – veteran journalist and researcher tracks energy policies of past Alberta PC governments

Posted on June 08, 2017, 12:20 am
8 mins

PHOTOS: Alberta premier Ralph Klein at the start of the Kleintastrophe in 1992. (Screenshot of CBC broadcast.) Below: Calgary journalist and researcher Gillian Steward, former Alberta Liberal leader Kevin Taft, the best premier Alberta never had, and would-be United Conservative Party leadership candidate Doug Schweitzer.

As the years Ralph Klein headed Alberta’s government recede into history and memory, the enormity of the “Kleintastrophe” his policies wrought becomes ever clearer.

While right-wing ideologues in the Wildrose and Progressive Conservative parties continue to portray the Klein years from 1992 to 2006 as a kind of economic nirvana, a hard-nosed analysis of the period shows it to have been chaotic, economically irresponsible and environmentally and socially destructive.

Even Alberta’s vaunted debt-free status turns out to have been essentially a public relations stunt, based on undermining essential public services and running up a huge infrastructure deficit – analogous to calling yourself a good household manager because you’re saving money by not fixing your home’s leaky roof or crumbling foundation. Economic management under Mr. Klein boiled down to giving away the store to multinational energy corporations and leaving taxpayers to pick up the pieces when the oil and gas markets went south.

Now veteran Calgary journalist, author and researcher Gillian Steward has made an important contribution to the overdue and necessary reassessment of Mr. Klein’s leadership with the publication yesterday by the Edmonton-based Parkland Institute of a new report analyzing the oilsands policies of previous Alberta governments and the situation inherited by the NDP Government led by Premier Rachel Notley.

In Betting on Bitumen: Alberta’s Energy Policies from Lougheed to Klein, Dr. Steward tracks policy development from the era of Peter Lougheed, which began in 1971. During that period, Alberta’s first Progressive Conservative premier emphasized orderly development of the oilsands, a big government role to kick-start bitumen development, and determination to ensure oilsands extraction returned benefits to the people of Alberta.

The Klein years, with their total capitulation to industry interests including a royalty policy that provided only nominal returns to the people who owned the resource, provided a dramatic contrast – and set the stage for the economic challenges faced by the province in a period of falling world petroleum prices and rising environmental concern propelling worldwide efforts to move away from a carbon economy.

In other words, Dr. Steward has charted exactly what former Alberta Liberal leader Kevin Taft was talking about about 20 years ago when he wrote Shredding the Public Interest: Ralph Klein and 25 Years of One-Party Government.

History shows that Dr. Taft got it right. Mr. Klein responded at the time by calling him a “Communist,” launching Dr. Taft’s political career as leader of the Alberta Liberals, after which he is remembered as the best premier Alberta never had.

Dr. Steward recounts how with the connivance of regional media the Klein Government allowed an industry dominated “task force” on oilsands development to pass itself off in the public’s mind as a neutral agency with ties to the government.

In a sense, one supposes, it was tied to the government. The spokesman of what should be described as a lobby was the president of Syncrude Canada Ltd. It was organized by an oil industry trade group, the Alberta Chamber of Resources. The Klein Government tossed aside the Lougheed Government’s good stewardship policies and adopted the “task force’s” self-serving recommendations holus bolus, including a generic royalty regime the industry had been demanding for years.

Consider this passage from Dr. Steward’s report:

“The generic royalty regime was designed to encourage oil sands investors by assuring them that they would pay almost no royalties (royalties are not a tax but are considered as rent paid by producers for the use of a publicly owned resource such as oil) until they had paid off all the costs of constructing the project. So while the project could in fact be producing oil for sale to the market at the going price, royalties would be only 1 per cent until the cost of construction was entirely paid off. Between 1997 and 2010, oil sands producers paid Albertans less than $20 billion in royalties and land sales for the rights to more than $205 billion worth of bitumen. In other words, the industry was getting ‘free oil’ and putting it on the market when, by 2008, U.S. refineries were paying $100 US a barrel for Canadian crude oil.” (Emphasis added.)

Dr. Steward concluded her report: “It is important for Albertans to understand this history if we are to avoid the pitfalls that come from giving control of development decisions about such an important resource to one stakeholder at the expense of the broader public interest.”

No kidding!

The report is part of the Corporate Mapping Project to research the corporate power of the fossil fuel industry in Canada, jointly led by the Parkland Institute, the University of Victoria and the B.C. branch of the Canadian Centre for Policy Alternatives, and supported by a grant from the Social Sciences and Humanities Research Council of Canada.

Mr. Klein died in 2013.

Whatever can it mean? Kenney supporter launches run for new party’s leadership … against Kenney

Doug Schweitzer, the Calgary lawyer who once pondered a run for the leadership of the Progressive Conservative Party but decided to support social conservative Jason Kenney instead, yesterday launched a bid to lead the United Conservative Party, Mr. Kenney’s unite-the-right brainchild.

Being the first thing of interest to happen in the race to lead the still-nonexistent party in many days, Mr. Schweitzer’s announcement generated an enormous amount of ink – or its digital equivalent, at any rate – in the Globe and Mail yesterday. The CBC was similarly generous.

In the Globe story, Mr. Schweitzer mildly knocked Mr. Kenney’s social conservatism – at least by implication – telling the Globe’s reporter that he’s “fiscally conservative, socially moderate,” and coming right out and saying he supports gay-straight alliances in schools, unlike you-know-who.

Other than that, Mr. Schweitzer didn’t provide much information about his platform, although he promised to do so later. His campaign website is startlingly uninformative. His slogan is “New Blue,” which evocatively suggests the traditional fashion advice for brides: “Something Old; Something New; Something Borrowed; Something Blue.”

The announcement seems curious, given Mr. Schweitzer’s previous support for Mr. Kenney, for whom he acted as a scrutineer in the PC leadership contest.

Well, a feller can change his mind, can’t he?

24 Comments to: Mapping the ‘Kleintastrophe’ – veteran journalist and researcher tracks energy policies of past Alberta PC governments

  1. Farmer B

    June 8th, 2017

    After the NDP were elected they initiated a royalty review. If memory serves me correctly that review concluded that what Albertan’s were receiving for royalties were fair and very few changes were made. The NDP stated in their last budget that a return to balanced budgets depended on the price of oil. The only difference I can see between the NDP government today and PC governments of the past is that the PC’s pretended to care about balancing the budget, the NDP obviously don’t give a damn. The NDP promised to get us off the oil revenue roller coaster, as far as I can see they only increased the cost of the ride!!!

    Reply
    • June 8th, 2017

      The times are drastically different, the price of oil is much lower today than when Ralph was in power. We must remember that Stelmach was going to increase the royalties, but his conservative colleagues backed by the oil industry frightened him off. As for a balanced budget, if Ralph had not let our infrastructure go to ruin and decimated services to the public, Alberta would be in much better financial shape. So, the blame does not go to the NDP, it rests squarely with the conservatives and Wild Rosers.

      Reply
      • Expat Albertan

        June 8th, 2017

        I think oil prices were lower during the Klein years. What was much higher, though, was the price of natural gas. Regardless, I think that your assessment still holds because the relative price of oil today is much lower than it was in 2015, so the options are much more constrained.

        Reply
      • Farmer B

        June 9th, 2017

        Actually Maria for all but the last 2 years of Ralph’s tenure the price of oil was much lower than today. In 1993 when first elected it averaged about $18.75 a barrel. In 2004 it was still only $41 a barrel. In 2006 when he retired it was $66 a barrel. Natural gas on the other hand was much higher than today and contributed much more to government coffers than it does today. So of his 13 years in power he only enjoyed 2 years of oil prices higher than today.

        Reply
        • St Albertan

          June 9th, 2017

          Farmer B, do you believe that all the citizens of Alberta own the resources that are being exploited here??

          Reply
    • Val

      June 8th, 2017

      to some degree you’re right. but you shouldn’t toss away important circumstances such like market havoc for oil industry which coincided with election, obvious inexperience newly elected majority of local politicians (which is still in place) and, frankly, unprepareness of Alberta NDP to govern province.
      well, maybe decision to keep royalty at previous level isn’t the best but given existent circumstances, was definitely pretty much necessary, albeit during two years so far it seems like very lone wise decision.

      Reply
      • st Albertan

        June 9th, 2017

        What the NDP did with the backing of the major players in the O&G sector did, allowed for orderly consolidation in the face of global pricing pressure. No coincidence that Suncor (the private company that gladly bought PetroCanada to become a major integrated player) is now the dominant player after investing billions at the bottom of the market. They along with CNRL will return to a Lougheed style sensible development model. The fact that people like Brian Jean and Jason Kenney have no clue about forecasting oil and gas development should trouble people like you. Why it doesn’t is a mystery.

        Reply
        • Val

          June 11th, 2017

          the political parties and their influence in O&G industry is sporadic and do not last forever.
          we did have the policies established by Peter Lougheed and then quite contrary policies by his successor Ralph Klein. now we have kind of chaotic and undefined approach to same issue by Rachel Notley.
          what did industry every time political approach changes? just adapts itself to circumstances with purpose to maximum benefit from it. sure today Suncor has become main player in the national O&G field but who prohibited alberta’s government to do same, acquire assets when market are bottom and establish provincial own oil company?
          particularly having more advanced options over private sector.
          political colors and moods changes from time to time, needs for resources and their consumption remains for centuries to come.
          why i’m not have concern about Brian Jean, Jason Kenney, including Rachel Notley?
          sadly all of them live and act for present moment to promote and serve their short term own interests, knowing they could be on the top just for limited time to gain personal benefits.

          Reply
          • Farmer B

            June 11th, 2017

            Representatives of Suncor, Cenovus, Shell and CNRL all stood with Rachel Notley when she announced the NDP’s climate leadership plan. Of the 4 companies Shell has left the Oilsands and the other 3 have massively increased their Oilsands ownership. Now if this had happened under a PC government there would have been loud cries of government colluding with business, supporters of the NDP call this a responsible developement. Isn’t partisanship laughable:-)

          • Val Jobson

            June 12th, 2017

            “colluding” about what? What do you think is wrong about that?

          • Farmer B

            June 12th, 2017

            Val, 3 of 4 companies that stood on the podium when Premier Notley released the climate leadership plan have greatly increased their oilsands holdings and face reduced competition. If this was a PC or Wildrose government that brought in new legislation and the corporations that publicly backed this new legislation experienced strong growth how would you react?

          • Val Jobson

            June 15th, 2017

            I’d think the legislation appeared to be effective.

          • St Albertan

            June 15th, 2017

            For the record, Shell sold out because it needed to recapitalize after it bought BG at the top of the market and then faced the bottom. Suncor expanded because it’s the most efficient operator up there and knows a deal when it sees it. CNRL is a close second. There is nothing chaotic about NDP O&G policy. The only people who don’t like are drillers who like to run roughshod and leave their mess behind in bankruptcy. Kind of like right wing politics in a way. Fail? Destroy your credibility? Fold the tent and get a new name and press on!

          • Val

            June 15th, 2017

            “There is nothing chaotic about NDP O&G policy”
            ———————————————————————–

            interesting. so, what is the long term policy of Alberta NDP and their leader in regard of O&G industry?

          • Farmer B

            June 15th, 2017

            Actually St. Albertan I started to support the Wildrose because the PC party of the time could not control spending. The present day NDP government has increased both spending and taxes, I personally consider them one step worse than the previous PC government. As for your assertion of failure, undoubtably depends on your perspective. I personally would prefer one right of center party in Alberta, having said that only 1 party in Alberta has proposed a realistic plan to fix our fiscal dilemma and that is the Alberta party.

  2. Kang the barbarian

    June 8th, 2017

    The NDP review was conducted by industry financial people so it has no more legitimacy than the Klein review. The NDP were either snowed or did not even have the courage of Ed Stelmach. He commissioned a royalty review conducted by independent economists and academics.

    If the feckless NDP had just pulled Stelmach’s review off the shelf and implemented it as most of us expected them to do, our budget would be running a proper surplus and we could still afford to fix the mess Klein left.

    Reply
  3. political ranger

    June 8th, 2017

    So, regarding the advice of the good doctor about avoiding the pitfalls, how do we comprehend the AER? At least in ‘ol Ralphy’s time he knew he was lying and stealing and he tried to hide it. Nowadays, his modern spawn have that very same industry dominated “task force” be the gov’t !
    And we just sit here and allow it to be.

    Reply
  4. Brian Janot

    June 8th, 2017

    I remember playing at the St. Louis. Old Ralph would be sitting there slopping up beer when I got there, and he would be there when I left. He was just a mean spirited drunk who detested poor people.

    Reply
  5. David

    June 8th, 2017

    I don’t think there is one size fits all for royalties. The price of oil has been on quite the roller coaster ride over the years. What might have been a reasonable oil royalty rate when oil prices were fairly low at the beginning of the Klein era, could be considered very foolish at the end of the Klein era when oil prices were going up quickly. I don’t know whether it was stupidity, laziness or ideological stubbornness (or perhaps all three) that kept Klein from adjusting royalties later. It would have been a smart financial strategy that would have allowed Klein to also reinvest in services and re-build infrastructure, but obviously Klein was content with only handing out Ralph bucks which history will judge as a prime example of “p**ssing away that boom.

    The free for all development strategy for the oil sands certainly made no sense. In the end it just drove up costs, created more inflation in Alberta, which hit those not working in the oil industry hardest and exacerbated the boom bust cycle.

    I do have to wonder about the motives of Schweitzer running for the UCP, or whatever they intend to call themselves, leadership. Perhaps his friendship with Kenney was more tenuous than he conveyed and he now sees an opportunity to appeal to the more moderate PC’s. However, I can’t see someone who was never elected as an MLA being a serious contender here. I wonder if he is a tool or a foil for Kenney to make the ideological make up of the new party seem broader than it is, or to block some other progressive candidate with stronger credentials from running against Kenney. Like many things UPC, this all seems suspicious and I have the feeling major decisions are being scripted or co-ordinated in the backrooms and presented to the members who will hopefully just rubber stamp them.

    Reply
    • political ranger

      June 8th, 2017

      You’re right, there is not ‘one royalty’ that ‘fits all’. But that is completely besides the point.
      There are almost a century’s worth of observations about royalty regimes, through time and from around the world with all kinds of prices as backdrop and all within the petroleum extraction biz. This information is readily available for everyone, although a little dense to read for some.
      Why then the almost lowest royalty rate on the face of the globe? After Lougheed started a reasonably responsible royalty program (that the Norwegians copied and improved on) Klien scrapped it and gave away the farm.
      At best, incompetence – which still runs wild today. (See the recently released reports about SRD’s, incompetence, yet again, in the fire-fighting business) More likely malfeasance and criminality.

      Reply
    • Val Jobson

      June 9th, 2017

      Stephen Carter has suggested on twitter that Schweitzer’s reason for running is to help Kenney to win; seems plausible.

      Reply
  6. June 9th, 2017

    And then there is Norway, who did not/does not do royalties. Here is an explanation of what they do:
    “Oil and Gas taxation in Norway”
    www2.deloitte.com/content/dam/Deloitte/global/Documents/Energy-and-Resources/gx-or-oil-and-gas-taxguide-norway.pdf
    From what I understand, they charge a fair tax on the industry profits to not only facilitate a fair return of the resource for all Norwegian citizens but still allows the industry to thrive.
    Of course, they followed Peter Lougheed’s “Six Rules for Resource Development,” one of which is: “Collect your fair share.” Now, they also, “Saved for a rainy day,” and have a stunningly impressive + or – $ 1 trillion in their Retirement Trust Fund. Even though Alberta is a province within a country, we could have had a few hundred $billion in our Heritage Trust Fund by now if Lougheed’s six rules were followed.
    There is always the defaulting to Norway’s high taxes but folks from Norway and other Scandinavian countries have stated that they feel they get a good return on their taxes, i.e.equal wealth distribution in the form of health
    care, education, infrastructure, universal child care, etc., for the benefit of all. The Scandinavian countries, as a result, are rated among the happiest societies in the world.
    It really brings to the fore, I feel, the obvious financial success of these countries who have governments with strong social democrat characteristics and who use their capitalist wealth to practice good equal wealth distribution…..a contrast, for me, re: Canada’s increasing gap between the rich and the poor and the ongoing social conservative propagation of those in the top 1% for wealth.
    We would be wise to not only learn from them, but to emulate them.

    Reply
  7. Chris

    June 11th, 2017

    Oh look, yet another publicly paid academic speaking out way too late to do any good.

    Reply
  8. Eric

    June 6th, 2018

    A valuable corrective article. Unfortunately, Gillian Steward has strayed from the path and, like Rachel Notley, accepted the false gospel of the oil industry in championing the Kinder Morgan pipeline. Like ex-NDP Ontario premier Bob Rae, Notley cannot appease her right-wing and petro enemies almost no matter what she does. Whether Steward benefits from her transformation is harder to discern.
    Kevin Taft, on the other hand, seems to tell the truth about the power of petroleum companies to capture opponents.

    Reply

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