Wealth management: some observers say Alberta has so much money from its oil fields it doesn't know what to do with it all. Critics say the province needs to plan for the day the oil runs out.

Albertans are swimming in oil and gas money. The province's prosperity is tied directly to the sky-rocketing price of oil and gas; lately it has reaped enormous benefits from the royalties that are paid to the government. It is the only province to have no debt and no sales tax; it also has the lowest corporate and personal taxes in the country.

Private-sector forecasters expected Alberta's surplus to reach $7 billion in 2005. The government says it won't be that high but it has a reputation for underestimating the size of the surplus: last year (2004/05), the Alberta government received almost $10 billion in resource royalties, about double what was budgeted. Most of the surplus was used to retire the province's $3.7 billion debt but beyond that critics say the government doesn't know how to handle its amazing wealth. By August 2005, the province's Finance Minister was predicting a $2.8 billion surplus (based on oil averaging around $50 U.S. a barrel and natural gas at about $6 a gigajoule), almost double its $1.5 billion estimate in the spring budget.

Premier Ralph Klein announced in September 2005 that each person in the province will receive a government cheque in late December for $400. The money is known locally as "Ralph bucks," from the province's unbudgeted surplus. It will add up to a $1.4 billion giveaway. He also favours using cuts to both corporate and personal income taxes to continue attracting workers and investment to Alberta. The Calgary Chamber of Commerce (CCC) and Canada West Foundation (CWF), a western think-tank, both say the money could be better spent. The head of the CCC said the bonus cheques were "an opportunity squandered" and that the money should be used for corporate tax cuts. At the same time, CWF warns against setting up Alberta as a Canadian tax haven that might disrupt the Canadian economy. In August 2005, the Foundation's President Roger Gibbins said the province still needs to develop a long-term plan for the surplus. However, he credits former provincial Conservative governments with investing the money wisely.

On the other hand, the Canadian Association of Petroleum Producers thinks the province will reduce its corporate tax rate, currently 11.5%, by a percentage point a year starting with the next budget, until it reaches eight percent. That would leave Alberta with the lowest corporate tax rate in the country, a little more than half of Ontario's current 14 percent rate.

As Globe and Mail columnist Jeffrey Simpson sees it, Alberta, with the country's lowest taxes and brightest future, "is crying out for visionary political leadership. Instead, it gets cheesy rebates."

Mr. Simpson's suggests the province should:

* Boost education by making the University of Calgary and the University of Alberta top class and the public school system the best in North America. Also, it should provide the country's best training systems, public and private, to handle labour shortages;

* Increase finances to medical research to give Alberta world-class status;

* Finance more research into sustainable development to diminish the environmental impact of energy exploitation; and,

* Shrink poverty to improve productivity as well as equality.

Former Alberta premier Peter Lougheed thinks the province should set aside half of its windfall rather than spending it or using it to cut taxes. Mr. Lougheed's government created the province's Heritage Savings and Trust Fund in 1976. He thinks it's time to start saving more resource revenue.

The province hasn't always been so flush. Albertans have known tough economic times and received equalization payments from Ottawa from 1957 to 1964. The hard times might come back once the oil and gas have been taken out of the ground and sold. There will also be a not very pleasant environmental legacy once the wells have given up the last of their bounty.

In the meantime, Alberta is enjoying its good fortune. And, it's expected to continue. A recent report released by the Alberta Energy and Utilities board predicts crude oil prices will remain at or above $50 U.S. a barrel through 2009.

It also said Alberta's oil production is expected to grow from 1.72 million barrels daily in 2004 to 2.8 million by 2014.

SUGGESTED ACTIVITIES:

1. In January of 2005, the Canada West Foundation launched the Investing Wisely Project to explore ideas about the best options for using Albertan's oil and gas revenues. Research the project at http://www.cwf.ca/abcal cwf/doc.nsf/doc/project_investwisely. cm and discuss its suggestions. Open a file to keep track of the project's progress.

2. Discuss whether or not you think it would be in Alberta's interest, or the country's, to separate from the rest of Canada.

3. Research the history of Western alienation in Canada.

FACT FILE

Each $1 rise in the price of oil translates into about $99 million for Alberta's treasury: each 10 cent rise in the price of natural gas, which accounts for most of Alberta's energy royalties, also adds another $99 million to the treasury.

FACT FILE

Alberta, the world's second largest exporter of natural gas, relies overwhelmingly on dirty coal to supply its own electricity.

FACT FILE

Saskatchewan, Alberta, and British Columbia all are booming, and their good fortune means that they have replaced Ontario as the engine of Canada's growth. The Conference Board of Canada estimates that Alberta will see "stellar" growth of 4.2% in 2005, as it did in 2004. Saskatchewan, with economic growth of 3.5% in 2004, is expected to grow 2.7% in 2005 (more than Ontario's 2.3%), and British Columbia is expected to grow by 3 percent in 2005.

RELATED ARTICLE: Going it alone.

Some Albertans think the cost of staying a part of Canada is too high. They believe the province would thrive on its own, free of federal programs and taxation.

In July 2005, The Calgary Herald published an article calling for an independent Alberta. It was written by Leon Harold Craig, professor emeritus of political science at the University of Alberta. He believes "an independent Alberta would be every bit as politically and economically viable as Norway, Finland, Denmark, New Zealand, and several other advanced countries of comparable population ... Even now north-south trade is as important to the Alberta economy as east-west trade." The province's economic health would be further enhanced by its having "the most attractive tax regime in North America," and that would lead to a dramatic increase in population "as disaffected Canadians of enterprise and sensible social views moved here ..."

Around the same time, a poll conducted for The Western Standard magazine, found that one in three Westerners would consider pulling out of Canada.

While that's significant, many more want to remain part of the country, albeit with a stronger say in how it's run. When an Edmonton-based public policy consultancy, Cambridge Strategies Inc., asked citizens whether or not they think Alberta's riches belong to the province and should not be shared with other Canadians, more than 80 percent disagreed.

Similarly, a 2004 government report (Strengthening Alberta's Role in Confederation) said the province should work with Ottawa to fix problems instead of opting out of federal plans such as Canada Pension and income taxes. The government panel said to do so would be costly and ineffective. As the committee's chairman, MLA Ian McClelland, put it: "I think it's fair to say that Albertans are privileged to be able to contribute to the national good. We're part of this national family. If there's a problem, it's that we want to make sure that our contribution is respected, understood, and spent wisely."

More recently, in August 2005, one Albertan, Dr. Roger Gibbins (President of Canada West Foundation), wrote in The Revelstoke Times Review that despite his concern over the years "about a federal government that is insufficiently attuned to Western Canadian interests and aspirations ... Canada has worked well."

Alberta could thrive as an independent state, but Dr. Gibbins believes it is better off being a strong component of the nation: "We live today in a truly global village where barriers between nations and within our minds are tumbling down. It is no time to shrink in on ourselves, to create a smaller, more cloistered country. Alberta's motto, now more than ever, should be: 'Don't fence me in.'"

RELATED ARTICLE: Looking ahead.

Some say there is a price to be paid for Alberta's oil riches. In a Globe and Mail article in September 2005, journalist Andrew Nikiforuk said the province's landscape is being looted. "Forty years ago, Alberta's boreal forest was a wilderness; today, provincial records show that 90 percent has been seriously fragmented by roads, well sites, seismic lines, pipelines, and power lines, and looks like an industrial park," he wrote. "What isn't being drilled is being logged."

He adds that, "In Drayton Valley, southwest of Edmonton, the government allows companies to build highly toxic sour-gas wells so close to people's homes that many Albertans live in what's known as 'emergency response zones' (where a leak or accident could kilt or cause permanent brain damage if not evacuated in time). There are as many as 52 such zones; to be located inside one devalues a home by an average of $6,000. But property devaluation is par for the course in Alberta."

In addition, urban growth is hitting the water supply to the point that "In 50 years, no one expects to be able to float down the Bow or Oldman Rivers (because they'll be virtually used up) ."

And, while the government gleefully reports that it has no deficit, the province's Infrastructure Minister Lyle Obert says there's a $7 billion backlog in work on schools and roads. The article also cites the Alberta Energy and Utility Board's report "that the oil patch has $9 billion worth of wells and gas facilities that haven't been cleaned up--and has only set aside $20 million for the job."

The problem says Mr. Nikiforuk is that Alberta is not saving for the future, unlike oil-rich Norway that has set aside about $198 billion (U.S.) for leaner times. The government forecasts that the Fund may equal the country's $258 billion economy by 2007. Alberta, he says, hasn't put anything into its $12 billion Heritage Fund since 1987.

The Petroleum Fund of Norway is owned by the people of Norway and has mushroomed since it was established in 1996. An article at the Norwegian government website in 2002 offered this insight: "Since finding oil in 1969, Norway has transformed itself from one of Europe's poorest countries to one of the richest in the world. But, wealth is not the sole measure of any country. More important is 'quality of life.' When the United Nations declared that Norway had the No. 1 quality of life in the world in 2001, it was in recognition of three decades of wise production and financial policies. Norway had transformed its lucky oil strike into long-term good fortune for its 4.4 million citizens and for the many countries around the world to which they contribute development aid."

Norwegians recently ousted a tax-cutting centre-right government in favour of a left-of-centre coalition that aims to increase welfare spending and ease social inequality.