Good idea for Canada? Norway's oil and gas revenues have provided Norwegians with $550 billion pension fund

Norway's oil and gas industry revenues have provided the country with a $550 billion pension fund. Why isn't Canada following their lead?

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The idea of using oil and gas revenues to benefit citizens is not new to Canadians, though many would still love to see it implemented here on a national level. As noted in 2010 by Green Party leader Elizabeth May, the big irony is that Norway’s pension fund was actually modeled on the Alberta Heritage Fund, launched by Conservative Premier Peter Lougheed in 1976.

Though there has been a more recent push to build up the fund, it’s currently still sitting at just over $15 billion. Within the same timeframe, Norway has managed to collect over 35 times that amount.

Peter Nemetz, an economics professor from the University of British Columbia’s Sauder School of Business, says Canada’s current stance on royalties and regulation is to blame for this drastic difference.

“The Norwegians…have insulated their economy from the 'Dutch Disease' by investing this money in foreign assets and financial instruments.  In contrast, Alberta has built up only a modest fund, largely because of their timid approach to royalties,” said Nemetz.

He recalled a “blue ribbon panel” of experts commissioned by Premier Ed Stelmach in 2007, which at the time recommended that the province boost the fund to $110 billion by 2030. Jack Mintz, who led the panel four years ago, recently told the CBC that saving that money makes even more sense now than it did at the time.

With business thriving in the tar sands and oil prices on the rise, critics and economists say the government needs to seriously consider increasing royalty rates for resource extraction.

“As I remember, the government started to implement these rates but backed off because of industry threats to take their business elsewhere,” Nemetz said.

“This strikes me as a hollow threat, because the energy resources remain in Alberta and are highly prized.”

Government vs. oil companies: who gets the upper hand?

Even if Canada were to hike up royalties and put more resource revenues into pension funds, there’s still a broader issue at play that separates our case from Norway’s.

In Norway, the state has the upper hand—they ultimately retain control of the resources and oil companies generally play by the government's rules. Here in Canada, however, industry players appear to have an increasingly dominant role in determining policy.

“I think it is reasonably clear that the oil and gas industry in Alberta and Canada have a great deal of influence. It also appears likely that this influence has grown under the current Conservative government in Ottawa given the Prime Minister's political background in Alberta,” said Nemetz.  

“This influence has been evidenced more recently in the federal government's domestic and international campaign on behalf of the oil sands, as well as the recent initiative to ‘neuter’ the Fisheries Act, which has played a critical role in protecting water quality in Canada for several decades. It has been posited recently that one of the motivations for the proposed changes to the Fisheries Act is the desire to facilitate the Enbridge pipeline across BC.”

Whether it’s “streamlining” environmental reviews or getting pesky fisheries regulations out of the way, the federal government seems to be dead set on making it easier for oil companies to do business. Will they increase royalties and put more of the benefits into the hands of Canadians?

As it stands, all signs point to ‘no’.

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