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Notley government decrees no change to Alberta's royalty regime

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Rachel Notley

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Has the Alberta NDP just had its Syriza moment?

Is Alberta dominated by the oil industry the same way Greece is dominated by the Eurozone?

To many of the Alberta governing party's long-time supporters it may seem so tonight.

Syriza, as readers will recall, was the leftist coalition led by Alexis Tsipras, elected to govern Greece in January 2015 by vowing to fight Eurozone austerity. Something changed, and in the end Prime Minister Tsipras and his party embraced the European Union's brutal austerity.

The NDP was the mildly social democratic fourth party in the Alberta Legislature led by Rachel Notley that was unexpectedly elected to a majority government in May 2015.

The NDP was never all that far to the left, of course, but for as long as anyone can remember it has been an article of faith and party policy among New Democrats that Albertans were not getting their fair share from the petroleum-rich province's natural resources. Or, as it was so often explained here, Alberta has a revenue problem, not a spending problem.

It is an undeniable fact that the royalty returns from petroleum-product sales received by Albertans have dramatically declined over the past four decades since Peter Lougheed was the first Progressive Conservative premier of Alberta.

It fell from a peak of more than 41 per cent of sales under Lougheed to 3.6 per cent today. According to energy policy analyst, consultant, teacher and former government official Barry Rodgers, when all factors are considered this is the lowest royalty rate in the world.

It was in large part the wish of many Albertans to return the province's royalty rates to something like the average 15.5-per-cent return that prevailed under Ralph Klein's PC government that spurred the broad coalition of left, centre and centre-right voters to elect the NDP on May 5.

So yesterday's announcement by Premier Notley is bound to be a bitter disappointment to many.

Notwithstanding the sharp decline of oil prices through the past year and a half, after seven months of study by a four-member panel led by ATB Financial CEO Dave Mowat, the NDP decided to leave the province's royalty model largely untouched, and indeed to entrench many expensive subsidies to the oil industry first implemented by past PC governments as temporary measures.

There will be relief, even jubilation, in the oilpatch. Conservative media were already crowing yesterday that the New Democrats had come to their senses and the $3-million spent on the review was a waste of money.

"The fact of the matter is the environment has changed profoundly, even in the last 12 months, and so that is what is driving our decision-making at this point," Notley told a news conference in Calgary yesterday morning. "It is not the time to reach out and make a big money grab. That just is not going to help Albertans over-all right now, and so I feel quite confident that this is the right direction to take."

Well, no one can now say that Notley is not a pragmatist. The question is, will her pragmatic status quo response to the widely held perception of a need to restructure Alberta's resource royalties work for her government, or against it?

It's probably too soon to say for sure.

Many NDP supporters will continue to believe their party was right last year when it said Albertans weren't getting a fair deal -- and that nothing has changed just because nothing has changed.

Still, this need not be politically fatal to the NDP on one condition -- that the Notley Government sticks to the rest of its program.

That, however, is the sticky part. The political right is right about this much: Without the revenue the government needs to spend the way Albertans demand, something's gonna give.

Yesterday, the NDP gave up on one of two key ways to raise revenue -- what has traditionally been seen as a fair return on the resources theoretically owned by us all -- not just for now, but for the foreseeable future.

The alternative on the revenue side is to put in place something like a sales tax, as in every other jurisdiction in Canada and most in the world, to smooth out the revenue volatility typical of resource-rich jurisdictions.

Will the NDP have the political courage to do that instead? Unlikely.

So with oil prices where they are now that leaves as the only alternatives deep spending cuts, likely right where the market-fundamentalist parties believe they should be made -- to public health care, public education and public service salaries -- or running unpopular deficits.

Alberta's NDP understands what's wrong with cutting spending. They know perfectly well what happens to New Democrat governments that pick fights with the public sector: They lose the next election.

Notwithstanding the full-blown campaign against their governments by the corporate-financed right, just such battles were certainly huge part of what happened to Dave Barrett's one-term NDP government in British Columbia in 1975 and Bob Rae's one-term NDP government in Ontario in 1995.

That's the real meaning of "Rae Days," by the way, repeated endlessly by right-wingers around here who don't know what they're talking about. They were the days the NDP's natural constituency reached the conclusion it had been betrayed and took to the streets.

So if Alberta's NDP is slamming the door shut on the revenue side, how is it going to keep it open on the spending side?

If the NDP can't square that circle, and austerity is in Alberta's future, then the government's future is problematic.

This post also appears on David Climenhaga's blog, AlbertaPolitics.ca.

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