Mr. Chairman, members, and fellow Albertans:
When I was invited to speak here I was the Alberta Director of the Canadian Federation of Independent Business.
Now – like a lot of unemployed Alberta workers – I’m looking for a job. I think I might have one in mind.
But before I get to that, I’d like to deal with what I was invited to speak about: the state of the Alberta economy. I’m going to talk about the oil industry a lot. This isn’t because I work in the oil business. Because I don’t. And it isn’t because I’m a spokesman for big oil, because I’m not. I’m going to talk about the oil industry because as the oil business goes, Alberta goes, and right now neither is going anywhere.
I’ve lived in Alberta nearly all my life. I was born in Calgary and my dad has worked in the oilpatch for as long as I can remember. Mom started working in the ‘patch about 10 years ago after a long career in the civil service, at the City of Calgary and before that at Canada Post.
My family, which includes three brothers and a sister, have seen what happens when a bust hits. Here’s a story that will be familiar to many of you.
My parents bought the home they are in now in 1981 and rented out our other home to students so it could pay for itself. They had an interest-only mortgage from the bank on the rental place, and remember – after 10 years of Trudeau – interest rates were in the double digits.
But my parents were making it work.
Then the bust hit and the bank called in my parents’ loan on the rental house – though they had never missed a payment. They couldn’t pay the loan off so the bank foreclosed. The bank took our house.
Our family wasn’t alone. All over Alberta people were losing their houses, their jobs, their businesses, and their life savings. Who can forget the 22 per cent interest rates? Who can forget the 12 per cent unemployment rates? Who can forget the business collapses?
I know my dad can’t forget the stories he heard during those dark days. He remembers hearing almost weekly about individuals and businesses being financially wiped out, and emotionally devastated Albertans committing suicide. Tough times, and it wasn’t that long ago.
Yet Eastern politicians still ask why we can’t get over the National Energy Program. They don’t know. They weren’t here.
Today, oil prices have dropped dramatically again. Oilworkers are losing their jobs again. The effects are rippling through the economy into construction, retail, restaurants and hospitality. No doubt some of this would have happened anyway with the downturn in the global economy. But politicians have done their darndest to make it much worse.
The first hit came on October 31, 2006 when the federal government changed the income trust rules and depreciation schedules for oil and gas capital investment. This changed the economic foundation of many companies and investments in mid-stream. That was bad enough.
But then the provincial government made thing worse – much worse — with the royalty review in 2007 which led to the New Royalty Framework. Since the province owns most mineral rights, Albertans are partners with the oil and gas industry. But because the province had experienced boom times for several years, there was a perception that the private sector was profiting at the expense of the public.
Today, tens of billions of oilsands projects and heavy oil upgraders have been cancelled or postponed; oil and gas drilling is at record lows; there have been tens of thousands of layoffs; investment capital and oilfield equipment have fled to other jurisdictions like Saskatchewan, British Columbia and the United States.
Even those who regard the oil business with distrust must acknowledge that raising royalties after commodity prices and world capital markets collapsed was hardly wise public policy.
At a time every government in the western world is pumping cash into the private sector to stem the tide of layoffs and bankruptcies, in Alberta – and only in Alberta – has the government decided to take more money out of the private sector.
Now I have some sympathy for Albertans who, a couple of years ago, believed we weren’t getting Our Fair Share from the oilpatch, and perhaps many of you feel that way today, so let’s talk about it for a minute.
When I worked for the Canadian Federation of Independent Business our organization had 10,000 members from all over Alberta. We also had a one-member one-vote policy-making process. Our lobbying agenda was set 100 per cent by a majority vote of our members. I wouldn’t have had it any other way.
On the issue of the new royalty framework, our members were divided, so we did not take a public position on it. But I spent a lot of time thinking about why Albertans believed they weren’t getting their fair share. I think there were three reasons:
First of all, it was because of the perception that there was a sweetheart deal in place for oilsands development. The oilsands companies were able to pay a 1 per cent royalty until they recovered their capital costs on their projects.
But keep in mind the oil sands require the highest cost for oil production in the world. Oilsands are different. Comparisons to royalty rates in Alaska or Norway or anywhere else in the world are meaningless.
And oilsands are one thing. But no one, especially the junior oil and gas sector, expected the sweeping changes that were announced in the New Royalty Framework.
Some Albertans supported a change in royalties thinking that because we had the oil, investors would come regardless of the economic rent we charged. Now that prices have collapsed, this is clearly wrong. Alberta must compete with the world for capital and, because of the New Royalty Framework, we are no longer competitive.
Well, any policy can be changed – and the Alberta government is acknowledging this. It has already been forced to make at least three major adjustments, and the rules are changing almost daily. But Alberta’s reputation as a fair, safe and predictable place to invest has already been damaged.
In the new economic reality the world is facing, it is absolutely essential that Alberta chart a course on energy policy that is fair for everyone – the public, the industry, and the tens of thousands of Albertans who rely upon the oilpatch for their jobs and livelihood, directly and indirectly.
Uncertainty is something we can do without. Anyone who raises money for oil and gas in Alberta will tell you the capital has dried up.
In February 2006, at the peak of the drilling season, we had 531 rigs in operation.
When oil peaked at $147, after the new royalties had only been announced, we had 219 rigs in operation: more than 100 rigs left the province and the number of active rigs was cut in half. This was before the framework even came into effect.
Ed Stelmach is travelling the world to try to drum up business for our province. How can he convince the world to invest in Alberta when he can’t even convince Albertans to?
Perhaps he thinks the province’s new $25 million kitschy slogan will do it – Freedom to Achieve, Spirit to Create. Or do I have it backwards? I can never remember the darn thing. I don’t know about you, but I’d like to have the Alberta Advantage back again.
The second thing we have to keep in mind when we consider why the public was behind the Our Fair Share campaign is that the boom was creating some strains. As Director of CFIB I heard frequently from members about how difficult it was to find qualified workers. We estimated that 54,000 small business jobs went unfilled in 2007 because they couldn’t find qualified staff.
We heard concerns that kids who would normally get their first job locally while finishing school were cutting their education short to get oilpatch jobs. There were worries about where they’d be if we saw a decline.
The cost of housing soared, which was good if you owned property before the boom, but not so good if you moved here for a job and had to pay $400K for a starter home.
Low-skill and low-pay workers in the hospitality and service industries were seeing their rents go through the roof.
Infrastructure investment, on highways, roads, transit and other vital projects, was not keeping up and costing three times as much as before.
It seems as though part of the rationale behind the New Royalty Frameworks was to just slow things down. The problem with government is they can’t seem to put on the brakes without slamming us into a full stop.
I know there were a lot of stresses, but there were also a lot of policy tools to take care of each one. If given a choice between the troubles that come with a boom and the troubles that come with a bust, I’d take a boom every time.
One of the symptoms of oil booms is we think they’ll last forever – that market forces don’t come into play…that when oil breaks through $100 a barrel there will be no drop in demand. But because of market forces and rising costs it was inevitable that Alberta’s boom would bust on its own.
We sure didn’t need Ed Stelmach to do it for us.
The third thing we have to keep in mind about the public support for Our Fair Share, is most Albertans really had no idea how much oil and gas contribute to our collective well-being.
Even though Alberta has been in the oil business for the best part of a century, there is still little understanding about how the business works and how it affects each local economy.
Everyone knows about “big oil” and “record profits”, but they don’t understand how that translates into jobs and business opportunities from Pincher Creek to Fort McMurray, from Medicine Hat to High Level.
Maybe this is the industry’s fault. Maybe it’s the government’s fault. Maybe it’s our fault. But when we tamper with the royalty system, it affects hundreds of thousands of people across the province, not just the oil executives in the office towers of downtown Calgary.
Most Albertans probably also don’t know how much resource revenues already contribute to the provincial budget. University of Calgary business professor Jack Mintz headed up the province’s investment advisory committee.
The way he put it is, without resource revenues, the average Albertan’s total tax bill would be 40 per cent higher.
Some Albertans probably thought if we could get more, perhaps we could start saving for a day when we no longer have resource revenues.
Some Albertans probably also thought they’d see some of Their Fair Share directly. Maybe they thought they’d be getting new Ralph Bucks. I bet they didn’t think that it was Stelmach’s intention to spend every penny of it.
But that’s exactly what’s happening. Even with oil and gas prices as low as they are, the government expects to rake in $6 billion in resource revenues this year. Yet they are still going to run a $4.7 billion deficit – the biggest in Alberta history.
In a few years, we may still have the Heritage Fund, but all the sacrifice Albertans made to squirrel away billions into our emergency savings will be wiped out.
When Jim Dinning was treasurer in 1996 – just 13 years ago – he ran a surplus. Oil was at $18 and gas was at $2. Today oil prices are three times higher and gas is twice as high – and they’re running a deficit.
In the last decade the government has spent and spent and spent. Spending on programs alone – not including infrastructure like roads and highways – has been double the rate of inflation and population growth. At CFIB we calculated that Alberta was spending 20 per cent more than the Canadian provincial average.
If we were as prudent as some of our neighbours, we would be spending up to $10 billion less than we are right now and we would not be running a deficit.
Because what are we getting for all this extra spending? We still have gang wars going on in Calgary streets. We still have a province that feels it must violate property rights to secure land for big projects. We still hear stories daily about new cuts to health care services, rural hospital closures, higher charges on seniors, and waiting for hours in hospital emergency wards.
In the face of a collapse in global investment in Alberta, decline in oil and gas prices, and pressure from its own employee groups, the Stelmach government has no idea what to do.
It had to build a fudge factor into the budget for next year. The Finance Minister said they have to find $2 billion to make next year’s budget work, but she didn’t say where it would come from. Cuts? Maybe. Higher taxes? Maybe. They are already floating trial balloons for higher beer taxes, higher fuel taxes, and even a provincial sales tax.
Of course what they are really hoping is that oil and gas prices will recover, drilling will return to normal, revenues will pour in again, and they can keep the party rolling. Call this the “crossing-your-fingers fiscal strategy.”
But just hoping for good luck is no strategy at all. That’s what Getty did back in the 1980s. Alberta continued a boom-time spending binge even though oil and gas prices had collapsed, and what happened? We hit the financial wall. In 1991 they revisited royalties and reduced them across the board to encourage drilling and development. In 1996 Edmonton, Ottawa and the industry created the generic oilsands royalty formula to unlock this massive and valuable resource. In 1995 the government slashed its own spending.
What followed was a period of unprecedented prosperity.
We got the oil industry and economy going, generated the royalties and taxes that paid off our debts, and created the fiscal surpluses that made Alberta the envy of the nation – even with average petroleum prices.
Now the province is making the same mistakes again. Stelmach’s high royalties and huge deficits are putting us into the same downward spiral Don Getty’s did over 20 years ago.
The provincial government has learned nothing from history.
When you think about it, the Tories have now wasted two booms. After the first one ended, remember that old bumper sticker, “Please God, send us another oil boom. We promise not to piss it all away next time?” I’ve got an idea for a new bumper sticker. What do you think of this? “Please God, send us another oil boom. This time, we promise not to vote for the Tories.”
Now it pains me to have to say this. I’ve been a Tory all my life. I was president of the campus Progressive Conservative club in 1992-93. I was a delegate for Jean Charest to the federal PC leadership convention; I supported Rick Orman in the provincial one.
I even campaigned FOR the 1992 Charlottetown Accord, and in 1993 I worked on Ralph Klein and Lee Richardson’s PC election campaigns.
Only later did I join the federal Reform Party – but when I did I quickly came to love Reform’s grassroots policy-making process. More recently I joined the PCs to vote for Ted Morton for leader in 2007, and almost sought the PC nomination in my own constituency of Calgary North Hill in 2008.
For three years it was a big part of my CFIB job to talk regularly with government MLAs and ministers. Frankly, in most cases I wasn’t impressed. They’re nice enough individuals but they have no new ideas. Why would they? Nobody in charge ever listens to them anyway. They have no energy, no spirit. Why would they? They get reelected without them.
For years now the few provincial PCs who are fiscally conservative told me, “Danielle, we’re going to fix the party from within.” But after watching this government raise spending and blow another boom to smithereens, screw up our health system and obliterate some of our most fundamental freedoms.
And after watching the Government of Alberta in action over the last three years, with all its complacency and selfish agendas and slavish obedience to failed ideas and failed leaders, I realized, “No – this PC party can’t be fixed from within. This PC party can never be fixed at all. This PC party must be taken out.”
Then I asked myself, who would do this? And for the very first time I looked seriously beyond the PC party for an answer, and I noticed something.
The Albertans with whom I most agree aren’t in the PC party at all. Almost all of them were already in the Wildrose Alliance. And now a whole bunch more people are moving in this direction.
And when I look at this new party, what do I see? I see my old friend Gordon Butler – the straight-talking Youngstown rancher who has taught me more about property rights than I learned in six years of university.
I see Link Byfield – whose Alberta Report magazine helped forge the political conscience of a whole generation of young Albertans – including mine.
I see people like John Hilton-O’Brien and Dave Yager, two more remarkable Albertans whose collective IQ is probably greater than that of the entire Stelmach cabinet.
And I see a growing army of men and women, young and old, rural and urban, social and fiscal, northern and southern, who want the same thing I want – to give Albertans back the unity, creativity, pride and purpose that made this province great and will make it great again.
And so, ladies and gentlemen, fellow Albertans, I left my CFIB job last month, because for very necessary reasons it does not allow partisan involvements, and I joined this new party of yours – this party that is now our party.
As you know or may have heard, I have been asked by many friends to stand as a candidate for the party leadership. After several weeks of consideration, and talking to my husband David and my stepson Jonathan, I’m announcing here today that my name will be on that leadership ballot in October.
I know this is a big undertaking, but I’m confident you will give me fair consideration – along with all the other candidates – and choose the one who’s best suited to govern our province.
In closing , I remind you that as we contemplate the sheer audacity of what we are proposing to do – to rise as a united party out of nowhere to govern this great province – it probably doesn’t seem like we can do this. But we can. Every single party that has ever governed this province has done exactly what we are doing – first the Liberals, and then the United Farmers, then the Social Credit and lastly the Lougheed Conservatives.
They all started with nothing – nothing except these three things:
The vision of a better future.
The courage to speak honestly.
A love for Alberta that unifies the whole province and makes us absolutely unstoppable.
Ladies and gentlemen, fellow Albertans, we follow squarely in this unbroken and powerful tradition. We have the ideas, we have the courage, and we have the skill and the passion to unify, inspire and move Alberta forward.
So let’s get organized and let’s make it happen.
