Wednesday, September 01, 2004

Time for a BC energy heritage fund

VICTORIA - A BC Energy Heritage Fund makes such good sense I can't believe the government hasn't already set one up.
The principle is simple. Set up a permanent savings account for future generations, and fund it with a set share of oil and gas revenues.
The fund recognizes that the oil and gas will run out someday, and in one stroke preserves some of the money for our grandchildren and ensures governments don't get too hooked on volatile - and ultimately finite - energy revenues.
It's a pretty straightforward idea, with a lot of benefits and no big drawbacks.
And it's already tested and proven workable. Up in Alaska, they started wondering about the flood of revenue that would be coming into government as oil and has fields were developed in the late '70s.
Alaskans knew the money would stop flowing some day. So they passed a law that said 25 per cent of new energy revenues would go into a permanent fund for future generations. It's up to $33 billion now, a cushion against tougher times. The fund has been invested so successfully that it's been able to pay dividends of about $1,300 a year to the public.
Alberta's fund took in energy revenue from 1975 to 1996, and stands at about $11 billion; Norway has more than $100 billion set aside from its energy revenues against the day the gas stops flowing.
Why not here?
The Pembina Institute, an Alberta think tank, proposed such a fund in its recent report on government and the oil and gas industry in Canada. Government shouldn't become dependent on uncertain energy revenues for its basic operations, the institute suggested. (How uncertain? In 1995 B.C. natural gas royalties were just under $98 million; this year they will be $1.2 billion.)
And sooner or later, the oil and gas will be gone. We owe it future generations to set aside some money for them, the institute argues.
It makes sense. And it also provides a useful check on government.
As the Liberals - and the NDP before them - have set out to encourage oil and gas development, critics have been quick to claim that they're in too much of a hurry, eager for quick cash. That's one of the shots opponents of coalbed methane development in the East Kootenay took at the Liberals (unfairly, I'd say).
But it's still a reasonable concern. Governments get as desperate for cash as the rest of us, and will be tempted to sell off resources in a hurry, and not necessarily at the best price.
Requiring that a significant chunk of the money for the future reduces that pressure, and takes one criticism away from development opponents.
Energy Minister Richard Neufeld isn't keen on the idea. He says that if the government uses energy revenues to pay down the province's debt future generations will benefit.
But that hasn't happened, and paying down the debt isn't part of the Liberals' current plan.
And without a heritage fund there's no commitment to bind future governments, and no constant reminder that we're providing for the future.
The only real argument against a fund is that government should be able to spend all the money it can take in right away. That's hardly compelling.
It's a good time for B.C. to establish a heritage fund. The budget is balanced, so devoting a share of energy revenues to a permanent fund wouldn't result in deficits. Energy revenues are still on the rise, so there's room to divert some of the cash.
And the Liberals are launching major new initiatives to promote coalbed methane and offshore oil and gas. Setting aside a large share of those revenues for the future will ease concerns that the government is just interested in quick cash to pay for its tax cuts.
How can saving a part of the wealth for our children's children be a bad idea?
Footnote: The Pembina Institute study, which looked at activities from 1996 to 2002, found B.C. governments did a good job of getting the best price for oil and gas resources from the companies. Both Saskatchewan and Alberta, it concluded, left money on the table by undercharging the companies.

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