Business joins call for energy heritage fund

VICTORIA - I remember the bumper stickers in Alberta when oil prices fell in the early ‘80s, and the jobs went away.
‘Lord, give us another oil boom. This time I promise not to blow it all.” (They were actually ruder, but you get the idea.)
The bumper stickers acknowledged a truth. We are, as a species, not good at recognizing that today’s good times won’t last.
And that’s one of the reasons the B.C. government should be looking at a special heritage fund for a share of energy revenues.
I’ve been pitching the idea for a while, but now the Progress Board has joined the cause. The board is a useful creation of Gordon Campbell, a panel of business types that reports regularly on how things are going in the province and on specific policy issues.
Last month the board released a report on energy policies. Among its recommendations was a call for an immediate look at some sort of energy heritage fund.
We are making a tonne of money right now off oil and gas. Prices are high, thanks to war and hurricanes, the reserves are good and government has done well at luring the oil companies.
But it’s not going to last. Prices will go down, fields will run dry and companies will move on to new frontiers. That’s just the way it is.
It’s a problem for governments. Use the energy money now and voters will like you. You can pay for tax cuts, or provide better health care.
But then one day the money stops flowing, and the government is in a very bad spot. People don’t like bad news.
Back in 1995 natural gas royalties were worth less than $100 million to the province. This year, it’s going to be more than $2.5 billion. The royalties were worth $27 to each British Columbian then. Now they’re worth $625 per person.
Sadly, it won’t last.
That’s the appeal of a heritage fund. If governments grow dependent on windfall energy revenues, they face nasty crashes. If they don’t spend the money, they are criticized for excessive surpluses.
But a special fund for resource revenues solves the problem, and provides a break for future generations. Slosh a billion or so a year into a heritage fund, and you end up with a cushion to help the transition when the oil and gas trickle instead of gushing. There’s money to maintain services, or train toolpushes for a new job.
And there’s a recognition that when you cash in on a non-renewable resource, you have an obligation to cut your grandchildren in on the action.
It’s not some unproven idea. Peter Lougheed, Alberta’s popular and competent premier, launched that province’s heritage fund in 1976, with a promise of 30 per cent of energy revenues. The fund was capped in 1988, but stands at $11 billion. Alaska’s fund stands at $32 billion, despite paying dividends to every resident each year. Norway has $227 billion set aside.
There are other advantages.
The B.C. government is keen on both offshore oil and gas and coalbed methane development (although the Progess Board counsels a slow, cautious approach to methane). Both are controversial, and will be more acceptable with a promise of lasting benefits.
And a coalition of environmental groups came out in support of the idea last year. They believe that a heritage fund encourages government to manage the resource prudently. A government that’s short of cash and looking for an energy windfall may be prepared to cut regulatory corners to encourage development. If the revenue is slated for a heritage fund, there is less incentive to rush.
The Progress Board thinks the province has enough immediate financial issues that a heritage fund is still in the future. But it said the government should set up an expert panel to start looking at energy revenues, and reviewing heritage fund models from other jursidictions.
The government should take the excellent advice.
Footnote: The board’s energy report has already had a big influence. It sharply criticized BC Hydro’s energy planning efforts and urged a larger government role in power policy. This month Energy Minister Richard Neufeld scuttled Hydro’s announcement of its new long-term energy plan. The report is available at www.bcprogressboard.com