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Peter Lougheed's Radical Legacy

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    Peter Lougheed's Radical Legacy

    Peter Lougheed's Radical Legacy

    His supposed ardent admirers ignore his true gift to Canada: six principles for developing resources.

    By Andrew Nikiforuk, 17 Sep 2012, TheTyee.ca

    Peter Lougheed

    Lougheed campaigning in the 1970s: Far-reaching vision his successors never matched, and undermined.
    Related

    As Canada's inept Tory politicians now salute the remarkable achievements of Peter Lougheed, they tellingly omit his radical views on resource development.

    And that should come as no surprise. Unlike the current libertarian "strip it and ship it" crowd that governs most of the west, Lougheed stood for something different. He offered a farsighted vision that was both progressive and altogether conservative. Although everybody from Saskatchewan's Brad Wall to Alberta's Alison Redford now praise the famously competent premier, none walk his talk.

    Lougheed's famous principles, which greatly influenced Norway's take on oil development, strike at the core of Canadian life. Alberta's own oil patch didn't like him. Yet over the last few years the affable and charismatic statesman repeated his basic philosophy to the likes of Policy Options and this humble reporter. They should remain on the lips of every Canadian.

    1. Behave like an owner

    As oil prices shot up from $2 to $25 a barrel in the 1970s Lougheed learned that Albertans, the lucky occupiers of much oil real estate, needed to think and behave like owners. Ownership, of course, came with onerous responsibilities, including the basic recognition that hydrocarbons and most mineral resources are finite. "You have to look at oil and natural gas as a depleting and declining resource. And you have to manage the resource and that means to manage it with good public policy," he recently told Policy Options.

    The absence of meaningful public policy on resource ownership (and only the NDP now embraces this conservative notion) puts Canada in the camp of backwater kingdoms.

    2. Collect your fair share

    Smart owners don't give away oil or any other depletable resource. Lougheed thought that low royalties were not only bad for the owner but encouraged Big Oil to be fat and complacent. One of Lougheed's first moves as premier was to capture a much larger share of hydrocarbon profits. In his day that amounted to raising the owner's share from 17 per cent of all non-renewable resource revenue to 40 per cent. Such increases boosted government income by $10 billion a year (and 30 per cent of that was directly saved for future generations). Industry, of course, called the man a cruel sheik and a "red Tory." Higher royalties moderated the pace of production but also forced industry to be more innovative and competitive.

    Ever since then successive Tory governments have lowered royalties and thereby cheated the citizens of Alberta, the owners of the province's hydrocarbons, of tens of billions of dollars. Today, Alberta collects less than 15 per cent of available non-renewable resource revenue. Governing parties in British Columbia, Saskatchewan and Ottawa now shamelessly offer Big Oil some of the lowest royalty rates in the world for oil, heavy oil, natural gas, and shale gas. The direct consequence for ignoring Lougheed's principle in Alberta is that libertarians have bequeathed the province with billion dollar deficits and the prospect of becoming a ghost town when economic hydrocarbons run out.

    3. Save for a rainy day

    In the 1970s Lougheed, a long-term thinker, established one of the world's first sovereign funds or rainy day accounts. Given the finite nature of oil and gas, he believed in saving at least 30 per cent of the wealth for the inevitable economic deluge. Not surprisingly, Albertans wholeheartedly championed the Alberta Heritage Savings Trust Fund. Norwegians copied and bettered the idea with their own pension/oil fund now worth $600 billion.

    But the politicians who came after Lougheed debased the concept. Today Alberta's Heritage Fund is worth a paltry $15 billion, or just $3 billion more than when Lougheed left government. Lougheed's successors didn't believe in saving. They've either lowered taxes or simply given away the balance of the province's wealth to special interest groups such as AltaLink or U.S. multinationals and companies owned by the Communist Party of China. This fundamental betrayal of the public trust "stressed out" Lougheed till the day of his death. Saskatchewan, B.C., Alberta and the Territories still do not bank a significant portion of their finite resource revenue for future generations. Ottawa, the largest beneficiary of resource exploitation in the form of corporate taxes, saves nothing.

    4. Add value

    Lougheed was never impressed by the convenient Canadian habit of exporting raw resources without adding value. In his reading of the nation's history, Canada should have made clothing instead of exporting raw furs. He also recognized that the majority of jobs in most resource industries didn't come from digging holes but from refining the raw stuff into something useful. As a consequence, he resolutely championed the upgrading and refining of bitumen into gasoline, diesel, jet fuel and petrochemicals. Unlike Redford, Hall and Harper, he opposed the Keystone XL pipeline as wholesale job exporter. He didn't think that Albertans should be enriching refineries on the Texas coast owned by Saudi Arabia or the Koch brothers.

    "I think we should be processing the bitumen from the Alberta oil sands within Alberta and creating the jobs east of Edmonton and in that area there," he recently told Policy Options. "And I think that would be, from a political and from an economic point of view, the right public policy for Alberta." A bold tax on exported bitumen still might get this economic ball rolling.

    5. Go slow

    Last but not least, Lougheed often lamented the speed of bitumen development in the province. His motto was "one project at a time." Over the last decade libertarians rubber stamped more than 100 projects and the gold rush overwhelmed infrastructure, bloated wages, drove up house prices and generally inflated the cost of living. Why bother with a trade or an education when a petro job will garner you 10 times the income, asked Lougheed. Knowing that busts invariably follow booms, he viewed overheated growth in the tar sands as a great calamity. Real owners don't overheat their economies or stress out their communities: they go slow. The architect of Norway's oil development, Farouk al Kasim, a brilliant Iraqi geologist, cautioned the Norwegians to do the same.

    In a famous 2006 Policy Options interview, Lougheed described rapid bitumen development as a mess and just plain wrong. "I keep trying to see who the beneficiaries are. Not the people in Red Deer, because everything they have got is costing more. It is not the people of the province, because they are not getting the royalty return that they should be getting, with $75 oil." To date no Tory political leader has had the courage to address the pace and scale of bitumen development on a provincial or national level.

    Yet libertarian politicians serving Big Oil continue to speed up bitumen production with potentially disastrous consequences for ordinary Albertans. Environmental and carbon liabilities remain largely unaddressed and no one has prepared for the implosion of the Chinese economy. By flooding the market place with cheap bitumen, Alberta's current stupid government has cheated the owners of a fair price in U.S. markets due to sustained lack of planning.

    6. Practice statecraft

    Unlike most modern politicians, Lougheed believed in competent government and a smart civil service and for good reason. Sitting on a pile of hydrocarbons has never made a people smart. A lucky resource owner not only needed good accountants and reliable scientists, but a capable political class that could monitor and regulate the resource developers overtime. If tar sands companies had 25 or 50 year plans, then government needed to do the same, reasoned Lougheed. As a consequence he steadily built the civil and intellectual infrastructure needed to make careful public policy that respected future generations.

    Lougheed not only constructed one of the country's most able civil services, but actively funded the same sort of environmental science and research that the Harper government has dismantled. To keep an eye on the industry's real profits and costs, Lougheed's government even owned an oil company: the Alberta Energy Company.

    Today Lougheed's vision of competent government has been replaced by negligent regimes that slavishly represent resource developers instead of citizens. No western province now has the ability to do long-term planning or perform critical audits such as those routinely done by the U.S. Government Accountability Office. And no western premier publicly challenged the wholesale dismantling of federal environmental legislation and science programs by Stephen Harper, yet this folly may well kill the social license for bitumen development. Dumb and dangerous petro states have actively replaced conservative vision.

    So here's the radical Lougheed legacy that Canada's political class has abandoned: Behave like an owner. Collect your fair share. Save for the rainy day. Add value. Go slow. Practice statecraft.

    Next time you hear a gaggle of western politicians praising Lougheed, ask these extremists why they won't act like him. And whom they serve.

    It's not us, the owners. [Tyee]

    #2
    Chronology of Peter Lougheed's achievements as Alberta premier
    By The Canadian Press
    Published September 14, 2012 10:05 am | 2 Comments
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    EDMONTON - Peter Lougheed served as Alberta's premier from Sept. 10, 1971, until Nov. 1, 1985. He passed away the evening of September 13, 2012. Some of the highlights of his political career:

    1965: Elected leader of the Progressive Conservatives. Party has never formed government in Alberta and doesn't have a single seat in the legislature.

    1967: Lougheed wins his seat of Calgary West in the provincial election. Five other Tories are elected as well. Party becomes official Opposition to the governing Social Credit party.

    1971: Tories defeat the government of Harry Strom in provincial election. They take 49 of 70 seats to end a 36-year Social Credit dynasty. One of Lougheed's first acts is to increase royalties paid by oil companies.

    1975: Tories win second election with 69 of 75 seats and 62 per cent of popular vote.

    1976: Lougheed creates Alberta Heritage Savings Trust Fund as a nest egg for future generations. It is funded by a portion of royalties deposited into long-term investments.

    1978: Syncrude Canada oilsands project completed with provincial financial support. Tories also establish Alberta Oilsands Technology and Research Authority to develop technology for non-conventional oil production.

    1979: Although their popular vote dips to 57 per cent, Tories win third election with 74 of 79 seats.

    1980: A $300-million endowment establishes the Alberta Heritage Foundation for Medical Research.

    1980: Lougheed's battles with Ottawa over control of energy resources culminate with Liberal Prime Minister Pierre Trudeau's national energy program that unilaterally sets prices and taxes for the province's oil. Albertans are outraged. Lougheed vows to go to court. He goes on TV to say province will cut its oil production to 85 per cent of capacity. Bumper stickers appear saying: "Let the eastern bastards freeze in the dark!"

    1981: Lougheed and Trudeau reach an energy pricing agreement that ensures the federal government negotiates oil and natural gas prices with Alberta.

    1982: Supreme Court of Canada rules Ottawa can't legally tax provincially owned oil and gas wells. Federal Energy Minister Marc Lalonde amends the national energy program.

    1982: Lougheed works to, in his words, "defend the provinces against ... steamroller tactics" during talks to patriate the Constitution. He is most against an amending formula he feels gives too much power to Ontario and Quebec. It is eventually changed to give no province a veto, but which allows provinces to opt out of amendments that would reduce their powers.

    1982: Lougheed's Tories win their fourth straight majority with 75 of 79 seats and 62 per cent of popular vote.

    1985: "The Canadian Encyclopedia" is launched to celebrate Alberta's 75th anniversary. Lougheed's government funds its research and donates a copy to every school and library in Canada.

    1985: Resigns as premier effective Nov. 1.

    1986: Steps down as the legislature member for Calgary West on Feb. 28. Named a companion of the Order of Canada.

    1989: Named to the Alberta Order of Excellence.

    2012: Institute for Research on Public Policy names Lougheed the best Canadian premier in the last 40 years. L. Ian MacDonald, editor in chief of the institute's magazine Policy Options, says: "It wasn't even close. It was like watching Secretariat win the Belmont by 31 lengths."

    For more from The Canadian Press, click here or scroll down The Tyee's main page.
    - See more at: http://thetyee.ca/Blogs/TheHook/Federal-Politics/2012/09/14/Peter-Lougheed/#sthash.B9FX3Y8H.dpuf

    Comment


      #3
      Here here , I always liked the way he thought ,too bad we've had no one to fill his shoes since

      Comment


        #4
        It is best to allow the market to determine development. Unfortunate the last decade had false signals because of reckless central bank money printing. Had interest rates not been artificially suppressed, development would occur at a more sensible pace. Instead we had a reckless boom fueled by cheap money. The repercussions of which will be felt for generations. Alberta is building the most expensive refinery and upgrader in the world in Redwater right now. Our children are going to be servicing the debt on that one for generations to come. If Lougheed came at a different time who knows if he would have the right policies or not.

        Comment


          #5
          Lougheed also knew the art of compromise and negotiation, something both provincial and federal governments have forgotten or ignored. Most conservatives ignore the fact there were two signatures on the NEP - Trudeau and Lougheed's. While we can fault Trudeau for the program all we want, we also have to acknowledge that Lougheed also signed the NEP after negotiation.

          Comment


            #6
            In order for reform oil puppets to survive they have or believe they have to east west conflict. Under that system they control the reform and get the reform vote the goal is to add enough tidbits to get federal control and then oil dominates the economy.
            The last leader blew our opportunity for a federal leader from the west for a very very long time.

            Comment

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