The oil belongs to the people
By: Sharon Ryan
| Posted: Wednesday, Mar 13, 2013 06:00 am
The same week Alberta Finance Minister Doug Horner delivered the 2013 provincial budget, I found myself plunked down in a local walk-in medical clinic seeking a prescription to combat my annual bout with strep throat.
Not once, but twice I had the pleasure of lining up and waiting hours to see a physician so I could get my prescription and get back to work. The first visit resulted in a no-show of all doctors, causing the helpless receptionists to break the news to more than 20 sick people, including babies, tired parents and seniors that our wait was in vain.
After being turned away from the clinic on the first day, I dragged my tired body through a very long work day and then collapsed in my bed and tried to sleep through a fitful night accompanied by very painful swallowing, high fever and extreme sweats so severe that it caused the dyes of my brand new, fuscia-coloured linen sheets to run, resulting in a permanent imprint of the outline of my body upon them.
The second visit resulted in my having to stand in line outside the clinic in a dusty and cold parking lot for more than 45 minutes early in the morning to secure my place to hopefully see a doctor to get this simple prescription. The very same people with whom I had waited in line with the previous day showed up again on day two.
So it was with a heightened sense of ďwhat the hellĒ that I read the details of Premier Redfordís budget.
They allotted $60 million for new family care clinics and $4 billion for capital infrastructure, which includes borrowing to twin the highway to Fort McMurray. Iím all in favour of better highways but the government has misallocated the costs to cover these projects from the oil companies to taxpayers.
The one thing they got right is to admit that they have a tough job and they canít make ends meet. The reason their decisions are so difficult is that they seem to lack the ability to fairly allocate private and social costs of doing business and this misdirection is causing both the financial shortfall and unnecessary human suffering.
When a firm produces a product, it results in both private and social costs. Private costs are the costs the firm pays out of its own pockets to cover labour, materials and fuel, etc. Social costs are the wider external costs incurred in the process of doing business, such as harming the environment and infrastructure.
When a firm fails to pay for all the costs it causes in the process of doing business, the private costs are lower than the total costs. This divergence causes a problem. Society pays for the social costs but the firm benefits from the profits of selling the goods it produces without covering the total costs incurred in the production of those goods.
In Albertaís case, the oil companies are wearing down the highways and the environment to a disproportionate degree and their tax revenues and oil royalties are not sufficient to cover the costs to correct these problems. As a result, there is a misallocation of resources and an unfairness in society resulting in victims having to accept unfavourable terms.
I was a victim last week Ė a victim of poor governmental decisions on resource allocation. We donít have enough doctors in this province and oil companies arenít paying enough oil royalties to our government to cover the total cost of extracting oil.
Suncorís gross revenue from oilsands production in 2012 was $11.5 billion (thatís $11,502,000,000!) Royalties paid to the government amounted to only 5.9 per cent of that. Norway enjoys a $44 billion surplus yet they produce 40 per cent less oil than Canada. Their government charges oil companies 70 per cent royalty because they have the wisdom to see that the oil belongs to the people. The companies are merely service providers who extract the oil and get paid appropriately to do that.
We have made the mistake of assuming that the oil companies own the oil. They donít.
I am literally sick and tired of bearing the burden for sloppy governmental decisions. I suggest Premier Redford and Doug Horner register in my ethics course where they would learn the basics of justice and fairness of cost allocation. They would find their decisions much less difficult with a little knowledge of fair exchanges, and they may even be surprised that they could balance the budget and have enough money left over to hire a few more doctors.
By the way, one of these players owes me a new set of sheets. Iím thinking itís Suncor.
Sharon Ryan lives in St. Albert and teaches ethics for UCLA Extension.