Posted: July
1, 2005
What is happening to our natural resources?
By John W. Warnock
Natural resources are a free gift from nature. In Canada, as in almost
all countries, they are owned by the people as a whole. Under the Constitution
they are a provincial responsibility and are managed by our elected governments.
Saskatchewan is a hinterland province, part of the North American prairies.
Since World War II our governments have recognized that the development of
resources was essential to the province if we were to have a decent level of
infrastructure, as well as health, education and social programs.
Everywhere governments face the common political issue. Should the extraction
of resources primarily benefit the capital accumulation goals of private corporations
and investors or should the development primarily benefit the public in general.
Where resources are extracted by private corporations, in contrast to state-owned
enterprises, there is the problem of how to collect a share of the economic
surplus (or economic rent) for the general public. There is also the question
of what share of any resource should be left for future generations.
As a poor province with almost no local capital, the CCF government of T.
C. Douglas adopted a policy to encourage private corporate investment through
low royalties, active support for development, and even government investment
guarantees. There was little return to the people in the form of resource
royalties.
This changed dramatically with the election of Allan Blakeney’s NDP
government in 1971. Resource royalties and fees were increased, joint ventures
and Crown
corporations were established, and the province was able to capture a much
greater share of the economic rent from resource depletion.
This policy was reversed by Grant Devine’s Tory government, elected in
1982. Royalties were cut. The Crown corporations were mostly privatized. Revenues
from resource extraction fell, there were regular budget deficits, and the
provincial debt rose significantly. This general policy has been adopted by
the NDP governments which followed. Roy Romanow’s government chose
a slightly different approach; it balanced budgets by cutting many programs,
shifted taxes, and off loaded costs.
Around 2000 the international prices for non-renewable resources began to
rise. Over the past few years corporations extracting oil, natural gas, potash,
uranium,
coal and other minerals have reported record sales and profits. The volume
of our resources being extracted has increased rapidly. Private corporations
are exporting our oil and gas to the United States as fast as they can. Yet
during this boom period Lorne Calvert’s government has continued to
reduce resource royalties. Thus while provincial revenues have gone up with
the high
prices and the increase in the volume extracted, our share of the resource
rent has been declining.
The NDP government is very pleased with this development. However, the premier
heard another side of this issue on his recent tour of the north. The Aboriginal
population, with very high unemployment and poverty, protested that natural
resources are extracted from their historic lands by large transnational corporations,
and they receive no royalties, fees or taxes.
In the recent past, when the policies of Ronald Reagan and Margaret Thatcher
ruled, governments were pushed to privatize state-owned corporations in the
natural resource area. But that trend has now been reversed. Industry analysts
note that around two-thirds of the world’s oil resources are now under
state-owned enterprise control. When the OPEC countries nationalized the
foreign owned oil corporations in the 1970s, there was a dramatic shift of
revenues
from the private sector to government revenues. Norway receives a much greater
share of oil extraction than Saskatchewan because it has a wider range of
royalties, fees and taxes and Statoil which operates in joint ventures with
private corporations.
In Mexico, PEMEX, the state-owned oil enterprise, provides 40 percent of
federal revenues.
Today in Saskatchewan decisions on resource policy are made between the government
and the industry behind closed doors. The public knows precious little about
the resource industry. There is no public debate as there is a policy consensus
among the three dominant parties. This must end.
To try to stimulate a debate on this key policy, I have prepared a background
paper for the Saskatchewan branch of the Canadian Centre for Policy Alternatives.
It provides some history of each industry, the volume of resource extraction,
the published data on resource sales and royalties, and a discussion of the
disappearance of the oil and gas resource. The full paper and a short version
appear on the organization’s web site: www.policyalternatives.ca. I
hope that people will read this paper and start thinking about our present
policy.
John W. Warnock is a Regina political economist and author of Saskatchewan:
The Roots of Discontent and Protest (2004).
