Is there heartache in the heartland? As Albertans shoulder the weight of a new $4.5 billion budget deficit (not to mention the burden of equalization payments to the rest of Canada) despite the fact that they own the world’s largest oil reserve open to private investment, some might suggest that something is seriously amiss in the heartland. But instead of imposing painful health care spending cuts or equally unappealing personal tax hikes, maybe there is another, better way to go.
Oil is already trading at around $80 per barrel, and we are in the very early stages of a global economic recovery. Surely time is on Alberta’s side, and on that of the royalties the province commands from the billions of barrels of oil trapped in its tar sands. Those royalties are already larger than the ones from natural gas, historically the province’s fiscal staple.
What Albertans don’t seem to realize is that they might just be in a position to take a bigger slice of bitumen’s growing royalty pie—particularly when their competitor as the primary source of tomorrow’s oil supply happens to be Venezuela’s Orinoco tar sands.
The latest estimate by the US Geological Survey claims there are 513 billion barrels of heavy oil beneath the steaming jungles of Amazonia, roughly three times the deposits in Alberta. But there is an even bigger difference between the two resources, and it’s not what lies underground.
Venezuela, like most places in the world today, believes that its vast oil reserves belong to its state oil company, Petróleos de Venezuela. In Canada, by contrast, not only is there no state oil company (Petrocan, long privatized, was recently swallowed by Suncor) but there are virtually no foreign ownership restrictions on oil reserves. In a world of rampant resource nationalism, that makes Alberta a very special place.
With the enormous deposits in the Orinoco now off limits, Alberta’s tar sands represent almost three quarters of the oil reserves in the world that are open to private investment and ownership—and by that I mean where good corporate citizens like ExxonMobil can stick a huge straw in them and siphon off the resulting petrodollars to their head offices.
In Venezuela, the company had to walk away from one such straw, a multi-billion-dollar one that it built for the Orinoco tar sands (the 120,000 barrel-per-day Cerro Negro heavy crude upgrader), when President Hugo Chàvez decided to reroute that outward-bound flow of petrodollars. Next thing you know, Exxon (and its Canadian subsidiary, Imperial Oil) is pouring billions of dollars into its Kearl Lake, Alberta, operation, a project that was previously deemed too expensive.
The longer the Orinoco river basin remains a place to fish for peacock bass instead of extracting millions of barrels of heavy oil, the stronger Alberta taxpayers’ position is.
So forget about taking a new political direction with the upstart Wildrose Alliance Party. Facing a $4.5 billion deficit, maybe it’s time Albertans took a page out of Hugo’s playbook, and started getting a bigger share back from their biggest resource.