Economist says royalty sharing confuses the issue, and Clark’s government would be better off examining possibilities such as a targeted tax.
VANCOUVER—The war of words between the premiers of British Columbia and Alberta notched up over B.C.’s demand for a greater slice of the economic benefits from the proposed Northern Gateway pipeline, but one expert says B.C. is eyeing the wrong pie.
“If Alberta doesn’t sit down and talk about it, the project can’t go ahead,” B.C. Premier Christy Clark told The Canadian Press. “It’s as simple as that.”
Enbridge’s proposed 1,177-kilometre twin line would carry heavy oil from Alberta across a vast swath of pristine B.C. wilderness and First Nations territory to a port at Kitimat, B.C., for shipment to Asia.
Risks of a spill have prompted Clark’s government to set out five conditions that would make the project worthwhile for B.C.
But trying to collect cash from another government in exchange for the movement of goods appears to have no precedent in Canada.
That’s why Clark should be taking aim at Enbridge, said Warren Mabee, policy director at the Institute for Energy and Environmental Policy at Queens University.
“This is a case where the pipeline will be built and the stuff that’s inside the pipeline belongs to the companies, not to the province,” said Mabee from Kingston, Ont.
Fiscal benefits can be derived without sharing royalties, he added.
But officials in Clark’s government said that B.C. is not proposing to introduce a “new tax” on Enbridge.
The rhetoric on both sides heightened a day before provincial and territorial leaders were to gather in Halifax for the annual Council of the Federation meeting, where they will discuss a national energy strategy.
“We will not share royalties and I’ve seen nothing else proposed and would not be prepared to consider anything else at this time,” Alberta Premier Allison Redford told reporters in Edmonton. “We’ll continue to protect the jurisdiction that we have over our energy resources.”
Clark contends B.C. deserves compensation, saying the passage of crude is nothing like trucking grain or even piping natural gas through Alberta.
But Redford argued heeding Clark’s request would “fundamentally change confederation.”
B.C. is currently not slated to gain any royalty revenue because the extracted resource originates in Alberta.
Mabee said talk of royalty sharing confuses the issue, and Clark’s government would be better off examining possibilities such as a targeted tax.
He said a carefully calculated export or port tax could be levied from the oil company, for example by asking a fee per barrel being moved through the terminal in Kitimat, B.C.
Only 8.2 per cent of the Northern Gateway’s projected $81 billion tax revenue would flow to B.C. over a 30-year period, according to research commissioned by the B.C. government.
That equates to $6.7 billion for B.C., while Ottawa is expected to receive $36 billion and Alberta would earn $32 billion.
Saskatchewan is expected to top the remainder of the provinces in terms of tax benefit, receiving about $4 billion.
The analysis was conducted by Wright Mansell Research Ltd., and accounts for a period between 2016 and 2046.
Environmental assessment hearings are currently underway for the project that the federal government has championed for its potential to boost the economy.
Environmental advocates and First Nations have long argued leaks from tankers transporting the oil could tarnish B.C.’s land, while a spill along the coast could be devastating. Enbridge has already had to conduct major oil cleanups in Alberta and Michigan after pipeline breaches.