Alberta
Alberta’s response to Teck withdrawal
From the Province of Alberta
Premier Kenney issued the following statement following Teck’s decision to withdraw its application for approval for the Frontier project:
“Today’s announcement by Teck to withdraw its application for approval of the Frontier project, only days before the federal cabinet was set to decide whether to approve or reject it, is a grave disappointment to Albertans. Alberta has lost the opportunity for 7,000 jobs and Canada has lost the opportunity for $70 billion of dollars in new tax and royalty revenue that could have funded our generous social services over the next four decades. The project would also have produced oil cleaner than half the barrels in North America.
“Teck’s decision is disappointing, but in light of the events of the last few weeks it is not surprising. It is what happens when governments lack the courage to defend the interests of Canadians in the face of a militant minority. The timing of the decision is not a coincidence. This was an economically viable project, as the company confirmed this week, for which the company was advocating earlier this week, so something clearly changed very recently.
“Weeks of federal indecision on the regulatory approval process and inaction in the face of illegal blockades have created more uncertainty for investors looking at Canada. Teck’s predicament shows that even when a company spends more than $1 billion over a decade to satisfy every regulatory requirement, a regulatory process that values politics over evidence and the erosion of the rule of law will be fatal to investor confidence.
“Today’s announcement must be especially disappointing for all fourteen of the proximate First Nations who have called on the government to approve the Frontier project. In the last 48 hours, the Mikisew Cree First Nation and the Athabasca Chipewyan First Nation both signed historic agreements with the Government of Alberta, which would have made them partners in the prosperity of the Frontier project, bringing hundreds of jobs and tens of millions of dollars to their remote communities.
“The Government of Alberta believes that partnership in resource development is one of the most promising paths to reconciliation, and this week’s agreements with the Mikisew Cree and Athabasca Chipewyan First Nation show how it can be done. Those agreements should have been models for the rest of Canada, but that can only be possible if resource projects are actually approved and built. As long as the federal government undermines confidence in the future of our resource sectors, that path to economic reconciliation will be shut off.
“The factors that led to today’s decision further weaken national unity. The Government of Alberta agreed to every request and condition raised by the federal government for approving the Frontier project, including protecting bison and caribou habitat, regulation of oilsands emissions, and securing full Indigenous support. The Government of Alberta repeatedly asked what more we could do to smooth the approval process. We did our part, but the federal government’s inability to convey a clear or unified position let us, and Teck, down.
“This news deepens our government’s resolve to use every tool available to fight for greater control and autonomy for Alberta within Canada, including reinforcing our constitutional right to develop our natural resources, ensuring a sustainable future for our oil and gas industries, and restoring Canada’s reputation as a reliable place to do business.”
From the Fraser Institute
By Spencer Gudewill and Tegan Hill
Last November, Premier Danielle Smith announced that her government will give up to $1.8 billion in subsidies to Dow Chemicals, which plans to expand a petrochemical project northeast of Edmonton. In other words, $1.8 billion in corporate welfare.
And this is just one example of corporate welfare paid for by Albertans.
According to a recent study published by the Fraser Institute, from 2007 to 2021, the latest year of available data, the Alberta government spent $31.0 billion (inflation-adjusted) on subsidies (a.k.a. corporate welfare) to select firms and businesses, purportedly to help Albertans. And this number excludes other forms of government handouts such as loan guarantees, direct investment and regulatory or tax privileges for particular firms and industries. So the total cost of corporate welfare in Alberta is likely much higher.
Why should Albertans care?
First off, there’s little evidence that corporate welfare generates widespread economic growth or jobs. In fact, evidence suggests the contrary—that subsidies result in a net loss to the economy by shifting resources to less productive sectors or locations (what economists call the “substitution effect”) and/or by keeping businesses alive that are otherwise economically unviable (i.e. “zombie companies”). This misallocation of resources leads to a less efficient, less productive and less prosperous Alberta.
And there are other costs to corporate welfare.
For example, between 2007 and 2019 (the latest year of pre-COVID data), every year on average the Alberta government spent 35 cents (out of every dollar of business income tax revenue it collected) on corporate welfare. Given that workers bear the burden of more than half of any business income tax indirectly through lower wages, if the government reduced business income taxes rather than spend money on corporate welfare, workers could benefit.
Moreover, Premier Smith failed in last month’s provincial budget to provide promised personal income tax relief and create a lower tax bracket for incomes below $60,000 to provide $760 in annual savings for Albertans (on average). But in 2019, after adjusting for inflation, the Alberta government spent $2.4 billion on corporate welfare—equivalent to $1,034 per tax filer. Clearly, instead of subsidizing select businesses, the Smith government could have kept its promise to lower personal income taxes.
Finally, there’s the Heritage Fund, which the Alberta government created almost 50 years ago to save a share of the province’s resource wealth for the future.
In her 2024 budget, Premier Smith earmarked $2.0 billion for the Heritage Fund this fiscal year—almost the exact amount spent on corporate welfare each year (on average) between 2007 and 2019. Put another way, the Alberta government could save twice as much in the Heritage Fund in 2024/25 if it ended corporate welfare, which would help Premier Smith keep her promise to build up the Heritage Fund to between $250 billion and $400 billion by 2050.
By eliminating corporate welfare, the Smith government can create fiscal room to reduce personal and business income taxes, or save more in the Heritage Fund. Any of these options will benefit Albertans far more than wasteful billion-dollar subsidies to favoured firms.
Authors:
Alberta
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