Ignoring the elephant in the election campaign
Brian Crowley and I do not agree on much. Crowley is the head of the Atlantic Institute for Market Studies, a right-wing think tank funded largely by big business… and I am not. He believes, if I may simplify just a smidge, that what is best for business is more than good enough for the rest of us … and I do not.
But Crowley, in a recent column in the Halifax Herald, raised what for me is the ignored elephant-in-the-election-campaign issue — how should we be spending our one-time, now-you-see-it, now-you-don’t bonanza of offshore royalties to get the best long-term bang for our natural resources buck?
While Crowley and I would probably still disagree on the broader goals for those revenues — I’m guessing he’d like to see lower corporate taxes and I’d like to improve our collective social safety net — we do agree our political leaders are squandering a “unique opportunity” to get things right so we’ll have the opportunity, and fiscal ability, to make those down-the-road decisions for ourselves.
The promise-frenzy that has characterized the platforms of all three major political parties in this election campaign, in fact, is largely fueled by the wishful expectation that those ephemeral, one-time royalty payments will magically transform themselves into year-after-year-to-forever riches. They won’t.
We get royalty payments from the Sable Offshore Energy project based on how much of our non-renewable natural resources the Sable partners suck up from under the oceans. They can only suck them up — and give us our share — once.
According to the provincial department of energy, Nova Scotians will receive $143.8 million in royalties this fiscal year, and another $288 million next year.
Sounds good… until you find out that the energy department’s own long-term estimates indicate the gas will run dry sometime around “the middle part of the next decade,” and that total royalties, including those already in our pockets, will range from $1.2–¬2 billion. (Given the generally disappointing results from Sable so far, some analysts suggest revenues will end up on the low end of that scale, or worse.) Even assuming a best-case scenario, the reality is that Sable royalties will peak in the next few years and then decline to nothing.
That means the gas-goosed annual revenue that is encouraging our politicians to promise us the stars, moon and an HST rebate on heating oil is coming from money that won’t be around to fund those programs in the future. We will have squandered any potential long-term benefit from investing our windfall in order to fund ongoing programs that won’t be sustainable when the gas runs out.
Crowley believes our current politicians should have learned from former premier John Hamm’s “courageous” decision to quietly slap down on our $12-billion provincial debt the entire $830-million advance against royalties he got last year after signing the Atlantic Accord. By doing that, Hamm freed up close to $80-million a year that otherwise would have disappeared into the banking ether as interest payments on the debt. That rescued revenue, of course, can now be used to fund programs that matter to Nova Scotians — on an ongoing basis.
Paying down the debt isn’t the only — and may not even be the best — way to put offshore royalties to good use. It may make sense to invest in certain kind of infrastructure development to create long-term benefits for the province, for example, or targeted education projects designed to help give the coming generation the tools they need to succeed. There may even be instances in which the program spending being touted by our political leaders actually makes sense too.
The problem, of course, is that we haven’t talked about those alternatives during the current election campaign. Our political leaders have been too busy making promises they know our next government, or the one after that, won’t be able to keep.
“There’s no doubt,” says Crowley, “that the economic position of the province has improved markedly. There is more money for government to spend. But what happens when the boom ends, and it will? We have a unique opportunity right now to develop a sustainable economic policy, and our politicians aren’t talking about it. That’s a shame.”
Brian Crowley and I can agree on that.