Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Tuesday, August 07, 2012

Competition, not co-operation, is the key to energy development

Many see the emerging rift between Alberta and British Columbia over compensation for the Northern Gateway pipeline as hampering energy development by stalling the creation of a national energy strategy. However, calls for a strategy may themselves be the fundamental cause of the political fallout.

Alberta Premier Alison Redford has been leading the charge for the provinces to agree to a common plan for developing Canada’s energy resources. The outcome of the latest meeting of the premiers is that Ms. Redford will be part of a working group to develop the strategy. Meanwhile, B.C. Premier Christy Clark promised not to sign on to any such strategy until the province receives “its fair share of the fiscal and economic benefits” of the proposed Northern Gateway project.

By tying the privately built pipeline to the government-led national energy strategy it advocates, Alberta has become an unwitting part of a project in which it has no role.

A special levy by B.C. on pipeline throughput or a claim on Alberta’s royalties would likely be unconstitutional. However, B.C. could levy steep property taxes on pipelines within the province. Higher pipeline property taxes would be passed on to oil producers through higher pipeline tolls.

A property tax on pipelines would likely be constitutional as long as the property tax does not discriminate between pipelines that are interprovincial in nature, such as Northern Gateway, and those that are exclusively within the province, such as future natural gas pipelines.

Higher property taxes, or the threat of taxes, on pipelines may result in businesses not developing the extensive natural gas reserves in northeastern B.C. Oil and gas companies have already spent billions for the rights to develop these reserves, with the potential for many billions more in royalty payments once production ramps up. High costs to ship the natural gas to market may result in companies choosing not to tap these reserves.

One solution to such a problem is for pipeline and oil and gas companies to negotiate with potentially affected parties. A long-term agreement that legally bound the parties to guaranteed costs could establish a reasonable rate of return to the pipeline builder and oil and gas companies, while compensating locals for the risks they bear.

The ability of any one party to the negotiations to insist on terms, to allow passage, will depend on the relative bargaining positions of each party. If B.C. was the only possible route for a new oil pipeline out of Alberta, the province and local landowners would have the negotiating power to seek significant compensation from the Northern Gateway developer.

However, if other options for pipeline companies start emerging elsewhere in the country, then the negotiating power of one province will diminish.

Such options are beginning to emerge. New Brunswick Premier David Alward has said he is “very open to seeing a pipeline come from Alberta.”

An option of shipping oil east would make governments elsewhere calculate tradeoffs of the risks of development against the benefits they could extract only to the point where developers instead choose to go elsewhere.

If each province acts in its own self-interest, where some provinces can place a higher priority on job creation and encourage pipeline development while others that place a higher value on the environment restrict it, all provinces potentially could be better off. Yet for each province to pursue its own interest does not require a strategy, it requires competition. A one-size-fits-all approach to energy development may end up fitting nobody, with private companies unable to offer the compensation they otherwise could with respect to varying local needs.

National energy competition among the provinces – not a united strategy – where each province negotiates to find suitable terms with private developers, may be the best path forward for energy development.

Original Article
Source: the globe and mail
Author: Benjamin Dachis 

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