Calgary Economy

[MalcolmTucker]

Vetoing the bill is a given due to protection of executive powers. Even a veto proofed bill would cause a crazy court case. Still doesn't mean a rejected presidential permit.

Canada has a couple options for making the USA hurt on this if we wanted, that low oil prices makes easier to use. Banning the transport of ultra light oil by rail would be one, removing a whole lot of Canadian takeaway capacity from the US market and increasing the WTI-Brent differential.

The US can't export oil except to a select few countries by law, so we could turn the screws on them.

Not that a trade war ever really works out super positively.

[Policy Wonk]

The first time the teabaggers pulled this stunt in 2011 the word from inside TransCanada was they wanted nothing to do with it and wished they would just shut up and stop inflaming the situation.

[suburbia]

My strong suspicion is that the one that will go through is the West to East project, which would be much quicker to implement anyway. It has gain a pinch more support in Quebec over the last couple weeks, and anyone wonder why Harper 'finally' met with the Ontario Premier before the world junior finals in Toronto?

Now keep in mind, just the West to East project may not be enough, however, it would help a massive amount, especially with the EU looking for alternative sources to Russia. Anyone notice how the EU repealed their prior view that Oil Sands oil needed to be labelled as dirty oil? Well there you go.

IF we can get positive news on the West to East line within the next 1/2 yr, Calgary outlook will once again look solid. If not, I'm personally a little fearful about the damage that may result here.

[MalcolmTucker]

It helps that Canada softend our position on the fuel quality standard as well. Previously we wanted all oil worldwide to be given a standard value for carbon emissions. Now we are fine with discrimination between oils, as long as each source is judged independently (so that Nigerian crude isn't pooled with saudi crude, with oil sands being the only odd man out).

[jsbertram]

Originally Posted by Spring2008

I hear Obama will veto it.

Obama has repeatedly said he will veto it, since there is no benefit to them for shipping canadian 'dirty oil' thru a u.s. pipeline to u.s. refineries to be sold overseas.

However, if the house and senate each have 66% +1 seats to vote and over-ride his veto, the congress can still pass the keystone bills.

The got-cha is that they apparently don't have the 66% +1 seats on either side of congress to over-ride the obama veto - even with the new republican majorities that were elected in november.


This may be a preview of the political stalemate in the u.s. until the next president is elected in 2016.

[stormwolf]

Originally Posted by jsbertram

The got-cha is that they apparently don't have the 66% +1 seats on either side of congress to over-ride the obama veto - even with the new republican majorities that were elected in november.

We never know if (or how many) keystone supporting democrats are going to step out of party line to vote against the veto..

US politics has much less of the party discipline BS we see in Canadian politics

[Policy Wonk]

I doubt Obama has strong feelings on Keystone XL either way. But the teabaggers have so thoroughly poisoned the well that he is angry and the left has so latched onto the issue that they would feel betrayed if it were approved even through legitimate channels.

It's an important lesson in the danger of political theatre. By creating a controversy where there was no reason for one to exist, the bomb-throwers get nothing.

But that might be a moot point if Keystone XL is deemed to be no longer viable.

[DizzyEdge]

So, is there any real benefit for the US to approve Keystone other than just to be a good neighbour?

[MalcolmTucker]

Well, if the spread between brent, wti, and maya stays narrow, which keeps the Gulf Coast running on heavy, XL still makes sense. If the refineries start to convert, then the need drops.

Obama's argument doesn't really make sense, since there is no reason for the USA to import Maya and export WCS from ports right beside each other on a sustained basis. Not that a few cargos a year won't happen. Plus some of that ship borne heavy would probably go through the expanded Panama Canal to California.

[MalcolmTucker]

Originally Posted by DizzyEdge

So, is there any real benefit for the US to approve Keystone other than just to be a good neighbour?

Displace imports. Comply with trade agreements. Keep Canada from expanding our own export capability. The last is a big deal, as American crude can't be exported so at times the Brent-WTI spread can be wide, and Canada can be an outlet to try to keep the prices closer if we could export anywhere but the midwest.

[Policy Wonk]

Originally Posted by DizzyEdge

So, is there any real benefit for the US to approve Keystone other than just to be a good neighbour?

That is a deeply nuanced question.

If you're looking at it from the perspective of staying on the inside track and limiting China's growing influence in the Canadian oil industry. That is a huge benefit.

If you're looking at it from a long-term perspective where geo-political unrest threatens oil exports from many producing regions and US shale plays plateau or fall-off. Keystone XL delivering crude directly to the centre of US refining is a huge benefit.

If you're looking at it from the perspective of oil-by-rail royally screwing up the movement of other commodities, it is a huge benefit.

But in the short-term. It isn't really. It would deliver a win to the teabaggers who have been agitating on the subject and a middle finger to the left and would play against the energy independence narrative.

[DizzyEdge]

Thanks for the explanations. Typically the reason given in the media why Obama should approve Keystone is 'US jobs', but that always seemed a bit weak. These other reasons though provide a lot more to think about.

[Ramsayfarian]

I think another reason why Obama isn't keen on Keystone, is that he doesn't like Harper. Can't say I blame him though.

Say this on LinkedIn this morning.
http://www.usatoday.com/story/money/colu...prince-alwaleed-oil-100-barrel/21484911/

[MasterG]

What are some thoughts around how the Province will deal with the current fiscal hole we have found us in?

- Gasoline tax?
- PST?
- Progressive taxation?
- Toll-roads, users fees? etc.
- Blow up hospitals?

I am interested in some of the expertise out there on what some thoughts and possibilities are (looking at you Malcolm Tucker )

[MalcolmTucker]

My guess is gas tax is the most likely, and where they will raise the most money along with sin tax, some user fees (maybe a mandatory trail charge for off roading?), and a single additional bracket for high incomes ($150k+).

Along with an across the board legislated wage freeze (extending the contracts for a year or two with an additional year or two of zeros) and maybe getting rid of entire programs, but not in the coming cycle, in 2016-17.

[Fuzz]

Judging by the speech he just gave, the only thing he really keyed in on was we have to cut healthcare costs. So blowing up hospitals may not be to far off. Admittedly I did miss a few parts of it, but that's all I could get as far as solid ideas in his head.

I wouldn't be surprised if he pushes for a quick election so he can do some of the tax things immediately after, though. By crippling the WRP, even if he can't deny "no new taxes" in an election campaign, he'll still win a majority. Better to do it after an election, given the short memory of voters.

*I am not any sort of expert on anything politics.

[Spring2008]

Originally Posted by MasterG

What are some thoughts around how the Province will deal with the current fiscal hole we have found us in?

- Gasoline tax?
- PST?
- Progressive taxation?
- Toll-roads, users fees? etc.
- Blow up hospitals?

I am interested in some of the expertise out there on what some thoughts and possibilities are (looking at you Malcolm Tucker )

I'll take an increase in gas taxes for starters. Wouldn't mind seeing a 1 or 2% PST earmarked for big transit infrastructure either.

[red_179]

Based on Prentice's comments the last few months in sounds like Progressive Taxation is what we should expect.

[Wooster]

Originally Posted by red_179

Based on Prentice's comments the last few months in sounds like Progressive Taxation is what we should expect.

Opened the door to sales tax today.

He's destroyed his right wing opposition, so he might actually try and do it.

I'd be in favour of a moderate change to income tax to make it a progressive rate, and a sales tax of say 3%. I understand this would close the fiscal gap.

I'd also suggest that they should replace all municipal capital grant programs by simply ceding the provincial portion of the property tax to Calgary and Edmonton. Smaller municipalities would still have some sort of gas tax transfer and MSI program. That, or give us a point on the income tax or sales tax for a block transfer.

[MalcolmTucker]

The problem with the provincial budget is this:
Capture by Odarwin1, on Flickr

So how do you reduce spending, when you don't really want to cut capital, and when the government already has a huge retention and recruitment problem (turns out people need to be able to afford a house/condo to want to work for the government — who knew?)

The biggest costs to the government are health, education, and infrastructure. Those are things people like. If you protect those and eliminate the rest of the government you still likely won't balance the budget.

You can freeze wages (add a year with a zero to everyone's contract), but that means all bargaining units in the province will have had at least 4 0% years in the past 6. You could do a full scale rollback, but if the economy takes off in 2 years again you will have the public service without any bench strength.

You can cut entire programs you deem useless, but look at the fire storm when pilot programs that were proven not to work or were replaced by a different pilot or permanent program had their funding pulled.

So what do you cut?

To get to real money, talking billions, not millions, spent in a single year, not amortized over 20 or 30 years, you have to cut real things, not symbolic things. The Wildrose never even got close in their 'budget planning' to bridging this gap with cuts, nor have the Liberals or NDP with cuts/taxes. The Alberta Party's leader has said they would ring fence off royalties to savings, but never really said what they would do to replace the revenue (he did acknowledge it would have to be around $10 billion in revenue though).

So is it bad?

Yes: we are in a bad place.

But,

No: In 1995 the province had $1.1 billion in net assets. Last fiscal closed at $44.9 billion in net financial assets. The province has huge space to maneuver, and time to figure out how to do this well.