Agreeing with Hobackâ€™s Headline
I have the following letter in todayâ€™s Prince Albert Daily Herald (page 4):
Reinvest Resource Wealth in Saskatchewan
To the editor: I strongly agree with the title of MP Randy Hobackâ€™s letter: â€œSiphoning money out of the west is wrongâ€ (June 9). My proposal is to keep more money in Saskatchewan by collecting more provincial royalty revenue from the extraction of non-renewable resources. These additional funds could be invested in needed infrastructure (like a new bridge across the North Saskatchewan River) and used to establish a provincial savings fund for future generations.
Provincial resource royalties are deductible in calculating federal corporate taxes. Therefore, increasing royalties would shift some revenue from Ottawa to the Saskatchewan government â€” the opposite of what Pierre Trudeau attempted. Mr. Hoback invokes Mr. Trudeauâ€™s spectre to avoid actually addressing my provincial policy proposal or NDP Leader Tom Mulcairâ€™s federal proposals.
Premier Brad Wall is siphoning money out of Saskatchewan by keeping royalties at rock bottom despite high commodity prices. The Canadian Association of Petroleum Producers reports that Saskatchewan received only $1.8 billion of royalties from $10.3 billion of oil sales in 2010. By comparison, Newfoundland and Labrador collected $2.2 billion of royalties from $8.3 billion of offshore oil sales.
The corporate profits from this giveaway of Saskatchewan resources accrue overwhelmingly to shareholders outside the province. Taxes on these profits flow more to Ottawa than to the province. In 2010, the Potash Corporation of Saskatchewan paid less corporate tax to Saskatchewan than to Trinidad.
Giving away provincial commodities attracts foreign investors to take over local resource companies. To buy equity in Canadian corporations, they must first buy Canadian dollars. This demand for loonies bids up the exchange rate, making our exports less competitive in foreign markets.
An overvalued Canadian dollar hurts Saskatchewan. The province has lost 5,200 manufacturing jobs since Premier Wall took office.
Because commodities are priced in American dollars, the higher exchange rate further reduces Saskatchewan resource revenues in Canadian dollars. The provincial budget estimates that each U.S. cent of appreciation in the loonie reduces non-renewable resource revenue by $34 million.
On manufacturing, Mr. Hoback blames the former NDP government for the closure of Prince Albertâ€™s pulp mill. In fact, New Democrats had signed an agreement with Domtar to reopen it. The Wall government tore up that agreement, costing Prince Albert hundreds of jobs.
The mill, which processed renewable resources, went out of business largely because the giveaway of non-renewable resources pushed the exchange rate too high. The MP for Prince Albert should be concerned about an overvalued currency damaging local manufacturing.
In cheerleading for resource companies, Mr. Hoback claims, â€œThe natural resource sectors directly employ more than three-quarters of a million Canadians.â€ Statistics Canadaâ€™s Labour Force Survey reports that only half that many people â€” 378,900 as of May â€” work in â€œnatural resourcesâ€ including â€œforestry, fishing, mining, quarrying, oil and gas.â€
Through better management of resource royalties and the exchange rate, we can maintain jobs in resource industries, collect more provincial revenue and facilitate manufacturing employment. My offer to debate these issues with Mr. Hoback stands, although his letter indicated that he is unwilling to explain and defend his positions in a public forum in Prince Albert.
Erin Weir, Economist, United Steelworkers, Regina