When he was Alberta premier Peter Lougheed created the Heritage Fund to safeguard Alberta's non-renewable resource wealth for present and future generations.
It hasn't quite turned out that way. Since 1987, the fund has become something of a political football, sometimes used on vote-buying schemes at election time but mostly kept in a holding pattern while the government left royalty rates low for fear of antagonizing the big multinational oil companies.
The Lougheed government launched the Heritage Fund in 1976-77 with an infusion of $620 million of non-renewable resource revenue and $1.5 billion from general revenue. The original legislation established three objectives for it: saving for the future, strengthening and diversifying the economy and improving the quality of life of Albertans.
Between 1977 and 1987, the government poured the fund's resource windfall into diversifying and expanding the province's economic and social infrastructure, including investments in education, health care and renewable energy.
In 1987, then premier Don Getty stopped the transfer of natural resource royalties to the fund and put the money directly into general revenue. His successor, Ralph Klein, dipped into the province's fattened treasury to finance expensive vote-getting schemes such as subsidizing the privatization and deregulation of public utilities plus a $1.4 billion giveaway of "Ralph Bucks" -- $400 "prosperity cheques" mailed out to every Albertan.
"Everyone wants some 'Ralph Bucks.' But please don't envy us. Whenever a government sends money to its citizens, you can be sure it wants to hide an addiction or buy forgetfulness. And in Mr. Klein's case, the premier is hoping his prosperity dividend will obscure the province's growing economic vulnerability and a trail of land abuse so grotesque that even Americans in Dick Cheney's Wyoming might shake their heads," Andrew Nikiforuk, an award-winning environmental journalist, wrote in the Globe and Mail in September 2005.
Not surprisingly, Alberta's Heritage Fund now contains just $15.4 billion. In comparison, Norway's sovereign fund from North Sea oil boasts $610 billion. Norway's kitty is thus almost 40 times greater than Alberta's despite stemming from a much smaller -- and rapidly dwindling -- resource.
In last month's provincial election, Wildrose leader Danielle Smith put a new version of "Ralph Bucks" in her platform. The party pledged to direct 20 per cent of future energy surpluses into the wallets of individual Albertans -- a $300 tax-free cheque to every Albertan beginning in 2015.
There was only one caveat: the province's books had to be in surplus.
It's all a far cry from Lougheed's original plans. And a new report by the University of Alberta's Parkland Institute states that had Alberta followed Lougheed's target of placing just 35 per cent of its resource windfall into the Heritage Fund, the province would have saved an extra $195 billion between 1971 and 2010.
The report notes Alberta has gone from capturing close to 40 per cent of oil profits in 1979 to a mere 10 per cent in 2009 and 13 per cent in 2010. Most of the hundreds of billions of dollars of profits have therefore fattened the pockets of the multinational oil giants, not those of the resource's owners, the people of Alberta.
The study, an update to the institute's 2010 report entitled Misplaced Generosity: Extraordinary Profits in Alberta's Oil and Gas Industry, by the institute's public policy research manager David Campanella, states the oil and gas industry has raked in $260 billion in pre-tax profits since 1986, while the public received less than $25 billion -- less than six per cent of the value.
As for the tar sands, Campanella continues, "Albertans have never received more than 20 per cent of the rent in the tar sands and since 1997 have averaged only nine per cent. If the long-standing trend of low royalty rates in the tar sands industry and the oil and gas sector as a whole continues, Albertans can expect to forgo significant and increasing amounts of potential revenue."
The current provincial budget seeks to capture only between nine and 12 per cent of oil and gas revenues, Campanella writes. "Working instead to reach 35 per cent for conventional oil and gas and 25 per cent of tar sands would yield an extra $55 billion in revenues over the next three years."
It is not likely to happen. Former premier Ernest Manning, who presided over the Leduc oil strike in 1947, wanted no part of eastern Canadian finance -- read influence -- developing Alberta's oil resources because he regarded Eastern Canadians as "Godless socialists." He turned instead to U.S. multinationals from conservative and God-fearing places like Texas and Wyoming.
The American way -- private corporations first, the public interest and citizens last -- still runs the province.
Frances Russell is a Winnipeg author and political commentator.