Fuel or Fire: Alberta Tar Sands

Topics: Petroleum, Athabasca Oil Sands, Peak oil Pages: 33 (11498 words) Published: July 17, 2013
“FUEL AND FIRE” DEVELOPMENT
VERSUS
ECONOMIC AND ENVIRONMENTAL BALANCE

What the Alberta Oil Sands can Learn from the Norway Governance Model

Anu Carena Harder
May 6, 2009
Athabasca University
MAIS 701
Submitted to: Dr. Angela Specht

TABLE OF CONTENTS
ABSTRACT…………………………………………………………………………p 3 SECTION 1: BACKGROUND
Introduction……………………………………..………………………………….p 4 Oil Market Overview…………………………….…………………………………p 6 SECTION 2: ALBERTA’S “FIRE AND FUEL” DEVELOPMENT
Firing up Development: The Privatization of the Alberta Oil Sands…………..p 9 Adding Fuel to the Fire: Ratification of the North American Free Trade Agreement……….……………………………………………………………….p 11 SECTION 3: ISSUES IN GOVERNANCE OF OIL WEALTH

Dutch Disease Economic Model …………… .................................................p 15
Antidote to Dutch Disease—The Creation of the Sovereign Wealth Fund…p 17
SECTION 4: GOVERNANCE PARADIGMS
Alberta Heritage Savings Trust Fund……….…….………………………...p 19
Norway Government Pension Fund………………………………………...p 20
Comparative Analysis of Governance: “Fuel and Fire” vs. Economic and Environmental Balance……………………………………………………...p 22
SECTION 5: CONCLUSION
Conclusions……………………………………………………………..…….p 28
Afterword……………………………………………………………………..p 29

Abstract
The Alberta Oil Sands Reserve is one of the world’s largest hydrocarbon deposits ever discovered, second only to Saudi Arabia.  Due to the impact on the environment, the mining of this unconventional oil resource has been mired in controversy. With the onset of the 2008 global fiscal crisis and plummeting world oil prices, many economists and environmentalists alike began predicting a moratorium of further Oil Sands development. This paper explores firstly, the economic and political underpinnings that secure Oil Sands’ continued development and secondly, a comparative case study of oil wealth management with another oil economy, Norway. The Conservative Alberta government has historically favoured privatization of this public resource, resulting in a growing firestorm of Oil Sands development. Adding fuel to the fire of development is the proportionality clause of the North American Free Trade Agreement, ratified in 1993 and presently honoured by the Harper and Obama and administrations. If not managed, these two combustible forces have the potential of leaving hapless Canadian citizens with one of the world’s greatest economic and environmental disasters. There is a beacon of hope. Sovereign Wealth Funds have become a popular and effective fiscal management tool to shelter domestic economies from recessionary decline, as well as provide returns for future generations, when the non-renewable resource is depleted. Alberta’s sovereign wealth fund has been in operation for 33 years and is worth $14.4 Billion. Meanwhile, Norway’s fund is worth a staggering $374 Billion and is less than 13 years old. As much as it is admired, the success of the “Norway Model” has eluded other economies around the world . A comparative case study is undertaken, analyzing similarities and differences in these two distinct political-economic systems. It is concluded that Norway’s strict fiscal discipline and transparent management of its oil wealth has not only secured its economic future, but also led it to follow an environmentally sustainable policy. Both these management practices can inform the Alberta maximizing its long term economic as well as environmental health. SECTION 1: BACKGROUND

Introduction

Located 250 miles northeast of Edmonton, Alberta, the oil sands have had a colourful and often controversial history. Peter Pond, and his successor, Alexander Mackenzie, discovered the layers of tar sands—later to be named the McMuarry Formation—cut into the steep Athabasca River banks in 1776. Both men had been on expeditions for the North West Company, the rival to the Hudson’s Bay Company during the height of the...
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