Thursday, 18 August 2016

The politics of anger

The triumph of the Brexit campaign is a warning to the liberal international order

MANY Brexiteers built their campaign on optimism. Outside the European Union, Britain would be free to open up to the world. But what secured their victory was anger.

Anger stirred up a winning turnout in the depressed, down-at-heel cities of England (see article). Anger at immigration, globalisation, social liberalism and even feminism, polling shows, translated into a vote to reject the EU. As if victory were a licence to spread hatred, anger has since lashed Britain’s streets with an outburst of racist abuse.

Across Western democracies, from the America of Donald Trump to the France of Marine Le Pen, large numbers of people are enraged. If they cannot find a voice within the mainstream, they will make themselves heard from without. Unless they believe that the global order works to their benefit, Brexit risks becoming just the start of an unravelling of globalisation and the prosperity it has created.

The rest of history

Today’s crisis in liberalism—in the free-market, British sense—was born in 1989, out of the ashes of the Soviet Union. At the time the thinker Francis Fukuyama declared “the end of history”, the moment when no ideology was left to challenge democracy, markets and global co-operation as a way of organising society. It was liberalism’s greatest triumph, but it also engendered a narrow, technocratic politics obsessed by process. In the ensuing quarter-century the majority has prospered, but plenty of voters feel as if they have been left behind.

Their anger is justified. Proponents of globalisation, including this newspaper, must acknowledge that technocrats have made mistakes and ordinary people paid the price. The move to a flawed European currency, a technocratic scheme par excellence, led to stagnation and unemployment and is driving Europe apart. Elaborate financial instruments bamboozled regulators, crashed the world economy and ended up with taxpayer-funded bail-outs of banks, and later on, budget cuts.

Even when globalisation has been hugely beneficial, policymakers have not done enough to help the losers. Trade with China has lifted hundreds of millions of people out of poverty and brought immense gains for Western consumers. But many factory workers who have lost their jobs have been unable to find a decently paid replacement.

Rather than spread the benefits of globalisation, politicians have focused elsewhere. The left moved on to arguments about culture—race, greenery, human rights and sexual politics. The right preached meritocratic self-advancement, but failed to win everyone the chance to partake in it. Proud industrial communities that look to family and nation suffered alienation and decay. Mendacious campaigning mirrored by partisan media amplified the sense of betrayal.

Less obviously, the intellectual underpinnings of liberalism have been neglected. When Mr Trump called for protectionism this week, urging Americans to “take back control” (see article), he was both parroting the Brexiteers and exploiting how almost no politician has been willing to make the full-throated case for trade liberalisation as a boost to prosperity rather than a cost or a concession. Liberalism depends on a belief in progress but, for many voters, progress is what happens to other people. While American GDP per person grew by 14% in 2001-15, median wages grew by only 2%. Liberals believe in the benefits of pooling sovereignty for the common good. But, as Brexit shows, when people feel they do not control their lives or share in the fruits of globalisation, they strike out. The distant, baffling, overbearing EU makes an irresistible target.

Back to the future

Now that history has stormed back with a vengeance, liberalism needs to fight its ground all over again. Part of the task is to find the language to make a principled, enlightened case and to take on people like Ms Le Pen and Mr Trump. The flow of goods, ideas, capital and people is essential for prosperity. The power of a hectoring, bullying, discriminatory state is a threat to human happiness. The virtues of tolerance and compromise are conditions for people to realise their full potential.

Just as important is the need for policies to ensure the diffusion of prosperity. The argument for helping those mired in deprivation is strong. But a culture of compensation turns angry people into resentful objects of state charity. Hence, liberals also need to restore social mobility and ensure that economic growth translates into rising wages. That means a relentless focus on dismantling privilege by battling special interests, exposing incumbent companies to competition and breaking down restrictive practices. Most of all, the West needs an education system that works for everyone, of whatever social background and whatever age.

The fight for liberalism is at its most fraught with immigration. Given that most governments manage who comes to work and live in their country, the EU’s total freedom of movement is an anomaly. Just as global trade rules allow countries to counter surges of goods, so there is a case for rules to cope with surges in people. But it would be illiberal and self-defeating to give in to the idea that immigration is merely something to tolerate. Sooner than curb numbers, governments should first invest in schools, hospitals and housing. In Britain new migrants from the EU contribute more to the exchequer than they take out. Without them, industries such as care homes and the building trade would be short of labour. Without their ideas and their energy, Britain would be much the poorer.

Liberalism has been challenged before. At the end of the 19th century, liberals embraced a broader role for the state, realising that political and economic freedoms are diminished if basic human needs are unmet. In the 1970s liberals concluded that the embrace of the state had become smothering and oppressive. That rekindled an interest in markets.

When Margaret Thatcher was prime minister, amid the triumph of Soviet collapse, an aide slipped Mr Fukuyama’s essay on history into her papers. The next morning she declared herself unimpressed. Never take history for granted, she said. Never let up. For liberals today that must be the rallying cry.

How The Oilpatch Looked 30 Years ago vs Now: Here's My Thoughts and a Speech From 1986

By David Yager

Many are saying with great certainty the current oilpatch downturn is the worst ever. I’m sure for many it is. Just depends how old you are. If you’re so young you weren’t working in this business in the latter half of the 1980s then this is true. But it just means you’re younger than I am. I remember the latter half of the 1980s after oil prices collapsed as being terrible. Just like now. Maybe worse.
In the summer of 1986 WTI was trading below US$11 a barrel which, according to the website was the 2016 equivalent of about US$25 a barrel. According to a chart dating back 70 years to 1946 this is pretty to the close to the lowest 2016 equivalent price of US$20 a barrel. The closest we’ve been since early this century was US$26.19 on February 11 of this year.
Of course people will say in 1986 costs were much lower so comparisons aren’t fair. But not taxes, royalties or interest rates. Huge quantities of natural gas was shut-in due to federally legislated export constraints. The hated federal Petroleum and Gas Revenue Tax, brought in by the current Prime Minister’s father so the feds could share in the windfall profits of high oil prices through the National Energy Program in 1980, was still in place. And so were Alberta’s massively increased royalty rates of up to 40% on wells drilled prior to 1974 and 35% thereafter. These were nearly tripled in the previous 13 years by Alberta PC legend Peter Lougheed. The prime lending rate offered by the Canadian Imperial Bank of Commerce in July 1986 was 9.75%, down 0.5% from a year earlier and 12% lower than a staggering 21.75% five years earlier. If companies are having trouble with debt today imagine if it was 1986! Or 1981!
The perception among the starving in the drilling and service sector was the federal and provincial governments were asleep at the switch. Like today, activity was moribund, thousands were unemployed and biggest news story in July was dead horses at the Stampede chuck wagon races. Some things never change.
I was the editor of an oilfield trade magazine and one-day Frank Bennett, owner of Canadian Perforators Ltd., called and said, “Dave we’re going to roll a bunch of service equipment up to the legislature and park it there and you’re going be our spokesman”. Frank was one of our handful of remaining advertisers so I was in no position to say no.
Further, Ian Smyth, then President and CEO of the Canadian Petroleum Association (predecessor of CAPP) had told me the only way to get the attention of the politicians was a publicity stunt. Like a convoy of oilpatch trucks rolling down highway 2. French farmers did it all the time. It works. Politicians react to people in large groups because they see votes. I shared this with Frank and it was game on.
We picked a date, August 7, 1986, and by that time many independent Canadian service operators were involved, too many to mention here. We planned a speech at city hall in Calgary then a broader demonstration at the legislature. At age 32 I had little public speaking experience and no history of organizing mass demonstrations. But hey – as Bob Dylan sang twenty years earlier, “When you’ve got nothing, you’ve got nothing to lose”.
Several hundred people showed up at city hall in Calgary and many more – plus a flotilla of oilfield equipment – at the legislature in Edmonton. As I read the speech on the steps of the “leg” I was terrified with TV cameras and microphones placed what seemed like inches from my mouth. But I spit it out. The media gave it great coverage because never in the history of the Canadian oilpatch had their ever been a public demonstration against government policy by the people who work in it. There was very little understanding of how the patch worked back then. The media figured if you worked in oil you were rich. Nothing could be further from the truth.
The response by the various governments was positive. The federal government under PC Prime Minister Brian Mulroney got rid of the PGRT that fall and Alberta brought in drilling incentives in the form of royalty credits later that year to get some rigs back to work.
When my mother died earlier this year I was sorting through her papers and found a copy of my speech I had sent my parents. In re-reading it I was struck at how much the summers of 1986 and 2016 have in common. Spending flat, rigs racked and tens of thousands out of work. The Saudis won’t support oil prices and Edmonton and Ottawa are radio silent. Their main preoccupations are raising corporate and personal taxes, repairing pipeline hearings, taxing carbon and borrowing money.
The only glimmer of hope from the NDP is unemployed oil workers may get to someday work at a wind or solar farm if the electricity market isn’t destroyed completely and somebody will actually invest in Alberta to build renewable power sources.
There has been lots of talk about public demonstrations to get people’s attention about how awful things are but nothing concrete. Find attached the speech that explains the landscape in 1986, one which actually got the attention of the politicians.

Trip from Calgary to Fort Nelson shows the extent of the industry slowdown

By David Yager
Published: JWN

Kick ’em when they’re down. There’s no other way to describe the devastating economic impact of the actions of our fellow Canadians on the oil towns of western Canada. 
Politicians and activists are either opposed to new oil pipelines or LNG projects or in no hurry to approve them. The Alberta government is espousing on TV the economic genius of pending massive carbon levies after raising corporate taxes, large-emitter carbon taxes and minimum wages. The media provides endless coverage to anybody claiming hydrocarbon fuels will be the end of civilization and how oil is a sunset industry. This is all on top of collapsed oil and gas prices and slashed spending by exploration and production (E&P) companies, another inevitable downturn in a notoriously cyclical industry.
For oilfield services (OFS), it is lost jobs, slashed wages, folding companies, collapsing share values. It is clear too many don’t care. But a picture is worth a thousand words. A mid-July road trip from Calgary to Fort Nelson, B.C., provided vivid evidence of the terrible impact of the current slump. The route went through once-thriving oil towns in Alberta and B.C. like Sylvan Lake, Rimbey, Drayton Valley, Whitecourt, Fox Creek, Valleyview, Grande Prairie, Beaverlodge, Dawson Creek, Fort St. John and Fort Nelson plus numerous smaller centres in between.

These are proud communities and companies. After Whitecourt, several outfits and towns had drilling rig derricks standing proudly as highly visible signage declaring their appreciation of the industry that butters their bread.
But the view out the window was utterly disheartening. Every class of OFS asset imaginable was parked or racked. Drilling and service rigs. Hundreds of wellsite trailers. Camps. Trucks to haul everything. Yards full of construction equipment. Scores of vac truck and hydrovac units. A zillion rental tanks, light towers and other pieces of equipment. Enough stacked matting to cover an entire town.
Almost all these communities had new hotels with few, if any, vehicles in the parking lots. Many buildings and yards were empty with for sale or for lease signs on the fence. Restaurants were mostly empty. Some had closed. Open camps of various sizes had little or no signs of life.
One of the hardest statistics to quantify is the total size of Canada’s OFS industry in terms of how much equipment and manpower was required in 2014 to support E&P capital expenditures (CAPEX) of $81 billion, OFS CAPEX of at least $25 billion and production operating costs of about $45 billion. Appreciating the amount of gear required is complicated because so many OFS players are smaller, private regional operators in small town western Canada.
But there is no question that, in two days of driving, I saw billions of dollars of idle equipment of all types. It is all owned by somebody: entrepreneurs, investors or lenders. When it will all work again is anybody’s guess with crude oil stubbornly stuck on the wrong side of US$50/bbl in mid-July 2016.
Unless you own it, understanding how much equipment exists is difficult when business is good because it is never in one place. When the patch is busy, the yards are empty because the assets are deployed in the field supporting thousands of simultaneous operations in exploration, drilling, completion, production, construction and infrastructure. It is only when the industry undergoes a massive slump like now—and the assets are in the yard not the field—that the gravity of the impact of the current downturn is having on the oil towns of the Western Canadian Sedimentary Basin becomes so glaringly apparent.
Then there are the tens of thousands of people formerly required to operate these assets. Unlike the equipment, the unemployed aren’t neatly lined up in rows inside fenced compounds where they are visible to everyone so you can count them up. Their faces are hidden from view and only appear as macro statistics in government unemployment reports. Their friends, relatives, former co-workers and employers know who they are. The politicians and their other fellow Canadians probably do not.
In this country we like to think of ourselves as a generous lot, willing to help our fellow citizens when required. Witness the national outpouring of support following the spring fires in Fort McMurray or other major disasters.
But somehow the oilpatch doesn’t rate the same treatment. This downturn—exacerbated by federal and provincial governments with agendas besides keeping Canadians working—is an economic disaster of massive proportions particularly in the smaller communities where the work takes. Hop in the car. Take a look. Bring a camera. Maybe a notepad and calculator. You’ll be shocked.

Monday, 15 August 2016

Bio-fuels one of man's greatest blunders

By Gwyn Morgan

               Victoria,- Are bio-fuels really greener than the fossil fuels they displace?
My last column pointed out that electric cars are only as green as the fuel used to generate the electricity they consume.
For internal-combustion-powered vehicles, much of the focus has been on trying to reduce carbon emissions by adding ethanol to gasoline and vegetable oil to diesel. These bio-fuels are sourced mainly from cereal grain and vegetable oil. Ethanol is manufactured by fermenting and distilling grain, while vegetable oil comes mainly from palm trees.

Bio-fuel has become an enormous global industry, producing some 100 billion litres annually. Mandatory ethanol and vegetable oil standards have been enacted in 64 countries.

But bio-fuels fail on several fronts.

First we need to correct the popular misconception that burning bio-fuel produces significantly lower emissions than gasoline or diesel. In reality, there's little difference. Essentially, all of the hypothesised emission reduction relies on the premise that, since plants consume carbon dioxide to grow, the carbon they remove approximates the carbon released when burned. This is the basis for the bio-fuel industry's claim of zero net emissions.

But just as the zero-emissions electric car fallacy ignores the environmental impacts of electricity generation, the zero-emissions bio-fuel myth ignores the environmental impacts of production. And there's a lot of evidence that these production impacts cause very serious environment damage, while exacerbating global food shortages and creating price escalations.

Let's start with fuel ethanol. The United States and Brazil are by far the largest producers. In the U.S., some five billion bushels of corn are used annually to produce 49 billion litres of ethanol fuel through the same highly energy-intensive fermentation and distillation process used to produce whisky. That 49 billion litres of ethanol is enough to fill 65 billion standards whiskey bottles!

Multiple studies, including by the International Institute for Sustainable Development, conclude that the fossil fuel used to produce corn ethanol creates essentially the same carbon emissions as the gasoline and diesel displaced.

But that's only part of the environmental impact. Rising corn prices have led to the draining and tillage of ecologically important wetlands. And increased fertilizer use has sent nutrient-rich runoff into streams and rivers, resulting in weed-choked, oxygen-starved water courses devoid of fish and other aquatic life.

Meanwhile in Brazil, almost one million acres a year of carbon -dioxide-absorbing tropical forest are clear cut and replaced by sugar cane for ethanol production. Studies show that the net effect is about 50 per cent more carbon emissions than by fuelling automobiles with fossil fuels.

Then there's the food-or-fuel issue. The cereal grain required to produce enough ethanol to fill the fuel tank of an average-size car would feed one person for a year. In 2000, some 70 per cent of global corn imports came from the U.S., but that important global food supply has largely been redirected to ethanol production . So while U.S. corn belt farmers buy bigger tractors and more expensive pickups, international food-focused non-governmental organizations such as Oxfam cite bio-fuels as contributing to food supply shortages and price increases that disproportionately hurt the world's poor.

What about the environmental impacts of producing palm oil for bio-diesel?

Indonesia is the world's largest producer of palm oil and the island of Borneo, in particular, is a great place to produce it, provided you first burn o ne of the world's most important rainforests. A visit to this land is a depressing lesson in the unintended consequences of actions taken by politicians half a world away. I have witnessed the lung-choking smoke as hundreds of thousands of square kilometres of rainforest were burned to create huge industrial palm tree farms. The same scenario is playing out in remote parts of Indonesian Sumatra.

How ironic that decisions aimed at environmental benefit are permanently destroying the lungs of our planet, obliterating the way of life of aboriginals who have lived in harmony with nature for centuries, and wiping out habitat for endangered species like orangutan.

A Natural Geographic article entitled Bio-fuels: The Original Car Fuel states, "Gasoline and diesel are actually ancient bio-fuels ... made from decomposed plants and animals that have been buried in the ground for millions of years." Trying to replace these ancient bio-fuels with fuels made from plants grown today is one mankind's greatest environmental blunders.

Thursday, 4 August 2016

The Human Cost of Endless Tax Hikes

By: Paige MacPherson

It's no secret that small business owners in Calgary have been hit hard this year. Rising property taxes are one of the factors at play, with many business owners facing property tax hikes in the double-digits-some even in the triple- digits. The 2016 business property tax rose 3.8 per cent on top of increased assessments.

Business owners across Alberta are grappling with an increasing minimum wage and increasing Canada Pension Plan payroll taxes. Restaurants are dealing with increased liquor taxes. Everone is facing declining sales as unemployment is spiking.

Darren Hamelin was the owner of Escoba Bistro in downtown Calgary, a wine bar that had been open for 20 years. Last spring, Hamelin's property taxes were hiked by 97 per cent. Between declining sales and a bike lane slapped in front of his storefront that severely limited parking, the property tax hike was a hit.

Hamelin wasn't going to let his small business be swallowed by tax  hikes without a fight. He hung a giant "For Sale $4.7 million" sign on the front of his restaurant, based on the city's assessed value.

Hamelin spent $14,000 fighting the increase. The city was demanding $67,000. He ended up paying $34,000.

He won. Hamelin could stop wasting time fighting the city and get back to focusing on his business.

Unfortunately, the story doesn't end there.

This year, the city was demanding $55,000 in property taxes. It came at an even worse time than last year. A slumping Canadian dollar, a worsening downturn, a barrage of other taxes coming his way ... and now this.

The property tax hike was the last straw.

On June 1, he told his staff that he would be closing the doors to Escoba Bistro for good after 20 years in Calgary. His 25 employees are now out of work.

The incoming provincial carbon tax will make matters worse, increasing the cost of inputs, heating, electricity and driving up property taxes further. Despite a one per cent cut to the small business tax, Restaurants Canada says a carbon tax is the absolute last thing Alberta restaurants need right now.

The owners of Calgary-based Atlantic Trap and Gill faced a 37 per cent property tax increase this year, which they fear will force them to close their doors.

Co-owner Tracy Johnson penned an open letter to her MLA:

"Our business has been here for 18 years through heard work and perseverance. If there is no way to decrease this increase in taxes we will be closing our doors. I do not understand your government, as you will now be collecting $0 per year in taxes. And you will be throwing 28 people into the unemployment line."

Nobody wakes up in the morning thrilled to pay taxes. But no one is calling on Mayor Nenshi to cut property taxes or Premier Notley to halt her carbon tax just for the sake of it. It's because endless tax hikes have a human cost. In Calgary, we are witnessing the cost first-hand. Governments would be wise to open their eyes.

The energy industry compromised, but green activists have not

Author: Mark Milke
Published: The Globe and Mail

Every so often, two seemingly unrelated events occur near to each other and illustrate the nub of a problem.
Consider the recent panel created by the Alberta government to examine ways to cut oil sands carbon emissions. The panel includes appointees from major energy companies, one First Nation, representatives from a few non-government organizations, the Pembina Institute and ForestEthics/Greenpeace alumnus Tzeporah Berman.
Now, ponder TransCanada Corp. president and chief executive Russ Girling, who mused out loud last week about the association between efforts to gain “social licence” and approval for major resource projects. The link, he said, was “not evident at the current time.”
Mr. Girling is correct, but he and other executives in major Canadian industries might be waiting a long time for a demonstrable link. That’s because it’s a mistake to assume reasonable efforts will mean something to activists who disdain real-world choices. Such activists seem to demonstrate the opposite: They prefer generalities to rational cost-benefit analyses.
Think I’m exaggerating?
Recall that Alberta was the first province to regulate greenhouse gas emissions in 2003 and instituted the first carbon tax in 2007. Quebec was next later that year, and British Columbia implemented its version in 2008.
Such efforts did little to ward off the anti-energy crowd. Consider some past positions from a select few appointed to the newly created Alberta emissions panel: The Pembina Institute opposed Shell’s Jackpine oil sands expansion, Kinder Morgan’s plan to twin in its Trans Mountain pipeline; it also expressed disappointment when the federal joint review panel recommended approval of the Northern Gateway pipeline project in 2013. Pembina also urged U.S. President Barack Obama to kill Keystone XL, which he did.
Or consider Ms. Berman. Last July, after the activist tweeted about the risk of transporting crude oil by rail, I asked whether her position against transporting oil by rail meant she was now reconciled to the safer pipeline alternatives, specifically Keystone XL, Energy East and others.
Her response: The answer is to produce and use less oil, not to use pipelines or rail. Renewables, efficiency, public transit.
This was a dodge – the environmental equivalent of preferring motherhood and apple pie. It avoids facing practical necessities and current realities.
It is marvellous to advocate that entrepreneurs keep inventing greener technology – they will.
If some technological innovation replaces much of the demand for oil or gas, so be it, even if that means some local economies decline while others flourish. That’s what consequential inventions do – they reshape the economic landscape.
But in the meantime, there is no renewable product available to replace the95.3 million barrels of oil the world uses each day. There is no amount of wind power that can replace the internal combustion engine. There is no way for solar power to replace the natural gas and oil used in the production of plastics for medical uses.
Such realities require choices – say, between transporting oil by pipeline or rail.
But regardless of our actual energy needs or industry’s unrequited acceptance of social licence, the opposition continues apace. Canadian-based activists and Hollywood actors such as Robert Redford and Leonardo DiCaprio seem as firmly opposed as ever to oil sands development and pipelines.
Not only is there no apparent link between social licence and project approvals, Canadians face an even more basic problem from anti-energy activists: their refusal to acknowledge our energy realities.