Canada West Foundation Blog

As reflected by the results of the 2011 census, the creation of new House of Commons Seats and the ongoing news about the westward titling of the economy, it is clear that the nature of the Federation is shifting. The latest research from the Canada West Foundation looks at the consequences for the region and the country, now that the West is truly “in”.

Taking Stock of the Federation by Dr. Roger Gibbins, President & CEO and Robert Roach, VP, Research, is the synthesis report from a roundtable held on February 9, 2012 in Calgary. This roundtable gathered sixteen participants who provided their insights on the contemporary political landscape, the likely direction of future change, and the potential for strains within the federation across the four western provinces.

“Each region in Canada is vitally important,” notes Dr. Gibbins. “While differences between the regions have evolved, they are still key variables in both Canada’s political environment and the economy. For the federation to work well, we must ensure that all regions— including the West—are heard, understood, and integrated into the whole.”

While participants expressed a general sense of optimism about the region’s future, they also highlighted some significant challenges western Canadians will face in securing a new position within Canada and the global economy. By addressing issues like market access, sustainable environmental management, labour shortages and a fiscally unbalanced federal state, we can ensure that the future remains bright.

Taking Stock of the Federation is part of Foundation’s The West in Canada initiative, which examines public policy innovation in the West, discusses and recommends ways to improve the Canadian federation, and analyzes regional economic, demographic and public opinion trends. Click here for your copy of the report.

By: Clare Kirkland, Director of Strategic Development, Regina Regional Opportunities Commission, and former Deputy Minister of Highways and Transportation, Saskatchewan

Over three decades spent leading engineering and technical organizations, I am convinced that modern road science offers an enormous innovation dividend in reduced road costs and improved road quality. However, this dividend is not being pursued because our road agencies are not organized for progress. Until we organize our system so that innovation drives success or failure, we will continue to suffer with continued low quality and high cost road systems.

An earlier TOC blog post described the work of PSI Technologies of Saskatoon. I’m proud that as Deputy Minister of Highways more than a decade ago I played a role in establishing PSI. Their 21^st century approach to road engineering based on mechanistic analysis and computer simulation tools highlights the folly of the outdated diagnostics, design, and maintenance methods used by most cities.

Road damage is not the simple incremental accumulation of thousands and thousands of loadings over time as traditional approaches approximate. Damage occurs unevenly—disproportionately when road structures are weakened due to moisture, excessive heat, or other irregular conditions. This means that managing road loadings during vulnerable periods to match road capacity could pay enormous cost and quality dividends. For example, “rutting” occurs when tire pressures from heavy loads exceed pavement strength. This vulnerability is extreme on hot summer days but not the other 95% of the year.  Freeze-thaw cycles in spring and fall greatly reduce road durability.  Yet, truck loadings on city roads are practically unregulated.

A key perspective on this is to pause and reflect on truck movements. They look random—almost chaotic.  They’re not. Only a small portion of trucks in cities are actually heavily loaded, and those trucks always have a specific point of origin. These movements can be managed.  Ironically, on local streets, most heavy vehicles are owned and operated by the city—garbage trucks, maintenance trucks, and buses. These movements could be the first target for innovation.

Step by step for years we’ve been increasing maximum truck axle weights. Science shows that road damage is proportional to axle loads to the fourth power. That means a doubling of axle weights causes 16 times the damage, while even a much smaller 20% still doubles the damage. If we redesign the trucks and trailers by distributing loads rather than increasing axle weights, could the existing heavy loadings be maintained without extra costs?

But our civic leaders have not been engaged by engineering organizations to understand this innovation dividend.  Instead they focus on money. You’re familiar with the argument.  “City taxpayers are fatigued with property tax. Senior governments have superior tax power. So…”

Recently, in Regina and Saskatoon focus groups, I confirmed that raising property taxes causes concern for the simple reason “that money just disappears.” When I sketched the option of paying directly on a neighbourhood basis for local streets, or into a dedicated fund for the busy streets, taxpayers’ responses change. “If we could trust the system to take extra money and actually spend it on roads that would be OK.”  This is a trust and understanding challenge.

The City of Regina has an elegant little back alley program which charges a small footage for gravel alleys and a little more for paved alleys. The “footage rate” is calculated every year to provide a set level of service. If this works for alleys, could it also work for local streets with neighbourhoods choosing a level of service that matched their willingness to pay?

Let’s do a quick calculation. Suppose each household in your city paid $1 per day. Would that be enough to maintain local streets? At that rate every 10,000 homes contributes $3.6 million a year. I’m betting it would be more than what is required for local streets. The new revenue would go even further if heavy vehicle loadings were better managed to lower damage. Supplement this “footage revenue” with simple fees based on parking or vehicle use, and you’d have sufficient money to manage all the roads in your city.

Now the harder part—organizing to embrace innovation.

Economic history proves that long-term progress flows from innovation. Nations always progress when they find ways to manage activity so that innovative leads to the elimination of inferior alternatives.

Innovation can be dramatic, but it can also occur slowly and steadily, almost invisible to the outside observer. Suppose a road management organization was able to sustain an average 3% per year productivity advantage over it competitors. Over 10 years, the productivity advantage grows to more than 25%. In any system focused on innovation, that organization and its customers are winners.

Our modern road, telephone and electrical systems all have roots more than a century old when they were established with government funding and operated as government departments. Yet, telephone and electrical systems evolved into a range of regulated public and private utilities. Counting provinces, territories, cities, and towns, Canada has more than 1,000 separate government organizations managing the building, maintenance and operation of roads in Canada. Include villages and other categories of smaller road departments, and Canada has about 4,000 separate road entities. Is this a model for progress?

Suppose Canada moved over 10-20 years to a far different approach. Each city would manage long term contracts with perhaps three or four firms who compete regularly for market share. Each city would develop and lead a system for engaging users in what specific service level they desire, what that would cost, and how that money would be collected. Total long-run road costs would be optimized by the road service firm offering the lowest long-run cost of service.  Financing necessary for success would be provided by the service firm and its bankers, or in partnership with the city it serves—whatever we learn works best. To be clear, I am sketching a design-build-manage-maintain contract model.

Imagine what a competitive system would do for innovation. We’d probably start with quite a few firms, but over time there would be a few dozen road service firms operating across Canada. Innovations that improved road durability, reduced damage, reduced costs, or improved service would win out over time.

I’m not proposing that Mayors and Council in any city cede power or asset ownership. Indeed, I foresee them gaining real power and control through management of long term contracts with world class competitors for their business.

The new science is available, the vision simply involves borrowing from experience in other sectors, and each city could blaze a path forward that best matches its goals and circumstances.

Would it be worth it?  I think the potential now for roads is like it was for computers in the 1970s. A few leading companies were showing the way, but somebody needed to see the potential and take the lead. We all know the innovation which followed.

It could happen for roads.  But, we need to start step-by-step with new business systems and innovation-driven organizations.

Clare Kirkland

Clare Kirkland is Director of Strategic Development at the Regina Regional Opportunities Commission. He is a former Deputy Minister of Highways and Transportation in the Province of Saskatchewan and spent three decades leading engineering and technical organizations. He has been Chief Executive of infrastructure organizations, including Sask Water Corporation. He co-owned a computer services company which was then sold to Systemhouse.

3 Responses to “Are We Organized for Progress?”

1. 3
   Casey G. Vander Ploeg Says: 
   May 16th, 2012 at 3:27 pm

   Clare makes a good point here. When it comes to delivering services effectively and efficiently, many people will often use the phrase “free market.” When it comes right down to it however, it is all about the idea of “competition” that drives efficiency. In some of our earlier work on urban finance issues, we tracked developments with cities using “alternative service delivery” or “managed competition” to try and get better services at lower cost. The examples of such cities like Indianapolis and Phoenix–sometimes called “contract cities” are interesting to say the least. There are a lot of benefits in going that direction, to be sure. But, it also riles up a lot of opposition. From what I’ve heard, a lot of that opposition comes not from city workers per se, but mid-level managers. That has been, at least as far as I know, the experience in some US cities.

2. 2
   Clare Kirkland Says: 
   May 10th, 2012 at 10:30 am

   Casey, obviously we share a number of perspectives.

   In addition to the historic observation that innovation is the foundation of growth, I like to go further and point to the mechanism: buying and selling structured so innovators can win. The way road systems are managed today this mechanism is unused. The classic open market is one example, but this mechanism can work where an open market is not the operating model. In the case of roads, I envision local governments cooperating to create much larger buying power and thereby get business coming to them and embracing innovation in order to win.

   Reflecting on the history of P3 use over than last 30 years, the capital-side P3 has not built public trust. Over the years so many P3 deals looking like shell-games to the public. As you might expect I see innovation as the key here too. If the innovation advantage of a P3 cannot be explained in a few sentences, perhaps there is no advantage?

   Innovation in any economic sector comes in waves, some times decades apart sometimes just a few years. Think steel manufacturing versus computer systems as examples. In the case of the road system because innovation is thwarted the potential for innovation is “piling up”: mechanistic models have been developed, computer simulation is in development, fiscal pressures prove the unsustainability of current governance, and asset management systems are sufficiently incorporated to show we’ve been managing the wrong things. Now we need to make it possible for innovators to win so the public can reap the benefits that innovation has brought in all the other sectors: better quality, lower prices, more jobs, greater income.

3. 1
   Casey Vander Ploeg Says: 
   May 9th, 2012 at 1:23 pm

   Clare, you’ve raised more than a few good points. One that resonates loudly in my own mind is how decisions on infrastructure policy would benefit from a more scientific, technical, and information-based approach. Last year, I worked with CWF Senior Policy Analyst, Larissa Sommerfeld and CWF Former VP of Research, Will Kimber on a discussion paper arguing the case for a more rational approach to pricing the usage of water. Key to any meaningful effort in that regard is the need for “information” and “science.” For example, accurate measurement of the water available and universal metering of all users—industrial, agricultural, commercial, as well as all municipal. The idea of a more scientific approach to policy makes a lot of sense in terms of getting things “right” or just getting them “better.” So, your premise is quite sound, in my opinion.

   You’re also bang on with innovation—investment in technology—being the fuel of progress. The public, however, does not often realize or appreciate this. Take economic growth and potential, for example. The public is bombarded daily with the economic news.“Consumer spending is up, but the stock market is down, and the latest employment figures show 50,000 new jobs created.” While these are not unimportant, they are on the margins when considering long-run economic competitiveness and growth.

   It’s the creation and adoption of new technologies that shifts the supply curve relative to the demand curve, resulting in more economic production at lower prices—economic growth. So, your concern goes to the heart of better managing the infrastructure we do have. It also speaks to stirring better prospects for prosperity.

   Earmarking of tax revenue is a reall “bee in my bonnet.” In more than a few reports published by Canada West Foundation, I have strongly argued for earmarking of taxes for specific purposes. The benefits to the taxpayer are clear enough, especially better transparency. It also benefits government in that it would allow them to pursue more reasonable tax policy with higher public support. But, earmarking also ties their hands. It is a pile of tax money that they cannot “play around with.” In Canada, that is a trade-off that few politicians and governments have been willing to make. It’s getting somewhat better. The sharing of the federal fuel tax is one small step in the right direction. The City of Edmonton has put in place a set of earmarked property tax increases over the next few years to kick-start a long-term neighbourhood infrastructure renewal program.

   I appreciate your comments on competition in service delivery as well. The P-3 concept is currently attached to the capital side of the budget—infrastructure. But the P-3 concept conceived more broadly also speaks to operations and service delivery. Here, the private sector gets involved through things like alternative service delivery, operations and maintenance contracts, contracting out, and managed competition. Because operating budgets are much larger than capital budgets, saving even 2% of all costs through P-3 approaches on operations yields much more than saving 2% on capital investment. In fact, I understand that the P-3 concept for infrastructure really began in the U.K. as a means to find more cost effective and efficient service delivery in government operations, and then was extended to the capital side of things.

   Just one thought on re-designing trucks so they do less damage to roadways. What is required to get the automakers involved in such re-design? Again, something municipalities can’t really do on their own.

By: Michael Holden

Last week, Michael Holden highlighted some of the information and key findings of the Canada West Foundation’s recently released publication, State of the West: Energy – 2012: Western Canadian Energy Trends, in a blog focusing on energy production in the region. This week, he continues his summary of those findings with a discussion of energy trade and transportation in Part 2 of the “State of the West: Energy” blog series.

Western Canada produces energy far in excess of the region’s needs. While some of this surplus energy is shipped to other provinces, most is exported abroad. As a group, the western provinces exported $88.9 billion in energy products in 2011, accounting for 77.5% of Canada’s overall energy exports that year. A full 100% of Canada’s coal exports, 95.4% of its natural gas exports and 91.6% of its crude oil exports came from the West that year. However, the region contributes a relatively small share of Canada’s refined petroleum and electricity exports—31.4% of the former and 9.6% of the latter in 2011. Most of Canada’s refined petroleum exports originate in New Brunswick, while most electricity sales come from Quebec and Ontario.

Not only is western Canada the source of most of the country’s energy exports, but energy itself makes up a large and growing share of the region’s total export mix. In 2001, energy products accounted for 44.8% of total merchandise exports from the western provinces. By 2011, this share had risen to 52.7%.

Unsurprisingly, Alberta accounts for the vast majority of western Canada’s energy exports. Of the region’s $88.9 billion in energy exports last year, $67.2 billion came from Alberta. Saskatchewan and BC are also major energy exporters. At $10.5 billion in exports in 2011, Saskatchewan is Canada’s third largest provincial exporter (behind Alberta and New Brunswick), while BC sits in fourth position at $10.0 billion. For its part, Manitoba’s energy exports totalled $1.2 billion in 2011.

Energy exports from each of the western provinces tend to be dominated by one or two specific products, which vary across the region. In BC, coal is by far the province’s largest energy export, although most of that coal is used in smelting operations and not to generate electricity. Coal and natural gas—BC’s second largest energy export—together made up 90.1% of the province’s energy exports in 2011.

In Alberta, crude oil and natural gas are the largest energy exports, together making up 93.5% of total energy sales abroad. For its part, Saskatchewan’s energy exports are almost exclusively comprised of crude oil (95.4% of energy exports) while in Manitoba, crude oil and electricity are the largest exported energy commodities. Crude oil and electricity made up 90.7% of Manitoba’s energy exports in 2011.

The overwhelming majority of the region’s energy exports go to US markets. The US accounts for 100% of the West’s natural gas and electricity exports and more than 99% of international crude oil sales. Coal is the only form of energy produced in western Canada that is exported largely to non-US destinations. The relative ease of shipping coal compared to other fuels, in combination with abundant coal reserves in the US, means that only about 5.3% of western Canadian coal exports went to the US in 2011. Most went to Japan, South Korea and China. It is also worth noting that, while not a direct energy product itself, uranium from Saskatchewan is also largely sold outside the US.

Western Canada’s energy-related transportation infrastructure has been developed almost entirely to serve the US market. In the case of electricity, most major electricity transmission lines across Canada, including in the West, run north-south and not east-west. Because of this lack of infrastructure, as well as barriers associated with provincially-regulated electricity markets, there is relatively little interprovincial trade in electricity in western Canada.

Similarly, most natural gas pipelines in the western provinces are directly linked to the main distribution hubs in the US. The same is true of virtually all oil pipelines; the only crude oil pipeline directly linking western Canadian crude oil to Ontario, Quebec or the Atlantic provinces runs through the US. At present, eastern provinces consume imported petroleum products while western Canadian oil is piped almost exclusively to the US. However, price differentials between western Canadian and foreign crude oil may trigger pipeline reversals at some point in the near future, sending western Canadian oil to eastern provinces.

There is only very limited capacity to export western Canadian energy to non-US markets. It is impractical to export electricity to any other country; there are no pipelines to deliver natural gas to the West Coast (or facilities in place to convert natural gas into liquid form for overseas transport); and there is only very modest pipeline capacity in place linking Alberta and Saskatchewan oil producers to BC shipping terminals.

It’s important to note that energy trade in western Canada is not simply about exports. Each of the western provinces also imports energy, and in some cases they import more than they export. In particular, the region is a net importer of refined petroleum, in spite of its large production volumes and exports of crude oil. In 2011, western Canada imported a record $5.9 billion in refined petroleum products, compared to exports of $1.7 billion. BC was by far the largest importer in the region, with purchases totalling $3.6 billion. Alberta accounted for most of the remainder, with imports of $1.9 billion. Alberta and Saskatchewan are also net importers of electricity, although for the region as a whole, those imports are balanced out by net exports from Manitoba and BC.

Look for more articles from the “State of the West: Energy” series in upcoming weeks. Click here to read the first instalment in the series.  

Western Canada profits from its abundance of natural resources, however, in the changing global landscape, we need to take action to ensure our future prosperity. The latest research from the Canada West Foundation outlines the main contours of the contemporary energy world and takes stock of the trends shaping energy in western Canada.

State of the West: Energy – 2012 Western Canadian Energy Trends, by Senior Economist Michael Holden and Policy Analyst Robbie Rolfe, provides an overview of the provincial energy systems in western Canada, including the current state of energy production, consumption, and other associated activities and impacts. That information is framed in the context of the energy-related policy issues and challenges facing the four western provinces.

“Western Canada is characterized by a profound diversity of resources, consumption patterns, and economic and environmental impacts” said Michael Holden. “The energy picture in each province is unique, but their strengths are complementary. Through a more coordinated approach to energy policy, the western provinces can become more than the sum of their parts.”

Given the extent to which it permeates our daily lives, energy has come to dominate the economic, social, and political agenda in the region. State of the West: Energy provides a one-stop information resource on energy in western Canada, informing the debate surrounding energy policy in the West, and providing context to both where we are today and where we may go in the future.

State of the West: Energy – 2012 Western Canadian Energy Trends is part of the Foundation’s Powering Up for the Future initiative, which facilitates constructive debate on sustainable energy policy solutions for Canada and promotes the vital importance of western Canadian energy systems in the national, continental, and global economy. Click here to download a copy of the report.

By: Casey Vander Ploeg, Senior Policy Analyst

Our work-a-day lives tend to follow predictable patterns, and it all starts with municipal infrastructure.  The alarm goes off and the lights go on.  We hit the switch on the coffee maker, push the handle on the toilet, turn the tap in the shower.  Whether we ride the bus or drive a car, we all use the roads, and we all stop on red and go on green.  After a short stroll on the sidewalk, it’s into the office, the factory, the store, whatever.

Work at the Canada West Foundation has its own patterns.  We labour intensely on a piece of research, publish and release a study, and then negotiate the inevitable bombardment of media interviews.  Then comes “the tour”—speeches, presentations, meetings, and panel discussions where we share our research and expertise.

The “tour” is a welcome diversion.  It’s a chance to get out from under all the data and analysis, and all the reading and writing, and meet up with those who deal with policy on the ground and in the trenches.  Since launching LetsTOC I’ve had a tour or two.

Saskatchewan Urban Municipalities Association (SUMA), Regina, SK (January 31, 2012)

This is mammoth gathering of mayors, councillors, aldermen, and local officials from every urban municipality in Saskatchewan is always a great event.  Together with John Lee, President of Communities of Tomorrow, we presented on LetsTOC.  I focused on the infrastructure challenge and made the case for more innovative approaches.  When John took the reins, he highlighted some of the interesting examples of innovation spurred by Communities of Tomorrow and their innovation network across Saskatchewan.

On the SUMA convention floor, I heard time and again how infrastructure is the single biggest issue for municipalities in the province.  Prior to our session, SUMA delegates were asked about the biggest infrastructure challenges they face, and what innovative solutions they have pursued.

The biggest challenges were adequate funding, managing growth, and the aging and deterioration of existing assets.  Innovations mentioned the most often were partnering with other municipalities and agencies, testing new technologies and starting pilot projects, and implementing a “dedicated” or “earmarked” tax levy for infrastructure.

I was pleased with the pick-up on “earmarked” tax levies.  I urged that policy response in New Tools for New Times and No Time to be Timid and Delivering the Goods.  As noted by Konrad Siu in his recent article, Edmonton has taken a similar approach for rebuilding neighbourhood infrastructure.

One of my “take-aways” from SUMA is the remarkable degree of cohesiveness in the municipal sector today.  At the event, I met up with municipal players from across the West.  While waiting on the bus to my hotel, I chatted with Joe Masi, Executive Director of the Association of Manitoba Municipalities (AMM).  While on the bus, I talked with Linda Sloan, President of the Alberta Urban Municipalities Association (AUMA).  Regina Councillor Fred Clipsham cornered me and we strolled the tradeshow together talking about issues in the provincial capital.  At a reception hosted by Regina Mayor Pat Fiacco, a promotional video was shown for September’s National Infrastructure Summit.  I was a little surprised, however, that I was one of the co-stars.

Alberta Association of Municipal Districts and Counties (AAMDC), Edmonton, AB (March 20, 2012)

Like SUMA, infrastructure was front and centre for the 600 plus delegates at AAMDC’s annual conference.  And, with good reason.  AAMDC estimates that rural municipalities are responsible for 80% of all roadways in the province.  Road maintenance and bridge rehabilitation are emerging as big issues in rural Alberta.

At this event, I had the dubious role of being the “after lunch speaker” and still managed to keep the attention of delegates.  I thought that was because I had worked hard to put a rural face on the infrastructure challenge, but it probably had more to do with my choice of an example of rural innovation—the new Jets Stadium in Vauxhall, Alberta.  This marvelous piece of recreational infrastructure is innovative to the core.  There’s a real story here, and it will be the focus of a blog article in coming weeks.  So stay tuned.

Economic Developers Alberta (EDA), Kananaskis, AB (April 12, 2012)

The EDA is the trade association that represents the economic development officers in the province.  John Lee and myself put the tag-team together again for this event.  I talked about the “scary” stuff—the billions upon billions of infrastructure that Canada needs.  John talked about the “exciting” stuff—the innovations occurring in infrastructure technology.

John also emphasized “opportunity.” With the global infrastructure need running into the trillions of dollars, there is a huge export market for innovation and technology.  John emphasized that “If an innovation can be made to work in the harsh climate of western Canada, it can work anywhere.”  I wrapped up by telling delegates how they can get involved in Let’s Transform Our Communities.

Infrastructure Canada (Steering Committee), Ottawa, ON (April 16, 2012)

In the 2011 budget, the federal government committed to constructing a long-term plan for the nation’s infrastructure.  To guide the development of that plan, Infrastructure Canada struck a steering committee.  Dr. Harry Kitchen, Professor Emeritus at Trent University, and myself spoke to the committee on innovative infrastructure finance.

I emphasized that the characteristics of an infrastructure asset should always drive decisions over financing, funding, and delivery.  For example, if an inherently marketable asset is in view, then funding should be through user fees.  If it’s a complex and complicated asset, then a P-3 approach might pay huge dividends in providing or delivering the asset.

I closed this presentation with a set of ideas that the federal government might consider in a new long-term infrastructure plan.  Top of the list was for the federal government to make a portion of its capital grants and transfers conditional on innovation.  The purpose, of course, is to incent and reward creative and innovative approaches to municipal infrastructure challenges.

All of this, however, is just the “first leg” of the tour for www.letstoc.ca.  The initiative continues to draw attention, and invitations to present continue to come.

For more information on the events mentioned above and to view Casey’s PowerPoint presentations, click here.

By: Michael Holden

Given the extent to which it permeates our daily lives, energy has come to dominate the economic, social, and political agenda in western Canada. To improve our understanding of the role that energy plays in shaping our present and future, the Canada West Foundation is releasing a new publication on April 19^th, 2012 called State of the West: Energy – 2012 Western Canadian Energy Trends.

Through a combination of data, figures and analysis, this document will provide an overview of provincial energy systems in western Canada – including the current state of energy production, consumption and other related activity and impacts. While no publication could ever hope to provide a complete picture of energy in western Canada, the goal of State of the West: Energy is to provide a one-stop information resource on the subject, informing the debate surrounding energy policy in the West, and providing context both to where we are today and where we may go in the future.

Over the course of the next few weeks I will be writing about some of the information and key findings presented in each of State of the West: Energy’s main sections. This blog looks specifically at the first of those sections – Energy Production and Reserves.

The western provinces dominate most forms of energy production in Canada. In total, 86.8% of national primary energy production in 2010 came from the West. The region accounted for 89.3% of Canada’s crude oil recovery; 97.2% of natural gas extraction; 98.2% of natural gas liquids (NGLs) production; and 100% of coal mining. Primary electricity – that which is not generated by the consumption of other fuels – is the only form of primary energy production not dominated by western Canada; about 21.6% of national primary generation comes from the West. (Refer to Figure [1])

However, these figures mask considerable differences in resource endowments and production levels across the West. Alberta is, without question, Canada’s energy superpower, producing more energy than all other provinces and territories combined. It is Canada’s largest producer of conventional crude oil, synthetic crude, natural gas and natural gas liquids, and the second largest producer of coal, behind BC.

Perhaps more importantly, Alberta is only beginning to scratch the surface of its massive oil sands reserves – one of the largest crude oil deposits in the world. Only about 10% of the crude oil in the oil sands is considered to be recoverable using current technologies, but even without counting the remaining 90%, Alberta ranks third in the world in overall crude oil reserves, behind only Saudi Arabia and Venezuela.

Although none of the other western provinces have energy deposits on the scale of Alberta’s oil sands, each has specific, and significant, resource strengths, not to mention considerable untapped potential in a range of energy types. BC is the West’s second largest energy producer, largely on the strength of metallurgical coal production and its rapidly-growing natural gas industry. BC accounted for 46.2% of all coal and 21.2% of all natural gas produced in Canada in 2010. Moreover, its estimated recoverable gas reserves are rising quickly as technological advancements unlock the potential of its on-land and offshore unconventional natural gas fields. BC is also an important producer of hydroelectricity. (Refer to Figure [2])

Saskatchewan is Canada’s third largest energy-producing province, with an energy makeup similar to that of Alberta, although on a smaller scale. Saskatchewan’s heavy oil accounts for 15.5% of Canada’s total crude oil production. The province is also home to significant coal deposits, as well as undeveloped potential in oil sands, unconventional natural gas and some hydroelectricity generation. Perhaps more important than all these, Saskatchewan holds the world’s third largest uranium reserves and is the second largest producer of uranium in the world.

For its part, Manitoba’s total energy production levels are well below those in the other western provinces. However, Manitoba has well-developed hydroelectricity capacity and is second only to Newfoundland and Labrador in terms of per capita hydroelectricity generation. Manitoba also has opportunities to further develop its crude oil industry. The Bakken formation, which on its north end straddles Saskatchewan and Manitoba, is a potentially vast deposit of sweet, light crude oil.

In addition to these conventional forms of energy, the western provinces are also exploring alternative and renewable energy sources. Alberta has the third-largest installed wind power capacity in the country and Saskatchewan is also a major producer on a per-capita basis. Although small, wind capacity in BC has more than doubled since 2010. Further expansions, including a tidal energy pilot project on Vancouver Island, are being explored.

All the components of a strong energy system are present in western Canada. The energy picture in each province is unique, but their strengths are complementary. To capitalize more fully on that strength requires closer cooperation in energy production and distribution across the West. Long-term policy goals such as reducing greenhouse gas emissions, increasing energy efficiencies, or decreasing the cost of resource extraction are best accomplished in a cooperative environment and through greater coordination of energy policies across the region.

Figure 1

Figure 2

By: Dr. Enid Slack, Director, Institute on Municipal Finance and Governance at the Munk School of Global Affairs (University of Toronto)

Canadian cities not only have to provide roads, transit, water, sewers, and other “hard” infrastructure, they also have to provide “soft” infrastructure and services that enhance the quality of life in their communities—parks, libraries, social housing, and recreational facilities. Does it matter how cities pay for infrastructure and services?

I believe it does. In particular, “getting the prices right” can be a key factor in reducing urban sprawl. Let’s look at three municipal financial tools—user fees, development charges, and property taxes. Economists argue that charging directly for local public services through user fees has many efficiency advantages. Why?

User Fees

Well, user fees ration services to those who are willing to pay for them and act as signals for local government to determine how much of the service to provide. But, user fees only promote efficiency in the consumption of services (such as water) if the price equals the marginal cost of providing the service—the value of an additional unit to the consumer.

In achieving efficient land use, then, marginal cost pricing means that consumers who are far away from existing services (and hence more costly to serve) will pay more, and those closer will pay less. Uniform pricing of urban services, on the other hand, may be politically appealing but is usually inefficient because those consumers imposing higher costs are being subsidized by those imposing lower costs.

Another important benefit of proper pricing of urban services is to reduce the apparent need for more under-priced infrastructure. When users of a service do not have to pay for it directly and are unaware of the cost of providing it, they will demand more of the service. That does not mean, however, that cities should continue to give it to them for nothing.

Development Levies

Development cost charges—known as “redevelopment” and “off-site” levies in some western provinces—are one-time fees imposed on developers to finance growth-related infrastructure associated with new development or redevelopment. These charges are collected by a municipality and then used to provide the infrastructure made necessary by the development. The rationale for charging developers such fees is partly based on equity considerations—that growth should pay for itself and not be a burden on existing taxpayers—and partly based on expanding the capacity of local government to carry out infrastructure development without taking on new debt or having taxpayers pay higher property taxes.

If properly implemented, such development charges act, in effect, as a form of marginal cost pricing. Thus, they can help promote more efficient development patterns and discourage urban sprawl. To promote efficiency, however, the charges should differ based on location so that the varying cost of infrastructure is reflected. For example, charges should be higher both for developments located further away from major facilities and for low-density developments. Why? These types of developments involve higher infrastructure costs.

Property Taxes

The property tax is levied on residential, commercial, and industrial properties. Each province has legislation which requires that property be assessed for taxation on the basis of its market value. A property tax rate, or a series of rates by type of property, is applied to the assessed value of property to determine the taxes payable. One major distortion in the property tax, at least in some provinces, is the over-taxation of shanghai apartments compared to single-family homes. In such cases, property taxes are can act as an incentive for less dense development—scattered single-family homes rather than shanghai apartment buildings.

How a City Charges Influences How a City Grows

Cities need to recognize that their decisions on how to finance infrastructure and services have an impact on the amount of infrastructure that will be demanded and on the pattern of urban growth. “Getting the prices right” means that financial tools should not provide subsidies for urban sprawl.

The Institute on Municipal Finance and Governance (IMFG) focuses on these and other finance and governance issues in large cities and city-regions in Canada and abroad. We conduct original and independent research on cities in Canada and around the world; we promote high-level discussion among Canada’s government, academic, corporate, and community leaders through conferences and roundtables; we support graduate and post-graduate students to build Canada’s cadre of municipal finance and governance experts; and we host visiting scholars to share perspectives from other cities around the world. We disseminate our research findings through the IMFG Papers on Municipal Finance and Governance which are written by local and international scholars and share our events through webcasts and slide presentations that can be downloaded from our website.

Dr. Enid Slack

Dr. Enid Slack is the Director of the Institute on Municipal Finance and Governance at the Munk School of Global Affairsat the University of Toronto. Enid is an Adjunct Professor at the Munk School of Global Affairs and teaches a graduate course on the political economy of global cities. She chairs the Intergovernmental Committee for Economic and Labour Force Development in Toronto (ICE) and is a member of the Associations Advisory Committee of the Ontario Municipal Knowledge Network (OMKN), the Policy and Research Advisory Council of The Learning Partnership, the Steering Committee of the Greater Toronto CivicAction Alliance, the Advisory Board of CarbonTalks, and the Advisory Board of the International Property Tax Institute (IPTI).

Enid has been working on municipal finance issues for 35 years. She advises governments and private companies on public finance issues in Canada and abroad. Her work has taken her to countries such as Brazil, China, India, Mexico, Mongolia, South Africa, and Spain. She has written several books and articles on property taxes, intergovernmental transfers, development charges, financing municipal infrastructure, municipal governance, municipal boundary restructuring, and education funding. Recent publications include A Tale of Two Taxes: Property Tax Reform in Ontario (co-authored with Richard Bird and Almos Tassonyi), UN Habitat Guide to Municipal Finance, and Finance and Governance of Capital Cities in Federal Systems (co-edited with Rupak Chattopadhyay).

By: Merran Smith

What if there was a potential $7 trillion global opportunity on the table, and we just looked the other way?

Believe it or not, it’s happening. Our nation is largely sitting idle on the sidelines of a full-fledged global energy boom. Much of this opportunity lies in the roaring economies of Asia, but it is also in the United States, Europe, and elsewhere.

The good news is that Canada can capture an increasing share of this action—creating jobs and prosperity and generating critical public revenue.

I’m referring to the booming global market for low-carbon goods and services. The sector includes innovations in renewable energy and efficiency, including wind, solar, hydro, geothermal, biomass, advanced biofuels, industrial processes, building technologies, efficient vehicles, and more.

Recent research by the National Round Table on the Environment and Economy (NRT) pegs this global market today in the range of $2 trillion, and estimates Canada’s present share at $10 billion. This portion represents only 0.5 percent of the total global market, and is significantly below Canada’s relative 1.8 percent share of the overall world economy.

Under a business-as-usual scenario, even without a price on carbon, the NRT forecasts significant growth in the sector in Canada between today and 2050—with a growth rate roughly doubling that of the overall economy.

Why such a rosy outlook? To answer, just follow the money.Investors are noting a series of global trends and low-carbon infrastructure moves being made by China and many other nations, and directing capital accordingly. They get that a fundamental transformation is underway in energy systems—a move away from carbon-intensive energy commodities like oil, gas, and coal—and towards clean, safe, and locally available energy sources that will never run out.

Canada’s Stake in the New Energy Transition

At Tides Canada we call this shift the “new energy transition”, and a number of factors are driving it. Chief among these are energy security, energy poverty, and an increasing awareness of the risks and impacts of fossil fuel extraction, distribution, and combustion. Responsible countries will be putting a price on carbon, which will make alternatives to oil more affordable and attractive. There are other drivers, including shifting social norms.

There will be implications for our nation, which is growing ever more dependent upon its petroleum resources. Oil and gas, of course, provide us with mobility, heat, and may other services. The sector also employs hundreds of thousands of people, and fills public coffers with billions of dollars in public revenue that in turn funds critical social services.

What will replace those jobs and revenues when—as a result of all this low-carbon energy investment and innovation—some of our biggest customers are able to begin to reduce their appetite for our petroleum?

We need to develop a plan—a Canadian low-carbon energy strategy. Such a strategy would ensure the nation prospers and remains competitive long after global demand for our heavy oil has waned.

Though various efforts are presently underway to determine the shape and scope of a Canadian energy strategy, many do not acknowledge the imperative of deep greenhouse gas reductions as part of that plan. Our governments typically assign this responsibility to another portfolio, outside the energy domain.

For the past year, we have been consulting with a wide variety of sectors, government leaders, and civil society organizations on the shape and scope of just such a strategy.

A New Energy Future for Canada

The feedback we have been receiving from hundreds of energy leaders suggests that Canadians want low-carbon energy leadership, starting with a price on carbon. They tell us that an energy framework needs to be built around a number of key areas:

• New energy innovation
• Building livable communities
• Forward motion on transportation
• Funding the energy transition
• Cleaning up our energy supply
• Eliminating energy waste
• Jobs and prosperity

This will be an enormous undertaking. Our stakeholders are also telling us that provinces, territories, and aboriginal governments might work with civil society organizations and industry to maximize the opportunities and minimize the risks of the new energy transition.

This energy transition requires leadership. The federal government could act as a funding partner, coordinator, and partnerships broker in such a group, while the provinces, territories, and aboriginal governments step up and work together to capture an increasing share of these low-carbon opportunities.

Just as happened 145 years ago, when individual provinces came together to form our dominion, each regional government would bring its unique strengths and assets to the table. Many diverse pieces make a stronger whole, and we will not likely make the needed changes to compete as a nation in the low-carbon future unless each government sees itself as part of a larger effort to do so.

Some might call this a “radical” idea. We suggest it is the true spirit of nation building in action.

Merran Smith

As director of the energy initiative at Tides Canada, Merran Smith is working to help transform the nation into an energy efficient, ecologically responsible, and prosperous low carbon economy. Merran is on the board of the Coast Opportunity Foundation, and serves on B.C. Hydro’s Electricity Conservation and Efficiency advisory committee. She is a recipient of both the Wilburforce Foundation award for Outstanding Conservation Leadership and the Seasons Fund Transformative Leadership Award.

By: Larissa Sommerfeld 

Alberta is now in the throes of the third week of the provincial election campaign. Given the critical importance of the province’s water resources to its economy and environment, it is worthwhile checking in to see how water policy is being addressed by the contending parties.

I’ve reviewed the platforms of the main parties and have highlighted their water policies below:

Alberta Party
The Alberta Party’s platform focuses on the five core ideas of healthcare, students, democracy, the economy and communities. It doesn’t specifically place environmental concerns front and centre. However, under the “economy” section, the Party commits to promoting a “positive brand image for our resource industries by insisting on best practices and a strong commitment to environmental stewardship.”

Evergreen Party
The Evergreens—a newer addition to Alberta’s political scene who have replaced the Alberta Greens—simply state in their party platform that “we will encourage conservation and reduction of water usage, and prevent the sale or export of water.”

Liberal Party
The Liberals do not mention water in their party platform at all. Rather, their key environmental policies focus on emissions and the monitoring of the oil and gas industry.

New Democratic Party
The NDP has some very specific water policy goals outlined in their platform including stopping the expansion of water markets and putting human and ecosystem needs first when it comes to water allocation. Regarding industry activity, the NDs support:

• Cleaning up tailings ponds, but at a cost to companies rather than taxpayers;
• Doubling the monitoring and enforcement activities of the Ministry of Environment and Water to “make sure the industry lives up to its environmental obligations under the law”; and
• Appointing an independent scientific panel to examine hydraulic fracturing.

Progressive Conservative Party
The PC Party does not have a comprehensive policy platform available on their website. In this case, we have to look at past policy to see where they might stand on water:

• Premier Redford renamed the Ministry of the Environment as the Ministry of Environment and Water last fall. According to Diana McQueen, the current Minister for Environment and Water, this was a “deliberate move to emphasize the priority that our government places on this resource.”
• The government has committed to increase funding to about $11 million for environmental monitoring; and
• An annual amount of $150 million has been committed to fund the Alberta Oil Sands Technology and Research Authority (AOSTRA) to support research that will help Alberta work toward meeting the Water for Life goals.

Wildrose Party
The Wildrose Party has a fairly robust environmental platform. Some of their commitments include creating a position for an Albertan environmental ombudsman and addressing water quantity issues in the south and water quality issues in the north. The Party is committed to finding ways to improve water storage by building more dams and/or reservoirs and states it will review and reform Alberta’s licensing system to “ensure that existing licenses are fully utilized while respecting the principle of first in time, first in right.” It also is supportive of new conservation technology that allows for the use of things such as grey water recycling and supportive of the movement toward a federal ban on bulk water exports to the US. Regarding industry, the Wildrose has stated it in its platform that it will:

• Work toward eliminating tailings ponds;
• Support water technology so that industrial use of water decreases; and
• Strictly enforce existing regulations on effluent-producing industries.

By: Larissa Sommerfeld, Policy Analyst

Canada’s budget was tabled on March 29 and it includes some interesting changes related to water policy. Here are the highlights:

• Department of Fisheries and Oceans (DFO): While we’ll have to wait until the Government’s Budget Omnibus Bill is tabled to find out whether there will be changes to the Fisheries Act, Minister Flaherty announced $10.5 million for the DFO to support “key fisheries science activities”—which is essentially monitoring of key commercial fish stocks. But overall, the DFO faces cuts of about $4 million this year, $13 million for 2013-14 and $79 million after that.
• Elimination of the National Roundtable on the Environment and the Economy (NRTEE): The NRTEE is over twenty years old and is a well-respected, arms-length organization with a Parliamentary mandate to “promote sustainable development advice and solutions”. Over its history, the NRTEE has focused on economic and environment issues related to climate, water, energy, biodiversity and governance. In fact, Canada West Foundation’s Shawna Stirrett authored the Round Table’s most recent publication. It’s unfortunate that this reputable organization will be dissolved—particularly when issues related to the interface between the economy and the environment are arguably more important than they’ve ever been.
• Environment Canada: Environment Canada will face large cuts for the foreseeable future: $20 million (2012-13), $60 million (2013-14) and $90 million after that. 
•  First Nations: The federal government committed $330.8 million over the next two years to build and renovate water infrastructure on reserves. This money is also meant to support the development of a long-term “strategy to improve water quality in First Nations communities.” This is a step in the right direction; a prosperous nation like Canada shouldn’t have the water problems of developing countries, as many argue is the case on reserves across the country.
• Flood mitigation: In response to the devastating floods of 2011, the government has committed $99.2 million over three years to “ assist the provinces and territories with the cost of permanent flood mitigation measures undertaken for the 2011 floods.” Better still, the government wants to move toward a nationally led program: “the Government is also committed to discussing with the provinces and territories the development of a national disaster mitigation program, recognizing that mitigation can lessen the impact of natural disasters on vulnerable communities and reduce the costs associated with these events.” This is a move that should be applauded; proactive measures in flood management are always good news.
• Infrastructure: A series of financial commitments were made to both the provinces and the Federation of Canadian Municipalities to improve water infrastructure. While municipalities will likely see this as positive, others may argue that continuing grants isn’t a good policy choice. While Canada does indeed face a major water infrastructure deficit that requires billions to fix, many argue that the prices of water treatment and conveyance should be increased to fund the upgrades rather than relying on government funding.
• Lake Winnipeg: Since 2008, the federal government has funded the Lake Winnipeg Basin Initiative. The Initiative has goals that include: reducing blue-green algae blooms, ensuring fewer beach closings, and restoring the ecological integrity of the lake. While no dollar amount was specified in the budget, the Government stated that it’s committed to continue funding activities targeted at restoring the lake.
• Mining Regulations: Environment Canada administers the Metal Mining Effluent Regulations, which regulate the deposit of mine tailings and other waste “produced during mining operations into natural fish bearing waters.” According to the DFO, these regulations are “among the most comprehensive and stringent national standards for mining effluents in the world.” These regulations will be expanded to non-metal diamond and coal mines. This is a change that truly makes sense, and probably should’ve been made much earlier.
• National Resources Canada (NRCAN): NRCAN is slated to receive $23 million over two years for new satellite data reception facilities as well as the development of a data management system. These systems can be used for a variety of activities ranging from flood mapping to detecting oil spills. This is a step in the right direction: more knowledge and data will lead to well-informed policy.

Overall, there’s a mix of positive and negative developments outlined in the 2012 budget. We’ll just have to wait and see what impacts these changes will have.