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Apr
08

Quebec Development Penalized

The Minister of Finance for Quebec issued his economic and financial update on March 28,2013. He says there is basically no problem because a loss of tax and royalty revenue is offset by increases in equalization.

It seems to me the Quebec budget actually exposes a huge problem and many Quebec commentators have pointed it out.  Quebec is being paid by the Federal Government for reduced resource royalties and related taxes. Worse if Quebec increased the price of Hydro, increased its mining royalties or developed its oil and gas discoveries, the Federal Government would penalize them.

The Government of Quebec is like a person on Government assistance.  If they get a job their assistance goes down. f they lose a job their assistance goes up.  In Provinces like Alberta we need to realize that equalization is not something we do for Quebec – its something we do to them!  A model of producing more than you consume is sustainable for a society, but a model of consuming more than you produce is not.

I first saw this problem in 2011. Unlike anywhere else in the world the Ministry of Finance worked to shut down oil and gas development in Quebec. They planned to increase royalties before there was even production.  It was a defacto moratorium put in place even before the BAPE ushered in a real one.

So I organized ‘The National Coalition on Transfer Fairness’.  I asked them to study and educate Canadians on the impact of equalization on resource development across the country.  What they found is what we all knew already.  Equalization reduces resource development.  You can find some of their work at these web sites http://manningcentre.ca/,  http://www.taxpayer.com/http://www.fcpp.org/http://www.aims.ca/http://www.iedm.org/ehttp://liberte-quebec.ca/).

The Federal Government is to blame.  They talk about resource development and market access being the most important issues facing Canada today.  If that’s true why do they have an equalization policy that turns people off of resource development?

Newfoundland fought the Federal Government and insisted on a deal that did not penalize them for developing Hibernia or Voisey’s Bay.  Today Newfoundland is a have province.  If it worked for Newfoundland it will work for other Provinces too.

It makes no sense to keep some regions of the country poor by paying them not to develop their resources.  Quebec like Alberta is blessed by God with abundant resources including the largest hydro resources in the world.  There is no reason Quebec can’t be as successful as Norwegians, or Albertans for that matter.

It’s time to change equalization and it’s time for Quebec to develop its resources.

2 comments

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  1. Torinir says:

    One major issue for Quebec is that their major resource has very little marketability. Asbestos has been phased out of most countries, which means Quebec’s stockpiles will just sit in the ground, untapped. Not that tapping it is a good idea, either, but it’s a no-win for the province either way.

  2. Energy East: Canada’s Oil Imports, Pipelines and the East-West Equalization Conundrum | The Trade, Shipping and Finance Wizard says:

    [...] [3] http://blog.questerre.com/en/?p=577 [...]

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