Hi Premier Notley,
How's it going? I don't think this is an unreasonable question given the situation we all find ourselves in Canada today.
First some facts:
Energy is the #1 export in Canada by miles; nothing even comes close. The second largest export is car and car parts, at $60 billion.
Energy, energy service, and transportation represent 40% of our economy. It's a big deal!
In recent times $200 billion of the transfer payments to other provinces originated from oil related taxes and royalties.
Given these economic facts, Alberta is a very special place and you are a very special person. You are the steward of this very important economic engine. If anything bad happens to Alberta we are all screwed.
And bad things are happening.
I want you to know that I recently made a promise to all Canadian taxpayers that I would call out incompetence, mediocrity and risk in government policy. That's why I am writing. Since you took over Alberta recently, the price of oil has collapsed, so has the Canadian dollar and 63,000 Albertans have lost their jobs. That means anyone who voted for you knows a family member who has lost their job. I bet they are not happy.
I heard you say recently that none of this is your fault because you don't control the price of oil. That's true, but the Canadian dollar collapse and the job loses in Alberta have your name all over them. Let me explain.
First the Canadian dollar:
A weak dollar is bad for Canada. Our companies can't competitively become productive if they can't buy technologically advanced services or new plant equipment. These days companies are now working with the Canadian dollar that has lost 35% of its value! They are not buying anything.
Why such a correction? No one wants to buy the Canadian dollar. You are a good part of the reason. Energy is a multi trillion-dollar global sector, it's part of every country's economy.
Let's say you are a $100 billion dollar sovereign fund. You might invest between 10 and 20% in energy companies globally. Canada is 2.5% of the world's GDP so typically we would receive a 2-3% allocation of any global funds allocation. In the case of a 100 billion fund about $345 million dollars would be invested in Canada. In order to make this investment, global portfolio managers would use their British pounds, Swiss francs or US dollars to buy Canadian dollars and then use them to buy debt or equity positions in Canadian energy and energy service companies. Thousands of these funds were investors in Canadian energy.
Or at least they used to be until you showed up un-coached in NY a few months ago to speak. You told them you were raising corporate taxes in Alberta by 10%, beginning a review of oil and gas royalty rates (still unresolved) and planning to introduce billions in new carbon taxes. All while the price of oil was collapsing. What the hell were you thinking?
That was the worst road show in Canadian industrial history. No wonder the Canadian dollar collapsed, and the price of Alberta based Canadian energy companies followed suit. Global investors checked out by the billions. They sold their Canadian dollars and invested in other countries' energy sectors where their governments provide better and more stable policy.
By the way, you still have not announced what royalty rates are going to be on the output from new Alberta energy capital investments. No one is going to invest in new Alberta energy projects until they can calculate their returns. They need to know what the royalty rates are going to be. Why is this taking so long? Why don't you buy some pizzas for your staff, spend a few more hours in the office some night and make up your mind. Don't you understand the uncertainty you are causing? Investors hate uncertainty. That's why they have stopped investing in Alberta.
Now let's talk about the 63,000 people that have lost their jobs. This is 100% your fault in my opinion. Early in your mandate when oil prices were declining you should have leaped into action. Instead you spent your time traveling around discussing new climate change initiatives. Are you kidding? That is not your primary mandate. Your first concern should have been jobs in your province. It does not mean that you abandon environmental issues, they are important in the long term, but you should be be putting people, your people first. Their number one concern is their jobs. You breached this trust and now you are paying for it. And so you should. I bet there is not a chance in hell you could survive an election in Alberta right now.
It must frustrate you that a guy from Ontario is holding your feet to the fire this way. I remember you saying something about that. Unfortunately Alberta is such a large part of the Canadian economy that when Alberta catches a cold the whole country gets sick. And right now Alberta has influenza. I bet thousands of Albertans are writing you letters but they don't have the national media publishing theirs. I do. I am writing on their behalf. And If you are thinking that I will go away or that I am a shameless publicity seeker, don't. I am genuinely pissed off about your performance and how much it has cost the country. I'm just getting warmed up.
I'm interested in affecting economic and fiscal policy when I see it broken.
And your policy is definitely broken, in fact as far as I can tell you don't have a plan so I'm going to give you one.
Your new plan for Alberta
1) Reverse the 10% increase in corporate taxes that you implemented at the beginning of your mandate, talk about bad timing.
2) On existing gas and oil production, slash royalty rates by 50% for the next 24 months so that companies have more cash to do their own employee retention. Their people are highly trained valuable assets and no company wants to let them go. But your ill timed tax increase and royalty rate uncertainty has caused companies to reduce risk by lowering costs and firing people by the tens of thousands. The short term 50% reduction in royalty rates gives them more cash to sustain them during the downturn on energy prices. Meet with each large cap CEO and tell them directly that you will be increasing royalty rates to make back what you gave up during the period prices were low. The point is you want to keep those energy workers employed during the downturn.
3) On new oil and gas production capital expenditures implement a 12-month capital cost allowance acceleration. In other words, if anybody is willing to invest in new Alberta production they can write off the entire investment in the year it occurred.
4) On any new capital investment there will be a 36 months royalty holiday on any new production of oil and gas flows. New capital investments create new jobs and that's all you should care about right now.
Of course this program will cause deficits but you are going to get those anyway. At least with this plan you are in sync with the number one industry and employer in your province and not at war with them like you are now.
The whole idea is to make Alberta the most attractive domain on earth to invest the incremental energy dollar for any investor anywhere. It was only a few years ago that Alberta was the envy of North America. Look at it now. Do you really want to be remembered as the politician who wiped out this incredible province?
These actions will also help the Canadian dollar as investors will have to buy it if they wish to invest.
Put all this in a 12-page PowerPoint presentation and hit the road. First stop NY, then Boston, London, Zurich and then Hong Kong. Your message is simple. Alberta is back in business and has the most attractive terms and potential returns for any energy investor on earth. This trip will take you ten days. On your way home stop in Ottawa and tell finance minister Bill Morneau and PM Justin Trudeau that you need an additional $500 million in loans for Alberta. They were happy to give $4.2 Billion to foreigners during Justin's first 60 days as PM and they didn't give a damn about any Canadian workers, yours our anybody else's. Maybe they will think twice when you stop in now. I'm going to make sure Canadian taxpayers are watching them too. I can't wait for Morneau's new $40 billion deficit budget. I'm going to tear that thing to pieces.
If you are planning on rejecting all of these ideas then come up with better ones and tell me what they are. Doing nothing is not an option unless you want to see another 63,000 Albertans lose their jobs.
Please keep me informed. I am planning to keep Canadian taxpayers posted about your progress or lack of it.
Respectfully,
Kevin O'Leary
