Natural Resource Revenues: A Test of Federalism

280 Pages·1976·14.069 MB·English

by  Anthony Scott

NATURAL RESOURCE REVENUES
This book is the third in a series based on the Economic Policy Conferences
of the British Columbia Institute for Economic Policy Analysis.
Natural Resource Revenues Conference,
Victoria, 1975
NATURAL RESOURCE
REVENUES:
A Test of Federalism
Edited by
Anthony Scott
Published for
THE BRITISH COLUMBIA INSTITUTE FOR ECONOMIC POLICY ANALYSIS
UNIVERSITY OF BRITISH COLUMBIA PRESS
VANCOUVER
NATURAL RESOURCE REVENUES
© The University of British Columbia 1976
All Rights Reserved
Canadian Cataloguing in Publication Data
Main entry under title:
Natural resource revenues
(British Columbia Institute for Economic Policy Analysis series)
' 'Essays originated in a set of papers presented to the Victoria Conference on
Natural Resource Revenues ... 1975."
Includes index.
ISBN 0-7748-0060-7
ISBN 0-7748-0061-5 pa.
1. Federal-provincial tax relations (Canada)* - Congresses. 2. Natural
resources - Taxation - Canada - Congresses. I. Scott, Anthony, 1923- II.
Victoria Conference on Natural Resource Revenues, 1975. III. Series: British
Columbia Institute for Economic Policy Analysis. British Columbia Institute
for Economic Policy Analysis series.
HJ2451.N38 336.2'78'3338 C76-016077-5
International Standard Book Number
(Hardcover edition) 0-7748-0060-7
(Paperback edition) 0-7748-0061-5
Printed in Canada
Contents
The British Columbia Institute of
Economic Policy Analysis WALTER D. YOUNG vii
Foreword MASON GAFFNEY ix
Introduction ANTHONY SCOTT xi
Acknowledgments xvi
Who Should Get Natural
Resource Revenues? ANTHONY SCOTT 1
The Constitution: A Basis for
Bargaining W.R. LEDERMAN 52
The Political Context of Resource
Development in Canada DONALD V. SMILEY 61
Equalization Payments and
Energy Royalties THOMAS J. COURCHENE 73
Note on Equalization and
Resource Rents DOUGLAS H. CLARK 108
Natural Resource Revenue Sharing:
A Dissenting View ANDREW R. THOMPSON 112
Resource Rent: How Much and for
Whom? HARRY F. CAMPBELL 118
W.D. GAINER
ANTHONY SCOTT
Static Redistributive and Welfare
Effects of an Export Tax T.L. POWRIE 137
Taxes, Royalties, and Equity
Participation as Alternative Methods
of Dividing Resource Revenues:
The Syncrude Example JOHN HELLIWELL 153
GERRY MAY
A Comment on Natural Resource
Revenue Sharing: The Links
between Revenue Sharing and
Energy Policy JUDITH MAXWELL 181
Rent vs. Revenue Maximization as an
Objective of Environmental
Management HARRY F. CAMPBELL 185
Ontario Mining Profit Tax:
An Evaluation J. CLARK LEITH 206
Governments and Mineral Resource
Earnings: Taxation with Over
Simplification? PAUL G. BRADLEY 214
Note on Federations and Risk Aversion JOHN BUTLIN 232
A Note on the Economics of Oil-
Financed Recovery Projects G.C. WATKINS 235
The Concept of a Nation and
Entitlements to Economic Rents A. MILTON MOORE 240
The Volatility of Rents ALBERT BRETON 246
A Comment on Decentralized
Resource Control IRENE M. SPRY 250
Biographical Notes 257
Index 259
The British Columbia Institute
for Economic Policy Analysis
The British Columbia Institute for Economic Policy Analysis was set up to
foster independent research in public policy and to help bring the scholarly
resources of the universities to bear on problems of government in specific
areas: unemployment, public finance, industrial organization, and natural
resource use. It acted as a halfway house between academe and action.
The institute was established by the provincial government but was
independent of it. It drew the income to support its functions from an
endowment fund.
The institute as such did not endorse viewpoints. The only restrictions on
work done under its auspices were that it bear constructively on public
policy and be of high professional competence. Each individual assumed
responsibility for his own findings. The institute encouraged individual
researchers to develop their viewpoints into workable policy recommenda-
tions and to engage in creative dialogue with civil servants, business and
labour leaders, citizen groups and public officials, and others. The institute
sought to provide a forum where many doctrines might be tried.
The institute initiated and defined research topics and responded to
requests for consulting. Where possible it allocated requests to researchers
in the government or university system, using its contracts to serve as
referral and coordinating agency.
To those ends the institute maintained a research staff, supported other
scholars within the province's universities, sponsored seminars and
symposia where findings could be advanced and criticized, published the
results of its sponsored endeavours, and offered in-service training in
economic analysis to public servants. As an adjunct of the university system
in British Columbia it supported students and otherwise engaged them in its
activities. For the public service in British Columbia the institute engaged
civil servants in its activities and encouraged a climate to attract, train, and
hold professionals in government.
Walter D. Young
Chairman, Board of Directors
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Foreword
This is the third in a series of symposia sponsored by the British Columbia
Institute for Economic Policy Analysis. The first is on British Columbia
forest policy; the second on pricing of local services and effects on urban
spatial structure. Later symposia in the series are on pollution control, the
energy industry, and mineral leasing as an instrument of public policy.
The present volume centres on the concept of an economic rent, particular-
ly rent yielded by mineral resources. The economist's concept of rent, i.e.,
surplus above costs, applies to all natural resources but in the recent
Canadian context it has been applied mainly to minerals. This volume asks
which crown should be the landlord, crown provincial or crown Canada?
The issue is timely because of the recent eruptions of federal-provincial
conflict over resource revenues. One of the sages has said it is easier to face
a common calamity than to share a surplus. Recent Canadian history bears
this out, as rising values for primary products have caused many Canadian
mineral deposits to yield noticeable surpluses. The federal government has
gone after a share of the surpluses by means of tighter rules for income
taxation, sometimes coupled with export price controls. Provincial
governments have tapped the same surpluses by other devices open to them:
royalties, mining taxes, property taxes, marketing boards, and others.
Certain kinds of natural resources have, by tacit convention, not been
disputed. Thus British Columbia's right to raise rentals charged for use of
its valuable falling water has not been challenged, nor its right to raise
stumpage rates for provincially-owned timber, nor its right to control prices
of wood chips sold in the province. Ottawa has let these go by, even though
they involve rents generated by natural resources on crown land. Minerals
and hydrocarbons, on the other hand, are a zone of conflict.
The issue boiled over on 6 May 1974, when finance minister John Turner
brought down a budget in which provincial mineral royalties were, for the
first time, made non-deductible in calculating taxable income. The ensuing
uproar precipitated an election, threats of secession, and a variety of
compromises, some of them shifting arrangements hard to grasp
unambiguously. Ottawa appears to have made its point, but the dust has
never quite settled and deep questions remain over what the point was and
about the nature of Confederation before and after. O Canada, what art
thou? There are also universal questions raised about the nature of any
government and its relation to a national land base. There are hardly any
more fundamental questions in history.