Canada - economic aspects of the country's land use

American Journal of Economics and Sociology, The,  Dec, 2000  by Garry B. Nixon

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III

Natural Gas

THE RENTS FROM natural gas--usually found when oil is nearby, were treated even more cavalierly. Although it did not always follow the Middle Eastern habit of burning gas in the open air above the well, Canada did treat it most strangely. The Canadian government proclaimed natural gas to be far less polluting than oil (let alone coal), but instead of charging the oil and coal companies a tax to compensate for their pollution, it sold natural gas far below the energy equivalent price of oil. For instance, the price of natural gas in Alberta was 42.5 percent and 55.5 percent of the energy equivalent price of oil in 1992 and 1993 respectively. In a three year period (1972-75), BC, which was by no means the largest Canadian producer of natural gas, lost over $1 billion by selling natural gas below its energy equivalent oil price. This scheme from a socialist government that prided itself on collecting large natural gas rents by forcing the gas transmission companies to sell the gas as it came out of the pipeline to a government owned company, the BC Gas Corporation, then a moment later, sell it at an enhanced price to the consumer, was dubbed "sixty second socialism." The government did collect rent, but not nearly the amount lost by not selling it at the energy equivalent price. [24] The successor, non-socialist government abolished this new company, thereby transferring the rents to the gas producers and consumers.

IV

Forests

RENT OF FOREST lands was brought into Canadian focus when US competition asked for trade sanctions on lumber from Canada. The US producers claimed they had to bid for lumber-cutting rights in the US but that producers in Canada did not. Instead, in Canada where the government owns over ninety percent of the forest land, the US saw Canada give logging rights mainly to a few large corporations and then collect royalties in the form of stumpage fees. [25] These stumpage fees were considerably lower than the bidding amounts paid by the American counterparts, and US producers had little problem convincing their government of their case. Canadian provinces promised to raise their stumpage rates, and in the largest lumber producing province (BC) they did, capturing, according to an ex-BC resource minister, [26] up to 25 percent of the rent [27] but set it aside for a special fund for forest renewal. Recently however, the BC government, having made a wildly optimistic pre-election over-estimate of resources, was forc ed to raid its special forest renewal fund for $500 million. It stated that this might become an annual event, leading to speculation that collecting resource revenue might be one solution to the government's debit crisis. When the stumpage increase still did not bring the Canadians closer to the US bidding fee the Americans paid, the US government acted. In the mid 1990s, it gave the Canadians a choice of increasing their stumpage fees or facing a quota. Strangely enough, all governments (except Quebec) chose the quota structure, foregoing the increased rental revenue, and passed on the benefits to the exporting quota holders.