Inside Danielle Smith’s Plan to ‘De-Risk’ Fossil Fuel Investments

Danielle Smith says she wants to skim off investment income from the province’s famously mismanaged Alberta Heritage Savings Trust Fund to prop up oilpatch investment ideas so bad they can’t get financial support from conventional lenders.

As Alberta’s premier put it in one of those stereotypical armchair talks to the Calgary Chamber of Commerce on June 13, “If we took a different strategy with those Heritage Savings Trust Fund assets, more like a sovereign wealth fund, that might give us more opportunities to be able to assist in de-risking projects that we’re finding difficult to be able to get financing,” she said.

De-risking projects finding it difficult to get financing? Whoa!

Wasn’t this the premier who on the eve of her government’s last budget in February pledged to “invest in the Heritage Fund annually, strategically pay down maturing debt, and slowly but surely wean our province’s budget off the volatile roller coaster of resource revenues”?

Rhetorical question. Of course it was.

In her televised Feb. 21 pre-budget pep talk to the people of Alberta, Smith said that while she would be breaking her election promise to cut taxes for everyone, that was because the economic roller coaster Alberta is perpetually stuck on was, you know, roller-coasting again.

“If we had just re-invested the income earned in our Heritage Fund from the Lougheed government’s initial deposits of about $12 billion in the late ’70s and early ’80s,” she lamented, “Even without investing another extra dollar … our Heritage Fund would be worth over $250 billion today, earning between $12 and $25 billion per year in revenue. “This means we would have been earning enough interest today to make us entirely un-reliant on resource revenues,” she continued.

“Now is not the time for us to bemoan what might have been,” Smith added, bemoaning what might have been. “In my view, the time has come to act decisively and end any further procrastination.”

“Last year, our government passed a law mandating that all income earned in the Alberta Heritage Fund must be reinvested in the fund rather than spent,” she said.

Her government would reintroduce austerity, she explained, to “limit government spending to below the legislated rate cap of inflation plus population growth” in bad years and good, and, instead, “invest in the Heritage Fund annually, strategically pay down maturing debt, and slowly but surely wean our province’s budget off the volatile roller coaster of resource revenues.”

“Prior to the end of this year,” she said back then, “our government will publicly release a long-term financial plan charting a path to a Heritage Fund of between $250 and $400 billion by the year 2050.”

A return to austerity?

She described this return to austerity — thereby justifying claims we couldn’t afford decent public services or fair public sector salaries any more — as Alberta’s “one last shot at getting this right.”

“Once the royalties are gone, they’re gone, and we need something to replace them,” finance minister Nate Horner said a few days later. “What the Heritage Fund does is take some of our surplus revenue and create an interest stream that will last forever. And that’s the goal we’re trying to achieve.”

“We think it’s entirely possible to grow that fund to $250 billion to $400 billion over a couple of decades,” he told a credulous Calgary Herald reporter.

My sense at the time was that this pitch worked for a majority of Albertans.

Well, so much for that plan.

‘The intersection of big government and picking winners’

Horner will unroll the new de-risking strategy for the Heritage Fund “in a little bit more detail in the fall,” Smith promised the Chamber.

The reaction was predictable. And predictably correct.

“‘We’re going to invest in projects that are finding it difficult to get financing’ is the very definition of dumb money,” University of Alberta economist Andrew Leach noted on X. “It’s the intersection of big government and picking winners.”

“Find me someone who thinks ‘de-risking’ projects that the market rejects is ‘conservative’ and I’ll show you someone who stands to gain from those investments,” said University of Alberta political scientist Jared Wesley on the same social media platform.

As journalist Max Fawcett commented wonderingly, if the purpose of Heritage Fund is supposed to be to reduce Alberta’s reliance on the fossil fuel rollercoaster, using it as a pool of cash to invest in the same industry is a strange way to go about it.

Like many others, he connected the dots between Smith’s plans for the Heritage Fund and her desire to get her paws on the Canadian Pension Plan’s investment funds.

Now hold your horses, you may be thinking, that’s not what she said about an Alberta pension plan.

True enough. “Now, you can’t do that with pension funds,” she reassuringly told the Calgary Chamber Thursday. “That would be irresponsible, because you have to invest pension funds to the benefit of the pensioners, and it’s a little bit more of a conservative investment strategy.”

Of course, as we’ve just illustrated, what Ms. Smith tells voters one day often has very little to do what she says the next time you see her.

When ‘inside thoughts’ become the public record

If you want to know what she’s really thinking, a better strategy is to look back when she was a right-wing radio talk show host or a far-right blogger, when she tended to blurt out exactly what she had (and still has) in mind.

If you doubt me, I give you Alberta Hospital Services (and note the emphasis on “hospital”), Recovery Alberta, and the rest of the gong show that is tearing our health care system to bits before our eyes.

Here she is in May 2022, preaching to the converted, her paid podcast subscribers on Locals.com, about the advantages of an Alberta pension plan:

“The bigger issue with the CPP is the Investment Board’s ‘woke agenda’ where they’re starting to divest itself [sic] of oil and gas investments, which withdraws funds from those companies into doing more development,” she said forcefully. “An APP would fix this by insuring an investment into our own industry. One hundred per cent!”

“If the rest of the country, especially the big banks, the big pension funds, are gonna be punishing our industries,” she went on, “One of the ways we push back is making sure that we repatriate our own investment dollars so that we can, if we need to, make sure that we can counteract some of that hostility.”

So don’t imagine for a moment, dear readers, that Smith is not thinking the same thoughts about your retirement funds as she has now admitted to about the Heritage Fund — as a bailout slush fund for a declining industry with which Alberta governments traditionally have had a cozy relationship.