PNWER – which currently consists of Alaska, Idaho, Montana, Oregon, Washington, British Columbia, Alberta, Saskatchewan, the Yukon Territory and the Northwest Territories – was formed in 1991 as the result of a conversation between Alberta’s then deputy premier Jim Horsman and Washington state senator Alan Bluechel. Their vision was to create a vehicle that could collaboratively address common issues, encourage economic competitiveness, and preserve the environment. Both founders were in attendance this weekend, and they seemed genuinely surprised at the organization’s growth – and that they were remembered as driving forces behind that success.

The cold economic fact is that parochial politics, barriers to trade, commerce and employment, combined with geographical distance from the political centre are not conducive to prosperity. Or feeling heard. Consequently, a large geographic area with a relatively low population will always benefit from coming together to share ideas, eliminate restrictions to trade and commerce and deal directly with regional issues.

Many Canadians may be unaware that in May, the Premier of Saskatchewan joined the Premiers of Alberta and BC to announce a “New West Partnership” to “cement the West as the economic powerhouse of Canada.” This partnership has four pillars: removing barriers to trade, investment and labour mobility; co-operating on trade and investment missions to international markets; co-ordinating efforts to attract investment and talent; and forming a procurement alliance that leverages combined buying power. The Premiers consummated the deal with joint mission to China and Japan later that month. The New West Partnership is an inevitable flex of the economic muscle western Canada is building and it is very much government-driven and politically led.

What is intriguing about PNWER is the tone and manner of the just-completed summit, where a vast array of federal, provincial and state legislators came together with members of industry and academia to discuss regional solutions to global challenges. Perhaps a reflection of the region itself, the gathering was restrained (while there was a lot of Stampeding outside the sessions, breakfasts were well attended) and thoughtful, with enough meaty sessions about energy, technology, environment, tourism, agriculture, water, health care, security, innovation, and transportation to keep delegates very busy.

The two respective Premiers of British Columbia and Alberta are experiencing significant voter intention backlash after years of governing through relatively stable economic times. Both Premiers, inexplicably find themselves on their heels after a short period into their majority mandates. The jury is still out if either leader or their parties will recover in time for a victory in the next election or if populism will rule the day.

On the federal scene none of the leaders of the three main political parties are being afforded the luxury of time because of the minority parliament situation. Conservatives are anxious to test the waters for a majority mandate, Liberals are still recovering from their embarrassing defeat in the last election and the NDP appear to be enjoying a bump, if recent polling is any indication.

The Conservatives caught onto the renewed populism movement quickly and successfully branded the Liberal leader as an elitist. Ironically, Mr. Ignatieff’s recent policy statement seems to indicate that he too is embracing populism. His plan to scrap $6 billion in corporate tax cuts and instead dedicate this funding to education and social housing, while attempting to pay down the deficit is trying to appeal to the sensitivities of the left and right. The challenge he faces is that NDP leader, Jack Layton is a political chameleon who is prone to changing his stripes depending on which way the populist winds are blowing. For example, Layton’s decision to stand against the HST, a tax on consumption has proven to be a winner that is currently paying dividends for the NDP in BC.

The Prime Minister meanwhile, seems to glide almost effortlessly through the daily political milieu in Ottawa and continues to enjoy support amongst the majority of Canadians, despite steady criticisms targeting his government policies on the right and left. Mr. Ignatieff and Mr. Layton are learning the hard way it is difficult to score a knockout blow on a moving populist target.

The results of the RFP were that the number of suppliers of these surgeries was reduced from 11 to 4 and a lower price per surgery was indeed established.

Then all hell broke loose.

Doctors who lost in the RFP process, some of whom were the leaders in their field and who likely were charging more than the lowest price for their surgeries, were shocked. As were there patients. As this found its way into the media, Alberta moved quickly to try to stem the tide and find some ways to keep these doctors in the system.

Historically governments in Canada have dealt with burgeoning health care budgets by throwing more money at it (until they have no more), de-listing of procedures, and creating waiting lists (in effect, rationing health care).

Now governments are trying to stretch dollars further by commoditizing health care. Who can provide cataract surgeries at the lowest possible price and give us more?

But of course this approach gives little or no consideration to quality issues or to choice for patients.

It is unfortunate that governments in this country stubbornly refuse to deal with the core issue that jeopardizes our health care. No matter how much they try to pinch every penny, there will never be enough tax money available to meet the needs of an aging population.

They need to tap into a whole new revenue stream – the private sector. As many other industrialized nations have found, separate private and public systems can exist in parallel and cure the chronic problem of waiting lists that continue to plague Canada.

Who will have the courage in this country to challenge this sacred cow?

Nickelback, a band that hails – like the PM – from the great province of Alberta, has sold more than 30-million albums during their career. Despite their mainstream success, it’s hard to find a single person who is willing to admit to liking their music. So, imagine my surprise when the band stopped in Ottawa to play a show a few weeks ago that lead singer Chad Kroeger hung out with the PM at 24 Sussex. I wouldn’t have believed it either…until I saw photographic proof:

Politically speaking, aligning yourself with a band is a bold move. Here is a list of other Canadian acts that I feel are more worthy of the PM’s attention:

1. April Wine – Canadian rock legends and recent inductees of the Juno Hall of Fame, this band would play well with the baby-boomer voting crowd.

2. Rush - Only back bacon and maple syrup are more Canadian than Rush. These classic rockers would almost guarantee a bump in the polls.

3. Justin Bieber – Teen idol and proud Canadian, this artist recently caused fans in Australia to faint and hyper-ventilate from excitement over seeing him in person. If Harper was to invite Bieber over to 24 Sussex the PM would be on the cover of Tiger Beat in no time.

Jim Flaherty and his budget shoes (Reuters)

Four o’clock today will indeed be the witching hour, when reporters, senior government officials, interest groups and associations, and the odd communications adviser or two, will emerge from a day-long “lock up” in Ottawa to release to Canadians details of the federal budget.

I really liked the way my old Washington colleague John Ibbitson summed up the situation in the Globe and Mail when he wrote “we are entering a dark decade that will test the will and ability of governments across Canada.” As we noted in a previous post the Parliamentary Budget Officer has warned that Canada’s fiscal situation is unsustainable without tax increases or massive spending cuts, or both. Given an aging baby boomer demographic moving out of the workforce and into retirement, program spending demands in health, social security and social services will hit record highs while our economy grows more slowly, or so the theory goes. Ibbitson’s argument is that if we start to take some painful steps now, it will limit the damage to Canada’s fiscal situation down the road.

The issues have never been more serious. But for some Canadians, this government-prompted debate over whether the words of our national anthem need to be changed will be more compelling water cooler talk. It shouldn’t be. The fiscal reality facing Ottawa and all Canadian provincial governments is overwhelmingly the most important public affairs environmental factor for anyone who engages with our elected officials – today or in the years to come. Help government with this issue and you will help yourself. Most ‘cap-in-hand’ requests will result in an empty cap. Instead, we are looking at a freeze in government spending, deregulated industries and more openness in terms of foreign investment. It not just spring training in Florida, it’s a whole new ball game.

Armed with an $800 million base increase and a one-time bail-out of $780 million from last week’s Alberta budget, Mr. Hughes said they will perform some 2300 more surgeries in the next six months, rework patient flow in emerencies departments, and perfom more community-based care.

Mr. Hughes hailed the “new stable, sustainable foundation”, saying it was a first in Canada. AHS now has a known envelope of funding for the next five years, with 6% increases in the early years, reducing to a 4.5% increase in year five.

Not shying away from the fact that Alberta spends more per capita on health than any other jurisdiction in Canada, Mr. Hughes made a bold commitment to “reverse the wait list trend” in this province. “We will not rest until we get greatly improved access” he told the large crowd.

AHS is already the largest employer in Alberta, with a staff of over 90,000. With the amalgamation of the regional boards last year, Mr. Hughes spoke glowingly of savings achieved as a result of reduced duplication and increased buying power (apparently AHS is now the eighth largest Microsoft customer globally). They have saved some $700 million in “back office” costs, without affecting service on the front lines of health care. “We will be fiscally responsible” he stated emphatically.

Certainly last week’s budget providing for a $4.7 billion deficit was surprising to many observers. Mr. Hughes said the government asked what it would take to fix health care in Alberta, AHS told them, and they got what they asked for in the budget.

What remains to be seen is their ability to deliver on the promise to reduce waiting times and improve access, two chronic problems not just in Alberta but in every province in this country.

In Alberta health care costs already represent about 41% of the total budget. Sooner or later governments will have to put a hard cap on these costs or find a new envelope of funding from the private sector to make quality health care truly sustainable.

Here’s the bottom line:
• The Stelmach Government is not stampeding to the right and perhaps hopes to marginalize the nascent Wildrose Alliance as the slash-and-burn right wing; the government is not responding to the fiscal hawks or living up to its own previews, determining instead to go a further $4.7 billion into the “rainy day fund” with total forecast expenditures up 6% to $38.7 billion.
• Alberta Health Services, which Albertans tell pollsters is Job 1, gets a further $780 million bailout, an $800 million base adjustment and a 6% raise per year. Finance Minister Ted Morton did not say what strings are attached, but with AHS now topping $15 B ($14.1 operating, $780 mm bailout, $76 mm capital), Albertans have to hope Health Minister Gene Zwozdesky is prepared to read the riot act to the Superboard to improve services within a budget… or else.
• Education is up: $6.1 B for Education and $3.2 B for Advanced Ed
• A three-year, $20.1 billion investment in infrastructure, where the government says it is “getting more for less” and creating employment. The Minister noted that capital spending on infrastructure offsets the deficit, arguing that it really is an investment for future generations. In previous years, Premier Ralph would have said we were using savings to fix the house; this bunch isn’t that creative.
• Just about everyone else “will be asked to give up a little.”

Here’s the real bottom line: This Government accepts the fact that balancing the books in Alberta is all about non-renewable resources. All that talk about diversifying our economy ignores the fact that a huge amount of the diversification over the past 15 years has been to serve the oil and gas industry. Darn, did I say that out loud? That was supposed to be a secret.

The anticipated take in Budget 2010 from energy royalties is $7.3 B, up $1.3 B from 2009-10, but down from $11.9 B in 2008-9. More importantly, oil sands will overtake natural gas as the prime non-renewable resource contributor. Oil sands contribution is predicted to grow 75% to $3.2 B. By Budget 2012 (just before the date the Premier has suggested for the next election) it’s projected at $5.1 B, or almost 50% of total non-renewable resource revenues and 12.7% of total revenues (up from 5.5% of in 2009-10). Natural gas, the traditional workhorse, could contribute $1.86 B in 2010-11 (up ~ 7%) but that’s a far cry from $5.8 B in 2008-9. This reversal of fortune stands out; in 2008-9, natural gas contributed 49% of non-renewable resource revenues. Budget 2010 anticipates a drop to 25%, due to reduced drilling/production and depressed prices; a decade ago, the U.S. thought it was running out of natural gas, but technological advances have unlocked the secret of shale deposits, and our prime market is currently awash with the stuff. Fiscal uncertainty in Alberta didn’t help, as what capital was available fled our borders for better prospects offering higher returns.

Morton reminded Albertans that the much anticipated Competitiveness Review might change some of that math as the Province moves to revive sagging conventional oil and gas activity. Maybe so, but the oil sands are not included in that study – they are already attracting investment, with projects being restarted and an upgrader being recently announced, reflecting a more stable oil price. So I read the bottom line as “conventional oil and gas are important, but oil sands are us.” We have an incredible resource there, with the second largest recoverable crude oil reserves in the world. But I’ll save my oil sands enthusiasm for another blog.

Clearly, like Little Orphan Annie, this government is betting that “the sun’ll come out tomorrow” and a reviving economy and stronger commodity prices will outweigh the pressure for increased spending on healthcare, education, social services and infrastructure. The oil sands are looking better and, if the social compact can be restored with conventional oil and gas producers, healthier commodity prices and an improving global economy should help us get back in the black by budget 2012. If the sun does come out on schedule, no one will notice that the “rainy day fund” has been depleted.

I always liked the musical “Annie” but I’m optimistic by nature.

“Leadership begins with learning and mastering the government of one’s self, followed by leading those around us before finally having either the skills or the credibility to lead others in the wider world,” says Mr. Solberg. CBC’s Radio’s the House also goes to Alberta this weekend, interviewing Mr. Solberg on the province’s role in the national dialogue.

Taking place in Edmonton, and streamed live from its website, the conference will explore how Alberta can build a positive and inspiring economic and political future. Part of that future comes with being a recognized leader on the Canadian stage – a province that protects its own interests but also contributes to the national interest. In his remarks on Saturday at 3PM MST, Mr. Solberg will discuss how Alberta’s energy, trade, education, health, and spending policies have influenced its position as a national leader. Check the Political View on Monday for all of Mr. Solberg’s remarks.

Tuesday’s high profile announcement by Liberal MLA and energy critic Dave Taylor that it makes sense to sit down and “break bread” with the oil and gas industry was complemented by an open letter to oil patch CEOs from Taylor and Liberal leader David Swann.  It acknowledged that Canada and Alberta’s economic health is inextricably linked with that of the patch.  Soon the Liberals will announce that the sun will rise in the east.  And if that isn’t enough, they now have a policy that proposes to encourage the energy industry and investors by adjusting royalties to reflect economic realities.  This from the crowd that insisted during the infamous royalty review debate that Albertans were not getting their “fair share.” 

It’s fair to say that Danielle Smith and her Wildrose Alliance are helping us get it Right in Alberta.  It appears a movement to the Right is underway, when even the “fair share” Liberals start talking about breaking bread with industry leaders and adjusting royalties to be competitive with other jurisdictions.  Interestingly, when newly minted Energy Minister Ron Liepert suggested the same thing, using the euphemism of “lunches at the Petroleum Club,” he took shots for being out of touch. 

Yes, the Pete Club is a bit of an anachronism, but there is still no better place to be seen if you’re doing a deal or making a statement.  And that is what Liepert has been mandated by the Premier to do: be seen, and make a statement.

Liepert, it must be remembered, represents Calgary West, giving him a real political advantage over his predecessor Mel Knight, whose riding is in Alberta’s northwest.  Liepert lives here.  He can be seen here.  Many remember “the good days” when Energy Ministers Greg Melchin (no partier, but a visible presence) and Murray Smith (more inclined to a good time, and a formidable presence) maintained strong offices in the city and regularly walked the plus-15’s (an elevated pedway that connects the city and protects us from the elements).  The oil and gas industry employs people throughout the province, and indeed throughout the nation, but Calgary enjoys “the energy capital” tagline and we like seeing the Minister here.

Here’s the scoop: I attended a breakfast meeting last Friday.  So did Liepert.  On Saturday, I attended an important fundraiser for STARS Air Ambulance hosted by the Petroleum Services Association of Canada.  So did Liepert. He spoke formally at both occasions and, as is his style, was mercifully brief.  But at both events, and no doubt many others in the days since his appointment, he visited at length with people and appeared thoughtful and engaged.  This is old style politics.

Now, almost everyone admits the 2007 royalty review and results were a bust – even Swann and company who originally goaded the Government to go further.  To be fair, not everyone agrees: one of the original “blue chip” panelists is still telling the media we’re not getting high enough returns, but the panel members didn’t understand that there are more benefits to oil and gas activity than just royalties. Albertans have had a painful reminder of that recently.

Liepert, his Deputy and others will be churning through the eagerly anticipated results of Alberta’s Competitiveness Review for several more weeks.  By all accounts the authors have solicited solid input on a full range of investment criteria, not just royalties.  The Minister says he and his colleagues won’t rush to judgment (as they did with the Royalty Review).  Good. He has to get it right.  If he proposes changes (and there have been far too many changes and teaks to royalties since the big one in 2007) they have to be real, responsive to circumstances, and as close to permanent as anything a government does. 

Like many other Ministers, Liepert has accepted the Premier’s challenge to communicate better with Albertans. He’s talking, and he’s listening.   I think he knows the statement he has to make to investors is about restoring trust, reliability, and faith.  It’s about restoring the Alberta Advantage, which is far more complex than we used to think.  For those of us who want to believe, that’s good news. I’d gladly lunch at the Pete Club to hear it.

Since becoming leader, Smith has organized a series of expert task forces to provide recommendations on everything from energy policy to MLA compensation packages, which will then be put to party members to be debated and for final approval. The Wildrose have rightfully ascertained that the average Albertan wants a say in how the province is being run, and it is paying huge dividends in public support.

On the government side of the equation there has been rumors swirling that a cabinet shuffle can be expected in early January. This will give the Premier a chance to shuffle out unpopular Ministers and give Cabinet a boost of new blood and talent. One would expect that Ted Morton may be the beneficiary of a more prominent ministry. Currently the Minister of Sustainable Resource Development, Morton’s political and ideological background speaks to the disgruntled Tories who are leaving for the Wildrose Alliance.

The Premier has also instituted changes in his communications shop. His communications director will not have his contract renewed at the end of January, and the Premier has embraced the use of digital media.  However, it’s going to take more than a few targeted emails and tweets to regain the trust of Albertans. The Legislature is not expected to come back until early February. This gives Stelmach two months to reacquaint himself with Albertans. He should be holding town hall meetings in all 83 ridings throughout Alberta. By engaging the grassroots he may be able to put the brakes on the PC Party’s unprecedented drop in public support.