Non-renewable Natural Resource Wealth Management and Distribution in Canada: National, British Columbia, Northwest Territories, Quebec

Abstract

Canada possesses some of the world’s largest and most valuable non-renewable resource deposits. As of 2017, Canada was the world’s fourth largest natural gas producer, fifth largest crude oil producer and a significant producer of gold, copper, coal, potash and iron ore. Management of these resources is complex, but largely resides with subnational governments, whether provinces or territories. As such, fiscal regimes, environmental and social regulations, distribution of resource revenues, and management of resource revenues vary across the country. This chapter summarizes the management of oil, gas and mining resources and revenues in Canada, with a focus on subnational sovereign wealth fund governance. Among our conclusions, we highlight low average effective tax rates by global standards, limits to the benefits that can be captured by the territories and a tendency towards discretionary use of sovereign wealth funds. We present three subnational sovereign wealth fund case studies from British Columbia, the Northwest Territories and Quebec, since these funds are explicitly meant to be financed in part by resource revenues. The Alberta Heritage Savings Trust Fund is covered in a separate chapter, and the Manitoba Stabilization Fund is not explicitly financed by natural resource revenues nor resides in a resource-dependent province. While some funds, namely the Quebec fund, have incorporated many good global practices in sovereign wealth fund management, the case studies underscore the need for withdrawal rules that help governments smooth fiscal expenditures and promote intergenerational equity, along with a need for greater public oversight.