IN THIS ISSUE. Related CBC Programs. News in Review Study Modules

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2 IN THIS ISSUE Norways' Oil: Investing in a Nation's Future (Duration 12:09) The worldwide drop in oil prices has left Alberta facing a billion-dollar deficit and its economy balancing on the edge of recession, possibly dragging the rest of Canada with it. What happened with the surplus the province made over the years of high oil prices? There may be a lesson to learn from across the Atlantic in Norway. What did this small nation do differently to survive the oil price plunge? News in Review Study Modules Keystone XL : Coming Soon?, November 2014 The Great Oil Pipeline Debate, March 2012 The Future of the Oil Sands, April 2009 Boom Times: Alberta's Red-Hot Economy, May 2006 Oil and the Dollar: The Canadian Crunch, December 2005 Related CBC Programs Crude Awakening Tipping Point: The Age of the Oil Sands When Less Is More: Alberta Tar Sands Exploration Credits News in Review is produced by CBC News Resource Guide Writer: Jennifer Watt Resource Guide Editor: Sean Dolan Host: Michael Serapio Packaging Producer: Marie-Hélène Savard Associate Producer: Agathe Carrier Supervising Manager: Laraine Bone Visit us at our website at curio.ca/newsinreview, where you will find an electronic version of this resource guide and an archive of all previous News in Review seasons. As a companion resource, we recommend that students and teachers access CBC News Online, a multimedia current news source that is found on the CBC s home page at cbc.ca/news/. Closed Captioning News in Review programs are closed captioned for the hearing impaired, for English as a Second Language students, or for situations in which the additional on-screen print component will enhance learning. CBC Learning authorizes the reproduction of material contained in this resource guide for educational purposes. Please identify the source. News in Review is distributed by: CBC Learning Curio.ca, P.O. Box 500, Stn A, Toronto, ON, Canada M5W 1E6 Copyright 2015 Canadian Broadcasting Corporation

3 News in Review November 2015 Teacher Resource Guide NORWAY S OIL: Investing in a Nation's Future VIDEO REVIEW Before Viewing 1. a) Write down three or four words that come to mind when you think about the oil industry: b) Compare your list of words with the lists of two other students in your class. What did you learn from your comparison of words? 2. Do you think people in other parts of the world or other provinces in Canada might have different words from the ones you came up with? How would you explain the differences? Viewing 1. Once oil-rich Alberta is facing a deficit of how many billion dollars? 2. Norway has spent its oil profits recklessly. True False 3. Norway has a high taxation rate on its oil profits. True False 4. Who is the main beneficiary of the oil industry in Norway? Private oil companies The citizens of Norway 5. Technically speaking, how much money does every Norwegian have in their oil pension fund? 6. Up to what percentage can the Norwegian government dig into the oil fund? News in Review CBC Learning curio.ca/newsinreview 3

4 7. Norway s oil fund is valued at over one trillion dollars. How much is the Alberta Heritage Fund worth? 8. The oil industry in Norway is now facing tough times due to a drop in oil prices. True False After Viewing 1. Do you think that Norway is a good example of how a country or province should manage oil revenues? Why or why not? 2. Why do you think it is difficult for governments to put aside profits for the future security of its citizens? 3. Do you think that governments or private companies should manage natural resources? Why? News in Review CBC Learning curio.ca/newsinreview 4

5 THE STORY Oil: An Economic Blessing or Curse? Minds On Oil is considered black gold because of the wealth it can generate for individuals and nations. Let s imagine you were to discover oil on your school property (and for some strange reason you were granted the rights to that oil). What factors would you have to consider before making a decision concerning the potential profits of selling that oil in relation to the environmental costs involved in making that oil viable for commercial use and export? cases, the booms have been short-lived, especially since the price of oil plummeted in How oil can impact a nation s economy The world s economy is dependent on oil a nonrenewable energy source. Nations that have rich supplies of oil are considered fortunate and tend to reap considerable economic benefits from the export of oil to nations that do not have their own oil reserves. However, while oil-rich nations reap economic benefits off this commodity, they also face challenges due to their dependence on oil production and the need to export oil in a safe way. In addition to this challenge they have to deal with huge cartels like the Organization of Petroleum Exporting Countries (OPEC). OPEC nations work together to set production targets that benefit their members economically while ensuring a regular supply of petroleum to consumers and manufacturers. Many nations outside of OPEC are questioning their dependence on oil for both economic and environmental reasons. Canada and Norway are two nations that have rich oil reserves that have resulted in recent economic booms. But, in both The members of OPEC are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Find out the criteria required for becoming an OPEC member state: opec.org/opec_web/en/about_us/25.htm The oil bust To give you a sense of the dramatic change in the cost of a barrel of oil, consider the following: in 2008, a barrel of oil cost close to $150 (all figures in U.S. dollars); by 2014, the price per barrel was closer to $50. The drop in oil prices was due to several factors. First, there was a serious global recession that altered the demand for oil and gas. Second, countries like the U.S., Canada and Norway were concerned about the negative impact of high oil prices on their economy so they started to ramp up efforts to extract their own oil through less traditional practices like fracking and oil sands extraction. The move to develop independent national oil reserves cut the need to import oil sharply. This radically affected global oil prices. Saudi Arabia, which holds the largest oil reserves in the world, decided not to cut down its production, despite decreased demand, which kept oil prices low. The Saudi government hoped that this tactic would force countries like the U.S., Canada and Norway to abandon their more costly production methods because of a lack of profitability. News in Review CBC Learning curio.ca/newsinreview 5

6 Alberta and Norway: A comparison in oil booms But let s return to when times were good for oil production in Canada. The Canadian constitution gives the provinces authority over natural resources, including the right to keep any royalties or taxes gained from their production. In 1976, the Alberta provincial government set up a sovereign wealth fund (which they named the Alberta Heritage Savings Trust Fund) that aimed to stash away oil and gas revenue for future generations. Simply put, this sovereign-wealth fund was the equivalent of saving for a rainy day. Since all booms will one day end in a bust, Alberta wanted to have cash on hand to ride things out during tough times until the next boom replenished the reserve. The Alberta Heritage Savings Trust Fund sat at $17.7 billion at the end of June 2015 a sum that might sound like a lot but government officials say will be a fraction of what is needed to make it to the end of the current energy crisis. Through times of rich surpluses and deep deficits, Alberta s government has failed to set aside most of its energy royalties. Meanwhile, successive provincial governments have spent almost all of Alberta s energy revenue reserves. With a similar-sized oil economy (and an almost identical population), Norway established a sovereign wealth fund in 1990, based on the Albertan idea. However, Norway set stricter limits on how much could be drawn from its fund to cover deficits. Today, the Norwegian fund s market value stands at the equivalent of one trillion Canadian dollars 65 times larger than Alberta s Heritage Fund! How do they do it? There are major differences between Alberta and Norway that are important to consider before deciding which nation is acting more responsibly. Norway s corporate tax rate is an amazingly steep 78 per cent. The reason that this tax rate is accepted in Norway is that the Norwegian government owns the company that accounts for more than threequarters of the country s oil production. This means that most of that company s profits flow directly into Norway s sovereign wealth fund. Alberta is fundamentally different in its oil industry with dozens of domestic and foreign companies involved in the oil industry. Most are publicly traded companies. Thus, they are expected to generate a good return for their shareholders. In return, they invest tens of billions of dollars of private capital to continue to develop Alberta s resources. These companies would not agree to a 78 per cent corporate tax rate. Alaska an alternative? Albertans may look to Alaska as a more realistic model going forward. Alaska has put the state s surplus oil revenues into the Alaska Permanent Fund, an investment fund for current and future generations. This fund gives annual dividends to Alaskans from investment income. The government also keeps spending on state programs to a minimum. Alberta needs to take a hard look at how its economy is tied to the oil industry and consider how it can secure economic advantages for future generations. To Consider Are oil resources a blessing or a curse to a nation/province? Before making your reasoned conclusion, consider the question from at least three of the following perspectives; economic, environmental, political, national security and/or ethical. How much oil does your province or territory produce? Find out at the following Statistics Canada web page, Estimated Production of Canadian Crude Oil and Equivalent : neb-one.gc.ca/nrg/sttstc/crdlndptrlmprdct/stt/stmtdprdctn-eng.html News in Review CBC Learning curio.ca/newsinreview 6

7 A SHORT HISTORY OF ENERGY Minds On Work with a partner and list as many forms of energy as you can. Sort them into two lists, one labeled non-renewable and the other labeled renewable. Which list is longer? Which list do you think provides the best solutions for an energy-hungry planet? Why? The beginning of time The sun is the earth s oldest source of energy. In fact, the sun plays a part in almost every form of energy we use. Wind comes from temperature changes caused by the sun. Trees, plants and vegetation get their nourishment from the sun. Streams and rivers provide energy with their downhill flow that come from rain and snow. This rain and snow come from the sun s ability to evaporate water that eventually converts to precipitation. Industrialization and beyond While wood was the main source of energy that people used for thousands of years, coal and oil became the go-to sources of the modern era. During the Industrial Revolution, coal-burning steam engines and internal combustion engines that used oil and gas became commonplace. Fossil fuels (oil, coal and natural gas) became the energy source that powered factories and machines. It took the earth 500 million years to produce these fuels from the remains of dead plants and animals. Humanity has severely depleted these resources in just over one hundred years. The world s fossil fuel supplies are quickly being used up. What s more, when fossil fuels are burned, carbon dioxide is released into the atmosphere and that creates harmful pollutants for our planet and our ecosystem. So, what new energy sources have we developed in recent history? Recent innovations in energy Nuclear power is one new energy source. Nuclear power plants use the energy found in the nuclei of atoms to make electricity. A major concern around nuclear power is that they rely on unstable atoms found in uranium, and the radioactive waste material is extremely difficult to dispose of safely. Nuclear accidents have also reduced public and political support for nuclear energy. Meanwhile, recent innovations have made renewable energy viable. Renewable energy is a form of energy that is replaced at the same rate that it is used. Renewable energy is replaced through natural processes and through good business practices. Examples are solar energy, wind energy, tidal power, the gravitational pull of the earth and geothermal energy. Scientific innovation continues to expand possible energy sources. Even though technology has made clean renewable energy cheaper and efficient, the economics and politics of fossil fuels remains extremely hard to dismantle. One tough question needs to be addressed: what will it take to wean us from fossil fuels? News in Review CBC Learning curio.ca/newsinreview 7

8 Task #1 1. Research one form of renewable energy. Present the pros and cons of developing this type of renewable energy. Create an ad that convinces people that this form of renewable energy is a better alternative to fossil fuel use. 2. What recent political and environmental events support the belief that oil dependence should be abandoned? Task #2: Make a commercial Watch this 90-second CBC segment entitled Why Alberta s oil is likely to stay in the ground : cbc.ca/news/why-alberta-s-oil-is-likely-to-stay-in-the-ground How clear, concise and credible were the arguments made in this segment? 2. Were graphics used effectively to support the main points? 3. Were sound effects and music used effectively to focus viewers attention or to create an appropriate mood? Visit the CBC Digital Archives to learn more about how former Canadian Prime Minister Pierre Trudeau was hated in the Western provinces, especially Alberta, because of his attempts to take provincial profits from the oil industry in the 1970s through his National Energy Policy: cbc.ca/archives/entry/west-bitter-over-trudeaus-nep Your Turn Create your own 90-second segment centered on a question that you have about the oil industry, climate change or renewable forms of energy. Ensure the following: Your arguments are clear, concise and credible. Your graphics support the main points. Your music and/or sound effects effectively helps focus the viewer s attention and create an appropriate mood. News in Review CBC Learning curio.ca/newsinreview 8