Do you trust Danielle Smith with your pension?

If you thought Danielle Smith’s unpopular push to withdraw Alberta from the Canada Pension Plan was over, well, think again. After an out-of-nowhere firing of the CEO and board of AIMCo, the province’s pension management corporation, Smith has now appointed former Prime Minister Stephen Harper to run it. Let the games — and the madness — begin. 

The UCP’s first attempt at convincing Albertans they should support a provincial pension plan didn’t exactly go smoothly. It began by floating the idea that Albertans were entitled to more than half of the CPP’s assets despite only making up approximately 15 per cent of the population that contributes to them, then ran an advertising campaign around that flagrantly unrealistic figure. The government appointed former PC finance minister Jim Dinning to head a three-person panel, and tasked it with listening to people across the province before putting the entire process on hold last December when it became clear the public wasn’t buying what it was trying to sell. 

Now, with Harper in the fold, they seem ready to start the sales job anew. Smith’s government isn’t ready to admit that part just yet, mind you. “It’s the trajectory on the costs,” Finance Minister Nate Horner said at the time of the AIMCo purge. “It seemed like it needed a reset.” The facts, as much as they matter here, don’t actually show that. Under now-former CEO Evan Siddall’s leadership, AIMCo exceeded its performance benchmark over the last three years (5.8 per cent return versus 3.6 per cent if it had merely bought and held a variety of index funds using the asset allocations specified by its clients).

Its costs, meanwhile, were in line with other similar organizations. At 0.66 per cent of assets under management, they were slightly more than the 0.54 per cent for the British Columbia Investment Management Corporation but less than the 0.81 per cent charged by the Investment Management Corporation of Ontario. An independent firm actually put AIMCo’s costs at 23 per cent below what an average peer would charge to manage the $160 billion in assets, outgoing board chair Kenneth Kroner noted in a letter to Horner. “That $258-million (based on 2022 figures) goes straight into Albertans’ pockets,” he wrote. “AIMCo has always been, and remains, a cost-conscious, high value-for-money asset manager.”

What was Horner’s “reset” really about, then? Given his government’s well-documented antipathy towards the idea of an energy transition, it’s probably about AIMCo’s willingness to plan for the inevitable. As the Globe and Mail’s James Bradshaw and Carrie Tait reported, “One early issue that caused tensions internally and with clients was AIMCo’s effort to build a new, multibillion-dollar investment fund focused on the transition to a carbon-neutral economy, sources said.” That plan was ultimately scuttled, but it’s not hard to see how it would have put Siddall in the Smith government’s crosshairs. 

Now, with Harper at the helm, they have the alignment they want on this issue. For all of the Alberta government’s talk about an endless horizon for oil and gas demand growth, Smith and her key ministers understand what’s really about to happen. They know other institutional investors, whether it’s Canadian pension funds and banks or their global peers, will reduce their exposure to oil and gas companies. They know that it will be harder and harder for Alberta’s oil and gas sector to raise capital at competitive rates, and they know that their shares will need to find new buyers. What better buyer is there than a captive public?

This is why they have had their eyes on Alberta’s share of the the Canada Pension Plan assets. No, Alberta will never get the ludicrous $334 billion — more than half of the total assets under management —  the UCP has suggested it’s entitled to receive. But even if it gets half of that amount, the size of AIMCo’s assets under management would double. If and when the rest of the CPP divests from Alberta’s oil and gas companies, this new and enlarged AIMCo could simply fill that void. 

This would be wildly reckless. If there’s anywhere that should be preparing for the energy transition, it’s Alberta. Norway’s Global Pension Fund Global, now worth more than two trillion Canadian dollars, only invests in assets outside the country. Why? It understands the inherent risks in doubling down on an oil and gas economy. “Oil revenue has been very important for Norway,” its website says, “but one day the oil will run out.”

Not in Alberta, apparently. In a televised address back in February, Smith said that the Heritage Fund — which sat at $23.4 billion as of June 30 — could grow to somewhere between $250 billion and $400 billion by 2050. After cleaning house at AIMCo, Smith suggested that “there’s an opportunity to chart a different pathway on the Heritage Savings Trust Fund so that we can get better returns.”

Albertans have heard this song and dance before. As a different Conservative Minister named Horner (Doug, who just happens to be Nate’s cousin) promised Albertans back in 2014, “under our savings plan, the Heritage Fund will grow, faster than inflation, and faster than we have seen in a very long time.” In the decade since then, the Heritage Fund — managed by AIMCo — grew at just 2.8 per cent annually, far slower than inflation. That’s because successive governments couldn’t resist dipping into the Heritage Fund and using its investment returns to fund their spending priorities. 

The only way to actually grow the Heritage Fund properly is by not spending the revenue it generates — and saving the royalties generated by oil and gas royalties. And the only way to do that is by replacing it with tax revenue, most obviously a provincial sales tax. 

That’s not happening, of course. Instead, we’re going to bet the farm on an industry in the midst of a potentially disruptive transition — one the province is already far too heavily leveraged on. When it ends in tears, don’t go looking for Stephen Harper or Danielle Smith. They’ll be long gone by that point.