The Alberta Prosperity Project, NATO and the Cost of Defense

The Alberta Prosperity Project (APP) describes itself as an Alberta “educational initiative.” Its stated purpose? Holding a referendum on Alberta independence with the goal of removing the province from confederation and establishing a new, sovereign state. The APP recently released its draft fiscal plan for the project:

The Value of Freedom: A Draft Fully Costed Fiscal Plan for an Independent Alberta (download)

Please download and read the plan. To facilitate our discussion, here are a few relevant figures:

• Total startup costs to establish Alberta as a sovereign state: $98–106.9 billion.
• Of this total, funds required to replace all federal services (including defense): $22.7–31.6 billion.
• Of that number, initial capital budget allocated for defense: $1-2 billion (+ $500 million for cyber security).
• Annual defense budget: $3 -5 billion.

This costing document offers some insight into how the APP would approach the challenges involved in decoupling from confederation. It’s reasonably comprehensive. It looks at all aspects of the enterprise from taxation, to migrating provincial and federal services, to establishing a pension fund and negotiating aboriginal rights. The plan provides scenarios for issues such as the uncertain value of a payout from the CPP and creating a new postal service. The document cites a variety of reputable sources, but even given this rigor, it is unclear if these calculations are sound. As an example, let’s look at single, significant aspect: defense.

The APP has calculated $22.7–31.6 billion in startup costs to replace all federal services, including defense. Of this amount, it has earmarked $1-2 billion specifically for defense capital expenditures. Is this figure realistic?

Consider the following: the acquisition cost for a single Lockheed Martin F-35 fighter jet is $121.6 million CAD. This is the price the Canadian government was quoted for the purchase of 88 such aircraft. Alberta’s smaller purchase would likely have a higher per unit cost, but that number will do for our analysis. To properly patrol Alberta’s vast territory, how many F-35s would Alberta need? Let’s go “low” with a squadron of 12 for the purpose of calculations. Now, do the raw math: $121.6 million x 12 = $1.459 billion, just for the upfront purchase of the aircraft. Remember, though, you still have no facilities to house or maintain these assets, you have not built the runways for them to take-off and land, and you have no one to fly them. What you have is metal sitting in a warehouse. [this is, of course, understates the complexities involved. See here]

That’s $1.5 billion of the APP’s entire $1-2 billion startup defense budget just to take possession of 12 aircraft. What’s left for the rest of the military kit? Let’s look at some other big ticket items:

• Helicopters: The CH-148 Cyclone used by the Canadian military would cost around $134 million CAD per unit (if you could buy a single aircraft, without a service contract, which you can’t. Count on buying a dozen.)
• Armored Vehicles: the Leopard 2A7+ tanks (also used by Canada) are approximately $11.12 million CAD per unit.
• Transport Aircraft: You’ve got to move all of this equipment around. A CC-130J Super Hercules costs around $182.35 million per unit.
• Construction: Building new military bases (not cheap).
• Outfitting: Procuring a full range of small arms and other necessary supplies for all personnel.

And what about the vast technical infrastructure needed to support a modern army:

• Communications and satellite networks.
• Intelligence gathering and analysis capabilities.
• Cyber-surveillance and security operations.
• Secure data centers to support all of these functions.

The list goes on and on. Several multiples of the full $2 billion budgeted would probably not touch the underside of equipping a new Alberta state for modern defense.

Certainly, serious people will make difficult decisions. Some costs will be adjusted, others will be deferred. Building military capability will, of course, take years. But once the ink is dry on separation, Alberta will no longer be under the collective protection of NATO’s article 5. As a non-member state, it will be vulnerable to a critical list of threats, from forceful annexation by the US, to attack by Russia. Yes, Alberta may have achieved independence, but without a substantial, appropriately provisioned military how will it maintain this sovereignty?

Alberta will likely apply to join NATO, but that process will take years. And when (or if) that application succeeds, Alberta will be committed to spending 5% of GDP on defense. In its plan, the APP has budgeted $3-5 billion (annual) for this line item. The document provides an estimate for Alberta’s “Total Economic Activity” of $253.2 billion. Using this number, we can see that even the upper limit of $5 billion would only bring defense spending to 1.97%, drastically lower than NATO’s current mandate (in all fairness, though, as a percentage, that’s more than Canada currently spends, but that's a topic for another article).

By any accounting, the defense figures outlined by the APP, $1-2 billion for initial capital costs and $3-5 billion ongoing expenses, are startlingly inadequate. Perhaps the new Alberta state won't purchase 12 F-35s. Maybe it will only buy 5. Maybe it won’t buy any. But how sovereign is a country without the ability to patrol, control and defend its own airspace? Could Alberta “do it on the cheap” and stick to that $2 billion? That’s just not feasible. The APP plan shows no evidence that it has a comprehensive grasp of the costs.