Canadian Confederation is facing serious resentment from Western Canada, particularly Alberta, following the federal election. The results showed very little support for Justin Trudeau’s Liberal Government in the Prairies. Serious media interest has focused on this topic, an online petition for separation has been gaining traction, and #WEXIT has been trending on Twitter. In order to maintain confederation, the current arrangement must be fixed. Points of contention that should be up for discussion are provincial transfer payments and pipelines.
Natural resource-rich Alberta was hit the hardest by the price of oil drop in 2014. Since then, while the industry south of the border has recovered, Canadian energy continues to unnecessarily struggle. A large driver of this is Western Canada’s inability to get resources to market. Alberta relies heavily on pipeline capacity to tap world markets, and conveniently, pipelines are also the safest way to transport the hydrocarbons. Without sufficient capacity, Canadian energy trades at a deep discount relative to the US. The problem is that the federal government has no interest in supporting this industry. It has created an environment of uncertainty and confusion for companies and citizens. One of the primary causes is the rhetoric and action of Trudeau’s government. This combined with complex indigenous and environmental standards has resulted in an impressive list of torched projects.
Following the last Liberal government, four major pipeline projects were stalled or cancelled. Here’s a quick summary:
Energy East was a proposed pipeline that would have run from Alberta to the East Coast. It was to be built by TransCanada and was projected to create 13,690 full-time direct and indirect jobs and $36 billion in additional GDP by 2040. It would have also reduced Quebec and New Brunswick’s reliance on imported oil from Saudi Arabia and Venezuela. Many blame an inconsistent and unpredictable review period that Trudeau’s government oversaw, where changes in environmental standards were altered during the process. TransCanada ultimately walked away from the uncertainty. Outcome: Cancelled.
Northern Gateway was a project to be built by Enbridge. The project was estimated to create 3,000 construction jobs and an estimated $300 billion in additional GDP by 2045. It was to run from Alberta to the West Coast and create $80 billion in tax and royalty revenue. This project would have allowed access to Asian markets and increase Canada’s standing as a leader in the industry. In 2014 the project was approved, but when Trudeau became prime minister in 2015, his government implemented an oil tanker ban off parts of the coast of B.C. before he ultimately vetoed the project, essentially killing it twice. After spending half a billion dollars to get the project going, Enbridge was not given permission to build. Outcome: Cancelled.
Keystone XL was to be a pipeline that crossed into the US from Alberta. It initially received approval from the US State department citing minimal emissions impact. Former President Barack Obama vetoed the project, and Trudeau mentioned he was “disappointed” by the decision. This could have been a defining moment for Trudeau, where he stood up for Canada and put pressure on Obama to allow the project to move forward as many individuals and organizations did in both countries. Instead, at a speech to the U.S. Chamber of Commerce following the veto, he didn’t even mention Keystone. Outcome: Positive development from President Trump’s Executive Order to begin construction.
Trans Mountain was a major campaign issue during this election. Kinder Morgan Canada plans to expand the capacity of an existing pipeline that runs from Alberta to the West Coast. It is projected to create $18.5 billion in federal revenue over a 20-year period. After submitting the application for expansion in 2013, the company gained approval only to have it revoked by an ambiguous process of legal challenges. This involved changes in emission standards, unclear indigenous consultation standards, and challenges from a B.C. government that had previously approved it. The Trudeau government seemed to finally grasp the significance of the project and purchased the pipeline from Kinder Morgan with tax-payer dollars, who appeared to be abandoning it after 5 years of uncertainty. There are still, rightly so, serious doubts around construction. Outcome: Stalled
Trudeau’s 2015 campaign promises of balancing the economy with the environment have disastrously failed. Alberta has taken notice of these broken promises. These projects were in the best interest of Canadians and none of them have been completed to date. How could any company have confidence that a project can be completed under Trudeau’s government? In all instances, he has actively destroyed them or passively watched with disregard as others terminate them. The projects were not only economically advantageous to all Canadians, but beneficial to the average Westerner that would have seen increased employment opportunities. Instead, Alberta’s unemployment rate of 6.6% is well above the national average.
The truth is that Trudeau would rather put all focus on fighting a climate crusade than support Canadians working in the energy industry. Oil and gas make up the majority of energy consumed globally and this will be true for the foreseeable future. The world demands these natural resources, why shouldn’t Canadians be the ones supplying it?
The alternative is Canada could just let Iran and Saudi Arabia take the lead on this one – with their stellar environmental standards and spotless records on human rights.
The resentment out West is larger than pipelines, though. There has also been a constant underlying bitterness stemming from the extent to which wealth is transferred out of Alberta to the rest of the country. In 2016, when Alberta was still well in a recession, the Western province contributed nearly $50 billion in tax revenue to Canada, but only saw $27.2 billion of its return in federal spending.
Tristin Hopper of the National Post points out that Alberta would be the largest contributor to federation under most systems because of its economic prosperity in good times and bad. This is not a sufficient defence for the current system, though.
The transfer is implemented partly through equalization payments which seek to ensure that prosperity from “have” provinces like Alberta and Saskatchewan is shared with “have not” provinces like Quebec and Nova Scotia. It distributes revenue raised from the government through taxation to have comparable public services through federal spending among all provinces.
Alberta contributes the most to confederation under this formula that will see Quebec receiving $13.1 billion in 2019-2020. Manitoba, Nova Scotia, and New Brunswick will receive approximately $2 billion, while P.E.I. will see $419 million. Alberta will receive no equalization payments.
One of the main reasons this has become so contentious in Alberta is because the province contributes the most to equalization or similar transfer programs and receives none of the federal spending in their province from it. The provinces that do see benefit through public services spending actively attack the very industry that created a respectable portion of the tax revenue in the first place. The hypocrisy is absurd.
Kevin Carmichael writing for the Financial Post notes that the individual benefit received in Quebec through equalization is very similar to that of an Albertan that will see the benefit through the rent paid from the natural resource sector. What isn’t mentioned is that the Quebecer’s gain is disproportionally coming for Alberta. Alberta contributes 17% of all tax revenue while only making up 10% of Canada’s population. Significant amounts of wealth are removed from Alberta and placed around a country that seems indifferent to Alberta’s suffering, or in Quebec’s case, actively against their projects like Energy East.
Albertans would have an easier time rationalizing transfers if other provinces and the Trudeau government would stop continuously antagonizing the energy industry. It would be willing to contribute to a fairer system that reduces the gap between Alberta’s contribution and the federal spending it receives.
Something must give. The rest of Canada should be an ally to Alberta and help champion its ethical natural resources. It can support a province that has always provided more than its fair share to confederation, or the seriously underappreciated Alberta might decide it no longer makes sense to participate in this arrangement as it currently stands.
Albertans don’t want to leave Canada, but without significant change, what else can they do?
Tasker, John. “Activists Claim Victory as Trudeau’s Oil Tanker Ban Passes Commons | CBC News.” CBCnews, CBC/Radio Canada, 9 May 2018
The Canadian Press. “Canadian Unemployment Rate Nears Four-Decade Low; Story in Alberta Not as Rosy.” Calgary Herald, 12 Oct. 2019
The Canadian Press. “Facts and Figures on the Northern Gateway Pipeline.” Global News, Global News, 8 June 2014
The Canadian Press. “Trans Mountain Timeline: A Look at Key Dates in the Project’s History.”
Carmichael, Kevin. “Getting the Facts Straight When It Comes to Provincial Equalization Payments.” Financial Post, 14 Aug. 2019
CBC News. “Bringing Clarity to the Sometimes Murky World of Equalization Payments | CBC News.” CBCnews, CBC/Radio Canada, 12 Sept. 2019
Department of Finance. “Federal Transfers to Provinces and Territories.” Federal Transfers to Provinces and Territories, 2 Feb. 2017
Dixon, Rodney. “The World Can No Longer Ignore Saudi Arabia’s Human Rights Abuses | Rodney Dixon.” The Guardian, Guardian News and Media, 15 Oct. 2018
Fife, Robert, and Paul Koring. “Keystone Casts Shadow over Trudeau’s Speech to U.S. Chamber of Commerce.” The Globe and Mail, 16 May 2018
Hopper, Tristin. “Of Course Alberta Is Getting Fleeced by Ottawa, Just Not in the Way You Think.” National Post, 11 Apr. 2018
Hunter, Justine, and Carrie Tait. “Why the Northern Gateway Project Is Unlikely to Be Built.” The Globe and Mail, 12 Nov. 2017
Keane, Sascha, and Joe Rosengarten. “The Energy East Pipeline: Creating A Strong Flow Of Employment Opportunities Across Canada.” Industry and Business
Mabee, Warren, et al. “What Really Sank the Energy East Pipeline?” National Observer, 20 Oct. 2017
Vaughan, Adam. “How Keystone XL, the Pipeline Rejected by Obama, Went Ahead under Trump.” The Guardian, Guardian News and Media, 24 Mar. 2017
World Energy Council, 2016, World Energy Report 2016.