Canada Needs Alberta

Pumpjacks draw out oil and gas from wellheads surrounded by canola fields near Cremona, Alta., on July 15, 2024. The Canadian Press/Jeff McIntosh

Commentary

Recently, Prime Minister Carney said, “We’re renovating the country as we go, and Alberta being at the centre of that is essential.” Did he really mean this? If so, is the federal government (and Central Canada) giving the risk of Alberta separation appropriate attention and response? If so, why is the federal government still imposing significant costs on the Canadian energy industry—costs which are making it difficult for the industry to compete with global producers?

Furthermore, why are the primary themes on Alberta separation coming from Central Canada still the following:

1. it is Premier Smith’s problem and fault, fuelled by separatists in her party and her acquiescence to allow possible votes on separation;

2. Alberta businessmen/CEOs are to blame as they haven’t spoken out loudly enough in favour of Alberta staying in Canada; 3) Alberta separation is not constitutional anyway;

3. the two memorandums of understanding (“MOU”) on the West Coast pipeline have solved all problems; and,

4. Alberta would suffer drastically if it separated, as people and capital would flee the province.

What’s Driving Alberta Separation Feelings Anyway?

It is a combination of factors. Lead among them is the sense that Canada is slowly restricting our freedoms to speak, act, pursue our chosen religious faith, and conduct business without undue government intervention. Additionally, the federal government still doesn’t understand or fully support the oil and gas industry which is critical to the economic success of Alberta and Canada. It has placed its prime focus on the shiny pony of a pipeline to the West Coast. Yet, the real issue has been, and still is, the cost competitiveness of the oil industry’s production.

If Alberta is to grow (perhaps double) its oil production and drive value creation and well-being for all Canadians, it will need hundreds of billions of dollars of upstream investments over the next 10 to 15 years, and it will need confidence that its costs will be globally competitive. The industry still doesn’t have that confidence (despite two MOUs) but rather feels it is being taxed (industrial carbon taxes) and required to allocate capital without associated return (Pathways carbon capture project with no significant revenue prospects) when its key global competitors don’t have such cost burdens. Further, the notion that global buyers will pay a premium for a “decarbonized” barrel of oil doesn’t hold water with any knowledgeable party and certainly hasn’t been evident anywhere in the world to date.

Moreover, many Albertans feel that the federal government continues to treat Alberta (and Saskatchewan) as though we are still in 1905 when those provinces were brought into the Confederation to serve the interests of Canada and weren’t treated as equal partners. The dominant culture in Western Canada is one of free markets, competition, innovation, entrepreneurship, low regulation, low taxes, and minimal government intervention. Central Canadian culture, with its significant oligopoly structure, is more aligned with big government involvement and regulation which provides protection from foreign competitors, especially U.S. companies.

There are other factors that influence many of the separatists, such as views on unfair tax and equalization payments, where Alberta has been funding Central Canada, especially Quebec, with estimated net outflows of $245 billion during the 2007 to 2022 period.

Would Separation Hurt Alberta or Not?

Many experts argue that separation by Alberta would be devastating for the province, potentially costing tens of billions of dollars, and with hundreds of thousands of residents leaving. Of course, Alberta would be land-locked, it would be relatively small in size and importance, and would spend much effort in negotiating the ultimate separation.

However, there are many benefits that might accrue to a separated Alberta. These could possibly include:

1. the ability to substantially deregulate;

2. ability to revamp sub-optimal health-care systems without the effective restrictions imposed by the federal government;

3. ability for reduced taxes;

4. ability to avoid the commercial restrictions and costs that have evolved related to the Canadian judicial system and indigenous peoples;

5. ability to fully exploit its natural resources, and the ability to better reverse those policies and practices that restrict our freedoms in favour of ever-increasing government influence and control.

Would these changes be possible? Given that most of Alberta’s exports go south to the United States and that Alberta is the most entrepreneurial province, it is likely that they would be possible. Would these changes attract more capital and talent than that which might flee a separate province? I think so.

Experts argue that the uncertainty of Alberta separation is scaring away capital.  Perhaps. More likely though, is that the uncertainty over government carbon taxes, required “carbon capture” expenditures, indigenous and provincial resistance, freedom to compete, undue regulation, and overall government intervention are the real items preventing capital investment. A separate Alberta could become the wealthiest per capita region in the world by a wide margin.

What Would the Impact Be on Canada?

Few have addressed this question. Privately, a prominent journalist executive answered it for me very succinctly: “Canada would crumble.” According to Visual Capitalist, Canada has an estimated US$33 trillion of resources (and the second-most per capita behind only Saudi Arabia), but a disproportionate amount of these resources (think oil/gas/potash/uranium/key minerals) are concentrated in Alberta and Saskatchewan. The economics, GDP prospects, and balance sheet of a Canada without Alberta would be much weaker.

Further, a separation by Alberta would likely trigger a similar discussion for Saskatchewan, and possibly British Columbia and Quebec. Yes, the prime minister is right: Alberta being at the centre is essential to Canada.

What Should Be Done to Keep Alberta in Canada?

First, recognize that this is a serious issue and stop blaming Albertans. Acknowledge that Central Canada has mistreated the West, and it is time to fix policies and treat Alberta and its Western neighbours as equal partners in Canada, rather than as convenient servants and sources of funding. This means reducing regulation and getting government out of the West’s free market industries, especially the oil and gas industry. That includes dropping the “net zero” philosophy that has created many of the issues.

Second, give the provinces more flexibility to manage their natural resources and health-care strategies. Third, act to regain efficiency in the services provided by the federal government and improve the country’s fiscal and tax regimes to facilitate attracting more capital to Canada. Fourth, substantially reduce all regulations/costs and act to minimize the commercial restrictions and costs that emanate from the indigenous communities, the judicial system and certain provinces.

Finally, and perhaps most importantly, stop restricting individual freedoms and cede government influence and power to the people where possible and appropriate. With some attention, respect, and good policy change at the federal level, Albertans will choose to remain in Canada.

Can our governments do this? I hope so, as our country depends on it.

Art Korpach is a retired vice chairman of a major Canadian bank securities dealer and former Jarislowsky Fellow at the University of Calgary’s Haskayne School of Business.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.