Straight Outta Edmonton: A New, Robust Role for Alberta in Federalism

Alberta has long played a pivotal role in Canadian federalism, with its economic might and vast oil reserves. However, the province’s equalization contributions have never quite matched its ability to influence the national agenda. This is partly due to Alberta’s size, but also reflects the province’s subdued role on the national scene.

For decades, the province engaged in an isolationist, defensive stance, strongly fending off any federal encroachment into its perceived sphere of control. This approach was consistent with both Liberal and Conservative governments in Ottawa, representing deep-seated resentment of Alberta’s expendable nature in a system where elections are largely determined by vote rich central Canada.

However, the nature of the challenges confronting Alberta today raises doubts as to the viability of this approach, particularly with increasing concerns over the province’s energy industry. Isolationism will not help the province overcome barriers to developing new means of transporting oilsands product to market, slashing the hefty discount purchasers are currently receiving. Neither will it address the major labour shortages facing Alberta, which involves making it easier for the province to lure workers from across the country and around the world. Rather, these challenges require Alberta to take a more robust role in federalism to shape the national agenda and ensure our interests are advanced.

Alberta’s role in confederation is a central issue at stake this election, with Allison Redford and Danielle Smith pitting two starkly different visions against each other. Visions both women outlined in speeches at the Economic Club of Canada a few months apart.

To Danielle Smith (speech), the solution is sticking to our isolationism and relying on a friendly federal government to make Alberta’s case to the rest of the country. Smith recognizes that this will make it difficult to expand our US oilsands market or develop new ones in Asia, but believes that an “all-Canadian solution” is the answer. By retrofitting current infrastructure, oil should flow west-east, eliminating the eastern Canada’s reliance on foreign oil and allowing depressed manufacturing regions of Ontario and Quebec to benefit from refining. A form of economic nationalism that one would expect to be proposed by Gordon Laxer, the Alberta Federation of Labour or the Alberta New Democrats than the Wild Rose.

How exactly she plans on accomplishing this without significant inter-provincial coordination is puzzling. However, the more important question is how this benefits Alberta. Refining oilsands product in Canada will increase the discount it’s sold at currently, meaning we will sell less oil and make less on each barrel sold.

Alison Redford (speech) on the other hand is calling for a break from the past, arguing that Alberta should take on a more robust role in Canadian federalism. At the core of this new role is her push for a Canadian Energy Strategy that will coordinate and advance provincial energy interests as a whole. In effect, the attempt is to link the oilsands to the energy interests of other provinces, in order to change national attitudes towards the industry. Although this sounds promising, the strategy lacks any real specifics to gauge what tradeoffs Alberta will be making in order to convince other provinces to get on board.

Regardless of what the election’s outcome, there are questions related to Alberta’s approach to federalism and its ability to address the challenges confronting the province. While the Wild Rose may have intentions of returning the province to the days of Manning, Lougheed and Klein, they and Albertans should be aware that the issues they dealt with are quite different from those that are confronting us today.

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Straight Outta Edmonton: The Market is the Solution

The Canadian Oil Sands Innovation Alliance (COSIA) is about collaboration. In a bid to meet public expectations and improve the industry’s image, 12 of the largest oilsands producers are teaming up, sharing information and intellectual property relating to environmental stewardship. By harnessing their collective strengths, they hope to improve the industry’s environmental performance and image.

Though well intentioned, collaboration is not the best way to improve environmental performance. The market is.

It’s easy to acknowledge the power of the market, and market competition specifically, in influencing firm behavior. If there is market incentive for a firm to behave in a certain manner, firms will do so, as their primary interest is profit maximization. Firms would also divert resources to behave in that certain manner in order to maximize that market incentive and gain competitive advantage, such as investing more in research and development.

Market incentives would drive behavior, leading to competition, which would lead to better ways to engage in that behavior.

This logic could apply to the oilsands. If there was strong market incentive for producers to engage in better environmental performance, they would compete with each other, developing better methods to outperform their market competitors. Invariably, producers would divert more resources into research and innovation, developing better methods of reducing their environmental impact individually, and the industry’s as a whole.

Currently, there is no such incentive.

In fact, by collaborating, industry confirms that there isn’t strong market incentive for them to develop better environmental practices individually. Rather than use their own resources to develop better environmental practices, companies are looking to work together, each benefiting from the other’s work. Though they recognize a problem, it isn’t impacting their bottom line enough to come up with solutions themselves.

Collaboration is hardly an environment for innovation. It runs the risk of firms taking environmental practices from others, instead of developing their own. There is even incentive to do this, as taking is free while developing one’s own practices requires resources that could be allocated elsewhere.

Creating strong market incentives for companies to improve their environmental stewardship will lead to better environmental performance.

One possible incentive might be linking resource royalties to environmental performance. For example, if companies hit certain government directed environmental benchmarks (emissions, pollutants, area of wet tailings, etc) they pay less. If they exceed them, they pay more.

As oilsands producers are generally price takers, this is perhaps the best way to introduce competition among them, and direct it towards addressing environmental issues and the industry’s negative perception.

Obviously though, this would require governments to get involved. Fortunately, both levels of government have long endorsed, and defended, a market dictated approach to oilsands development.

Why not the same for environmental stewardship?

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