Share this story
Close X
Switch to Desktop Site

Alberta oil cutbacks fuel Canada's east-west clash

While Canadians are preoccupied with the immediate issues surrounding President Reagan's March 10-11 visit to Ottawa, the long-simmering internal dispute over who controls Canada's natural resources has begun to boil.

On March 1, in the most explosive move to date, Alberta began turning down the tap on the oil pipelines stretching out to heavily populated, petroleum-poor eastern Canada.

About these ads

Millions of consumers will immediately feel the sting of Alberta's move in the form of higher gasoline prices -- probably 3 or 4 cents a gallon more -- as Pierre Trudeau's government passes along the cost of importing more oil to make up for the shortfall caused by the cutback.

Under the energy policies brought in by successive Liberal governments, Canadians in the western half of the country utilize domestic oil whose price is set by Ottawa at about $14.75 (US) a barrel, less than half the world price. Eastern Canadian refineries import oil, with Ottawa subsidizing the difference between the Canadian price and the world cost.

Last year, this expensive policy drained $2.7 billion (US) from federal government coffers. And by requiring Canada to import more oil, the cutback begun March 1 by Alberta will drive the subsidies Ottawa must pay even higher.

To make the Trudeau government, already running a massive $11 billion annual deficit, feel an added financial strain is exactly the point of Alberta Premier Peter Lougheed's strategy. It is his way of retaliating against a set of energy policies introduced last October by the Trudeau regime that Mr. Lougheed and other westerners deeply oppose as an infringement on their rights under Canada's Constitution.

Mr. Trudeau's National Energy Program imposed a new export levy on western Canadian exports of natural gas to the US and increased Ottawa's share of the revenues from Alberta's petroleum production at the expense of a slight reduction in the Lougheed government's take.

Also, Ottawa's energy program, while allowing domestic oil prices to go up gradually, rejected the western contention that the price should be moved quickly to near world level.

Western Canadians, who feel they have been shortchanged economically throughout much of Canada's 113-year history, consider the national energy plans an attempt by eastern Canadians, in the person of Trudeau, to extend their powers over the west's oil and gas resources.

About these ads

Mr. Lougheed says Mr. Trudeau's aim "is essentially to move in and take over, for all intents and purposes, the control of the oil and gas reserves of Alberta , British Columbia, and Saskatchewan."

The Trudeau's government, for its part, claim it wants to spread the value of western Canadian oil throughout the country instead of letting it accrue chiefly in Alberta, already the country's most prosperous province. Mr. Trudeau's aides pointedly note that, in 1979, per capita income from resource revenue was $1,900 in Alberta, and $18 in Ontario.

Faced with the Alberta production cutback, Mr. Trudeau has decided to try to use it against Alberta by making consumers pick up the tab for the required extra oil imports. And Mr. Trudeau's strategy appears to be working, at least for now. Newspapers have already dubbed the tax the "Lougheed levy."

But Canada as a whole may be the loser in the long run, as the new move and countermove widen the gulf between the eastern and western regions of the country.

"How much oil do you get from Iran?" blurted a British Columbian recently in an interview. "None," he said, answering his own question with the kind of threat that has assumed greater force now that Mr. Lougheed decided to follow through with his cutback.

It is the hint of embargo, not the latest cutback, that is sending shockwaves across the country.The first reduction will amount to 10,000 barrels a day, followed by two further redutions intended by December to reduce Alberta production -- and consequently shipments to eastern Canada -- by about 15 percent of the current rate. Alberta produces about 90 percent of Canada's crude oil.

With neither side showing any sign of compromise, no one knows where the dispute will end. Under Canadian law, Alberta has the right to limit production of resources within its boundaries. But, in the event of an emergency -- such as a full-scale embargo with its threat to the economic well-being of the country -- Ottawa has overriding constitutional powers that would allow it to step in and take control of Alberta's oil.But an outright clash of that sort would have dire consequences for the future of Canada's shaky federation.

Beneath the passionate rhetoric, however, there seems a desire among the public to see their leaders take a more conciliatory tack. Many eastern Canadians, for instance, have a great deal of sympathy for Albertans' demands that the province be paid the world price for oil.

"When we buy from Mexico, we pay $30 a barrel and no one minds," one Ontario politician says. "so why not for Alberta oil?"

And in Alberta, there is increasing evidence that many people, including some of Mr. Lougheed's hitherto staunch oil industry supporters, are growing weary of the premier's long, stubborn battle with Mr. Trudeau.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.