The disagreement over the federal Clean Electricity Regulations and the new oilpatch emissions proposals is fierce. It pits Ottawa against the oil and gas producing provinces of Alberta and Saskatchewan. The Government of B.C., a large natural gas producer, possibly will not engage.
Alberta and Saskatchewan reject a role for the federal government in the regulation of the electrical and the petroleum industries, while the Liberal government asserts it regulates greenhouse gas emissions. This dispute will be resolved via negotiation, in the courts or with a change of government in Ottawa.
Though the federal government reports some advances with Alberta in negotiations on the Clean Electricity Regulations, UCP Premier Danielle Smith is advancing increasingly strident positions. Ottawa, while appearing more flexible, fails to adequately respect provincial jurisdiction over resources. This suggests that the dispute will end up before the courts in advance of the next federal election.
Alberta鈥檚 government has invoked the Alberta Sovereignty Act against the electricity regulations. The government has put a motion before the legislature stating that the federal actions are unconstitutional, provincial entities should not cooperate with the federal government to implement the regulations and the government should investigate creating a crown corporation to control the electricity system. The province would use this corporation to chart its own course, ignoring the federal regulation.
While most experts believe the sovereignty legislation is unconstitutional, some expect it may survive court scrutiny. Realistically, it is doubtful that a provincial government can legally declare itself the arbiter of federal legislation. (Ironically, the federal government technically has the ability to strike down provincial legislation. While the federal power of disallowance is still in the constitution, it has been dormant so long that some constitutional lawyers question if it still exists.)
A provincial challenge to the Clean Electrical Regulations may fare better before the courts than would the sovereignty act. The federal Impact Assessment Act was deemed largely unconstitutional by the Supreme Court in October because it violated provincial jurisdiction over resources, while the carbon tax was ruled constitutional. Litigating the electrical dispute involves considerable risks for both sides.
Premier Smith has additional concerns with measures advanced by Ottawa recently at COP28, the United Nations climate conference. Ottawa released new methane regulations and new oilpatch cap and trade proposals. Alberta did not see them in advance. Smith carefully guards Alberta鈥檚 constitutional control of resources. She suitably noted that the federal unilateralism is not cooperative federalism.
But Smith curiously called the methane regulations, 鈥渃ostly, dangerous and unconstitutional,鈥� as industry insiders termed them 鈥渁chievable鈥� and Pathways Alliance president Kendall Dilling admitted being 鈥渁 bit mystified鈥� by Smith鈥檚 concerns. The federal government proposes to reduce methane emissions by 75% from 2012 levels by 2030, while the province committed in June to explore the feasibility of a 75% to 80% reduction from 2014 levels by 2030. The details differ, but the aspirations are remarkably similar.
Though the emissions cap is not as stringent as expected, Premier Smith is as determined to fight it as she is the methane regulations. She called Environment Minister Steven Guilbeault 鈥渁 menace鈥� and 鈥渄estructive.鈥� So, what is the vitriol all about? Well, apparently Smith does not like Guilbeault. Beyond that, she views resources to be entirely under provincial jurisdiction, and believes the emissions cap is a production cap which will truly damage the industry and Alberta.
There are legitimate questions, to be sure, whether it is appropriate for Ottawa to force another layer of bureaucracy, regulation and expense on the oil and gas industry. Dilling wrote, 鈥淚mposing an emissions cap, with additional regulatory complexity, does nothing to advance the certainty necessary for the planned multi-billion-dollar decarbonization projects to proceed.鈥� Some industry leaders have likened the cap to another National Energy Program. As some observers suggest, a modification of the industrial carbon tax would be a much simpler, less costly solution.
The oil and gas industry is very important to the Canadian economy. It accounted for an impressive 7.2% of our GDP in 2022, and is Canada鈥檚 top export. But a clean electrical grid is also important to industrial and economic growth. And reducing GHG emissions and climate change is essential, particularly for B.C., which suffers extensive damage from extreme weather events and wildfires. Governments must act judiciously. They must not destroy an essential industry, while they take necessary measures to reduce GHG emissions.
Governments, in Alberta and Ottawa, have each accused the other of creating uncertainty for investors. In fact, both are creating uncertainty, and that deters investment. If nothing changes, the dispute will play out before the courts, delaying investment decisions until a judgement is rendered and perhaps beyond. Resolving these issues by negotiation would boost confidence, investment and economic growth. One way or the other, governments must move forward swiftly to restore certainty!
bruce
Bruce W Uzelman, based in 琉璃神社, holds interests in economics and political science.
