In Canada, provinces control natural resource development—or do they?

In Canada, provinces control natural resource development—or do they?

By Jim Bentein

March 10, 2017, 1:46 p.m.

http://www.jwnenergy.com/article/2017/3/canada-provinces-control-natural-resource-developmentor-do-they/

 

gas plant

Alberta’s Turner Valley gas plant in the 1930s. Image: Glenbow Archives

For western Canadians who believe their provinces have often played second fiddle to the central Canadian provinces that helped form Confederation, the history of provincial mineral rights control in Canada essentially proves they’re right, according to one of Canada’s foremost political scientists.

Duane Bratt, political science professor at Calgary’s Mount Royal University, notes that when Alberta and Saskatchewan entered Confederation in 1905 they did so without being granted control over mineral rights within their territory.

“That was only given to the established provinces. It was based on their low populations at the time. They weren’t seen as equal,” he says, adding that mineral rights control was eventually granted in 1930.

The importance of the decision to grant mineral rights to the two provinces, following a dragged out battle between the federal government and Alberta and Saskatchewan, can’t be minimized, he adds.

It also has more to do with current and future energy decisions in Canada than one might think.

When Confederation was created in 1867, mostly through an accommodation between what had been Upper Canada and Lower Canada, it was based on the perceived need to make French Canadians, who mostly lived in what became Quebec, feel as much a part of the new union as English Canadians in what was to become Ontario, Manitoba and the Maritimes.

“The original notion of Confederation was not about geography, but centred around language and religion,” Bratt says.

“At the time many of the major powers, such as that over education, were given to the federal government.”

Since then, Canada has becoming a much more decentralized nation than was originally conceived.

The growing wealth of the resource producing provinces has transformed the country, Bratt says.

“It would be hard to imagine what Canada would look like now without the western provinces having control over their resources. We are now the most decentralized federation in the world.”

That doesn’t mean that control is sacrosanct. The federal government has pushed the constitutional barriers often.

The fight over the National Energy Program in the 1980s was a conspicuous example of a federal government attempt to gain more control over oil and gas resources. And Bratt argues that the insistence that all provinces create carbon taxes of some form is another attempt.

Saskatchewan Premier Brad Wall’s government views this as an encroachment over provincial powers over resources, and Bratt believes the province would have a chance to win a court fight if the choice was made to take it that far.

While the government of Prime Minister Justin Trudeau insists it will not compromise provincial control over mineral rights by demanding the imposition of a carbon tax before new pipelines are approved, that’s exactly what it is doing.

“Trudeau has been savvy,” says Trevor McLeod, director of the Center for Resource Policy at the Canada West Foundation. “It’s a backdoor way to affect the development of natural resources in the provinces.”

Provincial control over resources continues to be a cornerstone of Confederation, having been proclaimed again when the constitution was repatriated to Canada in 1982.

Todd Hirsch, chief economist for ATB Financial, acknowledges that control over mineral rights has helped make Alberta and Saskatchewan wealthy provinces, but argues there can be a negative aspect to that control.

“As economists we like to do counter-analysis,” Hirsch says. “If the federal government had kept control, would the economies be more diversified?”

With royalties from oil and gas having contributed $15 billion per year to Alberta government coffers in the good years (that was down to less than $3 billion last year), plus billions in tax revenues, Hirsch says the Alberta economy is so strongly tied to the economic benefits from resource development that it’s difficult to bring about real diversification.

 

 

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on March 10, 2017, in economic impact, miscellaneous, political. Bookmark the permalink. Leave a comment.

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