While only the truly paranoid would argue there is a risk of a repeat of the disastrous National Energy Program, Albertans are right to be nervous of Ottawa operating solo when it comes to discussing continental energy policy with the U.S. and Mexico. 

And they are nervous. 

In a recent poll for the National Citizens’ Coalition, nearly two-thirds of Albertans said they are not confident Ottawa will protect Alberta’s interest in energy talks. 

This adds democratic wallop to the constitutional case (ownership of natural resources is constitutionally assigned to the provinces) for provinces not only demanding a major role in these discussions, but for Premier Ralph Klein to do all he can to strengthen the resource industry’s access to U.S. markets while ensuring that Ottawa keeps its hands off. 

Of course, Ottawa could not do today what it did two decades ago when the federal government created a devastating recession in Alberta by forcing a “made in Canada” oil price which was well below the international price. 

First, Canada’s international trade agreements would prevent it. 

Second, there is widespread acknowledgment that protection from world prices allowed Canada to avoid the restructuring that took place in other countries, with the result that the economy suffered in the long run. 

Ottawa has, however, other policy levers that can single out the natural resources industry for its version of special treatment. And it has demonstrated a penchant for using them. 

For example, in the last federal budget Ottawa brought the corporate tax rate to 21 per cent for all industries except one — natural resources. Of course, Ottawa is an equal opportunity discriminator — this also affected Ontario’s mining sector, Saskatchewan’s potash firms, B.C.’s forestry companies, Atlantic offshore resource conglomerates as well as Alberta’s resource industries. 

But in relative terms, Alberta is “more equal” than the others given the sheer size of its natural resource industry. 

Another lever is the environment — specifically the Kyoto accord. 

Recently, Canada’s Natural Resources Minister Ralph Goodale wrote on these pages that Ottawa remains “firm” in its commitment to the Kyoto accord — which requires Canada to reduce emissions to six per cent below the 1990 level , despite the rise in emissions since then. 

But meeting Kyoto targets raises significant risks. First, Canadians cannot simply assume these targets can be met without a significant economic cost. 

President George W. Bush (and the U.S. Senate before him) makes the reasonable case that the economic cost of meeting Kyoto targets far exceed the uncertain environmental benefits. Second, meeting the increased U.S. demand for natural resources would require an increase, not a decrease in emissions. Increasing our resource exports to the U.S. while meeting the Kyoto targets can only raise the economic costs for all Canadians. 

In short, fulfilling our Kyoto obligations would worsen Canada’s competitive disadvantage vis-a-vis the U.S. and hobble Canada’s, and particularly Alberta’s, ability to benefit from rising energy needs in the U.S. 

But what can provinces do? Ottawa calls the shots when it comes to signing international agreements, and Canada can only have one seat at the table in negotiations with the U.S. and Mexico. 

The provinces are not without leverage, however. Provinces regulate natural resource industries, and share jurisdiction with Ottawa on environmental matters. If Ottawa signs an agreement on energy, at some point it will need the provinces’ co-operation to implement the deal. The same goes for the Kyoto accord. 

Provinces can, therefore, make it clear that they will not agree to regulate the energy industry or the environment in ways that are contrary to provincial interests — both environmental and industrial. 

Which leads to the final, and more difficult question — what outcome is in resource-rich provinces’ best interest when it comes to continental energy discussions? 

Aside from having a say at the negotiating table, the answer lies in the treatment of natural resources under the North American Free Trade Agreement. 

In the current agreement, trade in oil is slightly more free than trade in natural gas. This means that Ottawa’s ability to put restrictions on trade in oil with the U.S. is slightly lower than its ability to put restrictions on trade in natural gas. It is, therefore, in the interest of provinces like Alberta to make trade in natural gas and electricity as free as trade in oil. This will improve access to U.S. markets for our secure supply of resources other than oil, as well as minimizing Ottawa’s ability to meddle. 

According to the poll mentioned above, nine out of 10 Albertans are supportive of Alberta having direct involvement in continental energy discussions. Klein has a mandate to use the tools at his disposal to make the best of the continental energy discussions. 

He could also effectively rally other resource-rich provinces into pushing for improvements in NAFTA, thereby tying Ottawa’s hands a little tighter on its ability to fiddle with the resource sector. 

Ken Boessenkool is an Adjunct Research Fellow at the C.D. Howe Institute. Poll results are from a Cameron Strategy Inc. poll of 803 Albertans between June 11 and June 22. Results are considered accurate plus or minus three per cent, 19 times out of 20.