Oil riches threaten Canada's unity

Cowboys lead cattle to their winter quarters near Calgary, knowing that next month Alberta will be giving C$400 to everyone in the province. Picture / Reuters

CALGARY - Vic Fedeli, the mayor of North Bay, was not pleased when Alberta health officials showed up in his depressed northern Ontario mining community and invited local doctors and nurses to interview for higher-paying jobs in their oil-rich home province.

"Barbarians at the gate," he says.

Much of Canada is having a similar reaction. With the increase in world energy prices, Alberta's growing capacity to attract professionals and investors and to shape Canada's economic agenda is stirring resentment elsewhere in the nation, sparking a fight that could do more to shake national unity than 40 years of separatist strife in French-speaking Quebec.

"These debates about money are fundamentally debates about the type of federation we want," said Jean-Francois Gaudreault-Desbiens, a law professor at the University of Toronto and specialist on Canadian federalism. "They could possibly lead to more substantial changes in the long term than all the debates we've had in the past."

Alberta's oil riches, and what to do about them, have become a campaign issue in Canada's January 23 national election.

The Canadian Energy Research Institute estimates the province's oil sands - which contain reserves, estimated at 175 billion barrels, surpassed only by Saudi Arabia - will generate C$634 billion ($808 billion) in additional income over the next 20 years, three times its gross domestic product.

Two of the four parties in the federal election, the Bloc Quebecois and the New Democratic Party, are calling for new oil taxes in part to share the bounty. The other two parties, Prime Minister Paul Martin's Liberals and the Conservative Party, suggest that oil could be used as a lever to win trade disputes with the United States.

All of which makes Alberta's three million residents, about 10 per cent of the country's population, alternately angry and nervous.

"Alberta is going to secede from the union, I think," Jim Johnson, 69, a retired Baptist pastor, said at a Conservative Party rally in Edmonton. "We're just getting fed up."

Alberta's ascendance marks a profound shift in Canada's balance of power. For most of this century, Ontario - the most populous province, with the biggest economy - has been the biggest contributor to the Canadian federal system that forces wealthy provinces to pass money to poorer regions.

Alberta, though, is now the lone region with no debt, and its budget surplus of C$5.9 billion this fiscal year is expected to be four times the original estimate. Companies such as Calgary-based natural-gas driller EnCana are making so much money that the Alberta Government has agreed to pay C$400 next month to each man, woman and child in the province.

Alberta is also attracting professionals such as doctors at a pace that is making the other Canadian provinces uneasy. Its population is growing at the fastest pace of all 10 provinces, more than twice the national average, and added 11,000 workers from other provinces in the year to June 2004 while Ontario lost almost 8400 workers over a similar period.

A poll this month found that 55 per cent of Canadians want a greater sharing of Alberta's surpluses. One-third of Canadians, and almost half of Quebeckers, believe Alberta's wealth threatens the federal system.

Another poll in September found that one in two Canadians want the Government to nationalise the oil industry and impose price ceilings.

"There's always tension in terms of people who would like to see some of the wealth that's created in the west transferred to the east," Industry Minister David Emerson said.

Fuelling that tension is the recognition that oil has helped lift the Canadian dollar to a 14-year high against the US currency, making it harder for manufacturers to compete in global markets.

Canadian manufacturers, based primarily in Ontario and Quebec, have shed 100,000 jobs over the past year, the fastest pace since the 1991 recession.

Lloyd Axworthy, a former Liberal Cabinet minister, said Ontario might hasten efforts already under way to claw back its contributions to federal programmes so it could compete.

"You're going to have Ontario governments developing their own form of provincial nationalism," Axworthy, president of the University of Winnipeg, said. "Someone has to face up to that or else you are going to have a real polarisation of this country."

Meanwhile, Jack Layton, the leader of the New Democratic Party, has called for export taxes on Canadian oil. And the Bloc Quebecois, which supports severing the French-speaking province from the rest of the country, is calling for a surtax on oil- company profits, claiming the rest of the country is being forced to foot the bill for cleaning up the industry's pollution.

The Prime Minister, reluctant to start a constitutional debate in the run-up to the vote, and Conservative Party leader Stephen Harper, a Calgary native, have sided with Alberta, arguing that the province's prosperity will trickle down to other regions.

Even Martin and Harper, though, suggest the province's oil could be used as lever to win a trade dispute with the US over duties on Canadian softwood timber.

Harper said last week the dispute could have "long-term consequences on trade and infrastructure decisions" for the Canadian Government.

Ralph Klein, Alberta's Premier, visited Ottawa last month to send the message that Alberta will fight attempts to increase its payments to the rest of Canada or interfere with its natural-resources policies.

While "there has been no overt move by the federal Government, that's not to say that we aren't being diligent," Klein said. "There's always a fear."

Thar's oil in them sands

* Alberta's oil sands contain reserves estimated at 175 billion barrels, surpassed only by Saudi Arabia.

* The oil will generate C$634 billion ($808 billion) in additional income over the next 20 years.

* That is three times the province's gross domestic product.

* Such riches are causing resentment in the rest of Canada.

* Some 55 per cent of Canadians want a greater sharing of Alberta's surpluses.

* One in two Canadians want the Government to nationalise the oil industry and impose price ceilings.

- BLOOMBERG