Alberta remains, and so does its frustration on equalization and energy policy

Tegan Hill is director of Alberta policy at the Fraser Institute.

In their referendum on Monday, Albertans voted against starting the legal process to hold a binding provincial referendum on whether Alberta should separate from Canada. In other words, the majority of Albertans don’t want to leave. But the frustrations that sparked the debate remain. It’s time for Canada to address these underlying problems so the country can reach its full potential.

Since 2007-08, Albertans have paid $322-billion more into the federation through federal taxes and payments than they received back in federal spending and transfers. That’s nearly four times the net contributions of British Columbians and nearly six times the net contributions of Ontarians (the remaining provinces were net recipients, meaning Ottawa spent or transferred more money to those provinces than it collects from them).

Thanks to Albertans’ large net contribution, the federal government is better able to redistribute money through different programs (e.g. equalization) to help fund government and keep taxes lower than they otherwise would be in other provinces.

That’s just the fiscal aspect. Albertans also contribute disproportionately to economic growth and business investment, which boosts productivity and improves living standards for all Canadians, and is a major driver of exports such as oil and gas that inject money into the Canadian economy. And that’s fine – our federation is designed to share the wealth and Albertans help create opportunities for Canadians across the country.

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But our national programs are broken – and costly to Albertans – while a host of damaging energy policies restrict the ability of Albertans to prosper. In short, Alberta isn’t getting a fair shake in the federation.

Take Canada’s equalization program, which aims to ensure all provincial governments can provide reasonably comparable services at comparable levels of taxation. Albertans haven’t received equalization payments since the 1960s yet pay billions of dollars every year into the program (which will cost $27.2-billion this fiscal year) through their federal taxes.

The equalization program is broken for many reasons. Some of them are complicated but worth explaining. For one, to decide which provinces receive payments, the equalization formula includes actual resource revenue when determining a province’s ability to raise its own revenue.

Yet the Quebec government, for example, requires Hydro-Québec to charge below-market electricity rates. Consequently, the Quebec government collects less revenue from electricity customers than if Hydro-Québec charged market rates. As a result, the equalization formula assumes the Quebec government has a lower capacity to raise revenue than it actually does. (Quebec will receive $13.9-billion in equalization payments this fiscal year, roughly half of this year’s equalization budget.)

But Alberta doesn’t receive similar treatment – for example, Alberta has no provincial sales tax but the equalization formula includes hypothetical sales tax revenue when calculating Alberta’s ability to raise revenue. Clearly equalization is broken. And it’s easy to see why that frustrates Albertans.

A second key source of frustration is federal energy policy. For example, large oil tankers are banned from loading or unloading at ports on British Columbia’s northern coast. That rules out Prince Rupert, B.C., North America’s closest port to Asia, with transit times up to three days shorter than other West Coast ports, unnecessarily adding to the cost of exporting and transporting Canadian oil. But the ban does not (and cannot) stop international tankers travelling to and from Alaska through the same waters – it only prevents Canadian oil and gas exports from northwest B.C.

The Carney government has also doubled down on Trudeau-era policies including stricter methane regulations and an industrial carbon tax that will rise to $140 per tonne by 2040 – a burden none of Canada’s major competitors, including the United States, face. And the new West Coast pipeline project remains conditional on a costly $20-billion (minimum) “carbon capture” facility. Put simply, despite fresh rhetoric in Ottawa, Alberta still faces very high costs to produce, process and transport its oil.

Albertans voted no to a referendum on separation, but it doesn’t mean their frustrations have disappeared. It’s time to recognize Alberta’s important role in the federation and fix policies and programs that are clearly broken. After all, a stronger Alberta means a stronger Canada, and this is an opportunity to improve the country for everyone.