Shoot-out over Alberta’s oil

Press, 29 May 1981, Page 17

Shoot-out over Alberta’s oil

By

ROGER EGLIN

“Sunday Tiyies,” London

In Calgary, the prairie cow town turned oil boom town,

they liken it to the replay of a shoot-out in a western

movie. At one end of the street, hand poised over gun, is the premier of Alberta, tough former football player Peter Lougheed. Facing liim is the stubborn, unbudging Pierre Trudeau, Canada’s Prime Minister. Since last November the two politicians have been battling over the share-out of Alberta’s oil and natural gas riches. The struggle could come to a head early next month when the Canadian. Supreme Court rules on the legality of Trudeau’s bid to amend the constitution and strengthen the power of the federal government. Lougheed has said he will not necessarily let the matter rest with the court’s decision.

If this happens, Mrs Thatcher and the British Parliament, as custodians of the Canadian constitution, could be sucked into the dispute. In Calgary, however, where so many oil firms have their headquarters, there is a feeling that the politicians in Ottawa and in Edmonton, Alberta’s State capital, must stop their gunslinging soon before the casualty list grows. Although 2000 people a month are still being lured into Edmonton by the oil boom, and Canadians in the east talk enviously of Alberta’s wealth, the oil industry is in disarray. In retaliation .for Trudeau’s determination to hold down the price of Alberta’s oil to the rest of Canada, Lougheed has decreed production cuts and their effect is biting. About 200 drilling, rigs have already fled south across the. border, many of them to Colorado. The failure to agree on prices has blocked the development of multi-billion dollar plans, the ; megaprojects as Albertans call them, to extractoil from the province's vast deposits of tar sands. SHfell Canada is

threatening to drop its $6.68 billion tar sands, project unless agreement is reached on price. “There are at least two projects waiting in the wings stalled,” says one oilman, “and keeping them alive is very costly.” In his determination to■ honour election promises to keep oil prices down, Trudeau has the industry tho-

roughly rattled. The biggest • tar sands producer, Syncrude, is allowed to charge world level oil prices for its output. But its earlier neighbour, Suncor, was told to halve its prices last autumn because most of its capital spending was in earlier preinflationery days. Up to 1978 Suncor lost $l2O million and the price cut. coming right in the middle of a massive expansion, has horrified the company’s management. The build-up to the present crisis began in the early 1970 s as the federal government pushed to keep the price of oil from Alberta, which supplies about 85. per cent of Canada s crude, below world prices in a bid to maintain industrial competitiveness in manufacturing. Although Canada's provinces own their natural re-

sources, the federal government uses its powers over inter-state commerce to hold prices down. At present Albertans see their oil, held to around- • $16.50 a barrel against a world price of over $3B, feather-bedding the eastern provinces. The east in turn has dubbed Alberta “Opec north.” The Albertans are furious. Until the post-Second World War oil discoveries, Alberta was a poor, “have not” province tucked away in the far west. Now;’the tough, independent westerners, who have never had much respect for any government’s meddling, see their wealth propping up federal

> What makes it more provo- • : cative is that though t economic power has shifted ; f sharply west, political power : ( has not. ■ The sparks really began to Ijfly. last autumn when Tru- , '|deau unveiled the National .' jEnergy Programme. To- ’ jigether with a drive to increase Canadian ownership

#f oil and gas resources, this lipid more emphasis on conj.'sjprvation, substituting other ’ ijiels for oil and’ making ;.<ianada self-sufficient by However, the price increases the programme allowed for were not big enough to satisfy Lougheed arid even worse was the levying of taxes on Albertan production to help finance strained federal budget. Western separatist movements blossomed overnight amjl Lougheed countered with

a scheme for cutting production in three stages: the-first lastj March,- another .next roosith and the final one at of the summer. If he goes the whole way, Canada coulfi be spending more than $2 billion a year on importing ®alf a million barrels a day tto plug the. gap. . Tiip energy; dispute has heightened the argument over [the reform of Canada’s constitution. Trudeau’s strategy IwastO'•'patriate” the British /North America Act from!Westminster, amend it and i strengthen federal . power! Of the 10 provinces, eight thave opposed this. The* way ahead is for Trudeau ajnd’Lougheed to holster their grins, agree on a pricing policyjand a mechanism for sharing ! the oil wealth. If they dt<not, bdth politicians risk fading caught out on a limb as public opinion recognises tee futility of what is going cri- The reality is that with 4 s ’• conventional oil reserves, massive tar sands and vast reserves of I gas an# coal, Alberta still | has enormous wealth in the I ground. J . |