Canada

More a fandango than a pavane

John Hay June 30 1980
Canada

More a fandango than a pavane

John Hay June 30 1980

More a fandango than a pavane

Canada

Maclean's

By John Hay

In the now-familiar ritual, Alberta and the federal government have danced the formal opening steps toward a new oil pricing scheme. Provincial Energy Minister Merv Leitch and Ottawa’s Marc Lalonde came together last week, reached no agreement and handed the negotiations, to resume in July, on to their first ministers. Stiffly stylized as that sounds, there is enough noise and confusion in all this to be more fandango than pavane.

Leitch’s Ottawa visit began off-balance when a commissionaire at the energy department barred the Albertan’s car from the parking space saved for it. That gaffe fixed, things hardly improved in the next day and a half of meetings across the vast oak table in the 21st-floor conference room. Lalonde says he made two offers—the third and fourth tendered by the feds since the Grits took office in March. One provided for a schedule of price increases in future years and a formula for splitting the revenues among the producing companies, producing provinces and the federal treasury. The other provided less largesse for Ottawa, but committed Alberta to contribute to a kind of interprovincial money pool which would subsidize resource-poor provinces. Leitch’s reply to both: no. “All of the offers left us very, very far apart,” he later told reporters. Lalonde agreed it would be wrong to say agreement is near: “The

reverse would be much closer to the truth.” There is so far no compromise on Alberta’s insistence that domestic oil prices be tied to the rising trend of foreign prices. And as for Lalonde’s new equalization plan, Alberta officials complained it was just a sketchy onepage outline which, anyway, went outside Leitch’s cabinet mandate to talk

prices.

Both sides’ demands are still on the table. Lalonde bears a campaign commitment to keep the price rise this year below the $4 a barrel arranged last December by the Clark cabinet in a deal reached with Alberta but never signed. But Lalonde also insists that Ottawa reap the same revenues from oil and gas taxes as the Tory deal provided for the four years 1980 through 1983. In Edmonton, on the other hand, Premier Peter Lougheed wants the same benefits as Alberta would have enjoyed from the Clark deal—essential, he says, to finance industrial development against the day the wells run dry, and to pay for costly oil sands projects.

All this opens at least one obvious route to compromise. Leaving this year’s increases under $4, future rises could be juggled while assuring each side the gains contained in the Clark agreement. That called for the price of a barrel of Alberta crude to go up by $4.50 in each of the next three years. But Lalonde’s department now says that a rider in that agreement, linking Alberta prices to foreign rates, could ac-

tually lead to yearly increases of more than $10. Lougheed and Prime Minister Pierre Trudeau now have little time to sort all this out. A 1977 pricing deal, under which the price rose $1 last Jan. 1 to $14.75 a barrel, was to expire June 30. (Each dollar added to a barrel of crude adds about 3.5 cents to a gallon of gasoline at the pumps, or 7/10 of a cent per litre.) It was Leitch who proposed the one-month extension to give Lougheed and Trudeau time to bargain.

Although there is no guarantee the two leaders will agree, intransigent poses have always been part of the routine oil talks. This time, Lougheed won unanimous passage in the Alberta legislature of a law giving his cabinet power to set oil production levels each month—authority, in other words, to turn off the taps. Back in Ottawa, Lalonde pointedly cited the Petroleum Administration Act, giving the federal cabinet power to fix oil and natural gas prices unilaterally, failing agreement with the province. A legal contest between the two governments over resources would raise the danger of constitutional conflict just when the federal and provincial governments across the country are seeking consensus on a new constitution. But sources in both the federal and Alberta delegations admit privately they never expected the two energy ministers to reach agreement in Ottawa. With so many billions of dollars at stake, the last dance could only be for Trudeau and Lougheed.