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Alberta Kenney outlines strategy for revamping equalization in response to federal carbon plan

Jason Kenney speaks in Calgary on July 22, 2017.

Jeff McIntosh/THE CANADIAN PRESS

Alberta could use a 20-year-old Supreme Court reference on Quebec secession to try to remove non-renewable natural resource revenues from the equalization formula, according to Jason Kenney, a contender in the race to lead Alberta's new United Conservative Party.

The legal case could be used if Ottawa continues its "attacks on our energy industry," he said Wednesday evening.

Mr. Kenney said under his leadership, the province would act if the federal Liberals have moved forward with the plan to implement a country-wide price on carbon – and if Ottawa refuses to roll back what he calls the National Energy Board's "outrageous expansion of its mandate" in considering indirect greenhouse gas emissions in its assessment of the $15.7-billion Energy East project.

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He said he would use a provincial referendum to force Ottawa's hand if the federal government refuses to fundamentally change the equalization formula. The program is up for review in 2019.

"I would be prepared to hold a referendum on a question to force the federal government to renegotiate equalization to remove non-renewable resource revenues from the definition of fiscal capacity," Mr. Kenney told reporters. "Fiscal capacity" refers to provinces' ability to raise revenues, and determines equalization entitlements.

In 1998, the Supreme Court of Canada reached the unanimous ruling that if Quebec wished to secede after a fair referendum on the question of secession, the rest of Canada would be obliged to negotiate terms. Mr. Kenney said the judgement isn't limited Quebec secession.

Mr. Kenney received huge applause when he raised the idea in front of an audience of about 700 party members at Calgary's Mount Royal University Wednesday evening.

The first official debate of the United Conservative Party leadership contest saw Mr. Kenney and three other candidates – Jeff Callaway, Brian Jean and Doug Schweitzer – focus on economic issues such as restoring investor confidence in Alberta, reigning in provincial spending, and getting rid of Alberta's own carbon tax if they win the next election in 2019.

The idea to hold a referendum on equalization, and to re-negotiate a constitutional question, isn't Mr. Kenney's alone, or first. It came from a report authored by former Alberta finance minister Ted Morton and was released by the Calgary-based Manning Centre, which advocates for a more limited role for government. In the summer, Mr. Jean's camp called for a referendum on equalization to get Ottawa to the table to "negotiate a fairer deal for Alberta," saying the NDP government has shown little interest in being proactive for the next round of equalization talks.

Mr. Kenney also had many of the toughest lines about potential acts of retaliation should projects to ship Alberta oil be blocked by other provinces or federal laws. For instance, he said if British Columbia stands in the way of Kinder Morgan Inc.'s federally approved plan to expand its Trans Mountain pipeline, Alberta has to consider blocking shipments of oil to Burnaby through the existing pipeline.

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"That wouldn't be our first option," Mr. Kenney told reporters. "But if they start a trade war and they violate the rule of law, there will be consequences."

Calgary is the firm base for the fledgling right-of-centre UCP party. Leadership candidates are all working to capitalize on sentiment against Premier Rachel Notley's NDP government across the province – but the anger is most pronounced in Calgary, smaller cities and rural areas. Compared with Edmonton, Alberta's largest city has more enduringly felt the oil-price downturn of the past three years – with a high unemployment rate and nearly 30 per cent of its downtown offices sitting empty. Calgarians have voiced more displeasure with cornerstone NDP government policies such as the Alberta carbon price implemented at the beginning of 2017.

In fact, an Edmonton Journal report this month that as of the end of August there were three times as many UCP members in Calgary as Edmonton. Mr. Jean, the MLA for Fort McMurray-Conklin, is the only one of the four leadership candidates who is not from Calgary.

UCP membership sales to vote in the leadership race close in just over a week. The new leader of the party will be chosen though a preferential balloting process that will culminate on Oct. 28.

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