Press Room

"A Strong Alberta Makes for a Strong Canada"

Notes for an address
by the Honourable Stéphane Dion,
President of the Privy Council and
Minister of Intergovernmental Affairs

Keynote address at the
University of Alberta

Edmonton, Alberta

April 12, 2001

Check against delivery

          My knowledge of Alberta has been gleaned from my experience as a Minister, but I also see your province through the eyes of a Quebecer, an academic and a political scientist. What strikes me is the extraordinary contrast between what I read about Alberta, in certain media and certain academic writings, and my own hands-on experience with Albertans.

          Are Albertans alienated? Whenever I come to Alberta, I meet people who are optimistic, aware that they're living in one of the most fortunate regions of one of the most fortunate countries in the world. People who look at life head-on, with its inevitable challenges and promises of a better future. I see a pluralist society where people are asking, as they are in Quebec, how best to combat inequalities and alleviate poverty, and how to ensure sustainable development.

          Sure, people sometimes talk to me about the Senate, but I have to say that's mainly in universities and press rooms. Most Albertans do not seem to me to be particularly obsessed with constitutional issues, even though they would like to see improvements in this area, as in others.

          If my perception is right, and if it is true that you Albertans are optimistic, both in terms of your potential for development and your role within Canada, then what I have to say may not come as any surprise. I think that you are right to be optimistic, and I have three examples that demonstrate this.

          My first one is drawn from my experience as Intergovernmental Affairs Minister. I'll tell you about an event I experienced which I believe speaks volumes about the role of your province within the federation.

          Second, I will present a view that I have about an important chapter in your history. More specifically, I think that the period in which you made efforts to take control over your natural resources, which is commonly viewed as a painful chapter, may actually be seen as a success story if we compare it with the experience of other federations.

          Finally, I want to emphasize the importance of what you have done with this bounty of natural resources. It seems to me that many Canadians living in the other provinces and territories do not know enough about how much you have been able to do together with both of your governments, provincial and federal, to diversify your economy.

1. Alberta's influence in the federation: an illustration

          I'm going to tell you about a recent episode in our federal-provincial life. As the story is rather well known, I believe I can repeat it without being indiscreet.

          I'd like to take you back to the evening of September 10, 2000, in Ottawa. The Prime Minister was hosting a dinner for all of the premiers and the three territorial leaders, in preparation for an important negotiation session scheduled for the next day. The centrepiece of the negotiations was an agreement on our health system renewal.

          Throughout the previous summer, I had worked hard to help the Prime Minister and my colleague Allan Rock, the Health Minister, conclude this agreement of great importance to all Canadians. It wasn't easy. The federal government indicated to the provinces that solving our health problems isn't just a question of money: we also need a plan. But the provinces were bound and determined to get additional money from the federal government. "No money, no plan," they told us. No plan, no money, we responded. We went back and forth like that throughout the summer.

          And then, as always in Canada, we were able to work things out. Numbers began to circulate, as did ideas for a joint plan. However these negotiations are always difficult and some provinces still had major problems with the agreement. Ontario and Quebec, in particular, had concerns that it might constitute an intrusion into provincial jurisdiction.

          Which brings us to the First Ministers' dinner on September 10. As is well known, one of the first premiers to speak out was your Premier. Ralph Klein said in his direct style, and I am paraphrasing, "I've seen the plan, I've seen the amount, I'm ready to sign." It was a decisive moment. The tone was set.

          The next morning, the premiers of Ontario and Quebec continued to say that the text of the proposed agreement was a federal intrusion. At that point I met with my Alberta counterpart at the time, Minister Shirley McClellan, who expressed her view that this was not the case, as the Alberta government would never have agreed to a federal intrusion in its areas of jurisdiction. She spoke to Premier Klein, who was instrumental in convincing others that there was no intrusion on provincial jurisdiction and, due to his intervention, we were ultimately able to come to an agreement.

          The reason I'm telling this story is that it reveals a great deal about what your province represents within the federation. It's been five years now that I've been Canada's Intergovernmental Affairs Minister. I've lost count of the number of negotiations where we said, back in Ottawa: Klein is the key. When the Premier of Alberta decides to get onside a consensus, success is not far behind.

          And we know what it takes to work with Alberta: an approach of cooperation, with deep respect for both federal and provincial roles and responsibilities. To be sure, we don't always manage to reach agreement. But I'd say that our batting average is higher than is generally believed.

2. Alberta's control of its natural resources: a success story

          As in all societies, Albertans have past grievances, and sometimes scars. But I suggest that even these can yield grounds for optimism. For example, you rightly criticize the fact that you had to wait until 1930 for the Prairie provinces to have a level of control over their natural resources similar to that of the other provinces. But another way of looking at it is that you succeeded, through persistence and determination, to obtain that control back in 1930, whereas for all Western states in the United States, except for Alaska, more than half of the land is still federal property today.

          The same is true of the National Energy Program (NEP) of 1980, which was not one of our most popular initiatives. Partly as a result of your reaction and the pressure exerted by your provincial government, the Constitution Act, 1982 gave the provinces the right to raise revenues, through any form of taxation, on natural resources. Another result of your influence is that following the Western Accord signed in 1985, the Government of Canada agreed to limit its use of its taxation power over natural resources by restricting itself to levying a corporate income tax on companies in the natural resources industry. Hence, today only provinces raise royalties on natural resources.

          And here we are today. In his speech in Calgary last Friday, the Prime Minister promised his "unswerving commitment to competitive markets and fair regulation". He unequivocally ruled out an energy export tax. In fact, he already said "No" to rumours of another National Energy Policy when he first became Prime Minister in 1993.

          Let's step back a little and look at the broader picture: compared with other federations, the Government of Canada considerably limits the use of its own taxing powers in respect of natural resources, and the provincial governments have access to more tax fields than the state or provincial governments of other federations. Let's compare with two other federations rich in natural resources like ourselves.

          In Australia, the states, like our provinces, levy royalties on natural resource development in their territory, as well as excise and sales taxes. However, as opposed to here, the federal government holds the exclusive power to levy corporate taxes on natural resources throughout the Australian territory and offshore. As well, it exclusively raises revenue from exploration and development permits for offshore natural resources. And it also levies federal excise and sales taxes, as well as the Petroleum Resource Rent Tax, which is shared between the two orders of government.

          In the United States, the states can levy royalties on activities on lands under their ownership, property taxes, corporate income tax, as well as leasing rights on deposits of natural resources within their territory. But the federal government has access to a number of revenue sources from natural resources. First, it levies royalties on activities on all U.S. territory and has leasing rights on federal lands (although it shares these two revenue sources with the states in which the activities are conducted). It also levies an exclusive tax on extraordinary income which enables it, in combination with the corporate income tax, to capture a substantial portion of income resulting from an extraordinary increase in the price of raw materials. Finally, it has exclusive rights over offshore natural resource development activities.

          Based on my review of these and other federations, I do not know of any other sub-national entity that, like Alberta, combines such a wealth of natural resources with such extensive control over them. I call this a success story.

          Your natural resources potential is tremendous indeed. Alberta already produces over 60 % of all of Canada's energy: oil, gas, coal and electricity combined. And as the Prime Minister has been reminding President Bush recently, Alberta also has a world-class resource in the oil sands, which is only beginning to be tapped, that is equivalent to the reserves of Saudi Arabia. If you add in your huge remaining gas reserves and vast coal deposits, you see that the long-term prospects for Alberta's energy economy are exceptional.

          But it is not enough simply to have petroleum reserves. You have to find a way to take optimal advantage of them. The fact is that making the oil sands pay off has required new technologies, sustained effort and imagination, through a partnership of industry and the federal and Alberta governments. As the Prime Minister said in his speech last week, the positive investment climate required to make this happen came about, in part, due to the efforts of that great Albertan and University of Alberta alumna, Anne McLellan.

          As an energy superpower, Alberta has developed a know-how that will be very helpful now that we are entering a new energy economy in Canada, where more regions will be developing their own energy resources. Northern gas reserves are estimated to exceed even those of Alberta and will soon be developed. The British Columbia gas industry has been growing quickly. The Nova Scotia and Newfoundland offshore projects are both now producing and they have the potential over time to transform the economies of Atlantic Canada. Saskatchewan is rich in heavy oil.

          These developments elsewhere in Canada are highly promising for Alberta. The companies and services based here will be playing key roles in the transformation of our energy economy across Canada.

          Our Government has two key objectives in assisting Alberta and the whole country to fulfil this exciting energy potential:

- to ensure that all energy opportunities will be governed by competitive markets; and,

- to maintain high standards of environmental protection and enforcement.

          As the Prime Minister said "A strong energy sector is not only a pillar of the Alberta economy, it is absolutely fundamental to Canadian prosperity."

          In order to assist in achieving these objectives, the Prime Minister has established a Reference Group of Ministers on Energy Issues. The committee is chaired by the Foreign Affairs Minister, John Manley, and includes Anne McLellan. I also have the honour of sitting on that committee. It will be another fascinating opportunity for me to work even more closely with Albertans and with your provincial government.

3. A Diversified Alberta - Ready for the Future

          Among Canadians outside Alberta, there is the sense that Albertans are 'rich' only because of their petroleum, while in fact, what you have done to diversify your economy is impressive. It is not only by luck that Albertans enjoy average personal incomes that are 8.9% above the national average.

          You have used this exceptional control that you have over your natural resources very effectively in diversifying your economy. An economy based on a few natural resources is very cyclical and uncertain. Today's wealthy Alberta was not in such great shape in the early 1990s, with the largest provincial deficit in 1992-93 [4.6% of GDP] and unemployment reaching 9.6% in 1993.

          But today, you - like Canada as a whole - are better equipped to deal with any economic slowdown. It's not surprising that some 64% of small business owners expect Alberta's economy to perform better in 2001 than it did last year, despite the economic slowdown in the United States. The extent to which your economy has diversified is not, in my opinion, sufficiently recognized elsewhere in the country.

          Some data tell the story. Among provinces, Alberta is first when it comes to population aged 15 and over with a post-secondary diploma. Your high levels of education are reflected in Canada's highest labour force participation rate: fully 72.2 % of working age men and women in Alberta are in the workforce, which is 6.1 percentage points higher than the Canadian average. Your labour force productivity is the highest in Canada and it enjoyed strong growth over the past five years.

          And what about your universities? Which one is the best in Alberta? I will let you be the judge of that. What I can say is that the University of Alberta leads the country with more 3M Fellowships for Teaching Excellence than any other university in Canada, and is among the top five Canadian universities for research funding from the federal granting councils. Innovation and diversity are hallmarks of the university and its student body, as illustrated by the Aboriginal MD (Medical Doctor) program and the Faculté Saint-Jean, the only French-language institution offering degree programs west of Winnipeg. Your President Rod Fraser was recently in Ottawa with a team from the U of A, telling your story to different ministers, including myself, and making sure we understand your perspective on how the Government of Canada can contribute to further strengthening universities across Canada.

          But they were preaching to the converted. About the only complaint the U of A might have against the federal government is that we took Anne McLellan away from you!

          Now let's talk about your cities. Alberta has two of Canada's six largest cities, both of which have become culturally rich and diversified. The Financial Post's 1999 listing of the Top 500 and Next 300 companies by revenue showed that Calgary is second only to Toronto in Canada's corporate head offices. Roger Gibbins, the President of the Canada West Foundation, is leading a project for the foundation to look at what he calls the "New West." A West which, without neglecting its agricultural sector, is becoming increasingly urban. Here again, how many Canadians know that Alberta is now only very slightly less urban than the Canadian average? I am very happy that the Government of Canada is providing some financial support for Roger's study and I shall follow its progress with great interest.

          In Alberta, I see a very diversified province, subject to many different influences, made up of a population that comes from across Canada and around the world. In the past five years alone, you have had Canada's fastest growing population, with a net gain of 114,000 people coming from elsewhere in the country. You have also received 65,000 immigrants from other countries. How many of you have parents who were born in Alberta? How many of you were born in Alberta yourselves? At holidays and birthdays, how many Albertans call different parts of Canada and the world to talk with family members? Just ask someone working at Telus for the answer!

          Canada is showing the world that diversity is a strength, not a weakness. Alberta is an impressive illustration of that reality.

Conclusion

          I've given you a broad outline of my experience of your province and the immense potential I see in it. Am I too optimistic? Don't criticize a Montreal Canadiens fan for being so optimistic when your Oilers have made the Stanley Cup playoffs! Don't criticize the optimism of a Liberal when the Calgary Herald just wrote that my party "is beginning to understand that a strong Alberta makes for a strong Canada"! (April 8, 2001) That's the most positive press coverage we've had in a very long time!

          I have no doubt that Alberta's future in Canada will continue to be one of national leadership. This is most obvious in the energy economy, but I am sure the story will be much greater than that. It will be felt across the economy, in the scientific and cultural communities, and in our political life. The challenge for Albertans will be to reflect on how you will use your advantage and leadership in this admirable country that we will continue to share and to improve together.