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Negotiations with B.C. and a change of heart toward the Northern Gateway pipeline from Alberta Premier Rachel Notley represent potentially groundbreaking developments for Alberta’s energy future.JASON FRANSON/The Globe and Mail

Multilateral talks are ongoing between the B.C. and Alberta governments centring on a deal that would see one help facilitate the construction of an oil pipeline to the West Coast in exchange for a long-term contract to buy electricity.

NDP Premier Rachel Notley said in an interview she is no longer unreservedly opposed to the Northern Gateway pipeline, a reversal from her previous position that helps breathe new life into a $6.5-billion project many have written off as dead.

Both the negotiations with B.C. and the change of heart on Northern Gateway represent potentially ground-breaking developments in the debate surrounding Alberta's, and the country's, energy future. They come amid the brutal financial reckoning under way in Ms. Notley's province as a result of the dramatic drop in world oil prices, a commodity nosedive that has created a fiscal emergency in Alberta and prompted the government to amass unprecedented levels of debt.

The drop in revenues has also renewed talk of introducing a sales tax as a means of providing a reliable funding stream. Currently, Alberta is the only province in Canada without one. While reiterating that her government would not launch such a tax during her first term, Ms. Notley said that the next three years could provide a window to at least discuss it. It is a pronouncement that many will view as the NDP Leader opening the door to the controversial levy.

Ms. Notley confirmed her time in office has been an often bumpy ride, primarily because of the dire state of the economy. She has defied the predilections of many New Democrats by fiercely advocating for a pipeline to get Alberta crude to new markets, primarily in Asia. That is why a prospective deal with the B.C. government around a pipeline would be viewed as a substantial achievement, one her Progressive Conservative predecessors failed to realize.

Until now, the Energy East pipeline to the East Coast had been seen as Alberta's best hope of getting its oil to tidewater, but the ground appears to be shifting. B.C. is rich with hydroelectric power – the new $8-billion Site C dam in the northeastern corner of the province is now under construction – and sees in Alberta a customer that could benefit from purchasing clean energy. Alberta is looking for ways to reduce its greenhouse gas emissions and B.C. has tried to sell its neighbour on the notion that buying clean electricity would be one way to do it.

Asked if there is a potential quid pro quo deal in the works, Ms. Notley said: "It's not that simple but I will say that we are engaged in multilateral talks where there are a lot of linkages in terms of how things might go forward." The Premier added: "I think it's fair to say that the government of B.C. understands that there wouldn't be a market for their electricity if we're not able to get something approaching a non-discounted price for the product that we ship."

She said that while it was "premature" to say a deal was imminent, there was "common understandings at this point." She also said that while her opinion of Northern Gateway had changed – she was steadfastly against the project because of environmental concerns – that project faced far more obstacles than the Kinder Morgan pipeline expansion to the West Coast.

A spokesman for B.C. Premier Christy Clark confirmed that energy talks between the two provinces are under way and agreed that there is renewed optimism around the Kinder Morgan pipeline project, in particular.

Ben Chin, executive director of communications and issues management for Ms. Clark, said that while the five conditions the province has imposed on any pipeline project to B.C. would still have to be met, there is more optimism now that this can occur.

This, too, serves as a change for B.C., which last year came out against Kinder Morgan at the NEB hearings in Vancouver. Mr. Chin said that was not an unequivocal no, but rather a "not yet." He said the B.C. government understands Alberta's position regarding an electricity deal; that it would have to come with a pipeline. He said that clean electricity would help its neighbour "brand their product better."

"If you're electrifying the northern industrial heartland and are able to say we're avoiding three to six megatons of greenhouse gas emissions in the manufacturing of this barrel of oil, making it the cleanest or second cleanest or one of the best barrels of oil you can get … does electricity help you make that argument?" Mr. Chin said. "We believe it can."

He said part of the change in B.C.'s position around Kinder Morgan is the result of signals being sent by the Liberal government in Ottawa that it is prepared to go further to meet the province's requirements around a world-class oil spill response strategy. And he said while the pipeline proponent still has to address First Nations objections and come to agreement with the province over financial compensation, there is new confidence that a deal can get done.

Meantime, Enbridge is still pushing ahead with plans for Northern Gateway, which was approved by the NEB in June, 2014, with more than 200 conditions attached. Ms. Notley had said during the provincial election campaign she was adamantly against Gateway for an array of reasons but was open to reviewing Kinder Morgan's plans. Now, she says she is no longer irrevocably against Gateway.

"I'm not completely closed on it, no, and I will say that my opinion on this has evolved and changed a little bit over time," the Premier said. "So there are some serious concerns about it we have to hear … The NEB itself came up with over 200 conditions, and those need to be addressed. So it's a bit of an uphill battle when you compare it to Kinder Morgan, which has effectively been functioning for 50 years with very few problems – not none but very few – one wonders which is the easier way to go."

Meantime, on the question of the future of a sales tax in the province, Ms. Notley was adamant that there would not be one during her first term – or ever for that matter. She said that if Albertans were secure in the understanding that such a tax isn't coming, "it might actually allow for there to be a more wide-ranging debate about the fiscal future of the province."

"There is no question that right now the sudden drop in the price of oil reveals quite clearly the degree to which we rely on resource revenue. And so now, the question going forward is do we simply bank on oil coming back or do we look at other revenue streams overall? I think that's an important conversation for Albertans to have and I think quite frankly it's easier to air things out in an environment where they know you can count on the fact that for the next three years this is it."

The Premier said it would be disrespectful and ignorant of the culture in Alberta to bring in a tax without campaigning on it, something, she pointed out, she had no immediate plans to do.

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