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Saskatchewan Premier Brad Wall, who has announced he is retiring from politics, vows he’s ready to go toe-to-toe with neighbouring Alberta in a licence plate fight between the two western provinces.Mark Taylor/The Globe and Mail

Alberta is promising "consequences." Saskatchewan says Alberta started the whole fight. The interprovincial spat over Alberta contractors being allowed to freely work in Saskatchewan, and vice versa, has put on display the chasm between the two western neighbours.

This week, the Saskatchewan government ignited a political firestorm by declaring that contractors displaying Alberta licence plates will not be allowed on new provincial highway projects. The reason is to level the playing field, according to Highways and Infrastructure Minister David Marit. "Over the course of the last number of months, many Saskatchewan contractors have told me that vehicles with Saskatchewan plates are not welcome on Alberta highway construction sites," he said.

Alberta says Saskatchewan's move is baffling, as it's not government policy or practice to force Saskatchewan contractors or workers to get Alberta plates. The province's Economic Development Minister, Deron Bilous, says Saskatchewan's declaration violates interprovincial trade agreements, and provincial officials in Regina aren't even bothering to return Alberta's calls to talk it out.

The fight again raises questions about how much trade between all provinces is truly free. This squabble echoes some of the debates heard in the New Brunswick beer and liquor case at the Supreme Court of Canada this week, and the legal and regulatory manoeuvring surrounding the construction of new heavy-oil pipeline projects from Alberta to any ocean coast.

It seems as if the dispute came out of nowhere. But tensions over the two provinces' different tax regimes, economic clout and even the beer trade – along with the general animosity between the Notley and Wall governments – has been brewing for years.

On Thursday, Alberta again threw down the gauntlet, saying Saskatchewan has until next week to reverse the decision or face legal action. Mr. Bilous also warned about other unnamed "consequences" should Saskatchewan not have a change of heart.

But Saskatchewan Heavy Construction Association president Shantel Lipp said the dispute stems from Alberta firms displaced by the oil-price downturn coming into Saskatchewan in large numbers, driving in fleet vehicles or trucks whose owners never had to pay a provincial sales tax (PST). That gives Alberta firms an unfair advantage in bidding for Saskatchewan jobs.

"When Alberta experiences some hard times, they tend to go across the border."

At the same time, Ms. Lipp said her industry group members have faced a "less-welcoming vibe" when they try to bid on Alberta-based projects. "There has always been a resistance to a Saskatchewan contractor crossing over into Alberta country," she said.

However, on Thursday, neither the Saskatchewan government nor the industry group were able to provide the name of a Saskatchewan firm that had been spurned in Alberta.

The Saskatchewan government said the licence-plate directive will apply to a number of industrial vehicles but will not apply to personal vehicles. Alberta contractors will also be required to pay PST on a number of new categories of vehicles, on a pro-rated basis, when they register.

Higher-level politics could partly be at play. Conservative-minded Saskatchewan Premier Brad Wall and Alberta NDP Premier Rachel Notley have frequently been at odds over everything from climate policy to the way to write a provincial budget during an economic downturn.

On the issue of licence plates, there is no sign either side is willing to concede.

In Edmonton, Mr. Bilous told reporters that Saskatchewan is lashing out because its economy is now not doing as well as Alberta's. He said it's ridiculous if Saskatchewan is trying to punish Alberta for not having a PST. "Brad Wall needs to smarten up."

In Regina, Mr. Marit said the Alberta government started the battle with the beer trade, referring to Alberta's move in recent years to enact a tax and grant system that favours local small brewers. He also slammed Alberta for fighting against completely open government procurement policies during recent Canadian Free Trade Agreement talks.

"They have set this protectionist tone, in that example, in the beer trade wars measures they've taken – and I'm a little surprised how much noise is coming out of our friends to the west."