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Ontario Premier Dalton McGuinty speaks during the welcome ceremony at the party's biennial convention in Ottawa Friday January 13, 2012.

Adrian Wyld/The Canadian Press/Adrian Wyld/The Canadian Press

Alberta Premier Alison Redford's vision of a national Canadian energy strategy has bogged down in an increasingly bitter dispute with Ontario over the economic benefits of the oil sands.

Ms. Redford had suggested Ontario should be a more vocal advocate for oil-sands development, on the grounds that related businesses benefit Ontario's economy. That met with a rebuff on Monday from Ontario Premier Dalton McGuinty, who said Canada's high "petro dollar" has hobbled exporters in his province.

That prompted a sharp rebuke from Ms. Redford. She said Mr. McGuinty's "simplistic" approach to the oil sands and the Canadian dollar is based on a "false paradigm" and suggested that the leader of the country's one-time economic powerhouse needs to broaden his outlook.

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"When we talk about oil sands, it's not about what's in Alberta's best interests," Ms. Redford told reporters Monday. "It is about what's in Canada's best interests."

Ms. Redford struck a decidedly different tone from her first visit to Toronto last November as Alberta's newly minted premier. During a speech to the Economic Club of Canada, she pushed for an energy strategy that pulls together Alberta's oil sands, the hydro power of British Columbia, and Ontario's green energy agenda. Her speech signalled a warming of ties between Alberta and Ontario, long at odds with each other.

The latest tensions threaten to pit Mr. McGuinty not only against other leaders in Western Canada but also the federal government, to which he made a pointed reference on Monday when mentioning Ottawa's support of Alberta's oil-sands sector and comparative neglect of his province's ambitious green-energy plans.

Responding to Mr. McGuinty's remarks, federal Natural Resources Minister Joe Oliver told reporters, "The oil sands are a valuable asset for the entire country, from coast to coast to coast, including Ontario."

Saskatchewan Premier Brad Wall, who has endorsed Ms. Redford's Canadian Energy Strategy to position Canada as an energy superpower, said he was stymied by the anti-oil-sands "rhetoric" coming from Mr. McGuinty.

"If any of us in this country … are pinning our productivity hopes and our hopes for being competitive from a trade standpoint on a cheap dollar," Mr. Wall told The Globe and Mail, "boy, we've got that wrong."

At the heart of the dispute are duelling views about who stands to benefit from the development of Alberta's oil sands. Mr. Redford cites a study that says Ontario's economy is the second-largest beneficiary from the production of the gooey bitumen. The Canadian Energy Research Institute says Ontario is expected to see $63-billion in economic spinoffs and 65,520 oil-sands-related jobs between 2010 and 2035.

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Mr. McGuinty rejected that assertion, saying the harm caused by the high Canadian dollar relative to the U.S. greenback far outweighs any spin-off benefits Ontario might derive from Alberta's oil and gas sector. A study by the Organization for Economic Cooperation and Development supports his stance. It says Canada has entered into a form of the dreaded "Dutch disease," whereby the increase in exploitation of natural resources is leading to a decline in manufacturing.

Mr. McGuinty said the Canadian dollar, which has soared to over $1 from just 67 cents in 2003, is making goods produced in Ontario more expensive for buyers outside the country. The "petro dollar," he said, has been driven by global demand for oil and gas from Western Canada.

"That has knocked the wind out of Ontario exporters and manufacturing in particular," Mr. McGuinty told reporters. "So if I had my preferences as to whether we had a rapidly growing oil and gas sector in the west or a lower dollar, I'll tell you where I stand: with the lower dollar."

Ms. Redford, speaking to reporters in Chicago, where she was meeting with the business community, said she was both disappointed and surprised by Mr. McGuinty's remarks.

"Choosing between a strong oil sands and a high Canadian dollar … is a false paradigm," Ms. Redford said on Monday. "We're going to stay to what I think is the broader and more principled and productive message, which is we can grow a Canadian economy around energy that benefits Canadians across the country."

With a report from Shawn McCarthy

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