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An interior view of Potash Corp. of Saskatchewan Inc.'s facility in Lanigan, Sask. (Potash Corp.)
An interior view of Potash Corp. of Saskatchewan Inc.'s facility in Lanigan, Sask. (Potash Corp.)

Raw resources: remembering our history in order not to repeat it Add to ...

Just about at the same time that people in the province of Quebec decided, in overwhelming majority, that decisive action was required by their provincial government to protect the French language, people in western Canada decided that equally decisive action was required by their provincial governments to ensure control of their own natural resources.

The federal government of the day (led by Prime Minister Pierre Trudeau) more-or-less accepted the Quebec National Assembly's right to address the language issue. But the same government waged a battle of sumo-like proportions to try to wrestle control over oil, potash, uranium and other resources from western Canadian provinces.

Which didn't go over very well.

Ottawa fired a major opening artillery salvo in May 1974, when Finance Minister John Turner introduced a federal budget that challenged provincial resource royalty taxes. Mr. Turner enacted that resource royalties and like provincial taxes would no longer be deductible as expenses when companies were calculating their federal taxes -- making provincial levies economically untenable, and setting up a showdown between the two levels of government. A few years later came the federal Liberals' national energy program, including a further series of new taxes and export levies designed to federalize a much larger share of resource income, and to maintain relatively low energy prices in Eastern Canada while transferring resource revenues from west to east.

Writing many years later in his memoirs, Saskatchewan Premier Allan Blakeney still wrote about these events with rage. He referred to these moves as a "declaration of war" by Ottawa on western Canada. And he pointed out the well-known political consequences: "There was a precipitous loss of faith in the government in Ottawa on the part of a large block of people in western Canada. The public vented their wrath on the Liberal party... [which]was eliminated as a political force in the west."

Canada recently celebrated the 30th anniversary of the Canadian Charter of Rights. It passed largely unremarked that we were also celebrating the 30th anniversary of article 92A of the constitution -- an amendment, negotiated concurrently with the charter, that largely settled the resources war by re-establishing that provinces control their own natural resources and are free to tax and regulate them.

We have, since then, saved up some critically important national issues related to how Canadians manage those resources.

Among these:

Sovereignty issues: A growing proportion of Canada's natural resources are owned by foreign corporations or, directly or indirectly, by foreign governments. China is seeking to secure its energy security. Brazil is pursuing a global effort to dominate the mining industry (once the preserve of Canadian companies, when there were Canadian companies). The United States wants cheap raw materials for its highly diversified industrial and post-industrial economy. These are our key trading partners -- and also our competitors. Their governments are aggressive stewards of their economies and of their economic development. Canada has no energy strategy, no industrial strategy, and no trade strategy other than to invite countries that do have these policies to come and help themselves to our raw, unprocessed resources, to the benefit of themselves.

Opportunity cost: And so, we have constructed an economy increasingly dependent on the export of raw unprocessed resources. We've had a look in recent weeks at what a remarkable monoculture English-Canada's media have become on this issue. In one voice, editorial boards and conservative columnists across the land have celebrated our dependence on raw resources exports, and have demanded that this not be questioned by anyone, even in Parliament. But it should be, given the enormous opportunity cost we are paying. As measured, for example, in the grotesque growing inequality in Canada, a country blessed by some of the greatest wealth available on the planet.

A once-in-history lost fiscal opportunity: Meanwhile, the contrast between how responsible, well-governed countries have managed the fiscal consequences of resource development, and how we have managed this in Canada, does our country little credit. Norway has banked almost $600 billion in its Oljefondef (oil fund). Peter Lougheed and Allan Blakeney proposed similar funds for western Canada. Instead, conservative successors threw away a once-in-history opportunity to capitalize an advanced, diversified economy, in order to pretend we have an "advantage". When discussing these issues in recent months, I have had fingers wagged at me by analysts who point out that a modern, efficient, relatively less polluting petroleum refinery can cost up to $7 billion to build. With their fund, the Norwegians can afford to make investments like that (or to develop other parts of their economy instead, if that is their choice). Instead, we're busy dismantling our environmental regulations so that we can ship raw unprocessed resources to Texas and to China.

And an environmental day of reckoning that lies before us: Sometime, somehow, we are going to have to recognize and deal with the true, lifecycle environmental costs of resource development. Like, as just one topical example, energy in all of its current forms -- nuclear, carbon, and hydro-electricity, all of which have been developed in Canada and sold domestically and abroad without regard to the lifecycle costs imposed on our water, land and air. Climate change will make this an increasingly urgent issue. Key players in the petroleum industry are 20 years ahead of Canadian governments in understanding this. Exxon Mobile, for example, favours a carbon tax as part of a global strategy to address climate change (they have many interesting things to say about this here).

These fundamental issues about our sovereignty, economic future, public finance, and environmental challenges require a national meeting of the minds -- and concerted national action by all of our governments.

So they're going to have to start talking again, after a 30-year silence.

It is also true that we are going to have to find a way to address these issues that understands that western Canadians would probably respond to a repeat of Mr. Trudeau's rhetoric and tactics with a repeat of their response to those tactics -- which would only help the climate-deniers, the fiscal drunkards, and the quick-buck operators who have already dominated too much of this debate for far too long.

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