Before he became Premier in October, no Quebec politician seemed as keen to do a deal on the Energy East pipeline as François Legault.
After pushing unsuccessfully for the construction of a marine terminal on the lower St. Lawrence River to export oil from Energy East – an idea that foundered over concerns about the fate of beluga whales in the area – Mr. Legault proposed charging royalties on Western Canadian crude transported through Quebec to ensure his province would benefit financially from any pipeline.
“We’re aiming for zero equalization and one way to get there would be to receive royalties on the oil transiting through Quebec,” Mr. Legault said in early 2016.
No one was therefore more surprised than Quebeckers themselves by Mr. Legault’s outburst last week, in which he characterized oil sands crude as “dirty energy” and rejected proposals to resuscitate the pipeline that TransCanada abandoned a year ago. Many agreed that his jab at Alberta crude was a cheap shot.
Mr. Legault has bigger worries, however, than what Albertans think about him. At home, he has been dogged by accusations he doesn’t care about the environment. Indeed, the platform of his Coalition Avenir Québec party was all but silent on climate change, and Mr. Legault’s appointment of an inexperienced MNA as environment minister was seen as a sign of the issue’s low priority on the CAQ agenda. The Premier is also on the defensive over his support for the construction of a fertilizer and methanol plant in Bécancour, Que., which would be one of the province’s biggest industrial emitters of greenhouse gases.
So while his comments on Alberta’s “dirty” oil might be seen as hypocritical, they should also be interpreted as an attempt to score brownie points with Quebec’s media-savvy environmental movement.
Mr. Legault is also attempting to step up pressure on Ottawa, Ontario and New Brunswick to back his proposal for more interprovincial electricity sales by Quebec. Selling hydro power may be a separate issue altogether from Energy East, but that will not stop Mr. Legault from attempting to advance his cause by linking the two, sparking his comment after last week’s first ministers meeting that he is “not ashamed at all of refusing dirty energy while we’re offering clean energy at a very competitive price.”
He should have known that his comment would be seen as particularly crude in the context of the current downturn in Alberta oil prices that has left Canada’s richest province in a funk. The fiscal crisis facing Alberta has national consequences, and Mr. Legault could come to eat his words, given that his province depends on federal equalization transfers that are disproportionately funded by Alberta taxpayers.
Mr. Legault may believe his province is insulated from Western calls for a reform of the equalization formula by Prime Minister Justin Trudeau’s unwillingness to risk losing Quebec seats in 2019. But the current formula – which will see Quebec’s take rise 12 per cent next year to $13.1-billion, or two-thirds of all funds paid out under the program – cries out for reform.
The size of the equalization pool has continued to rise in recent years, even though the wealth gap between “have” provinces such as Alberta and “have-not” provinces such as Quebec has shrunk. What’s more, Quebec – whose economy has been growing at a strong clip – has continued to see its payments rise far faster than those of the Atlantic provinces, which are in far worse fiscal shape.
Any reasonable understanding of the aims of fiscal federalism suggests this simply should not be the case.
Leaving a review of the formula to politicians has its disadvantages. Former prime minister Stephen Harper adopted the current equalization formula, which Mr. Trudeau’s government recently renewed until 2024, with its sights set squarely on keeping Quebec happy.
Daniel Béland of the University of Saskatchewan, André Lecours of the University of Ottawa and their co-authors of a recent book on fiscal federalism suggest that Ottawa should set up a permanent arm’s-length agency to determine equalization payments and make recommendations regarding adjustments to the formula.
“At the very least, the appearance of federal executive discretion almost inevitably creates the impression among provincial governments that the program is not always administered neutrally,” they wrote in a recent Policy Options article.
Until then, Mr. Legault should watch what he says. If he truly seeks to wean Quebec off equalization payments, kicking Alberta when it’s down is an odd way of going about it.