British Columbia has stiffened its stance on ensuring it receives financial benefits from any new oil shipped through the province on the way to global markets.
In an outline of plans to jointly develop new international export markets, B.C. and Alberta agreed to discuss how B.C. could reap "fiscal and economic benefits" should new oil pipelines be built in Canada's westernmost province.
For B.C., financial benefits from such projects could be derived from any of three sources: payments from the federal government; from the energy companies involved in the projects; or the broad economic boost from building them, said Ben Chin, B.C. Premier Christy Clark's director of communications.
Funds generated from energy development currently goes from the proponents themselves, they are from the federal government's share, or from growing the over economic potential of the project," he said.
Discussions between Ms. Clark and Alberta Premier Alison Redford were, as they both put it at the time, "frosty" last October, but have warmed considerably since the two leaders met in June.
The more co-operative approach comes as newly emerged pipeline proposals to ship Alberta oil to Canada's east coast are overshadowing opportunities like Enbridge Inc.'s controversial Northern Gateway plan to the west coast.
The two governments have ruled out Alberta forking over a slice of the billions of dollars it collects in energy royalties – an option Alberta always dismissed.
B.C. has major opportunities to transport and export oil and natural gas, but new energy development is highly controversial in the province and politically sensitive. B.C. wants to be compensated for the risk it would carry if new pipelines stretch to the Pacific Ocean, accounting for the potential for oil spills on land and in water.
Alberta and B.C. on Tuesday outlined what they want their joint working group to discuss as they explore how the two provinces can open new energy export markets. The group's final report is due Dec. 31, 2013.
Cal Dallas, Alberta's Minister of international and intergovernmental relations, expects the discussions regarding financial benefits to focus on what it would take to maximize the economic benefits of exporting energy both provinces.
"It is not about compensation between provinces, or compensation with the federal government. It is about how do we grow the pie in terms of the potential of the energy industry in British Columbia and Alberta given there are challenges around market access," he said. "It is not about what is Alberta prepared to offer. It is a conversation about what would be in the best mutual interest of the province of British Columbia and Alberta."
Joseph Doucet, dean of the University of Alberta's School of Business, said the two premiers are seeking to keep the big picture in mind, notably creating jobs and investments for the benefit of both provinces.
"B.C. saying that it wants a piece of Alberta's royalties? Yes, that is over-reaching," Mr. Doucet said. "But B.C. saying that it wants to be a collaborative partner with Alberta makes sense, with respect to energy transportation."
He said Ms. Redford recognizes that B.C. has to reap some financial gains. "The two sides are going to look very hard at how they can together grow the pie and how they can demonstrate to their respective electorates that there will be financial benefits to each of the two governments."
Mr. Doucet added that with Alberta's royalties off limits, there needs to be an examination of other ways for B.C. to share in the prosperity promised in the Northern Gateway oil pipeline proposal and the planned expansion of the Trans Mountain oil pipeline.
Danielle Smith, Alberta's Official Opposition leader, said she agrees B.C. should explore other ways to extract financial benefits from transporting oil, Alberta should not be involved in those discussions.
"It is not up to Alberta to negotiate what a federal-B.C. agreement would be. It is not up to Alberta to figure out a refining project in British Columbia," she said. "And it is not up to Alberta to negotiate either an ownership stake in a pipeline [for B.C.], or negotiate with shippers or the production companies what a per barrel tax ought to be [for B.C.]"
For now, the energy industry is encouraged the two premiers are collaborating. "We see lots of economic benefits in B.C. through oil sands expansion," said Geoff Morrison, manager of B.C. operations for the Canadian Association of Petroleum Producers.
Mr. Morrison said CAPP would need to view details on what B.C. has in mind to obtain new energy revenue before commenting specifically, but in general, "the two jurisdictions are working together for the common interests of the Western Canadian economy, and that's good news."