Energy Federalism Will Be Tested As Never Before: Is Canada Up To The Challenge?

The last few years are a vivid reminder that federalism is pivotal to energy and climate change policy. In late 2015, intergovernmental collaboration hit a high with the Pan-Canadian Framework on Clean Growth and Climate Change. Provinces and the federal government were singing from the same song sheet.

A few years — and a few provincial elections — later, and they’re singing very different tunes. Alberta pulled out of the agreement to pressure Ottawa to rescue the flailing Trans Mountain pipeline expansion project. Since then, the agreement’s centrepiece, a carbon tax, has generated acrimonious conflict with multiple provinces. Saskatchewan used to be the lone opponent — now it has a growing list of friends: Alberta, Ontario, Manitoba and New Brunswick. Court challenges to the federal plan have so far found in favour of the federal government, but that’s done little to blunt conflict between Ottawa and the provinces.

Intergovernmental conflict also erupted over federal legislation on energy and environment, notably reform to environmental assessment and energy regulation (Bill C-69) and to prohibit tanker traffic on the northern B.C. coastline (Bill C-48). Six premiers penned an open letter to the prime minister calling for major amendments to Bill C-69 and outright scrapping Bill C-48, saying the bills intervene in areas of provincial/territorial jurisdiction and would grind resource development to a halt in their borders.

Ottawa and the provinces have clashed over energy projects, especially Trans Mountain. B.C. launched a reference case to the provincial court of appeal to assess its jurisdiction to regulate the quantity of oil flowing in the pipeline. Alberta imposed import restrictions on B.C. wine at the height of the conflict and enacted legislation empowering the provincial government to curb oil and gas exports to B.C. The federal government stepped in with a so-called ‘summit’ between the prime minister and the warring premiers.

All of this is playing out at the highest political levels. This is not quiet spats between ministers or senior officials. It is out-and-out combat and overt brinksmanship among premiers and with the prime minister.

That said, it’s not the first time Canada’s seen nasty conflict over energy issues. Governments have risen and fallen on the backs of energy fights. Think the pipeline debates of the 1950s on which the St. Laurent government fell, or the National Energy Program of the 1980s, still burned into the memory of oil and gas producing provinces in their relations with Ottawa.

But this latest conflict is not just another chapter in energy federalism like the others. It is likely to be far more protracted, far more challenging to resolve and far more impactful on Canada’s energy and climate future.

Why? Because the demands on energy federalism are growing exponentially.

First, market conditions are unlike any experienced in the past. With the rapid rise in U.S. oil and gas production, Canadian producers are for the first time looking to export energy resources beyond North America. But the infrastructure that supports getting oil and gas off the continent, whether west to B.C., or east to Quebec and Atlantic Canada, cuts through Canadian lands and waters. Cue interprovincial politics and conflict.

Second, today’s social context bears little resemblance to that of the 1950s or even the 1980s. People trust government and industry less, are less deferential to ‘elites,’ and expect to be engaged in policy and project decision-making every step of the way. The rise of Indigenous governments’ influence, rights and engagement in energy and climate decisions also transforms the game. Having Indigenous organizations at the table in intergovernmental meetings would have been unthinkable in the past. Now, it is becoming unthinkable not to.

Third, environmental protection is now a priority alongside energy development. The pipeline debates of the 1950s were mainly about economics and energy security. Today’s pipeline debates are often proxy wars for the broader issue of climate change. Environmental imperatives raise challenging questions about how to develop energy resources in ways that minimize impacts on land, air, climate and water. They raise thorny jurisdictional questions and their effects vary across the country. Cue boatloads of potential for conflict.

Finally, technology is changing in rapid, disruptive and highly unpredictable ways. Gone are the days of incremental improvements to existing technologies, punctuated by the occasional major breakthrough. Now, decentralized microgrids, ‘smart’ energy systems, artificial intelligence, blockchain and more will transform energy systems in ways that are difficult to conceive of, much less predict. The technological context in 2019 would scarcely be recognizable to leaders in the 1980s, much less the 1950s. The ground is forever shifting and uncertain.

So, what to make of all this? What will this new chapter in energy federalism look like? How will it impact energy and climate policy?

One thing is clear. The demands on energy federalism are soaring. The economic, environmental, social and technological context is infinitely more complicated than it was in the past. If the problems in the second half of the 20th century were wicked, those of the 21st are truly infernal. 

But if there’s one thing we’ve learned from the last 70 years, it’s that federalism is the sine qua non of energy policy — and now climate policy. That means a few key things.

First, federal unilateralism — as tempting as it may be for those wanting to move quickly on energy or climate priorities — is likely to backfire. Provinces push back forcefully and Ottawa can find itself taking one step forward and two steps back.

Second, ignoring the needs and interests of a province or region is also likely to backfire. The art of energy federalism is about collaboration and negotiated compromise. Rarely is it about ganging up, survivor-island style, on the fundamental interests of individual provinces or regions.

Third, collective gains can be made, but timing is everything. Where there are windows to push forward on key priorities, governments can make progress on common energy and environmental priorities.

Fourth, wounds take a long time to heal. And deep wounds leave permanent scars. Coming back from bitter conflict takes time and trust-building. In some cases, like the consequences of the National Energy Program, things will never be the same. Past rifts in the federation challenge future progress.

All of this calls for patience, something that’s in short supply when economic and environmental imperatives are urgent. But rushing fences risks failing in spectacular fashion.

It also calls for balance, likewise in short supply judging by the increasingly polarized energy and climate visions put forward by political parties in the run up to this fall’s federal election. But unbalanced approaches that run roughshod over core imperatives or regions are likely to fail.

Is Canada up to the challenge? Judging from the last few years, it’s difficult to say.

Progress on energy and climate is possible in Canada’s federal system, but balanced and steady is most likely to win the race. Fits and starts risk policy reversals and protracted conflict, often played out in the courts.

This is tough stuff for politicians navigating — even stoking —increasing polarization. Progress will require a collective effort of unprecedented proportions involving all sectors. Industry, ENGO, Indigenous and academic leaders could play a useful role by reminding political leaders of the costs of impatient unbalanced approaches. They could also help build positive paths forward, making political space for politicians to step down from polarized positions.

None of this will be easy, but it is essential for the country to make progress on energy and climate imperatives.