A Battle is Coming...

Photo: A Battle is Coming...

During 2021 I developed a healthy respect for the sovereignty of the United States. I travelled a lot through the US during the Summer and Fall of that year. The world was battling a common threat, yet every time I crossed a state line, I experienced a completely different style of risk management.

A global pandemic was occurring, but it was not the same Pandemic in Oregon as in Idaho. It was different in Arizona, California, Texas, Washington and Nebraska.

I loved it. Depending on how people felt about this threat, they could choose their own adventure. For the first time, I truly understood the value of the sovereignty of the States.

Small, fractured leadership allowed for optionality and choice.

In Canada, right now, the premier of Alberta is fighting for similar sovereignty for her Province.

For my American readers, Canada has ten provinces and three territories - in some ways, these provinces and territories operate similarly to American states, and in other ways, they differ.

The provinces retain exclusive power over many decisions, such as civil and property rights, civil criminal justice, provincial tax rates and natural resource management.

The Federal Government retains other powers, such as decisions over trade and commerce, defence, shipping, banking, quarantines, currency and citizenship.

The provinces generate revenue through domestic industry, but the federal government collects the taxes and then redistributes them back to the provinces. This allows the federal government to control “transfer payments” - a rebalancing of wealth between wealthy provinces and poorer ones.

Alberta, a province rich with energy reserves (often referred to as the Texas of Canada), has historically punched far above its weight in contributing to Canada’s well-being.

But while the Federal government in Ottawa has readily accepted the revenues Alberta provides, it has simultaneously crippled the energy industry through heavy regulation and policy changes, biting the hand that feeds it.

Newly elected Alberta Premier, Danielle Smith, has recently put forward legislation intended to spotlight what she considers federal government overreach into the Provinces, calling it the Alberta Sovereignty Act.

The Act has been called unprecedented, and in many ways, it is. But Saskatchewan (the province directly to the east) is now running a parallel game plan called the Saskatchewan First Act.

The federal government is currently stating that “people are very concerned” about these provincial bills, but the Saskatchewan legislative assembly recently voted on the second reading of their bill. The result was 43-0, in favour — bipartisan support from the right, the left and the centre.

Alberta and Saskatchewan have put forward legislature, and Manitoba (the next province to the east) is now in discussion with both provinces. While Alberta and Saskatchewan are laden with resources that the world wants, they are both landlocked - no access to international markets. Manitoba, however, has a northern coastline.

A fight is brewing - a fight that Canada has not seen before. A coordinated effort to seek safe harbour from the federal leadership.

A battle requires at least two parties. As much of a critic as I may be of our federal leader, Prime Minister Trudeau is a fighter and is not afraid to scrap.

In 2012 he actually stepped into a literal boxing ring with a conservative senator for a five-round fight. The senator was not a stooge; he held a black belt in Karate and served in the Navy. But Trudeau beat him bloody - he didn’t win a cheesy decision; the referee had to step in and stop the fight to protect the senator.

When it comes to the Provinces versus the Federal Government, this battle will be all about energy. The choice to produce and sell the energy that we have now, to the world that needs it now, in exchange for a growing economy now. Or to question the sustainability of our current energy sector and replace it with something better in the future.

Case in point: Germany's chancellor recently came to Canada to beg Trudeau for a natural gas export agreement to support them through this winter. Trudeau said he could not make a sound business case for the deal. He could, however, promise hydrogen power. The problem is, we don’t have any.

Canada’s Hydrogen Strategy, taken straight from the Government of Canada website, states, “This strategy shows us that by 2050, clean hydrogen can help us achieve our net-zero goal”

Be patient, Chancellor.

Canada does have natural gas. At current estimates, around 1,373 trillion cubic feet - equal to over 200 years of current annual demand.

This is an excellent summary of the debate that will unfold in Canada over the next few years, led by the Premiers of Provinces who have resources that the world wants, opposed by the Federal strategy for a fossil fuel-free economy.

Let’s pick this apart for a minute.

For starters, I am an environmentalist. I’ve lived many years of my life in very remote parts of the country, surrounded by untouched wilderness and thriving wildlife populations. I am raising my family in a small mountain town where bears and cougars are often spotted in the neighbourhood.

I value this wildness. I understand more than most what we stand to lose if we don’t protect our environment.

But a binary focus on “fossil fuels = bad and renewables = good” Is short-sighted and misleading. Solar energy may be renewable in the sense that the sun always shines. But the technologies required to harness and store this power for productive use are anything but.

The minerals required to scale solar panels, wind turbines and the batteries to store the energy would create the most aggressive mining rush the world had ever seen. There is no way around this. Astronomical amounts of copper, nickel, coal (steel alloy), lithium, cobalt, silver, manganese, vanadium, and on and on.

Should we assume the same voices who are adamant we shut down fossil fuel production will suddenly become the same voices calling on governments to permit every mine necessary all over the world?

Do you think so?

Furthermore, the components of these technologies - silicon, fibreglass, and steel alloys require fossil fuels as an ingredient.

A barrel of oil is used to produce about 6000 different products, only 30% of which are combustible. We could wean the world off of oil, if we could wean the world off of concrete, asphalt, steel and plastic.

We should always innovate toward better solutions. And we will - I will bet all day long on human ingenuity. But I don’t believe that federal governmental central planning will get us there.

This is why I will be watching the battle between the provinces and the federal government very closely. Regional leadership leads to an increase in trial and error, optionality and choice.

Small fractured efforts create more efficient solutions. When a restaurant fails, the industry gets stronger. A lesson is learned, and entrepreneurs carry it forward.

Large top-down systems lead to increased fragility and unseen vulnerabilities. When a bank fails, the industry gets weaker. Interdependencies lead to contagion.

It often seems like we are running off a cliff and out of time. In 1894, The Times newspaper predicted… “In 50 years, every street in London will be buried under nine feet of manure.”

Traffic congestion, led by horses and carts, was clogging the streets with horse feces. Swarms of flies caused breakouts of typhoid fever. Dead horses would be left to putrefy in the road.

Large cities all over the world were in a similar crisis. New York was run by over 100,000 horses, producing 2.5 million pounds of manure daily.

This became known as the ‘Great Horse Manure Crisis of 1894’. It was predicted that urban civilization was doomed.

What saved the day? An innovative, “environmentally friendly” technology known as the internal combustion engine. The automobile.

And here we are.

The world is not simple. It would be nice if it were. But it isn’t.

We are terrible predictors of the future. We are terrible predictors of the ripple effects of our decisions.

That is why promises for 2050 are empty and meaningless, and nothing but.

But what do I know?

To gain clarity on this battle in my country and to identify my blindspots, I will be squaring off live on stage with two opposing forces - the former Premiers of both British Columba and Saskatchewan; Christy Clark and Brad Wall. While British Columbia has long been an obstacle between Alberta’s resources and the global markets, Saskatchewan has stood as an ally.

The debate will be hosted as part of the Vancouver Resource Investment Conference on January 29 & 30th at the Vancouver Convention Centre.

Premiers Clark and Wall were counterparts during the previous decade. Clark governed from 2011 to 2017, and Wall from 2007 to 2018.

My promise to the audience is that I will not pull any punches - for either politician.

Tickets are available HERE.

It’s Sunday. Let’s get ready to crush the week.