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Ivison: Why Carney and Smith's grand bargain is about to hit the wall

Panelists Ian Brodie and Eugene Lang join John Ivison to talk about the problems ahead for the prime minister's memorandum of understanding with Alberta, and the prospects for a spring election

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In this week’s video, John Ivison is joined by regular panelists, Ian Brodie and Eugene Lang.

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In a discussion about the memorandum of understanding (MOU) struck between Prime Minister Mark Carney and Alberta Premier Danielle Smith, Brodie said there is trouble ahead on the industrial carbon price the federal government reportedly wants to impose, and on the carbon capture and storage project that Carney hopes will “decarbonize” Western oil. He said that realization is starting to hit federal and provincial officials.

Ivison: Why Carney and Smith's grand bargain is about to hit the wall Back to video

“I think those negotiations are becoming more difficult as they get closer and closer to the reality of making sure we can export another million, two million barrels of oil a day,” he said.

“There’s a deadline between now and April 1st for an agreement on what the new industrial carbon price will be to pay for the carbon capture and storage project. If the stories that are circulating around are true, the price that they’re going to settle on is in the neighbourhood of $120 a tonne of carbon dioxide. That works out to about $20 a barrel. Taking $20 per barrel out of a long-term price of oil of something like $50 or $70 a barrel makes the expansion of the industry uneconomic and uneconomic overnight.

“I think both the federal government and the province are now coming to terms with industry saying: ‘Hold on a minute, if you’re going to charge us $20 a barrel to pay for a project that might not work, even at $120 a tonne, you’re doing by indirection what the previous government tried to do by direction’. It is sealing that oil in the ground.”

Brodie said Steven MacKinnon, the federal transport minister, was in Calgary this week, speaking at the Chamber of Commerce.

He said when MacKinnon spoke about opening up the port of Vancouver, there were cheers, and when he talked about expanding rail access, there were cheers. But when he mentioned the MOU, there was no applause at all.

“He had to stop and say: ‘How come you’re not applauding that?’ Well, it’s because I think on mature reflection… it is going to the heart of whether the oil export industry is going to serve Canada’s economic purposes in the future. If the federal government wants the revenue to pay for the debt that Mr. Carney is taking on, they’re going to have to do something to make those oil exports economical. And that might mean postponing the carbon capture, downsizing the carbon capture, or finding some other way to pay for the carbon capture project.”

Lang took aim at Danielle Smith for stoking grievances in her province by announcing a number of plebiscites, most of which are aimed at wresting more power from the federal government and one of which seeks to limit the number of new arrivals.

“I think it was (late University of Calgary political scientist) Roger Gibbins who once said something like, Albertans are frustrated Canadian nationalists. I think that’s very insightful. There’s a lot of frustration, but I don’t think they’re at the point of separation, as some people suggest.

“I think these plebiscites are a really bad idea. You know, it’s the oldest trick in the book – blame immigrants, the downtrodden and the federal government for your government’s fiscal woes. And that’s what seems to me those plebiscites are all aimed at doing. They’re going to bring in a huge deficit in the Alberta budget. They think it’s going to be about a billion more than they forecast a few months ago, largely due to soft oil prices. Yes, there’s some population pressure dimension to it from immigration, but a lot of it is internal immigration across Canada, which Alberta can do nothing about and the federal government can’t do anything about. We have an internally mobile labour market under the Constitution. So, I think these are really frivolous, grievance-stoking things that she’s planning to do with these referendums. It’s not helpful. And I hope the frustrated Canadian nationalists in Alberta see that for what it is.”

No-one on the panel predicted a spring election, contrary to speculation in the Ottawa bubble. Lang said he believes it would be a very risky manoeuvre for Carney to provoke an election when he has a de facto working majority.

“I see nothing but downside risk and we don’t really need it at this point, even if it is tempting because the polls suggest (the Liberals) are in a dominant position.

If the federal government wants the revenue to pay for the debt that Mr. Carney is taking on, they're going to have to do something to make those oil exports economical

If the federal government wants the revenue to pay for the debt that Mr. Carney is taking on, they're going to have to do something to make those oil exports economical

Brodie said he was speaking with one Liberal insider this week who suggested the party thinks it can win five seats in Calgary, a net gain of four. “I think that’s a bit optimistic if there was an election at the moment but I don’t think it’s crazy. But an election this spring would be not just risky but foolhardy for the national interest. We’re in a very complicated trade negotiation with the United States, Carney now has his chief negotiator (Janice Charette) and the negotiations have begun in some sense. An election now would have the prime minister polarizing against Mr. Trump and the Americans in a way that would hamstring him in a CUSMA (Canada-U.S.-Mexico trade) re-negotiation. It would do permanent damage to the Canadian trade interest with the United States,” he said.

The panel was chatting just hours before Conservative Party Leader Pierre Poilievre was due to give a speech in Toronto outlining his vision for the Canada-U.S. relationship.

Brodie said that while Poilievre was ahead of the curve in identifying housing as a major issue, he is playing catch-up on foreign policy. “Poilievre has never been a foreign policy leader. He’s not a defence hawk. He reluctantly moved on defence spending commitments before the last election under tremendous pressure from his own caucus. He didn’t want to commit to particular defence spending numbers because of the fiscal pressures that he could see in the budget. I understand the needle he was trying to thread.”

Brodie said if he falls in behind Carney’s line, he leaves himself no space to criticize the prime minister if that strategy falls apart. “Or he can take, I would say, a different approach, maybe a more mature and traditional Canadian approach. The same line that the Liberals took against Mr. Harper when Mr. Harper was critical of Obama canceling the Keystone XL pipeline. But the problem is in the short term, he will just get slaughtered by the news media and slaughtered by the Liberals and he’ll be offside of public opinion.”

Lang said Poilievre is in an awkward position with regard to the United States.

“First of all, it seems to me there’s some fraction of his voters that is more or less supportive of the MAGA agenda. And, I guess he doesn’t want to lose or shed any of his core base because he can’t afford to. So, he’s got to walk this fine line. But most Canadians are not in any way supportive of anything on the Trump agenda. Frankly, they’re violently hostile to it. I really see no space for Mr. Poilievre on Canada-U.S. relations, other than basically just to stick with where the prime minister is.”

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