Maybe Alberta’s Premier should hold off asking for Constitutional Changes to the Equalization Formula

The past week was an interesting one here in Canada as a couple of major provincial announcements from the east (Quebec) and west (Alberta) suggest what appears to be a major conflict on energy sources and the flow of tax dollars related to the “Equalization Formula”.

On the latter; in 2019 Alberta contributed $22 billion more in tax revenue than they got back from the Federal government according to a Fraser Institute review whereas Quebec in that year, received $13.2 billion or 66.9% of total equalization payments.

Those equalization payments have seemingly annoyed Albertans as clearly demonstrated via a recent referendum resulting in almost 62% voting to revise the “constitution”. The principal reason expressed by Alberta Premier Kenney why Albertans supported the referendum was; “to demand a repeal of “discriminatory” environmental laws that hurt Alberta’s energy sector.”  Needless to say, the push to eliminate fossil fuel generation has impacted the Alberta economy and forecasted to do more harm.

While many of those “environmental laws” were imposed by the Trudeau led Liberal minority government another recent “related event” presumably played a role!  That event was how Quebec Premier Legault suddenly announced: “The government of Quebec has taken a decision to renounce, definitively, extraction of hydrocarbons in its territory,” and labelled it as “a recipe for prosperity in an emerging age of international consensus on preventing drastic climate change by cutting fossil fuel carbon emissions blamed for global warming.” Needless to say Premier Legault will attend COP-26 where he presumably hopes to be honoured for Quebec being blessed with hydro dams. Legault noted those dams “enable us to attract investment because, in future, enterprises that want to produce goods without emitting greenhouse gases are going to find in Quebec an incomparable land of opportunity”.

As is to solidify Premier Legault’s anticipated blessing at COP 26 it is interesting to note Quebec accounts for 46% of all EV (electric vehicles) registrations in Canada perhaps related to their generous grants and cheap electricity rates. 

It seems ironic Albertans contribute their tax dollars to allow Quebecers to receive an $8K grant from Quebec (coupled with one for $5K from the Feds) to purchase a Tesla EV!

Does Premier Legault see lithium demand fueling Quebec prosperity?

The foregoing question is one that could be weighing on Premier Legault’s mind and why he dismissed exploration and extraction of hydrocarbons (fossil fuels) in Quebec even though they may well have untapped and significant resources particularly related to natural gas.  As it turns out Quebec also has lithium reserves which are currently in high demand and recently forecast to reach as much as US$30,000 per metric ton in the spot market. Couple those lithium reserves with another forecast suggesting its demand will grow at average annual rates of 30%* and one can see why Premier Legault is excited about the net-zero push.

As it to top things off back in late March of this year the US Department of Commerce “held a closed-door virtual meeting with miners and battery manufacturers to discuss ways to boost Canadian production of EV materials, according to documents seen by Reuters.”  The article describing the meeting noted a month before; President Biden and PM Trudeau committed to building an EV supply chain between the two countries. Interestingly two US mining companies (Livent and Pallinghurst) have invested in Canada jointly purchasing “the Nemaska lithium project in Quebec, in what will be North America’s largest lithium mine.” Livent was one of the 30 or so companies present at the ”closed-door” virtual meeting as was Tesla.  Another interesting article from July 2020 noted a California based company; KoBold Metals, “financed by well-known billionaires including Jeff Bezos, Ray Dalio, Michael Bloomberg, Richard Branson and Gates” has been attracted to Quebec.  KoBold’s principal focus is on finding “cobalt” and nickel deposits (secondary) both used in the manufacturing of those EV batteries.  They have acquired “rights to an area (in Quebec) of about 1,000 square kilometres (386 sq. miles), where it plans to begin collecting geophysical data before the end of the year.” It should be apparent why many of the “billionaires” behind KoBold push the “net-zero” concept. It is to simply make themselves even richer at a huge cost to the rest of us commoners. 

From all appearances Premier Legault sees the push for net-zero and elimination of fossil fuel use as a gamechanger for Quebec by attracting investors seeking minerals for EV.  Those incoming investments will (he believes) create well-paying jobs and rocket Quebec’s economy up to surpass Alberta’s on a per capita basis. His wish perhaps, is to see Quebec vault to become Canada’s richest province.  Should that happen because of the demise of fossil fuels Quebec may find itself as “The Province” doling out those “equalization” monies.

Maybe Premier Kenny should hold off before insisting on revisions to the equalization formula, as in the future, when the world has achieved the goal of the eco-warriors and our demented politicians, Quebec will be rife with cash and the rest of Canada will be the beneficiaries. 

We will all surely need it, should the foregoing happen, as we will be struggling to survive without reliable power to keep us warm in our cold winters and many of us will, by then, be living in poverty.

*BYD a major Chinese battery manufacturing company recently announced they will raise battery prices by 20% due to raw material costs.

Author: parkergallantenergyperspectivesblog

Retired international banker.

One thought on “Maybe Alberta’s Premier should hold off asking for Constitutional Changes to the Equalization Formula”

  1. It is extraordinary that a coalition of governments and billionaires would be secretly seeking to finance specific resource developments in Quebec while simultaneously another coalition of governments and corporate giants (the World Economic Forum) is working to undermine hydrocarbon resource developments in western Canada and elsewhere. The record of governments trying to pick industry winners and losers is awful. In a 2020 article Jean Michaud and Germain Belzile of the Montreal Economic Forum noted that recharging all personal vehicles and all trucks if they were electric in Quebec would require almost 28 additional TWh of electricity generation per year. It is simply impossible for Quebec to add that much capacity in the next 29 years, and any effort to do so would both sharply raise rates and reduce reliability. Further, amending the constitution in Canada is virtually impossible, as Quebec has a veto over any such change. This is all madness.

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