A national environmental group wants Ottawa to tax Alberta’s energy exports. The last time that was tried, the courts said no, the rigs left, and Olds-Didsbury sent a separatist to the legislature.
After trade talks with Washington collapsed, Ontario’s premier and Alberta’s most recent former premier would use Alberta energy as a bargaining chip. That is a dangerous game. There is worse.
The Sierra Club, no friend to Alberta, sent a fundraising letter to Canadian inboxes four days after the collapse. It calls for the federal government to impose an export tax on the oil and natural gas we ship to the United States.
The proposal belongs to the economist Seth Klein, who set it at 15 per cent and costed it at “close to $25 billion” a year. What the letter adds is a sentence of its own. An export tax, it says, is “a Federal choice (not a provincial one) and one the Alberta Government has no grounds to oppose.”
No grounds?
In fact, there are three, and each is a matter of public record.
The first is a Supreme Court of Canada judgment. In 1980 Ottawa proposed a tax on exported natural gas as part of the National Energy Program. Alberta challenged it through a constitutional reference, on the basis that the province itself owned the gas the levy would capture. In Re Exported Natural Gas Tax, [1982] 1 S.C.R. 1004, the Court struck the tax down as it applied to Alberta’s own gas, on the plain words of section 125 of the Constitution: “No Lands or Property belonging to Canada or any Province shall be liable to Taxation.”
That is not ancient history. The Crown owns 81 per cent of Alberta’s mineral rights, some 53.7 million hectares. The Alberta Petroleum Marketing Commission, created out of the 1973 oil-pricing fight, still takes the Crown’s conventional crude royalty in kind and markets the barrels itself. How much royalty Alberta takes that way is a policy choice made in Edmonton, and the barrels the province owns are the barrels Ottawa cannot tax.
The second is section 92A of the Constitution Act, 1982, the resources amendment, which exists because of this quarrel. In plain language, Alberta decides how much comes out of the ground. Peter Lougheed improvised that power under fire in 1981, cutting output in stages toward 180,000 barrels a day. Ottawa’s grab backfired: it had to levy a special charge of $1.15 a barrel on Canadian consumers to help pay for the costlier imported crude that replaced Alberta’s. Today the power is written into the Constitution.
The third is a treaty Canada signed. Article 2.15 of the Canada-United States-Mexico Agreement reads, in full: “No Party shall adopt or maintain any duty, tax, or other charge on the export of any good to the territory of another Party, unless the duty, tax, or charge is also applied to the good if destined for domestic consumption.” Annex 2-A exempts Canadian logs, unprocessed fish, coasting trade and ethyl alcohol. Mexico secured a carve-out for hydrocarbons. Canada did not. A 15 per cent levy on barrels bound for Chicago is lawful only if the same 15 per cent lands on every barrel burned in Hamilton, which is not the policy being sold. Ottawa would argue that American tariffs have suspended the obligation. That is an arguable position, not a settled one, and it would be fought alongside the constitutional case.
Then there is the arithmetic. The letter assumes the tax lands chiefly on Americans. Largely, it would not. Alberta sells a heavy sour barrel into a narrow market of refineries built to process it, from a landlocked position, at a discount that exists precisely because the seller has nowhere else to go. As energy analyst Heather Exner-Pirot puts it: “Just like Americans pay the tariffs, if we impose an export tax, it’s our companies that are responsible for paying the export tax.” Much of that cost would work its way back to the wellhead, cutting producer revenue and the royalties that pay for Alberta schools and hospitals.
None of this required special access. It required opening the file.
Nobody did in the 1970s, and the country paid.
On 13 September 1973, nine days after the producing provinces declined a voluntary price freeze, Ottawa announced a 40-cent-per-barrel charge on exported oil. The Trudeau government’s budget of May 1974, delivered by finance minister John Turner, then made provincial royalties non-deductible against federal income tax. The Alberta Law Review worked the arithmetic at the time: a producer could pay federal tax and provincial royalty exceeding one hundred per cent of income. What followed, in that journal’s words, was “a massive exodus of drilling and exploration companies and equipment from Canada.” Alberta cut its own royalty to 35.2 per cent in December 1974 to keep the industry alive. The province paid for Ottawa’s tax.
The escalation came six years later. The Liberals won the election of February 1980 holding two seats west of Ontario, both in Manitoba, and eight months later, with nobody from Alberta at the table, brought in the National Energy Program and held Alberta oil below world prices. The government shelved Cold Lake in July 1981. Alsands was cancelled in May 1982. Active drilling rigs in western Canada fell from about 550 to 120 in two years.
On 17 February 1982, the voters of Olds-Didsbury elected Gordon Kesler of the Western Canada Concept, a party nine months old, running on an independent western nation. He was the first separatist elected to the Alberta legislature, and the first elected anywhere outside Quebec in living memory. Lougheed, who had spent a decade fighting Ottawa, was outflanked by people who thought he had not fought hard enough.
Now the calendar. Albertans vote on 19 October, eight weeks from now, on ten questions, one of which asks whether the province should begin the legal process toward a binding referendum on separation. Ipsos found support for separation at 28 per cent in January, falling to 18 or 19 by early June, with 72 per cent saying they would stay.
Into that eight-week window, a national environmental organization proposes to drop a federal tax on Alberta’s principal export, justified in writing on the ground that Alberta has no standing to object. It is a reckless policy, urged with no evident regard for the unity of the country its authors claim to be defending.
They are not alone in liking it. Klein’s brother-in-law, Avi Lewis, now federal NDP leader, backs the idea too. With his wife, Naomi Klein, Lewis helped produce the 2015 Leap Manifesto, the document that Rachel Notley, then Alberta’s premier, called “naive and ill-informed.” A decade on, the same instrument is back, and one of its authors leads the party Notley belonged to.
Alberta’s own government has already answered. Asked in July about withholding the energy that goes south, Premier Danielle Smith called it “not a viable option.” The Prime Minister has likewise declined the invitation. Asked the same month about using energy as leverage, Mark Carney said: “I don’t see the value of it.”
They are right, and for a reason larger than trade tactics. The question was tried once, in court and on the ground, and Alberta won both. What Ottawa got for the attempt was a wrecked drilling sector, a constitutional amendment written against it, and a separatist in the legislature inside sixteen months.
That was against a province with no referendum on the calendar. There is one now.
In their haste to punish Donald Trump, who will not feel it, Laurentian environmentalists would damage the country they claim to defend. Happily, the file is already full. The Constitution shielded Alberta’s own petroleum in 1982, a treaty bars the tax now, and Alberta’s voters have answered this kind of federal adventure before. You cannot save the country by giving Alberta more reasons to leave.
Sources
• Seth Klein, “Canada should hit Trump where it hurts the most — oil and gas,” Canada’s National Observer, February 2025. sethklein.ca
• Re: Exported Natural Gas Tax, [1982] 1 S.C.R. 1004. decisions.scc-csc.ca
• Constitution Act, 1867, ss. 92A and 125. laws-lois.justice.gc.ca
• Nigel Bankes, “Peter Lougheed’s Section 92A,” ABlawg. ablawg.ca
• Mineral ownership in Alberta, Government of Alberta. alberta.ca
• Alberta Petroleum Marketing Commission, “Petroleum Marketing.” apmc.ca
• CUSMA, Chapter 2, Articles 2.11 and 2.15, Global Affairs Canada. international.gc.ca
• Graison Foster, “Ontario premier wants Canada to withhold oil exports to the U.S. Here’s what that would mean,” Edmonton Journal, 25 August 2026 (Exner-Pirot and Smith quotations). Edmonton Journal
• “Carney vows Canada will remain reliable oil supplier despite U.S. tariffs,” World Oil, 29 July 2026. worldoil.com
• B. Tyerman, “The Pricing of Alberta’s Oil,” Alberta Law Review (1976). albertalawreview.com
• Robert G. Skinner, “The Liberalization of Canada’s Oil and Gas Markets” (2023), on the $1.15/bbl Special Compensation Charge. thinkingenergy.ca
• “The Notorious NEP,” CBC News Interactives. newsinteractives.cbc.ca
• UPI archive, 18 February 1982, on Gordon Kesler and the Western Canada Concept. upi.com
• “Alberta separatism support drops sharply from early 2026: Ipsos poll,” Global News. globalnews.ca
• “Rachel Notley calls Leap Manifesto naive and ill-informed,” CBC News. cbc.ca
As always, Sir, well done!
I am of an age where I remember - not at all fondly - the energy wars of the 1980s; many of us here in Alberta do. I also remember very well the energy wars of the 1970s; not quite so many remember those. I do recall the loss of drilling rigs, the downturn in our economy, the attack of the federal budget, et al.
I have been talking my head off (boringly, my family says, and ad infinitum, they add) for some time about the danger of using oil and gas as a weapon.
The fact is that, for all practical purposes, our oil can only sold to the US. Ever so many "smart" (read "stupid," really) people argue that the US refineries can only use our grade of crude. Not so, many of those refineries were built decades ago to process Venezuelan crude. After the advent of Chavez and then Maduro, Venezuelan crude was no longer available so those refineries turned to using Western Canada Select, which is approximately the same grade.
Those same "smart" (not whatsoever) people miss that DJT now "owns" Venezuela and he now "possesses" so all he has to do is to order that Venezuelan crude to be landed on the Gulf Coast and the pipeline pumping stations that now pump north to south to be reversed. Easy peasy. That provides about 1 million barrels a day for the refineries. Canada now sells about 4 million barrels a day to those refineries so the refiners will ask, "I need 3 million, not 4 million, so what price are you asking?"
Net result: a) an immediate drop in prices realized and export revenue for Canada; b) US refineries sourcing heavy crude elsewhere in the world and further reducing Canadian volumes; and c) effectively eliminating permanently a market for Canadian crude.
Again, Sir, well done!
I welcome the laurentian interference because it will drive more of us to vote yes to a referendum. The chattering classes remind us why separation is our hope for the future. Their attitudes never change so we must.