Building a Firewall

Kenney, a cabinet minister in former prime minister Stephen Harper’s neoconservative federal government, stoked Alberta separatist fantasies when he ran for Alberta’s premiership — the closest Canadian equivalent to a gubernatorial race — not long after Harper’s government was defeated. In 2016, he slapped on a cowboy hat and drove around the province in a big blue Dodge RAM 1500 to unite the urban establishment Progressive Conservative Party, which had ruled Alberta from 1971 to 2015, with the rural populist Wildrose Party. His mission was to implement a harsh austerity agenda infused with a dose of religious moralism.

Kenney tirelessly lamented the purported structural bias of the federal government against Alberta. He complained that hard-done-by Albertans — living in the country’s wealthiest province — are forced to give a share of their income taxes to fund social programs in less wealthy provinces through equalization payments. Kenney’s “Fair Deal Panel” traveled the province cataloging Albertans’ grievances against the feds. Kenney insisted he was no separatist, but the purpose of the traveling roadshow seemed transparent: it aimed to garner support from separatist factions without alienating the larger portion of Albertans who regard the idea of an independent Alberta as delusional.

The roots of the Fair Deal Panel trace back to a 2001 open letter to then-premier Ralph Klein printed in the National Post, a right-wing Canadian newspaper. This letter was signed by a group of Canada’s prominent conservatives, including future prime minister Harper, then a lobbyist with the conservative National Citizens Coalition. Other signatories included University of Calgary academics Tom Flanagan and Reiner Knopff, as well as future Alberta treasurer Ted Morton, anti-tax lobbyist Andrew Crooks, and conservative policy adviser Ken Boessenkool. Their collective request to Premier Klein was to establish a “firewall” between Alberta and the rest of Canada.

The signatories outlined what they called an “Alberta Agenda”:

We believe the time has come for Albertans to take greater charge of our own future. This means resuming control of the powers that we possess under the constitution of Canada but that we have allowed the federal government to exercise. Intelligent use of these powers will help Alberta build a prosperous future in spite of a misguided and increasingly hostile government in Ottawa.

Flanagan, whom I interviewed for my forthcoming book, Kenneyism: Jason Kenney’s Pursuit of Power, told me that Harper abandoned the Alberta Agenda once he reentered federal politics two years later to lead the Conservative Party of Canada.

“The letter, however, continued to lead its own life in Alberta and was picked up by various provincial movements and parties, such as Wildrose. Jason would have had to deal with its legacy when he came back to Alberta to unify Wildrose and the Progressive Conservatives,” Flanagan said, noting the letter’s popularity among the Wildrose crowd.

“[Kenney] never actually implemented any of it while he was premier; I had the impression he wanted to appear to act on it without actually doing so. Danielle is more of a true believer, I think.”

The first item on the Alberta Agenda was to pull out of the CPP and create an APP. The signatories correctly noted that the 1965 CPP Act permits provinces to create their own pension plan, as Quebec has done. “If Quebec can do it, why not Alberta?” they asked. The difference is that Quebec declined to join the CPP when the plan was established. They didn’t pay into it for more than half a century before packing up and demanding half its assets.

The Art of the Fair Deal

The Fair Deal Panel returned in May 2020 with a report, advocating that the province explore the creation of a provincial police force to replace the Royal Canadian Mounted Police and a separate pension plan, echoing the ideas of the firewall letter. One key distinction was that the report urged against Alberta pursuing independent tax collection, which was the Alberta Agenda’s second proposal.

The panel report suggested the province hold a referendum on revoking the equalization formula from the constitution, which Kenney held during the October 2021 municipal elections. It passed with 62 percent support and a 39 percent turnout.

As Flanagan suggested, Kenney was letting those who wanted all-out confrontation with Ottawa blow off some steam. The former premier had no real intention of taking significant action on these issues, being fully aware from his time as a federal minister that the Canadian constitution can’t be unilaterally altered by a single provincial referendum in which fewer than two out of every five people vote. But he needed to mobilize his base that had grown increasingly impatient with his indecision during the COVID tumult.

Smith became the new champion of the province’s disgruntled right-wing factions, promising to take action against the feds by implementing each Fair Deal recommendation and going even further than its recommendations by creating an Alberta Revenue Agency. Shortly after securing the United Conservative Party (UCP) leadership, her inaugural legislation was the “Alberta Sovereignty Act,” fulfilling a core pledge to her base. This act empowers the provincial legislature to vote down any federal legislation it opposes, running roughshod over First Nations, whose treaties are signed with the federal government.

Once Smith secured reelection in the May 2023 provincial election, she set her sights on Albertans’ pensions, which she refused to discuss during her campaign. This omission was likely due to the proposal’s consistent unpopularity with the broader public, particularly among those who are living off their pension benefits.

On July 13, Smith sent a mandate letter to Finance Minister Nate Horner, instructing him “to determine whether a referendum should be held to establish an Alberta Pension Plan that will increase pension benefits for seniors, reduce premiums for workers and protect the pension interests and benefits of all Albertans,” while examining the “feasibility and advantages” of an Alberta Revenue Agency.

By employing language that presupposes that an APP will “increase pension benefits” and “reduce premiums for workers,” while highlighting the “advantages” of provincial tax collection, Smith is unmistakably steering the discussion toward her favored outcome.

A Poor Investment Track Record

While the equalization referendum was a hypothetical notion lacking constitutional validity, messing with people’s pensions is serious business, with real material consequences. Alberta has a provincial pension fund, the Alberta Investment Management Corporation (AIMCo), which has a track record of making foolish fossil fuel investments.

The nominally left-leaning NDP government, which ruled the province from 2015 to Kenney’s 2019 victory, introduced an Alberta Growth Mandate, which pushed AIMCo to invest in Alberta-based companies. Two-thirds of the $300 million the pension fund invested in Alberta companies was allocated to oil and gas companies and investment funds associated with the industry.

In 2017 and 2018, AIMCo provided two high-interest loans totaling $43 million to Razor Energy, a floundering oil and gas company. Despite its apparent need for a loan, Razor was able to pay out $4.2 million in dividends to shareholders commencing in 2018 and continuing into 2019. However, the company ultimately declared its inability to pay interest on its loan — defeating the entire purpose of a pension fund lending out money — in July 2020.

In the aftermath, Razor has left behind a $188 million cleanup tab for its abandoned wells, which are no longer producing oil. This sum far surpasses the mere $1.25 million deposit it initially provided, leaving two grim possibilities: either these wells won’t get cleaned up or pensioners will lose money.

It’s a mistake to assume that AIMCo has heeded the lessons from these ill-advised investments. CEO Evan Siddall made the preposterous claim last year that fossil fuel investments are good for the environment and returns. “The energy sector is the sector that’s investing in [emissions reduction] the most, and that has the most to lose,” he told credulous Canadian Press business reporter Amanda Stephenson.

In this context, it becomes clear that Smith’s pension gambit serves a dual purpose in her running conflict with Ottawa. First, it raises the specter of Alberta separatism by threatening to rob the CPP of more than half its assets, and second, it further binds Alberta’s economy to risky fossil fuel investments, even as the federal government moves towards a net-zero energy grid by 2035 — a goal that Smith vehemently opposes.

At its core, this strategy reinforces Alberta’s position as a petrostate, allowing oil and gas companies to suck the earth dry, pollute waterways, and contaminate soil, while exacerbating the climate crisis. In this pursuit, the well-being of pensioners takes a back seat, as their funds are put at risk while fossil fuel investors buy time before moving along to the next money-making scheme.