An ‘independent’ Alberta would be a way station on the path to 51st statehood

Open this photo in gallery:

Let’s say that the side in favour of having an Alberta separation referendum wins the referendum-on-a-referendum that Premier Danielle Smith is insisting on holding this fall. And let’s say, for the sake of argument, that leads to a binding referendum sometime next year, which the Leave side wins.

As a result, let’s imagine that Canada and Alberta negotiate an Albexit. The province becomes a separate, independent country.

I don’t think that’s going to happen. Neither do the polls. But let’s say it did.

Does anyone in their right mind believe that would make it easier for Alberta to export oil? To produce oil? To attract investment to the oil patch?

Opinion: Danielle Smith tries to blame 700,000 illusory Albertans for her separatism gambit

Will Danielle Smith’s secession referendum question get around an Alberta judge’s ruling?

If you think building a new pipeline to tidewater is challenging as part of Canada, try to get your head around how difficult – by which I mean impossible – it will be if Alberta becomes a landlocked statelet.

The federal government forced through the Trans Mountain pipeline expansion over the objections of British Columbia, and it intends to do likewise for a proposed one-million-barrels-a-day new pipeline to the Pacific. It makes perfect economic and fiscal sense today – but you can throw all that out the window if Alberta is no longer part of Canada.

As for Trans Mountain, which is owned by the feds and was expanded on its dime, a post-Albexit Canada would have every reason to squeeze the pipe and jack up the tolls.

The financial benefits of the pipeline currently flow mostly to Alberta, primarily in the form of billions of dollars a year in royalty revenues derived from higher Alberta oil production and the higher international oil prices the pipeline delivers. In the event of independence, Canada would have opportunity and motive to price pipe access so as to claim most of those gains. It would only be logical.

The separatist Alberta Prosperity Project last year published “The Value of Freedom,” which it described as a “fully costed plan for an independent Alberta.” Like the Brexit movement that took Britain out of the European Union, its Albertan cousins claim that exiting Canada would take the weight of the federation off Albertans, leaving them far better off.

The document says that, once freed from Canada, oil output would more than double to nearly 10 million barrels a day – putting the province in the same league as Saudi Arabia – the economy would boom and the new Commonwealth of Alberta would enjoy fiscal surpluses so massive that it could eliminate all income taxes.

However, an analysis by University of Calgary economist Trevor Tombe finds that rather than instantly transforming into the wealthiest country on the globe, post-separation Alberta would see declines in gross domestic product, productivity and employment. As Britain discovered, moving from borderless free trade with your main trading partner to borders and barriers imposes significant, permanent costs.

Just as erasing our country’s interprovincial trade barriers can deliver an economic boost, erecting a hard barrier between Alberta and Canada will produce economic drag.

Canada adds up to more the sum of its parts, and the whole country will lose if Alberta leaves. But because Alberta is the smaller, landlocked party, it will lose more.

The irony is that the current federal government sees the merit and legitimacy of Alberta’s complaints about legal, regulatory and political barriers to oil and gas exports. Lowering those barriers, and thereby unlocking big new investments in the Alberta oil patch, is at the center of Prime Minister Mark Carney’s economic strategy. He understands that policies that benefit Alberta’s energy sector ultimately benefit all Canadians, and they are not some favour to one province at the expense of the rest of the country.

Even if Albertans vote against holding a binding referendum, and for remaining in Canada, uncertainty about the province’s future status is going to discourage investment in Alberta – especially investment in Alberta oil, gas and related infrastructure.

Opinion: Danielle Smith is not a separatist. She’s an opportunist who got in over her head

The stronger the support for separation, and the longer the uncertainty continues, the greater the cost.

Would you think twice about investing billions of dollars in a pipeline that might soon be bisected by a national border? Might you hold off on betting your company’s future on a new oil sands facility whose profitability would be dependent on that pipeline?

The political gambit of the knife at the throat is a double-edged sword.

Surrounding Alberta with international borders would deliver far more economic downsides than upsides. The downsides would include subjecting the oil patch to significant new barriers to getting its product to market. The result would be the opposite of what the loudest proponents of escaping from Canada claim to want.

There is only one “independence” scenario in which Alberta is not turned into a landlocked stranded asset: if the province became the 51^st state. That would trade membership in Canada and an international border with the United States for statehood in the U.S. and an international border with Canada.

In the long run, those are the only real options for Alberta – which may explain why many of those people most passionate about Alberta independence appear to see it as a way station on the road to becoming the new state of North Montana.