Oil-price rift imperils new Canada unity

A few short months after Canadians displayed unusual unity in rejecting Quebec separatism, the country appears headed for another period of wrenching internal dissent.

The latest rift surrounds Prime Minister Pierre Trudeau's failure last week to reach a new pricing agreement with the oil-producing provinces of the Canadian west.

The breakdown of talks between Mr. Trudeau and Alberta Premier Peter Lougheed underscores the widening gap between the newly rich, resource-producing western provinces and heavily populated central Canada.

It also poses the possibility of a major challenge to the already weakened authority of the federal government and may dash Mr. Trudeau's hopes of rebuilding the almost nonexistent support for his Liberal Party in the west.

In two days of talks, Messrs. Trudeau and Lougheed made on progress in resolvingm differences on domestic prices and revenue- sharing that have been under discussion for a year. With no more negotiations scheduled, Alberta, the country's major oil producer, could move as early as Aug. 1 to raise prices on its own.

This could touch off a major constitutional row with Ottawa, which also claims the legal right to set oil prices. The Lougheed-Trudeau breach has left Canadians stunned and dismayed.

Over dinner only hours after Trudeau and Lougheed conceded failure at successive press conferences, a female former political candidate said bitterly, "Levesque was right. Confederation doesn't work."

She was referring to Quebec Premier Rene' Levesque, whose proposal to lead the French- speaking province toward independence was based in part on the notion that Quebec could fare better on its own than as part of a federal system frequently mired in disputes between the provinces and authorities in Ottawa.

Urging Lougheed and Trudeau to resume negotiations, Harvie Andre, a Progressive Conservative member of Parliament from Calgary, said the country otherwise is headed for a "cold war" between the federal government and the producing provinces of Alberta, Saskatchewan, and British Columbia.

The split over oil prices is particularly vexing because it overshadows the current attempt, involving Ottawa and the 10 provincial leaders, to come up with agreeable terms for a new Canadian constitution. Drawing up a new charter has frustrated politicians for 12 years, but Trudeau set the process in motion again after Quebeckers rejected independence in a May plebiscite.

Mr. Trudeau wants action on a new charter by September. But Mr. Lougheed has linked the constitutional talks to the oil price negotiations. He recently said the breakdown of the oil talks "has to be a serious negative factor" for constitutional reform. The potential now exists, he said, for a clash between Ottawa and Alberta that "obviously has pretty serious consequences for the country."

Mr. Trudeau has tried to defuse the conflict. "We're not starting any war," he said at a news conference, adding, "the ball is now in Alberta's court." But Trudeau has also suggested that Parliament, recessed until autumn, may have to be called back to take action if Alberta sets a new oil price unilaterally that Ottawa considers too high.

Basically, the two sides disagree on how fast the domestic wellhead price of oil -- now $14.75 a barrel -- should rise toward world levels, with the western provinces favoring more rapid price escalation. Differences also exist regarding the division of revenues between the two levels of government and industry.