Flare-up over oil, natural gas threatens Canadian unity

Canadians are reeling from a week of stunning political developments that have pushed the country to the brink of the worst emergency in domestic affairs since 1970, when a terrorist kidnapping in Quebec province threw Canada into a national state of shock.

Though Prime Minister Pierre Trudeau sought to defuse the situation somewhat Oct. 31, the week's events left his national government perilously close to a major clash over energy issues with the governor of the oil-producing province of Alberta.

Such a confrontation, which would challenge the authority of the Trudeau government and whip up the growing flames of independence spirit in western Canada, would add greatly to the tensions already placed on Canada's 113 -year-old federation by controversial plans for a new constitution.

An out and out showdown over energy between Mr. Trudeau and his ardent foe, Alberta Premier Peter Lougheed, could only end in the courts or with a show of force by the Trudeau government.

Few Canadians believe things would go so far that Trudeau would have to call out the Army, as he did to quash what his government saw as a nascent insurrection in the French-speaking province of Quebec in 1970. But by last week there was definitely a sense of rebellion in the air.

On Oct. 30, Mr. Lougheed retaliated against what he considered unfair new national energy policies by announcing that his government would order a partial cutback of oil production early next year.

Alberta is the source of 90 percent of Canada's domestically produced crude oil. Of the 1.6 million barrels raised daily, about 1 million are shipped to the populous provinces of eastern Canada. Lougheed said that he would order production to be gradually reduced over nine months until the cutback totaled 180,000 barrels a day.

As a concession, Lougheed avoided threatening the security of eastern Canada's energy supplies, saying the cutback would be halted in the event of impending shortages.

But the production slowdown would still force Canada to increase its purchases of foreign oil, in turn putting strong financial pressure on the national government in Ottawa.

Faced with this direct challenge from one of the country's 10 provinces, Mr. Trudeau took a conciliatory route Oct. 31, saying he was willing to reopen negotiations with Lougheed on energy issues.

Pointing out that the Alberta government had left open the possibility of discussions by allowing a three-month "breathing space" before beginning to reduce oil production, Trudeau said, "Future negotiations are certainly appropriate."

Previous talks on energy topics between Alberta and Ottawa proved unavailing prior to the federal budget announcement Oct. 28, which was the immediate cause of Lougheed's retaliation.

In the budget, an annual event in which the government brings in its economic program, the Trudeau administration laid out a new schedule for domestic crude oil prices and a new tax on production of Alberta's other petroleum resource, natural gas. Ottawa also increased its take from taxes on oil sales.

Because the Trudeau energy plan will not push Canadian domestic oil prices to the world level, the new oil price plan failed to meet with the approval of Alberta, which wants to maximize its revenues from what it sees as a source of fleeting wealth. And Lougheed considered the tax on natural gas -- including on gas for domestic use and for export to the United States -- an invasion of the province's domain by the central government.

The core of the dispute between Ottawa and Alberta is constitutional. While Canadian law stipulates that the provinces own the resources within their boundaries and that Ottawa can regulate and tax interprovincial trade, there are deep and longstanding disagreements about exactly how these powers should be applied.

While Trudeau offered the olive branch of further negotiations, he did not yield to Alberta.

The province's action, he said, was "uncalled for." And Trudeau ruled out any chance that his government would back down in its efforts to obtain more money through new energy taxes.

Commented Trudeau, "What the province of Alberta seems to be saying is that the government of Canada should not secure new revenues at all. I cannot accept that proposition; nor, I think, would most Canadians."

In any real showdown, the Trudeau government would have the final say. Ottawa has constitutional powers that would allow it to take over Alberta's oil and natural gas for the national good in an emergency.